By Greg Peel

The Dow rose 207 points, or 1.7%, while the S&P gained 2.0% to 1386 and the Nasdaq jumped 2.2%.

"I am confident we can get our fiscal situation dealt with," said President Obama from Bangkok last night, where he is on an Asian tour.

A week ago, no one else seemed to be. But on this statement (and I'm sure Obama would have said something similar in 2011, just before the S&P downgrade) and Friday's suggestion from the Republicans of early talks having been "constructive", the mood on Wall Street has suddenly turned to one of optimism. Commentators are swinging more towards expectations of a compromise being reached,which might involve some constrained tax increases and some constrained spending cuts rather than the extremes previously feared, or rather than deadlock.

If this is true we'll have to wait a week before hearing of any further progress, given Washington has now cleared out ahead of Thanksgiving. Congress will reconvene next week. But the assumption is that any sign of a swift and conciliatory resolution to the "cliff" will be very positive for markets, so there is a risk in staying on the sidelines and preparing for the worst.

It is universally agreed that whether or not the cliff will drop the US into recession, cliff uncertainty is what is holding the US economy back. Business investment has stalled, companies are not game to hire new employees, and investors have no idea what jumps in capital gains and dividend taxes they may be facing. If the veil of uncertainty is lifted, businesses and investors may not be thrilled with the new policy framework, but at least they can get on with life. This can only be positive for a US economy that is otherwise showing signs of growth.

Last night the NAHB housing market sentiment index posted 46 for the month, up from 41 last month. That's the highest reading since May 2006 at which stage the US housing boom had peaked. Housing industry sentiment is approaching the 50-neutral mark at which point builders are balanced between those viewing conditions as weak or strong. One year ago the index read 19.

Sales of existing homes were up 10.9% over twelve months in October after having risen 2.1% for the month. Foreclosures in October were down 19% from a year before. Last week the average for a 30-year fixed rate mortgage hit a record low of 3.34%. Read it and weep Australia.

All of the above was enough to spin the mood on Wall Street last night from facing darkness to seeing light at the end of the tunnel. Indices opened strongly, held on to gains and then kicked to the close on volumes considered reasonable if not spectacular. Helping the numbers along was a 7% gain in Apple after its 25% correction since September.

A bit more "risk on" finally meant a drop in the US dollar index last night, by 0.4% to 80.90. This sparked up gold, which jumped US$18.50 to US$1732.20/oz, and the Aussie, which jumped 0.6% to US$1.0409.

Between a weaker dollar, strong US housing data and hopes of cliff resolution, base metals found some strength in London. Copper and nickel rose over 2%, while the others managed at least 1% gains.

The oils also surged, with Brent up US$2.50 to US$111.70/bbl and West Texas up US$2.30 to US$89.22/bbl. Oil was reacting to the same positive US data and signs of fiscal hope, but also to the escalation of hostilities in the Middle East. Iran is the spectre.

The US ten-year bond yield was a little bit enthused on a risk-on basis, rising 4bps to 1.61%. However, the bond market did not show signs of joining in the euphoria and did not move all afternoon as Wall Street spiked to the close. Bond traders are not as skittish as stock traders.

The SPI Overnight rose 29 points or 0.7%.

There are more US housing data out tonight, in the form of housing starts, while all eyes will be on Brussels and the eurozone finance ministers' meeting in which the Greek bail-out tranche will be discussed. News wires are suggesting the ministers feel Greece has done enough to be paid, but hanging over discussions is the IMF's insistence on further hair cuts for bondholders. So we won't hold our breath.

Thorn Group ((TGA)) will post its interim result today.

Late breaking news: Moody's has downgraded French sovereign debt to Aa1 from Aaa.