By Greg Peel

The Dow rose 96 points or 0.7% while the S&P gained 0.8% to 1653 and the Nasdaq added 1.1%.

Australia's June quarter GDP came in at 0.6% quarterly and 2.6% year on year growth which was a tad above expectations. The result reaffirms RBA claims that the economy is growing "below trend" and suggests an upward trend for unemployment. The slowdown is not only due to the peaking of mining capex, suggests Westpac, but also the lack of a response in domestic demand, specifically consumer spending and non-mining business investment, to the 225bps of rate cuts the RBA has delivered since November 2011.

Growth in domestic final demand has slowed to 0.6% in FY13 from 6.0% in FY12 and marks the slowest rate of growth since GFC-impacted 2009. Consumer spending has slowed to 1.8% growth in FY13 from 3.5% in FY12, and is a major contributor to the general slowdown. The flipside is new dwelling construction growth, which has shifted from minus 5.5% in FY12 to plus 8.5% in FY13.

Westpac expects another rate cut by year's end, probably on Cup Day.

Problematic for the RBA is the Aussie dollar, which the central bank again called as too high in its statement this week. The RBA believes the currency will fall further, thus alleviating the need for aggressive easing, but the Aussie was under 90 on Tuesday and since yesterday has risen another cent to US$0.9174. The "problem" is China. As the world becomes more confident that the Chinese slowdown is now over, and lower but steady growth can resume, the Aussie dollar again becomes the China proxy.

Further confidence in China was provided yesterday by HSBC's measure of the Chinese service sector PMI, which showed a rise to 52.8 in August from 51.3 in July. This result contradicts Beijing's number, which showed a slight fall to 53.9 from 54.1. Consistent with the weak Australian GDP, the local services PMI fell to 39.0 from 39.4, indicating still rapid contraction, and the salt in the wound is those wretched Poms, who just want to win everything. The UK PMI rose to a rapidly expanding 60.5 from 60.2. The eurozone provided slight disappointment with a fall to 50.7 from 51.0.

The US will report tonight, but last night the Fed's anecdotal measure of US economic performance, the Beige Book, suggested growth that was still "modest to moderate", as it has been for a while. No further clues to tapering there. The tapering discussion has nevertheless taken a backseat to Syrian considerations this past couple of weeks.

Congress is yet to vote but House Republican leader John Boehner has given his endorsement and last night a Senate committee voted in favour of a retaliatory strike. Despite extreme partisanship, it is unlikely Congress will wish America to be seen as the land of the free and the home of the not so very brave. As I have been suggesting, markets tend to fall on the threat of war and then rebound on the action, and last night it appeared Wall Street was not prepared to wait for the CNN footage. Aside from a solid monthly sales result from Ford (Dow), there was little else driving Wall Street enthusiasm last night.

The reverse in stocks was backed up by a reverse in gold, which fell US$19.40 to US$1392.90/oz, and a reverse in the oils, with Brent down US81c to US$114.93/bbl and West Texas down US$1.25 to US$107.29/bbl. US bonds were also sold, with the ten-year yield rising 5bps to 2.90%.

The US dollar is still battling against strength in the euro and yen, and it's down 0.2% on its index to 82.16.

Base metals traders remain confused. Since the Syrian issue erupted, movements on the LME have been volatile and indecisive with little net result. Last night all metals bar tin fell, with copper down 1.6% and aluminium down 1.8%.

Spot iron ore fell US70c to US$138.00/t.

After yesterday's weak session on Bridge Street, which to some extent was due, the SPI Overnight closed up 16 points or 0.3%.

The next 24 hours sees monetary policy meetings for the Banks of Japan and England and the ECB. Nothing much new is expected. In the US tonight's ADP private sector jobs report will provide a lead-in to tomorrow night's non-farm payrolls report and the services PMI will be released.

Australia's July trade balance will be released today.

Rudi will appear on Sky Business at noon.

Note that FNArena has now called the August reporting season closed, and hence the FNArena Reporting Season Monitor is now closed. The updated report will live on as a feature story (Sell&Buyology) for ongoing reference.

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