Global markets extended their gains overnight, as Greece dropped voting on its financial rescue and the European Central Bank unexpectedly cut interest rates. Markets cheered the news and gains were posted across the board. The ECB surprised the markets with a 25 basis point rate cut to 1.25% to bolster economies reeling from the debt crisis. New ECB President Mario Draghi made it clear that the euro area is at risk of relapsing into a mild recession.

Among the major averages, the Dow Jones Industrial Average surged 1.8% to end at 12044. The S&P advanced 1.9% to close at 1261 and the NASDAQ climbed 2.2% to close at 2698. News that unemployment claims in the US dropped back below 400,000 went almost unnoticed as investors focused on news out of Europe.

It seems that the Greek Prime Minister George Papandreou yielded to the immense pressure exerted by EU leaders. Mr Papandreou seems to have more to worry about as he is reportedly struggling to maintain control of his government. The opposition leader said his party would support the bailout package and its stringent terms for Greece. Mr Papandreou will now be focusing on winning a parliamentary confidence vote.

The news gave much needed and welcome relief to financial markets, with risk assets being the biggest beneficiaries. There were some big gains in the commodities space with oil up 1.2% and gold rising 2% to a six-week high. Our resource names are likely to be big movers today on the back of these leads.

Some of the recently beaten down cyclical plays will also be in focus, particularly in the retails space. Investors will also be looking to snap up some of our big financial names after recent share price weakness. However, some investors will remain cautious as the Aussie market has been a serial underperformer this year. We are currently calling the Aussie market to open up 2.3% at 4267. In economic news, traders will be looking out for the RBA's monetary policy statement at 11.30am.

Market

Price at 7:30am AEST

Change Since Australian Market Close

Percentage Change

AUD/USD

1.0407

0.0158

1.54%

ASX (cash)

4267

95

2.28%

US DOW (cash)

12039

328

2.80%

US S&P (cash)

1259.8

35

2.88%

UK FTSE (cash)

5573

144

2.65%

German DAX (cash)

6162

293

4.99%

Japan 225 (cash)

8785

173

2.01%

Rio Tinto Plc (London)

34.46

0.71

2.10%

BHP Billiton Plc (London)

19.86

0.34

1.74%

BHP Billiton Ltd. ADR (US) (AUD)

37.96

1.42

3.89%

US Light Crude Oil (Dec)

94.29

2.78

3.04%

Gold (spot)

1763.5

32

1.82%

Aluminium (London)

2152.00

25

1.18%

Copper (London)

7903.00

103

1.32%

Nickel (London)

18451.00

26

0.14%

Zinc (London)

1955.00

39

2.04%

RBA Cash Rate to be decreased by 25bp (Dec) (%)

38.00

10

10.00%

Stanley Shamu, IG Markets Market Strategist

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