Scoreboard: Europe euphoria

European shares rallied to their highest point in over five years while the US trade deficit shrunk on better than expected exports.

In US economic news, the US trade deficit narrowed by 12.9 per cent to $US34.3 billion – the smallest deficit in four years. Exports lifted by 0.9 per cent to a record high $US194.9 billion, largely driven by a record lift in petroleum exports. Imports fell by 1.4 per cent.

An Obama-backed bill to renew jobless benefits for 1.3 million Americans narrowly cleared the US Senate for consideration. The Senate may vote later this week on whether to approve the bill and send it to the Republican-led House of Representatives. If passed, the bill would extend the recently ended unemployment benefits for 3 months at the cost of $US6 billion. Unless the bill is renewed a further 2 million Americans are expected to lose their benefits in the first six months of 2014.   

European shares rallied on Tuesday to five and a half year highs as investors bet on an ongoing economic recovery in southern Europe. Spain's IBEX rose by 2.9 per cent supported by the Spanish banking sector. The FTSEurofirst 300 index rose by 0.9 per cent with the UK FTSE up by 0.4 per cent, and the German Dax rose by 0.8 per cent. Mining shares were mostly weaker with BHP Billiton shares flat in London trade while Rio Tinto fell by 1.6 per cent.

US share markets rallied on Tuesday following the upbeat trade data. All 10 S&P500 sectors were higher, led by the healthcare index (up 1.2p per cent) following broker upgrades. JP Morgan fell by 1.3 per cent after confirming it would pay more than $2 billion in penalties to settle charges of suspicious activity involving the Madoff Ponzi scheme. With just over an hour of trade, the Dow Jones was up by 107 points or 0.7 per cent while the S&P 500 was up 0.6 per cent and the Nasdaq rose by 37 points or 0.9 per cent.

US treasury prices rose on Tuesday (yields lower) after Boston Fed President Rosengren, said the central bank will reduce stimulus "only gradually". US 2 year fell by 1 point to 0.39 per cent while US 10 year yields fell by 3 points to 2.94 per cent.

The US dollar lifted against major currencies on Tuesday on the back of the narrowing trade deficit. The euro fell from highs around $US1.3650 to lows near $US1.3595 and was trading around US$1.3615 in afternoon US trade. The Aussie dollar fell from highs near US89.40c to lows near US88.95c, and held near US89.15c in late US trade. And the Japanese yen fell from highs near 104.25 yen per US dollar to lows near JPY104.70 and was trading near 104.45 in afternoon US trade.

World oil prices lifted on Tuesday as fresh concerns about Libyan output and fighting in Iraq helped prices rebound after straight declines. Brent crude rose by US31c or 0.3 per cent to US$107.43 a barrel while US Nymex crude rose by US24c or 0.3 per cent to US$93.67 a barrel. 

Base metal prices were mostly stronger on the London Metal Exchange on Tuesday, with the exception of Nickel (down 0.3 per cent) and lead (down 0.4 per cent). Gold futures fell for a second straight session on Tuesday. The Comex gold price fell by US$8.40 or 0.7 per cent at US$1,229.60 per ounce. The iron ore price fell by US$1 to US$133.80 a tonne.