MORNING REPORT
(7am AEDT)

There were solid data readings from major European nations on Monday. Industrial output rose by 0.5pct in France in August with Italian output up 4.3pct - both results well ahead of market expectations. And German exports rose by 3.5pct in August to record highs.

French President Nicolas Sarkozy has told US President Obama that France and Germany have agreed to come up with a ´´global and lasting solution to the euro zone´s difficulties before the Cannes summit of the G20´´ (held on November 3-4).

European shares rose for the fourth straight day to fresh 5-week highs on Monday, as investors were encouraged by economic data and efforts to deal with the region´s debt crisis. Resource stocks rose in response to higher metal and energy prices with BHP Billiton up 2.8pct in London trade and Rio Tinto up 2.6pct. The FTSEurofirst index rose by 1.7pct with the German Dax up by 3.0pct and the UK FTSE lifted by 1.8pct.

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US sharemarkets posted strong gains in thin trade with many investors observing the Columbus Day holiday. The Dow Jones rose sharply at the open, drifted sideways, and finished stronger, ending at the day´s highs, up by 330 points or 3.0pct. The S&P 500 was up by 3.4pct while the Nasdaq lifted by 86pts or 3.5pct.

The US government bond market was closed on Monday for the Columbus Day holiday - banks and government offices were closed. On Friday US 2yr yields rose by 2.5pts to 0.29pct and US 10yr yields rose by 9pts to 2.08pct.

The Euro and commodity currencies soared in ´´risk on´´ buying on Monday - a desire for investors to embrace ´´risky´´ assets like equities, commodities and currencies sensitive to global economic growth. The Euro rose from near US$1.3455 to almost US$1.3700 and is near US$1.3655 in late US trade. The Aussie dollar also rose from around US98.20c to US100.15c and was trading near US99.90c in late US trade. And the Japanese yen traded in a very tight range between 76.55 yen per US dollar and JPY76.75, ending US trade near JPY76.65.

Global crude oil prices rose on Monday as investors became more hopeful about a resolution to the European debt crisis. A strike halting Kuwaiti crude exports further buoyed oil prices. Nymex crude oil rose by US$2.43 or 2.9pct to US$85.41 a barrel and London Brent crude rose by US$3.07 to US$108.95 a barrel.

Base metal prices posted gains of between 0.4pct and 2.6pct on Monday with lead faring best and tin up the least. The gold price rose on Monday in line with other commodities as the US dollar fell. The Comex December gold price rose by US$35.00 an ounce to US$1,670.80.

Ahead: In Australia, the NAB business survey is released. In the US, Alcoa reports its quarterly earnings result and weekly chain store sales data is released.

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