US initial jobless claims fell by 7,000 to 395,000 in the past week - marking the lowest reading in four months. The number of people receiving benefits after drawing an initial week of aid fell by 26,309 to 3.16 million.

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The US trade deficit surged from $50.8 billion to $53.1 billion in June - the largest deficit in almost three years. Exports dropped by 2.3pct in June, while imports only dropped by 0.8pct. The wider deficit could result in the a downward revision to June quarter growth. Imports from China rose by 5pct to $34.4 billion, lifting the trade gap to $26.7 billion, the highest in 10-months.

European shares rose on Thursday in a volatile trading session. The banking sector received a boost as investors bought up oversold stock , although European bank borrowing costs were showing signs of upward pressure. In the credit swap market, the cost to insure against French banks defaulting on their debt touched record highs in European trade. However French bank Societe General rose 3.7pct after the 14pct slide in the prior session. The European banking index gained 3.2pct. The FTSEurofirst index rose 2.6pct while the German Dax gained 3.3pct and the UK FTSE rose 3.1pct.

US sharemarkets rallied on Thursday, recovering the losses in the previous session as investors bought up cheaply valued stocks. The better than expected job data supported sentiment. Financial stocks led the gains. The S&P financial index jumped 6.3pct. Cisco gained almost 16pct after reporting healthy results. The Dow Jones rose by 423pts or 4pct with the S&P 500 up 4.6pct and the Nasdaq rose 112pts or 4.7pct. The so-called ´´fear gauge´´ or Vix fell by 9pct to 39.

US long-dated treasury prices fell sharply on Thursday (yields higher). A $16 billion auction of 30-year notes was shunned by investors following the recent ratings downgrade. US 2yr yields were flat at 0.18pct and US 10yr yields rose by 22pts to 2.33pct.

The US dollar eased against commodity currencies and traded in a range against the Euro. The Euro hit early lows near US$1.4105, before rising to highs around US$1.4285, ending the US trade near US$1.4225. The Aussie dollar rose from lows near US101.75c to US103.55c, ending US trade near US103.30c. And the Japanese yen held between 76.30 yen per US dollar and JPY76.85 ending US trade near JPY76.80.

Benchmark crude oil prices rose for a second straight day on Thursday following the release of the better than expected weekly employment data. Nymex crude oil rose by US$2.83 or 3.4pct to US$85.72 a barrel and London Brent crude rose by US$1.34 to US$108.02 a barrel.

Base metal prices were higher on the London Metal Exchange on Thursday. Lead was once again the best performer up 5.2pct. And the gold price eased from record highs. Comex December gold fell by US$17.90 an ounce to US$1,766.40.

Ahead: In Australia, no economic data is released. In the US, retail trade and business inventories is expected.