In US economic data, the New York ISM index rose from 663.4 to 673.8 in December.
European shares slumped on Monday on worries about the future of Greece within the Eurozone. A report in the German newspaper, Der Spiegel, suggested that German officials believe the euro currency bloc would cope should Greece decide to exit. There were also worries about possible deflation in Europe. The FTSEurofirst 300 index fell by 2.3 per cent, with the German Dax down by 3.0 per cent and the UK FTSE down by 2.0 per cent. The biggest declines occurred in southern Europe with the Italian sharemarket down by 4.9 per cent, the Spanish market lower by 3.5 per cent and the Greek market down 5.6 per cent. In London trade shares in BHP Billiton lost 4.5 per cent, while Rio Tinto fell by 2.9 per cent.
US sharemarkets followed European bourses lower on political and economic uncertainties in Europe. The energy sector was amongst the hardest hit, with the oil price slumping to fresh 5½ year lows. At the close of trade, the Dow Jones was lower by 331 points or 1.9 per cent, the S&P 500 index was down by 1.8 per cent and the Nasdaq was down by 74 points or 1.6 per cent.
US longer-term treasuries rose sharply on Monday (yields lower) as investors flocked to safe-haven assets like government bonds and gold. Investors also await the release on Wednesday of minutes of the last Federal Reserve meeting. US two-year yields fell by 2 points to 0.665 per cent while US 10-year yields fell by 8 points to 2.039 per cent.
Major currencies were mixed against the greenback in European and US trade on Monday. The euro fell from highs near $US1.1975 to lows near $US1.1890, and was around $US1.1940 in afternoon US trade. The Australian dollar rose from lows near US80.35c to highs around US81.05c and was trading near US80.90c in afternoon US trade. And the Japanese yen lifted from 120.60 yen per US dollar to ¥119.40 before settling near ¥119.70 in afternoon US trade.
World oil prices fell on Monday on fears of weaker demand emanating from the political jitters in Europe. Supply continues to rise with data showing that Russia's oil output hit a post-Soviet high last year, and Iraq's oil exports in December were the highest since 1980.Brent crude fell by $US3.31 or 5.9 per cent to $US53.11 a barrel while the US Nymex crude price fell by $US2.65 or 5.0 per cent to $US50.04 a barrel
Base metal prices fell by up to 1.7 per cent on the London Metal Exchange on Monday, with copper leading the declines. But nickel bucked the trend, up by 2.5 per cent. Gold rose on Monday as investors embraced safe-haven assets. The Comex gold futures price was up by $US17.80 an ounce, or 1.5 per cent to $US1,204.00 per ounce. Iron ore fell by US40c to $US70.80 a tonne on Monday.
Ahead: In Australia, weekly consumer confidence data is released with international trade figures. In China, the HSBC services index is released. In the US, the ISM services index is released together with factory orders.
Craig James is chief economist at CommSec.
