By Greg Peel

The Dow closed up 19 points or 0.2% while the S&P gained 0.3% to 1357 and the Nasdaq was flat.

Yesterday's surprise drop in Australian unemployment was well received locally and did not go unnoticed across the waves either. However, the gloss came off somewhat on Bridge Street when China's trade balance was released. China's imports rose only 0.3% in April compared to expectations of an 11% rise and down from a 5.3% rise in March. China's exports rose 4.9% compared to expectations of 8.5% and down from March's 8.9%.

There have been excuses offered ? our old friend the Chinese New Year distortion in the first quarter for example, as well as lower commodity prices impacting on imports and Europe impacting on exports. But the fact remains that a pick-up in the Chinese economy in the second half of 2012 ? which most economists expect ? will really need some help from Beijing. Today we get inflation, industrial production and retails sales data. Will we see another cut in the bank's required reserve ratio by Saturday?

Once upon a time Wall Street might have panicked on these Chinese numbers, but fears of a hard landing have tended to ease on the data flow offering a slowdown scenario but not a rapid one, and on expectations Beijing will respond sooner or later. Might as well ? every country on the planet is easing now including that big one down the bottom. Wall Street's attention is nevertheless squarely focused on Europe at present, primarily, and also on local data.

It's been a quiet week in the US for economic data, but a good result on weekly new jobless claims helped Wall Street take a breather last night. More fundamentally however, the latest attempt to form a government in Greece has failed and a return to the polls next month appears inevitable. This means markets will be in limbo for a month before the next round of news from Greece, but it's probably academic because we have reached the stage of assuming Greece will now exit the euro.

Which is why the Dow opened nearly 100 points higher last night. Well, it can't have been on one half decent week of jobless claims. It must be noted that current Wall Street volume is barely existent, and this might just be a typical five minute relief rally after six down-sessions, which lost momentum by day's end anyway. Yet while there is no precedent for a euro-exit, and nothing in the treaty to accommodate such an unforeseen event, the thought of a swift solution to at least one nagging problem replacing the potential of years of rolling frustration is quite appealing.

Of course if Greece goes, does the whole eurozone start to unravel? That is the real question.

In the meantime, Spanish bond yields continue to offer concern. The Spanish government has stepped in to support one Spanish bank but has called for greater provisions against property loan losses, which has alerted the market to the fact the Spanish banks are underfunded against potential losses from the earlier bursting of the Spanish property bubble. It's all well and good but the banks have already been asked to recapitalise as well, and the Spanish government does not have the funds to help out unless the ECB prints them some more money.

Yet last night the yield on the US ten-year bond ? the world's safe haven ? rose 5bps to 1.88% despite European problems and despite solid demand for the Treasury's auction of 30-year bonds, which recorded their lowest settlement yield ever. Have US bond rates simply fallen as low as they might go, offering little in the way of price upside for investors?

Gold also managed to claim back US$3.90 to US$1593.40/oz last night as the selling wave tapered off and the US dollar index remained relatively steady at 80.19. The jobs numbers have helped the Aussie back up half a cent to US$1.0099. Base metals were mixed on small moves ? again ? and Brent oil fell US47c to US$112.73/bbl while West Texas was steady at US$96.89/bbl.

The SPI Overnight fell 6 points.

As noted, today sees China's monthly data-dump. What we don't want to see is a spike in inflation. That aside, we have entered yet another period of "what happens now?" with regard to Europe ? aside from Greece we are yet to see how Hollande and Merkel get on at the first pow-wow, and Mario Draghi has been rather silent so far on recent developments. Obviously he needs to see how things play out as well. This play has no script.

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