Scoreboard: Iron ore misery

Iron ore prices dropped to a new five-year low, while Wall Street weakened following the release of Federal Reserve minutes.

In the US, housing starts fell by 2.8 per cent to a 1.009 million annual rate in October. Analysts had tipped a result near 1.025 million. But building permits were stronger than expected, up 4.8 per cent. The mortgage market index rose by 5.2 per cent in the latest week. And there were net capital outflows totalling $US55.6m in September.

Minutes from the US Federal Reserve meeting held on October 28/29 showed members spent time debating the central bank's communication strategy on interest rates and long-run goals. Reuters noted that "Among policymakers there was 'widespread agreement' that inflation moderately below 2 percent is just as costly as inflation moderately above that level."

European shares were mixed on Wednesday ahead of the release of the US Federal Reserve meeting minutes. The FTSEurofirst 300 index was flat with the UK FTSE down by 0.2 per cent while the German Dax rose by 0.2 per cent. In London trade shares in BHP Billiton and Rio Tinto both lost 2.1 per cent.

US sharemarkets were modestly weaker on Wednesday. Significant snowstorms served to crimp trading volumes while investors dissected the latest economic data and Fed minutes. At the close of trade the Dow Jones was down by 2 points or less than 0.1 per cent while the S&P 500 index was down by 0.2 per cent and the Nasdaq was lower by just over 26 points or 0.6 per cent.

US treasuries eased on Wednesday (yields higher) as investors digested the latest economic data and minutes from the last Federal Reserve meeting. US two-year yields rose by 1 point to 0.525 per cent while US 10-year yields rose by 3 points to 2.354 per cent.

The US dollar was mixed against major currencies on Wednesday. The Euro rose from lows near $US1.2515 to highs near $US1.2580, and was around $US1.2545 in late US trade. The Aussie dollar fell from highs near US86.75c to around US86.05c, before edging up to US86.15c in late US trade. The Japanese yen eased from 117.22 yen per US dollar to ¥117.91 and was near the weakest levels in late US trade.

World oil prices fell in late trade on Wednesday after traders reacted to the Federal Reserve minutes. Oil prices had risen earlier in the day on statements by Libya that OPEC will cut production quotas next week. Brent crude fell by US37c or 0.5 per cent to $US78.10 a barrel while the US Nymex crude price fell by US3 cents to $US74.58 a barrel.

Base metal prices rose on the London Metal Exchange on Wednesday. Nickel rose 3.2 per cent but other metals only lifted up to 0.7 per cent. Gold fell on Wednesday with the Comex gold futures price down by $US3.20 an ounce or 0.3 per cent to $US1,193.90 per ounce. Iron ore fell by $US2.10 a tonne or 3 per cent to $US70.00 a tonne.

Ahead: In Australia, monthly data on unemployment beneficiaries is released. In the US, data on consumer prices is released with weekly jobless claims, existing homes, the leading index and the Philadelphia Federal Reserve index.

Craig James is chief economist with CommSec.

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