Overnight US stocks rallied and commodity gained after the Federal Reserve's chairman backed more government spending to help the economy and credit market conditions showed further signs of improvement.

Wall Street closed weaker on Friday with fluctuations that has become a standard in recent weeks and further turmoil overseas is likely to prompt fresh slides for Australia markets. Last Friday the Australia benchmark S&P/ASX 200 index lost 42.6 points, or 1.1%, to 3970.8, after rising as much as 3.4% in the morning. The broader All Ordinaries lost 43.3 points, or 1.1% to 3944.8.

Overnight Wall Street gained in a late rally early this morning, as investors snapped up beaten-down shares after Wall Street's worst day since the 1987, and consumer companies gained as the price of oil fell.

Overnight the Wall St took a dive on grim economic news pointing to weaker growth and profits in the year ahead, with Dow Jones Industrial Average fell 7.87% for its biggest percentage loss since October of 1987. The US Federal Reserve's snapshot of business conditions said economic activity was weaker across all 12 districts in September and consumer spending fell in most regions.

Yesterday, the Australian share market ended almost 4% higher in its best two-day gain since 1975, adding $42 billion to the value of stocks listed in the All Ordinaries index. As confidence was buoyed, investors rushed back to the big miners and banks and pushed the two-day rally to 9% in total. The benchmark S&P/ASX200 index was up 154.5 points, or 3.7%, at 4335.2, while the broader All Ordinaries index gained 169.6 points, or 4.09%, to 4311.5.

The Australian share market ended a horror week on Friday, down more than 8% in a session that wiped A$106 billion from the value of stocks on the bourse. Last Friday the S&P/ASX200 index fell 8.3% in mid-afternoon trading, losing 360.2 points to plunge to 3960.7, the biggest one-day loss for the ASX200 index. Its affiliate, the All Ordinaries index, had its worst day since the October 1987 crash, losing 8.2%, or 351.9 points, to 3939.4. The ASX200 lost almost 16% for the week, about three times the amount it lost in the week after the September 11 attacks in 2001.

Yesterday, the Australian share market closed at a fresh three-year low, plummeting 5% as the continuing fallout from the global credit crisis wiped A$56 billion from the value of stocks. The benchmark S&P/ASX-200 share index lost 5% yesterday, the biggest one-day fall for both major stock exchange indices since January 22 this year. RBA has said the Australian economy is slowing faster than originally anticipated. Analysts said the sell-off is totally unemotional. Markets across Asia also slumped with 5-10% drop in Tokyo, Hong Kong, Singapore, Mumbai and Jakarta.

Overnight Wall Street closed more than 5% down on growing fears that the spiralling credit crisis would drag the US economy into a recession. While the global financial crisis deepened, RBA cut the interest rate by a full percentage point, double the amount that had been expected.

The Australia share market has fallen sharply with 3pc in minutes of the start of trading this morning, after Wall St tumbled overnight. The benchmark S&P/ASX200 index was down as much as 3.3%, or 148.5 points, to 4391.9 in early trading.

Yesterday the Australian share market closed higher with most of the upside in the financial sector, after news that American billionaire Warren Buffet would buy a $US5 billion slice of investment bank Goldman Sachs. As Buffet is a long term investor with a good record of investing at the right time, people speculate that potentially it's the bottom of financial stocks.