US durable goods orders fell 1.3pct in August after a revised 0.7pct gain in July. The decline was largely due to a 40.2pct fall in non-defence aircraft spending. Excluding transportation orders rose by a more-than expected 2pct in August - marking the largest rise since March. Non-defence capital goods orders (a closely watched proxy for business spending) rebounded 4.1pct in August.

US new home sales were unchanged at a 288,000 annual pace However there was better news on the inventory front, with the number of new homes available for sale falling 1.4pct to the lowest reading in 42 years.

European shares recorded strong gains on Friday. Stocks reversed early losses and rallied into the close following better than expected US economic data. Also, the German IFO business sentiment index rose for a fourth straight month to the highest levels since March 2007. The FTSEurofirst index rose 1.1pct with the UK FTSE higher by 0.9pct and the German Dax gained 1.8pct.

US sharemarkets rallied on Friday, as investors bet that the economic recovery remained on track, following the upbeat economic data. The CBOE Volatility index lost 9.1pct. The Dow Jones rose 198pts or 1.9pct with the S&P 500 up 2.1pct and the Nasdaq gained by 54pts or 2.3pct. For the week the Dow rose 2.4pct, the S&P500 gained 2.1pct and the Nasdaq added 2.8pct.

US treasuries fell (yields higher) on Friday as the strength in business spending boost the bid for equities. US 2yr yields rose 1pt to 0.44pct and US 10yr yields gained 4pts to 2.60pct. For the week 2yr yields fell 2pts, while 10yr yields lost 14pts.

The Euro and commodity currencies rallied against the greenback on renewed optimism for the global economy. The Euro rallied from lows near US$1.3305 to US$1.3495, ending US trade near it highs. The Aussie dollar rose from lows near US94.95c to US96.00c, closing US trade near US95.90c. The Japanese yen held between 84.85 yen per US dollar and JPY84.15, ending US trade near JPY84.20.

US crude oil prices recorded a strong increase on Friday. The better than expected economic data supported investor sentiment. The Nymex crude oil contract rose by US$1.31 or 1.7pct to US$76.49. For the week oil rose 3.8pct. London Brent crude rose US76 cents to US$79.40 a barrel.

Base metal prices were mostly higher on the London Metal Exchange on Friday. Investors were a more optimistic that the economic recovery would gain traction over coming months. Copper gained 0.8pct, with Aluminium up 1.2pct. And the Comex gold price hit early record highs of US$1301.60 an ounce, before closing up US$1.80 an ounce to $1298.10.

Ahead: In Australia, no economic data is released. In the US Dallas Fed activity index is released.