By Greg Peel

The Dow rose 145 points or 1.2% while the S&P gained 1.3% to 1296 and the Nasdaq added 1.5%.

Wall Street has not posted a two-day gain of this magnitude since February, believe it or not. But with volume on the NYSE extremely light, it appears most investors are preferring to remain on the sidelines. Light volume provides fund managers with a perfect opportunity to window dress ? to invest excess cash in portfolios so they don't look clueless and to mark up returns for the quarter.

Confidence is nevertheless growing that the Greek parliament will pass the requisite austerity bill. Debate is currently underway in Athens amidst a two-day general strike, and violence has erupted spasmodically outside the parliament building. The actual vote will not occur until noon tomorrow Athens time, which equates to 7pm Sydney tonight and 5am New York.

Vote aside, Wall Street is also feeling positive about the deal offered by French Banks on Monday night which should ease Greek default fears. In the meantime, last night ECB president Jean-Claude Trichet reiterated that the central bank remains in "strong vigilance mode" and undeterred by developments in the European periphery in pursuit of its dual policy path. In other words, Trichet reconfirmed that the ECB will hike its cash rate on July 7.

The euro thus rallied 0.6% last night as forex markets begin to assume a positive vote and refocus on inflation issues being driven by the big European economies. The ECB is set to tighten long before the Fed ever does, so last night's 0.4% fall in the US dollar index to 75.05 is a suggestion of returning to the earlier theme. And easing fears over Greece mean the "risk on" trade is back in vogue, at least right this moment.

The popular "risk on" indicator is the humble Aussie, which appears to have decided 1.04 is a nice place to visit but you wouldn't want to live there. It gained a full percent last night back to US$1.0542. And oil is the global economic benchmark commodity. It was knocked down hard by news of the release of IEA strategic reserves last week but last night Brent jumped US$2.81 to US$108.80/bbl and West Texas US$2.53 to US$93.14/bbl.

Gold stopped falling last night to post a US$4.40 gain to US$1501.30/oz with 1500 no doubt playing its psychological role. Silver rose 1% and base metals were again fairly subdued, albeit all up around the 1% mark. LME traders are proving more inclined to play wait and see.

There was a surprising US economic data release last night. Having only last month declared the US housing market to be officially in a double dip, Messrs Case and Shiller revealed that their 20-city house price index rose by 0.7% in April to mark its first gain in eight months. Gains were noted in 13 of the 20 cities, including in some of the hardest hit to date. Is this just a blip or finally a positive sign? Well, April does mark the beginning of the spring buying season.

There was also good news from the industry-intensive Richmond Fed district, which saw its manufacturing index rise to plus 3 this month from minus 6 in May. The result reverses the trend of very weak numbers out of the New York and Philly Fed districts noted earlier in the month.

On the other hand, the Conference Board measure of US consumer confidence fell to 58.5 this month from 61.7 in May to mark its lowest level in eight months. We recall that US consumers are considered to actually be "confident" when this measure reaches 90.

Over in the US bond market there's a big calendar on the wall with crosses marking off the final lazy, hazy, crazy days of QE2. As the uncrossed dates grow rapidly fewer, demand for US Treasuries at historically low yields rapidly diminishes. Last night's auction of US$35bn of five-year notes met with a timid response and the market accelerated bond selling in its wake. Foreign central banks bought 38% compared to a 42% running average and the benchmark ten-year yield leapt a full ten basis points to 3.04%.

How's QE3 looking? Well there are plenty in the market who consider QE3 inevitable but the Fed is not amongst that group, still assuming, albeit with fingers crossed now it would seem, that easing Greek fears, a rebounding Japan and relief on the local weather front will aid the expected second half recovery resumption. Inflation is rising, not falling, and QE has to date been used as a tool against deflation.

The SPI Overnight put in an optimistic performance on Monday night but the physical market saw yet another one of its afternoon fades in yesterday's trade. Undeterred, the SPI Overnight is up 52 points or 1.1% this morning.

So it's over to Greece, and perhaps an announcement some time during tonight's regular ABC evening news (Sydney time), although the previous confidence vote did go on and on. The result will determine market direction in Europe and the US tonight.