By Greg Peel

The Dow rose 72 points or 0.6% while the S&P gained 0.4% to 1360 and the Nasdaq managed 0.1%.

Let's get last night's earnings highlights out of the way first. Toothpaste and soap purveyor Colgate-Palmolive (don't wait to be told) saw a 2% gain, chemical giant Dow Chemical also added 2%, America's biggest company Exxon-Mobil (Dow) fell 0.5% while counterpart Royal Dutch Shell gained 1%. Germany's financial megalith Deutsche Bank mirrored Swiss colleague UBS' earlier strong result by posting near record profits, and like UBS it was wealth management flows which stood out. Deutsche gained 5%. Australia's ResMed saw a sleepy 1% fall.

After the bell, software monopolist Microsoft posted a beat but it wasn't good enough, sending its shares down 2% in the after-market. It was a better performance than fruiterer Research In Motion nevertheless, which missed substantially and is suffering an 8% drop.

On the economic front, the highlight of the day was the release of the first estimate of US first quarter GDP. To recap, first estimates take the GDP performance of the first month of the quarter and extrapolate for the whole quarter. The first revision adjusts for the second month and the final revision completes the picture. Each takes another successive month to be released.

Economists were expecting growth of 1.7% in the March quarter and the result was 1.8%. This was good enough to maintain the momentum on Wall Street but is still a much lower number than the 3.1% growth rate of the December quarter. Note that unlike Australia's quarter-on-quarter measurements for GDP, US results are annualised.

Compared to Q4, reduced government spending was a feature of Q1 but then so was reduced consumer spending. Business investment slowed and the pace of trade activity also pulled back from the previous quarter. This does not sound like the outcome one might expect from an economy flooded with Monopoly money in the form of QE2. As each major bank has reported this earnings season, a common theme has been sluggish credit demand. The whole idea is for the Fed to give the banks cheap money and for the banks to feed that into the economy in the form of cheap loans.

Or is it? Well that would be nice, but at the same time QE2 undermines the value of the US dollar and thus makes US exports more attractive. It's about the only way the US can beat China at its own game at a time when the Chinese consumer is becoming the world's most influential driver. The feature of this quarter's earnings season to date has been the increase in revenues derived from sales to emerging markets by the multinationals.

And another day out from the Bernanke press conference, the US dollar continued to fall. Another 0.3% was lost last night on the dollar index to take it to 73.12 and very close to the all time low just above 72 set just before Lehman went down. The Aussie passed 109 in yesterday's trade and is sitting at US$1.0927.

The flipside of the US dollar's fall, and the clear inflation trade, is the precious metal surge. Gold was up US$8.70 last night to US$1536.00/oz and silver rose 1% to US$48.39/oz.

In the real commodity world however, further gains are not simply a matter of a weaker denomination currency. Despite building tensions in Syria, which may lead to more serious implications across the oil producing Middle East, the oil price has largely stalled for now. Brent was down US11c to US$125.02/bbl and West Texas was steady at US$112.22/bbl. Beyond these levels, it would seem, investors fear demand destruction.

In London, LME traders fear the impact on global economic growth of the high oil price, and the subsequent impact on real industry demand for metals. It was month-end in London last night given tonight's knees-up, and prices were relatively steady.

In other US economic news, the Chicago Fed national activity index edged down to +0.20 from +0.27 in March. Pending home sales provided a positive surprise in rising 5.1% in March when economists had expected 1.5%. Pending sales take a month or two to convert into real sales.

There was not a lot of demand for the Treasury's US$29bn auction of seven-year notes. Dealers were forced to take more than half the issue, at a higher yield than expected, and that hasn't happened for two years.

The SPI Overnight rose 9 points or 0.2%. It's a bit hard to make solid progress when you have a big bungee rope attached to your back called the Australian dollar. Don't expect any intervention from the RBA however – the currency is playing the role of monetary policy implementer at the moment. Despite all the hoopla about this week's CPI numbers in Australia, it will be interesting to see how we fare in the June quarter, and also interesting to see how the March quarter GDP comes out.

It must also be remembered that the local market is very heavily influenced these days by offshore investment. With the Aussie surging, US investors are making profits while the ASX 200 stands still. Should they risk more purchases on a 109 exchange?

The UK will shut down tonight, just in case you've been living under a rock. US earnings highlights include three Dow heavyweights tonight in Caterpillar, Chevron and Merck.

On the local bourse we'll see quarterly production reports from Australian Worldwide Exploration ((AWE)), Minara ((MRE)), Murchison ((MMX)) and Tap Oil ((TAP)), while Foster's ((FGL)) shareholders will vote on the planned demerger, I believe. Macquarie Group ((MQG)) will release its full-year earnings result.

Rudi will be a guest on BoardroomRadio's Round Table today at 3pm.

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