SCOREBOARD: American progress

The Senate passes a budget compromise deal, while US manufacturing gets a booster.

The US Senate has approved a bill to avert the so-called "fiscal cliff" issue, which the House of Representatives is expected to vote on later on Tuesday.

Meanwhile, the US Dallas Federal Reserve manufacturing index rose from minus 2.8 points to 6.8 points in December.

The Chinese HSBC Purchasing Managers index rose from 50.9 to 51.5 in December but the National Bureau of Statistics measure of the PMI was unchanged at 50.6.

European shares closed higher on Monday in thin trade. Reuters noted that "French, Dutch, Spanish and UK markets only traded for half the session ahead of the New Year Holiday, while those in Germany, Italy, Austria, Denmark, Norway, Sweden and Switzerland remained closed." The benchmark FTSEurofirst 300 index rose by 0.3 per cent on Monday and rose 13 per cent over 2012. The UK FTSE was down by 0.5 per cent on Monday and rose 5.8 per cent over 2013. Miners fell in London trade on Monday with Rio Tinto and BHP Billiton both down 0.7 per cent. The Indian sharemarket was one of the only markets to trade on Tuesday, rising 0.8 per cent.

US sharemarkets rose on Monday on optimism that Congressional leaders would successfully reach agreement on budget talks. The Dow Jones rose by 166 points or 1.3 per cent, with the S&P 500 up by 1.7 per cent while the Nasdaq lifted 59 points or 2 per cent. For the month, the Dow rose 0.6 per cent, the S&P 500 lifted 0.7 per cent and the Nasdaq edged 0.3 per cent higher. Over the year the Dow rose by 7.2 per cent, the S&P 500 rose 13.4 per cent and the Nasdaq rose 15.9 per cent.

US long-term treasuries fell on Monday (yields higher) as investors unwound safe-haven positions in expectation of a budget deal being secured. US 2-year yields fell by 1 points to 0.25 per cent and US 10-year yields rose by 4 points to 1.76 per cent. Over 2012, US 10-year bond yields fell by 12 points.

The Euro and commodity currencies have lifted against the US dollar on optimism about a US budget deal. The Euro rose from $US1.3175 to $US1.3225 on New Year's Eve, ended US trade at $US1.3220 and now stands at $US1.3185. The Aussie dollar lifted from US103.65 cents to US104.05 cents at the US close on New Year's Eve. The Aussie lifted to US104.43 cents in Middle East trade on Tuesday and now stands at US103.95 cents. And the Japanese yen eased from ¥85.97 per US dollar to ¥86.70 at the US close on New Year's Eve and now stands at ¥86.75.

World crude oil prices rose on Monday on hopes for a positive end to US budget negotiations. Brent crude rose by US49 cents to $US111.11 and Nymex crude rose by $US1.02 to $US91.82 a barrel. Over the year Brent rose by 3.5 per cent but Nymex lost 7.1 per cent.

Base metal prices generally rose on the London Metals Exchange on Monday. Zinc led the way, up 1.4 per cent, but nickel lost 0.8 per cent and lead lost 0.1 per cent. The gold price rose on Monday, with the Comex gold futures price up by $19.90 or 1.2 per cent to $US1,675.80 per ounce. Over the year, gold rose by 6.1 per cent – its 12th straight year of gains. And the spot iron ore price rose $US5.50 or 3.8 per cent on Monday to $US144.90 a tonne.

Looking to the day ahead, in Australia, the Performance of Manufacturing index is released. In the US, the ISM manufacturing index is released together with construction spending and weekly chain store sales data.

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