In US economic data, new home sales fell by 2.4 per cent in July to a four-month low. New home sales are up 12.3 per cent on a year ago. A lift in the stock of properties on the market and slower price gains should help stimulate demand in the months ahead. The Markit Services Purchasing Managers Index dipped from 60.8 to 58.5 in July.
European shares rallied on Monday on growing speculation that the ECB would move to boost growth if inflation slows further. Eurozone investors got their first opportunity to react to Mario Draghi's comments on Friday, which reiterated the ECB's commitment to do whatever it takes to foster stronger growth. UK markets were closed for the Summer Bank Holiday. The FTSEurofirst 300 index rose by 1.1 per cent with the German Dax down by 0.7 per cent.
US sharemarkets rose on Monday with the S&P 500 briefly lifting above 2,000 points for the first time. Bio techs and financial stocks lifted the benchmark index to a record high. InterMune shares surged 35 per cent and helped lift the bio tech sector after it agreed to be acquired by Roche Holding AG for $US8.3 billion in cash. In further M&A activity Burger King (up 20 per cent) was in talks to acquire Canadian coffee and doughnut chain Tim Hortons (up 21 per cent) in a deal that would be structured to move Burger King's domicile to Canada, which has lower overall corporate taxes. The Dow Jones index rose by 76 points or 0.4 per cent with the S&P 500 index up by 0.5 per cent while the Nasdaq actually gained almost 19 points or 0.4 per cent.
US treasury prices rose slightly on Monday (yields lower) in light trade. The lift in prices was in line with the rally in European bonds on expectations the ECB will look at further stimulus measures. Weaker German sentiment and French political issues increased safety bid. US two-year yields fell by 1 point to 0.49 per cent while US 10-year yields fell by 2 points to 2.39 per cent.
Major currencies ended weaker against the US dollar after European and US sessions on Monday. The euro fell from highs near $US1.3210 to around $US1.3185, before ending US trade near $US1.3190. The Aussie dollar eased from highs near US93.25c to lows near US92.90c ending the US session near its lows. And the Japanese yen eased from ¥104.25 per US dollar to ¥103.85, ending US trade near ¥103.95.
World oil prices were mixed on Monday as geopolitical tensions in Ukraine and Libya offset ample supplies weaker data out of the US. Brent crude rose by US36c or 0.4 per cent to $US102.65 a barrel and the US Nymex price eased by US30c a barrel or 0.3 per cent to $US93.26 a barrel.
Base metals did not trade due to the UK holiday. Gold prices fell on Monday with the Comex gold futures quote down by $US1.30 or 0.1 per cent to $US1,278.90 per ounce. Iron ore fell by US90c or 1.0 per cent on Monday to $US89.20 a tonne.
Ahead: In Australia, no major economic data is scheduled. In the US, durable goods orders and consumer confidence figures are released.
Craig James is chief economist of CommSec.