By Greg Peel

The Dow rose 322 points or 3.0% while the S&P gained 3.4% to 1162 and the Nasdaq jumped 4.3%.

Around 2pm local time last night a magnitude 5.9 earthquake struck in Virginia, some 80 miles west of Washington DC. Minor damage was reported and precautionary evacuations in New York's financial district were brief. There were no fatalities. There was some concern with regards to a string of nuclear reactors in the region, the nearest only 15 miles from the epicentre, but they switched automatically to emergency power and no damage was reported.

One wonders what the market response might have been had last night been a day Wall Street had decided to tank rather than decided to surge. Stocks had been running hard up to 2pm and the dip on the earthquake news (and a shaky floor on the NYSE) was also only brief, with insurance companies and nuclear power companies falling into holes before recovering. The quake nevertheless dominated last night's US financial news.

So why the rally? One might cite three reasons: the rally yesterday in Asia; no new news out of Europe; and building expectations ahead of Jackson Hole. One might also add, however, a short-covering rush in a session of relatively light volume.

Yesterday's 2% rally in Australia began with some strong corporate earnings reports, kicked on with a "positive" PMI estimate from China, and accelerated on the first real sign the RBA will not be raising rates anytime soon.

There have been some duds among the results in the local season so far but on average the scorecard to date has been a solid one. Given the market has been sold so far down to this point there has already been plenty of "bad news" built into prices, and expectations of reduced earnings forecasts, so downside from here on weak results is limited and upside more available, particularly for the bargain hunters.

HSBC's "flash" estimate of China's August manufacturing PMI came in at 49.8, which is a shade into contraction but implies an increased rate of growth from July's reading of 49.3. The meter is not exactly flailing about, but a potential bottom in Chinese contraction is good news for a global market in a very nervous state over what's going on in the developed world. The last thing we need is a weak China as well, so the HSBC result was well received in Australia and in Chinese and other Asian markets.

The last time we heard officially from the RBA was before the US downgrade and so before the extreme volatility in markets experienced this month. Prior to the turmoil RBA rhetoric remained very much to the hawkish side, with the one caveat of holding off to see what transpired in Europe. But yesterday in a scheduled speech deputy governor Ric Battelino spoke to the recent turmoil and drew comparisons to similar European scares this time last year.

Yes, even the RBA is having a Groundhog Year.

"An important issue ahead of us," suggested Battelino, "will be to assess what impact this is likely to have on global and domestic economic activity, commodity prices and inflation. As yet, there is little information on which to base such judgements."