SCOREBOARD: Fiscal miff

Disappointing retail sales and lack of progress on the fiscal cliff boosted America's bid for safe-haven assets overnight.

The US Richmond Fed manufacturing composite index eased overnight, from 9 to 5 in December, while the forward looking new orders index ticked down from 11 to 10. But the S&P/Case Schiller composite index of 20 metropolitan areas gained 0.7 per cent in October – stronger than the 0.5 per cent rise forecast by economists. Prices across the 20 cities rose by 4.3 per cent over the year.

Across the Atlantic, European shares were closed on Wednesday for the Christmas break. On Monday – the last trading session before Christmas – volumes had been light as investors waited on a outcome to the US budgetary concerns. The benchmark FTSEurofirst 300 index lost 0.1 per cent on Tuesday while the UK FTSE rose 0.2 per cent and Germany's Dax lost 0.5 per cent. In London, Rio Tinto gained 0.5 per cent and BHP Billiton rose 0.1 per cent.

US stocks fell overnight, dragged lower by retail stocks after a weak holiday shopping period. According to data from MasterCard Advisors SpendingPulse, holiday-related sales rose by 0.7 per cent from Oct 28 to Dec 24, compared with a 2 per cent increase last year. The Morgan Stanley retail index fell 1.8 per cent. Volume was light in the holiday-shortened week. With just over an hour of trade the Dow Jones was down 25 points, or 0.2 per cent, with the S&P 500 lower by 0.4 per cent while the Nasdaq fell 18 points or 0.6 per cent.

Meanwhile, US treasuries rose (yields lower) as the bid for safe-haven assets increased following the lack of progress toward a budget deal in Washington and disappointing holiday retail sales. US 2-year yields fell by 1 point to 0.27 per cent, while US 10-year yields fell 2 points to 1.758 per cent.

The Japanese yen fell to a 20-month low against the US dollar on expectations that Japan's new prime minster will pursue drastic stimulus policies to drive growth. The euro rose from lows near $US1.3175 to highs of $US1.3245, and held near $US1.3220 in late US trade. The Aussie dollar fell from highs near 103.85 cents to lows near 103.40 cents and held near 103.65 cents in late US trade. And the Japanese yen eased from 85.20 yen per US dollar to 85.70, and was near 85.60 in late US trade.

World crude oil prices rose sharply on Wednesday, as technical buying fuelled an year-end rally. Prices have now broken through the 100-day moving average for the first time since October. Brent crude rose by $US1.76, or 1.6 per cent, to $US108.97 while Nymex crude rose by $US2.37, or 2.7 per cent, to $US90.98 a barrel – a two-month high.

Elsewhere, base metal prices were mostly weaker on the London Metals Exchange, with the exception of lead and tin. Traders continued to weigh up the Chinese recovery against the potential US fiscal crisis. The gold price edged higher as efforts to revive US budget talks were in the spotlight. Comex gold futures rose by $1.20 to $US1,660.70 per ounce. And the spot iron ore price was unchanged at $US135.40 a tonne.

Looking to the day ahead, new home sales figures are released in both Australia and the US.

Craig James is CommSec's chief economist. Adam Carr is on leave, returning January 7.

See Business Spectator's glossary for definitions of technical terms used in SCOREBOARD articles.

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