Scoreboard: High expectations

European markets reached fresh seven-year highs on reports detailing the ECB's proposed bond buying package, while Wall Street wavered and the Bank of Canada shocked with a rate cut.

In US economic data, housing starts rose by 4.4 per cent to a 1.089 million annual rate in December, above forecasts for a result near 1.04 million. Chain store sales rose by 3 per cent in the latest week on a year ago, down from 3.8 per cent on the previous week. The weekly mortgage market index rose by 14.2 per cent with refinancing up 22.3 per cent while the purchase index fell by 2.5 per cent.

Bank of Canada cut its key policy rate by a quarter point to 0.75 per cent, believing that low oil prices are negative for the country.

European shares rose for the fifth day on Wednesday on suggestions that the European Central Bank will unveil a bond buying package of 50 billion euros per month. The FTSEurofirst 300 index rose by 0.6 per cent to seven-year highs with the German Dax up by 0.4 per cent to record highs and the UK FTSE lifted by 1.6 per cent. In London trade mining shares rose with BHP Billiton up by 2.5 per cent while Rio Tinto gained 1.4 per cent.

US sharemarkets drifted on Wednesday as investors digested earnings news and reports of a bond-buying stimulus program in the Euro zone. At the close of trade, the Dow Jones was up by 39 points or 0.2 per cent after being down 121 points at one stage. The S&P 500 index was up by 0.5 per cent and the Nasdaq was up by 12.6 points or 0.3 per cent.

US long-term treasuries fell on Wednesday (yields higher) on reports that the European Central Bank executive board has recommended a bond-buying programme of 50 billion euros a month. US two-year yields were steady near 0.503 per cent while US 10-year yields rose by 5 points to 1.844 per cent.

Major currencies fell against the greenback in European and US trade on Wednesday. The Euro rose from lows near $US1.1550 to highs near $US1.1660 but eased back to around $US1.1590 in afternoon US trade. The Aussie dollar fell from highs near US82.35c to lows around US80.80c and was near US80.90c in afternoon US trade. And the Japanese yen held between 117.19 yen per US dollar and ¥118.15 and was near ¥117.86 in afternoon US trade.

World oil prices rose on Wednesday on news that French oil major, Total SA, will cut spending on US shale oil production. Brent rose by $US1.04 or 2.2 per cent to $US49.03 a barrel while the US Nymex crude price rose by $US1.31 or 2.8 per cent to $US47.78 a barrel.

Base metal prices were higher by up to 1.9 per cent on the London Metal Exchange on Wednesday, with zinc the strongest while tin bucked the trend, down by 0.4 per cent. Gold eased from five-month highs on Wednesday, with the Comex gold futures price down by US50c an ounce to $US1,293.70 per ounce. Iron ore fell by US90c to $US66.50 a tonne on Wednesday.

Ahead: In Australia, new home sales and detailed employment data are released. The European Central Bank meets to decide policy. In the US, weekly data on unemployment claims are released together with the FHFA home price series.

Craig James is chief economist with CommSec.