In US economic news overnight, new home sales rose by 2.3 per cent in April to a 454,000 annual pace. The median sales price of a new home jumped 14.9 per cent from a year ago. US jobless claims fell by 23,000 to 340,000 last week, while US Markit flash manufacturing fell from 53.2 to 52.2 in May.
Meanwhile, a report by New York Federal Reserve staff economists expects US economic growth to rise to 3.25 per cent next year as the drag from tight fiscal policy fades. The labour market is likely to take a long time to recover, with unemployment averaging 7.35 per cent in the fourth quarter of this year. Inflation is expected to edge towards the Fed's 2 per cent goal.
Over in Europe, shares fell sharply with investors getting their first opportunity to react to Ben Bernanke's latest comments. In addition, the contraction in Chinese manufacturing hit commodities, and mining stocks were among the worst performers. The STOXX 600 Europe Basic Resources Index fell 3.4 per cent. The FTSEurofirst 300 index closed down 2.1 per cent and the Dax and UK FTSE also lost 2.1 per cent.
In London, BHP Billiton lost 2.9 per cent while Rio Tinto fell 4.3 per cent.
Back in the US, sharemarkets ended modestly weaker but off their session lows, with trading choppy ahead of the long weekend. Hewlett-Packard jumped more than 17 per cent to a 52-week high after raising its 2013 outlook. The Dow Jones closed down 13 points or 0.1 per cent after being down more than 120 points earlier in the session. The S&P 500 lost 0.3 per cent while the Nasdaq lost 3 points or 0.1 per cent.
US Treasuries rose (yields lower) after the Treasury department saw strong demand for its auction of $13 billion in inflation protected securities. Indirect bidders, including fund managers, bought 56.8 per cent of the bonds – a two-and-a-half-year high. US 2-year yields fell 1 point to 0.25 per cent and US 10-year yields fell 3 points to 2.02 per cent.
In the forex space, the US dollar fell against major currencies in overnight trade. The euro rose from lows near $US1.2825 to highs near $US1.2945 before ending US trade near $US1.2935. The Aussie dollar rose from lows near 96.05 to highs near 97.70 and ended US trade near 97.40. Meanwhile, the Japanese yen strengthened from ¥102.15 per US dollar to ¥100.95, ending US trade at ¥101.75.
In commodities, world crude oil prices recovered from early losses to close modestly weaker. Brent crude fell by US16 cents or 0.2 per cent to $US102.44 and US Nymex crude fell by US3 cents to $US94.25 a barrel.
Base metal prices were weaker in London trade. The surprising contraction in Chinese manufacturing added to fears the world's top consumer of metals was stalling. Copper lost 2.3 per cent but gold rallied on the back of a weaker US dollar, closing at a one-week high. The Comex June futures price rose by $US24.40 an ounce or 1.8 per cent to $US1392.80 per ounce. The iron ore price was unchanged at $US123.20 a tonne.
For today, we see no economic data locally. In the US we see durable goods orders.
Craig James is CommSec's chief economist. Business Spectator's Adam Carr is on leave.
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