By Greg Peel

So much for expecting a quiet session on Bridge Street yesterday with Wall Street closed last night. The rise in the official Chinese manufacturing PMI announced on Sunday, to 51.0 from 50.3, was enough to spur the Australian market on to a 1% gain despite the drag of some significant ex-dividend activity. Nor did a mixed bag of local data hamper the enthusiasm. And as for Syria, well that's been forgotten for now.

Australia's own manufacturing PMI improved but remained in its long-running contraction phase, rising to 46.4 from 42.0. House prices have shot up, according to RP Data-Rismark, and building approvals saw a big jump in July, while company profits took a turn for the worse in the June quarter. But again overriding the local news was another Chinese PMI, being HSBC's independent measure. It jumped to 50.1 from 47.7, as announced late morning, thus aligning both the official and unofficial Chinese PMIs in a return to expansion.

And the good news kept coming as the sun set. The eurozone continued its steady manufacturing recovery, seeing a rise to 51.4 from 50.3, while the UK cemented its position as recovery leader with a jump to a surging 57.2 from 54.8. The US PMI is due tonight.

The European stock markets loved the numbers, with Germany up 1.7%, France up 1.8%, and London up 1.5%.

After a couple of sessions of Syria-led weakness, base metals bounced back in London, with copper up 2% and aluminium up 1.5%. Nickel was the only laggard, falling 0.5%.

Spot iron ore rose US$1.00 to US$138.70/t.

The oils proved a mixed bag, with Nymex operating under electronic trading. Brent crude, which is most directly influenced by any Middle East disruption, rose US39c to US$114.40/bbl while West Texas fell US81c to US$106.84/bbl.

The US dollar index ticked up 0.2% to 82.25 in thin trade while the Aussie jumped 0.8% to US$0.8976 on the China effect. Gold slipped US$2.10 to US$1394.40/oz.

Never mind that Bridge Street led out the positive Chinese manufacturing response yesterday. The SPI Overnight is up another 24 points or 0.5%.

One might be forgiven for thinking there was nothing to worry about. An apparent end to the slowdown in China is certainly good news but tonight Congress will decide if the US will or won't instigate retaliatory action against the Assad regime. It's no lay-down misere, and one wonders just how much partisan politics might come into it. But one also wonders whether the US can afford to become a laughing stock in the Arab world, and a mouse that roared, if it is decided to let Assad get away with both his chemical attacks and his subsequent taunts.

Then there's the tapering issue. If a decision to begin tapering is backed by solid US data ? and recently the data have been not that solid ? then Wall Street will probably not respond too adversely. Friday's jobs numbers will of course be very important. But if the economy still looks weak, or if Wall Street rallies sharply ahead of the September 18 FOMC meeting, the chances of a poor reaction increase.

On the other side of the coin, and the world, it is assumed the RBA will not cut its cash rate today. The renewed surge in the local housing market will weigh heavily on the board's mind, and the turnaround in Chinese data provides pause for thought. If there is no dire need, it's best not to cut just before the election. Particularly when broad Coalition policy intentions still remain a mystery with only days to go.

Today will also see the Australian June quarter current account released, including net export data, along with July retail sales. Beijing will release the official Chinese service sector PMI.

Ex-div activity is minimal today so there's not a lot to hold Bridge Street back, assuming a second bite of the cherry is justified.

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