By Greg Peel

The Dow closed up 42 points, or 0.3%, while the S&P gained 0.1% to 1541, but the Nasdaq slipped slightly.

Australia's December quarter GDP growth rate of 0.6% was either on or slightly below expectation depending on whose forecast survey one references. The 3.1% growth rate for 2012 was bolstered by an upward revision to the September quarter result to 0.7% from 0.5%, which suggests the Australian economy slowed in the December quarter (unless December is also later revised). The RBA nevertheless believes 18 months of rate cuts are beginning to work, hence the cash rate has been kept on hold.

Alarmingly, private investment posted a poor result although this was attributed to the Victorian desal plant changing hands from private to public ownership in the quarter and thus also explains a lumpy rise in government spending. Either way, private sector investment remains muted and household consumption also disappointed in the numbers. The saviour was exports of iron ore and coal, and December saw a surge in these numbers, which is not continuing into March.

Resource sector capital expenditure will peak this year and with commodity prices weak, exports are not likely to offset. Unless the non-resource economy can show real signs of a pick-up we will be seeing more rate cuts, but will they have any effect?

The most disappointing aspect of the Fed's Beige Book anecdotal survey, released last night, is the persistent failure of US private sector lending to grow. The central bank has pumped and pumped and pumped money into the economy via the banks but that's where the bucks have stopped. US December quarter economic growth was basically zero. In the US, as in Australia, banks lend to anyone with a pulse at the top of the market and only to the safest of credit risks at the bottom. If one wants to lay blame for boom and bust cycles, one need go no further than banks. US banks are competing to lend only to quality borrowers.

US bank share prices have been rocketing though, given all that cash they're hoarding. The Dow has hit a new all-time high, and house prices in Las Vegas are now up 100% from their trough. The Bank of Canada last night cited persistent low CPI inflation as reason not to raise its cash rate from 1.0% as expected. The eurozone's December quarter GDP was confirmed in a revision last night at 0.6% contraction, for 0.9% contraction in 2012. The ECB is expected to announce some sort of further easing tonight, as is the Bank of England given a weak UK economy. Japan is embarking on its most ambitious stimulus program in twenty years. China will increase fiscal stimulus by 50% this year. Across the globe, CPI inflation is stagnant, but asset price inflation is rampant. Have we seen this movie before?

At least US corporate earnings are growing. House prices are recovering after a very big fall. In Australia, house prices are rising modestly but on average never fell, household debt levels remain in record territory, and while Australia's share price rally has not yet taken us anywhere near the all-time high, the rally has continued even as corporate earnings are falling. All hail the search for yield in a low interest rate environment. But dividends are paid from earnings.

Last night the US ADP private sector survey showed an addition of 198,000 new jobs last month, exceeding expectations of 175,000. January factory orders fell on face value but taking out aircraft leaves a 1.2% increase. These numbers ensured the Dow held on to new highs and pushed higher, although it was a rock and roll session.

Strong US data also sent the US dollar index higher, up 0.5% to 82.48. Yet gold rose US$1581.50/oz. Gold may have fallen a long way from its peak, and ETF outflows continue, but what is gold telling us in rising in defiance of the dollar? That it's cheap with the US debt ceiling deadline approaching in May? The Aussie is slightly lower at US$1.0238.

Base metals posted a standard reaction to the stronger dollar, falling around 1% across the board.