By Greg Peel

The Dow closed up 128 points, or 0.9%, while the S&P hit blue sky at 1587, up 1.2% as the Nasdaq shot up 1.8%.

Forecasting Chinese data is a bit of a mug's game and yesterday provided a perfect example. Consensus expectation had China posting a budget surplus of US$15bn in March following a 6% rise in imports and a 12% rise in exports (year on year numbers). Instead, Beijing announced an US$880m deficit following a 14% rise in imports and a 10% rise in exports. In February, imports fell 15%.

Once again those outside China have been confounded by the impact of the lunar new year holiday. The response to the figures in Australia was a 0.5% rally in the Aussie to US$1.0541 this morning.

The bigger than expected jump in Chinese imports is music to the ears of the big miners, so why did the ASX 200 struggle to a loss of a few points yesterday? On Tuesday the market surged a rare 1.5% with help from lower than expected Chinese inflation data. The answer is that while Tuesday exhibited "index" buying, probably from Japan, yesterday the "big switch" was on. The miners did rally, sending the materials index in the ASX 200 up 1.6%. The only other sector to rally was industrials (+0.4%).

On the other hand, the market decided it was time to take profits on the higher yield sectors which have driven the rally to date and for which analysts have been screaming "overvalued!" since about the beginning of the year. Banks (-0.7%), consumer staples (-1.0%), consumer discretionary (-1.1%), healthcare (-0.7%) and utilities (-0.5%) were the most heavily sold as fund managers realigned their portfolios to a more "risk on" stance in a largely zero sum exercise.

Is this "phase two" of a bull run? Aside from anything else, we may yet need to see Wall Street begin to implement a similar "switch". Like Australia, the US stock market rally to date has been largely driven by defensive, higher yielding sectors such as healthcare and utilities. Not so much the banks, nevertheless, given they cannot pay high dividends until they have cleared out their TARP obligations and proved to the Fed their disaster risk sensitivities are sufficiently contained. The biggest bank, JP Morgan, for example, has not yet satisfied the Fed. JP Morgan reports earnings tomorrow night. And like Australia, the materials sector in the US has been a laggard.

Last night's rally on Wall Street was across the board, again suggesting more "index" style buying. While the bulls only need the slightest of excuses at present, the major impetus for last night's particular rally was all a bit farcical.

The minutes of the last Fed meeting, held early in the month, were due for release last night at 2pm New York time. But on Tuesday night someone accidently pressed a button and the minutes were released 24 hours early to a bunch of non-market institutions. Given the minutes came with a publication embargo, those institutions respected the embargo and there were no leaks. But when the Fed realised the error had been made it decided to release the minutes at 9am last night instead of 2pm and lifted the embargo.

The irony is that if the March jobs number released last Friday had come in at around 200,000 as expected, instead of 88,000, the Dow probably would have been down around 200-300 points last night. Because all talk in the minutes was of preparing for a wind-back of QE, at least beginning by year-end or maybe even as soon as the (northern) summer. The reason the Dow was up by triple digits is because the March jobs number was so weak.

Had that number been around 200k it would have represented the third consecutive month of such a result. The Fed has suggested it would only start to back off if a sustainable improvement in the jobs numbers was evident, which would suggest at least six months of 200k plus additions. March's weak number has reset the timing. That six months begins again from April and Wall Street has thus decided there is no way the Fed will be backing off anytime soon.

It was enough to again stop the dollar-yen breaking the magic 100 mark, as the US dollar index rose 0.1% to 82.48. The victim, yet again, was gold. It fell US$26.60 to US$1558.70/oz. One would be forgiven for expecting gold to rally on expectations of endless QE, but last night news came through that the Cypriot central bank was selling gold to help pay for its "bail-in", while Goldman Sachs downgraded its gold price forecast for the second time in two months, lowering its 2013 average price expectation to US$1545/oz from a previous US$1610/oz. And it was a "risk on" session in markets.

Was money flowing into equities out of bonds? The US ten-year yield rose 6 basis points to 1.80%.

After a positive session on Tuesday night, base metals were slightly weaker last night on the stronger greenback. Brent fell US44c to US$105.79/bbl while West Texas rose US33c to US$94.53/bbl. Spot iron ore rose US$1.50 to US$140.60/t.

The SPI Overnight was up 38 points, or 0.8%.

The Australian unemployment figures are out today. Last month's big surge in jobs was jumped on by a foundering government and largely dismissed by every economist. Could we see a statistical correction today? It might take the gloss off the government's Chinese diplomacy coup.

Rudi will appear on Sky Business today at noon and later for the Switzer Report at 7pm.