By Greg Peel

The Dow rose 275 points or 2.5% while the S&P gained 2.9% to 1198 and the Nasdaq added 3.0%.

Rather than attempting to determine whether or not there is longer term value in equities to provide for steady investment returns over time, markets are currently trading as if one day the world is about to end and the next day it isn't. Movements from Friday through to last night, with Wall Street missing a day in between, provide for few alternative conclusions.

The US jobs number on Friday night was bad but let's face it ? who cares? All that matters at present is whether the eurozone survives or doesn't. Earlier in the week it looked like it could be all over. As of last night it didn't.

Wall Street turned around on Tuesday night from a 300 point loss when some hope was provided in the form of an IMF back-down on European bank capital requirements and predictions that Germany's highest court would not deem Germany's bail-outs and EFSF contributions to be unconstitutional. Having fallen in panic in Tuesday's trade (driven down by panicked Seppos), Australia found itself potentially oversold. Thus it rallied from the bell yesterday, and then the GDP number was released.

At the end of the day the June quarter GDP growth result of 1.2% was in line with expectations, but only with those expectations hastily reassessed in the wake of the lead-up data this week and last. Prior to last week, consensus had been closer to 0.6%. The real surprise was the 1.4% year-on-year growth result, and strength here was due to the March quarter result of 1.2% contraction being revised up to only 0.9% contraction, and a very surprising 1.0% June quarter jump in consumer spending. How on earth does this correlate with the June quarter retail sales growth figure of only 0.3%?

I bet Gerry could tell you. Quite simply, the retails sales number collates only domestic sales while the GDP spending constituent includes offshore spending (overseas travel for example and, of course, on-line sales).

What this suggests to economists is that rumours of the death of the Australian consumer are exaggerated. It's not a case of weak demand, it's a case of the strong Aussie dollar. The same strong Aussie which has rendered steelmaking and other manufacturing industries non-viable, killed off inbound tourism, and crimped the earnings of exporters. Yet it was exports which ultimately drove the strong GDP result, with economists pointing quite simply to the rebound in coal and iron ore production and sales post the weather-impacted March quarter as behind the June quarter strength.

Will the strength continue into the September quarter? No. The rebound effect will ease, market (and thus consumer) fear has returned since July, and the June quarter GDP breakdown showed a slowing in the momentum of domestic demand anyway, from 1.4% growth in March to 0.7%. Lower expectations will not, however, be enough alone to keep the RBA's gun in its holster. If European debt crisis issues subside ? and that could take a long time yet ? the RBA will raise. Outside of another Lehman in Europe, you can throw away any ideas of a rate cut.

Which is not good news for Australia's construction industry, which saw its PMI fall to 32.1 in August from 36.1 in July. Remember that not only is this a 50-neutral index between expansion and contraction, the index measures the rate of expansion/contraction. The construction PMI has been in contraction now for 15 straight months and the continuing fall in the index indicates the rate of that contraction is increasing.

It was still all enough for the local market to have a cracker of an up-day yesterday, with those Seppos going back the other way this time. The Aussie has risen over 24 hours by over one and a half cents to US$1.066. "Risk on" is back on.

The same applied on Wall Street last night, with the Dow opening up about 150 points from the bell and climbing steadily all day. The VIX volatility index, which traded close to 40 on Tuesday night, fell 10% to 33. The US ten-year bond yield rose 8 basis points to 2.05%. The US dollar index fell 0.7% to 75.43.

When it's risk-on we like base metals and they were all up in London last night, with copper rising 1.5%, zinc 2% and nickel 4%. We also like oil, but oil has become a strange beast of late. It makes sense that the price of crude should rise if the global economic outlook is rosier but then oil has also become a safe haven trade as a substitute for crowded gold. It's also the most heavily traded physical commodity in the world, which means if Hurricane Lee shuts down one third of Gulf production supply-demand fundamentals kick in. Last night Brent was up US$2.91 to US$115.80/bbl and West Texas was up a whopping US$4.09 to US$90.11/bbl.

The victim was that crowded gold trade which, given the rise in the euro rather than the fall in the US dollar index, fell US$56.30 or 3% to US$1817.30/oz.

All these movements were driven by a combination of factors, the most influential of which was the ruling by the German court that Germany's bail-out and EFSF contributions are indeed constitutional, and that further bail-out decision need only go to a budget committee for approval and not to the full German parliament. At the same time, the Italian senate passed the government's new austerity package, although it still has to go back to the house for final approval.

Germany's parliament also still has to pass the EFSF bill and second Greek bail-out (if it comes to that) but the number crunchers have decided Merkel should no longer find overwhelming opposition.

On top of the latest episode of In Europe Tonight, the White House has been quietly leaking details of what the President will announce tonight (tomorrow morning Sydney time) in his new fiscal package, which somehow will include US$300bn of stimulus. How that gets past the Tea Party is anyone's guess. And last night the Fed's Beige Book indicated the US economy is actually still growing, albeit at a "modest" pace.

So mark down last night as a good day for the bipolar world financial system ? the one that is either in euphoria or deep depression on any given day. As for tonight or tomorrow night or next week, well, who knows? The ECB will be holding a policy meeting and press conference tonight, so hang on to your hats.

The SPI Overnight was up 44 points or 1%.

Aussie jobs today, then Rudi will appear on Sky Business at noon and at 4.30pm FNArena's Market Insight drills down into last month's local result season (brr.com.au).