In US economic data, retail sales fell by 0.9 per cent in December, well below expectations for a 0.1 per cent fall. Excluding gas stations and autos, sales were down 0.3 per cent. Import prices fell by 2.5 per cent in December and export prices fell by 1.2 per cent.
The Federal Reserve Beige Book reported that manufacturing and consumer spending expanded in most districts in November and December.
European shares fell on Wednesday. Investors fretted that US retail sales were weak in December and that the World Bank had trimmed global growth forecasts for 2015. The World Bank tips 3.0 per cent economic growth this year, down from the June 2014 forecast of 3.4 per cent. Mining shares fell in line with lower metal prices. Overall the FTSEurofirst 300 index fell by 1.6 per cent with the German Dax down by 1.3 per cent and the UK FTSE slumped by 2.4 per cent. In London trade shares in BHP Billiton fell by 5.3 per cent while Rio Tinto lost 4.0 per cent.
US sharemarkets fell on Wednesday but pared losses after the Beige Book release. Retail sales data disappointed, dragging retail stocks lower. Weaker metal prices weighed on miners. And shares in JP Morgan Chase fell by 5.3 per cent after disappointing earnings results. After being down by 349 points, the Dow Jones ended lower by 187 points or 1.1 per cent. The S&P 500 index fell by 0.6 per cent and the Nasdaq was down by 22 points or 0.5 per cent.
US treasuries were firmer on Wednesday (yields lower) as weak US economic data and downbeat World Bank forecasts drove investors away from equities and to government bonds. But there was average demand for a $13 billion auction of 30-year bonds. US two-year yields fell by 5 points to 0.49 per cent while US 10-year yields fell by 6 points to 1.83 per cent.
Major currencies were mixed against the greenback in European and US trade on Wednesday. The Euro rose from lows near $US1.1725 to highs near $US1.1845 and was around $US1.1780 in afternoon US trade. The Aussie dollar rose from lows near US80.70c to highs around US81.75c and was near US81.45c in afternoon US trade. And the Japanese yen lifted from 117.30 yen per US dollar to ¥116.04 and was near ¥117.23 in afternoon US trade.
World oil prices lifted late in the session on bargain hunting in response to the Federal Reserve Beige Book. Brent crude rose by $US1.62 or 3.5 per cent to $US48.21 a barrel while the US Nymex crude price rose by $US2,59 or 5.6 per cent to $US48.48 a barrel.
Base metal prices were lower by up to 5.4 per cent on the London Metal Exchange on Wednesday with copper leading the declines, although aluminium did best, down just 0.8 per cent. Gold rose, with the Comex gold futures price up by US10c an ounce or less than 0.1 per cent to $US1,234.50 per ounce. Iron ore fell by US10c to $US67.80 a tonne on Wednesday.
Ahead: In Australia, monthly labour market data is released along with dwelling starts. In the US, weekly claims for unemployment insurance is released along with producer prices and the Philadelphia Federal Reserve survey.
Craig James is chief economist at CommSec.