US consumer spending rose by 0.8pct in July - marking the fastest pace in five months. The pickup in spending was supported by strong demand for motor vehicles as Japan related supply restraints faded. When adjusted for inflation spending was up 0.5pct, the largest increase in 18 months.

The Dallas Fed manufacturing index fell from 10.8 to 1.1 in July, while the associated business confidence reading fell from -2 to -11.4. The decline in sentiment was consistent with other recently released manufacturing surveys. US pending home sales fell by 1.3pct in July.

European shares rose in low volumes on Monday. Investors were buoyed by the upbeat US consumer spending data and a merger by the second and third largest Greek banks. Adding to the positive sentiment the European Commission said a fresh round of bank recapitalisations was not needed. The STOXX Europe 600 banking index gained 2pct. The UK market was closed for holiday. The FTSEurofirst index rose by 1.3pct while the German Dax was up by 2.4pct.

US sharemarkets rallied on Monday on better than expected consumer spending figures and expectations of further stimulus by Federal Reserve policymakers. The merger between Greek Banks, Alpha and EFD Eurobank provided investors with a rare bit of encouraging news out of the Euro zone and resulted in the S&P Financials Index gaining 4.2pct. Insurers also rose sharply as property damage from hurricane Irene was less than feared. The Dow Jones rose by almost 255pts or 2.3pct with the S&P 500 up by 2.8pct and the Nasdaq gained 82pts or 3.3pct.

US treasury prices fell (yields higher) on Monday after the surprising pickup in consumer spending soothed fears about the slowdown in the US economy. US 2yr yields rose by 1pt to 0.207pct and US 10yr yields rose by 7pts to 2.26pct.

The US dollar fell against the Euro and major commodity currencies on Monday as risk appetite improved. The Euro rose from lows near US$1.44.85 to US$1.4545, ending the US trade near US$1.4510. The Aussie dollar rose from lows around US106.05c to US106.60c, ending US trade near US106.50c. And the Japanese yen eased from highs near 76.50 yen per US dollar to lows at JPY77.00, ending US trade at JPY76.80.

US crude oil prices rose in line with the rally in equity markets on Monday. Nymex crude oil rose by US$1.90 or 2.2pct to US$87.27 a barrel and London Brent crude rose by US52c to US$111.88 a barrel.

The London Metal Exchange was closed on Monday due to the UK holiday. And the gold price eased with investors switching away from the safe-haven asset. Comex December gold fell by US$5.70 an ounce or 0.3pct to US$1,791.60.

Ahead: In Australia, data on building approvals is released. Harvey Norman and Beach Energy are amongst those to issue earnings results. In the US, FOMC minutes and the S&P/Case-Shiller home price index are released.