RTTNews - The Australian stock market gained nearly 2% on Monday, led by resource stocks on higher commodity and oil prices in the international market. Chinese manufacturing data as well as a positive closing by Wall Street stocks on Friday lifted market sentiment.

In the U.S., the major indices continued their northward march for the second day on increasing hopes of recovery in the economy. A revised reading of the consumer sentiment report for May from Reuters and the University of Michigan came in at 68.7, higher than the previously reported reading of 67.9. The result was also higher than April's final level of 65.1. Analysts expected the survey to yield a reading of 68.0.

In a separate report, the Commerce Department said that gross domestic product for the first quarter contracted at a slower rate than previously estimated. As per the report, gross domestic product fell 5.7% in the first quarter compared to the advance estimate of a 6.1% decrease. Economists had been expecting the pace of contraction to be revised to 5.5%.

Optimism about the economy received a minor jolt when manufacturing data from the Chicago area continued to show a notable slowdown in the region. The ISM-Chicago said its index of activity in the manufacturing sector fell to 34.9 in May from 40.1 in April, with a reading below 50 indicating a contraction. Economists expected the index to edge up to a reading of 42.0.

Notwithstanding mixed reports on the economic front, the Dow closed up 96.53 points or 1.2% at 8500, the Nasdaq closed up 22.54 points or 1.3% at 1774, and the S&P 500 finished up 12.31 points or 1.4% at 919.

Taking cues from Wall Street, the All Ordinaries Index opened slightly higher at 3,820 compared to its previous close at 3,813. In early trading, the index slipped below the unchanged line briefly on short covering, but recovered smartly following the release of Chinese manufacturing report that showed an increase in manufacturing activity for the third straight month. The index ended the session at day's high of 3,888, registering a gain of 1.96% or 74.60 points. The benchmark S&P/ASX 200 Index followed a similar trend and ended up at 3,894, with a gain of 76.3 points, or 2.00%.

On the economic front, the Australian Bureau of Statistics revealed that retail sales were up a seasonally adjusted 0.3% in April compared to the previous month, coming in at A$19.35 billion. The increase was below expectations for a 0.5% monthly gain following the increase of 2.2% in March and the fall of 2.0% in February. In another report, the Statistics Bureau revealed that inventories declined by a seasonally adjusted 1.2% in the first quarter of 2009, following a 1.9% drop in the fourth quarter of 2008. On an annualized basis, inventories were down 1.1% during the first quarter.

Commodity stocks led the gains in the market. A measure of six commodities traded in London Metals Exchange rose 2.5% on Friday. While copper futures gained 2.7%, nickel prices rose 3.3%. BHP Billiton advanced 3.12%, Orica gained 3.57%, Oz Minerals added 2.86% and Rio Tinto rose 2.77%.

Crude oil prices ended $1.26 to $67.53 a barrel in Asian trading. Light crude oil price for July delivery closed at $66.31 in New York Mercantile Exchange on Friday, on increasing optimism about a recovery led by consumer spending.

Woodside Petroleum gained 1.55%, Santos advanced 1.71% and Oil Search soared 4.95%. In a statement, Woodside Petroleum revealed that it is planning to utilize the Port of Broom in Western Australia as a service hub for its Browse Basin LNG development.

In banking space, ANZ Bank gained 1.82%, Commonwealth Bank advanced 2.90%, National Australia Bank rose 2.27% and Westpac Banking added 0.37%. Macquarie Group soared 11.82% following the finalization of terms to acquire Canada-based global energy advisory firm Tristone Capital Global Inc.

Among gold stocks, Lihir Gold advanced 1.22%, and New crest Mining added 2.37%. However Sino Gold bucked the trend and shed 1.07%.

Retail stocks advanced on hopes of a revival in consumer spending. David Jones gained 4.99%, Harvey Norman advanced 2.05%, Coles owner Wesfarmers rose 4.50% and Woolworths added 0.20%.

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