Scoreboard: Greek hope

European sharemarkets rallied as the Greek government backpedalled on demands, while Wall Street surged as rising oil prices helped lift energy shares.

In US economic data factory orders fell 3.4 per cent in December -- the fifth consecutive fall. US home prices rose 5 per cent in December compared with a year ago according to CoreLogic. Home prices are still 13.4 per cent below the peak reached in April 2006.  

European shares rallied on Tuesday supported by improved sentiment in Greece. The Greek government ditched calls for a reduction in foreign debt and proposed ending a standoff with its creditors by swapping the debt for new growth-linked bonds. The Greek index rose by 11.3 per cent -- the biggest one-day gain in almost four years. Overall the FTSEurofirst index rose by 0.8 per cent while Spanish and Italian stocks both rose 2.6 per cent. The German Dax rose by 0.6 per cent and the UK FTSE rose by 1.3 per cent. Mining shares rose in London with BHP Billiton up by 5.0 per cent while Rio Tinto lifted by 3.9 per cent.

US sharemarkets rallied on Tuesday as the lift in the oil price boosted energy stocks. Eight of the 10 S&P sectors recorded gains. M&A activity also added to the rally. Office Depot surged (up 20 per cent) after reports that the company was in talks to merge with Staples (up 12 per cent). January car sales topped expectations buoyed by low gas prices and easy access to credit. Ford gained 2.5 per cent and GM rose 3 per cent.  At the close of trade, the Dow Jones was up by 303 points or 1.7 per cent. The S&P 500 index was up by 1.4 per cent and the Nasdaq was up by 51 points or 1.1 per cent.

US long-term treasury prices were weaker (yields higher) on Tuesday as the rally in equities supported sentiment. Expectations of a new debt deal for Greece also boosted risk appetite. US two-year yields rose by 4 points to 0.50 per cent while US 10-year yields were up by 11 points to 1.78 per cent.

Major currencies were firmer against the greenback in European and US trade on Tuesday. The Euro lifted from $US1.1315 to $US1.1530 and was near $US1.1490 in afternoon US trade. The Aussie dollar rose from lows near US76.25c to US78.35c and was near US77.85c in late US trade. And the Japanese yen weakened from 116.90 yen per US dollar to ¥117.70 and was near ¥117.50 in afternoon US trade.

World oil prices rallied for the fourth consecutive session. Traders said that the market was encouraged by BP's plans to cut capital expenditure by 13 per cent in 2015, alongside reductions announced by other oil majors. Brent crude rose by $US2.93, or 5.4 per cent, to $US57.68 a barrel while US Nymex crude rose by $US3.48, or 7 per cent, to $US53.05 a barrel.

Base metal prices mostly rose on Tuesday with the exception of Nickel (down 0.1 per cent). Copper rose by 3.5 per cent while the Aluminium price rose 1 per cent. Gold fell, with the Comex gold futures price down by $US16.60, or 1.3 per cent, to $US1,260.30 per ounce. Iron ore rose by US70c, or 1.1 per cent, on Tuesday to $US62 a tonne.

Ahead: In Australia, the performance of service index is released. In the US, ISM non-manufacturing is released.

Savanth Sebastian is an economist with CommSec.

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