In US economic data, the ISM services index rose from 56.0 to an 8.5-year high of 58.7 in July. Factory orders rose by 1.1 per cent in June, above forecasts tipping a 0.6 per cent gain. And chain store sales rose by 4.6 per cent on a year ago, up from the 3 per cent annual gain recorded the previous week.
European shares rose modestly on Tuesday in response to encouraging earnings results and merger and acquisition news. Shares in Deutsche Post rose 2.2 per cent in response to its earnings result. The FTSEurofirst 300 index rose by 0.3 per cent with the German Dax up by 0.4 per cent while the UK FTSE edged 0.1 per cent higher. Australia's major miners were lower in London trade with shares in BHP Billiton largely flat while Rio Tinto lost 0.3 per cent.
US sharemarkets fell on Tuesday on geopolitical risks. In afternoon trade Bloomberg quoted the Polish Foreign Minister as saying that Russia had boosted its military presence on the Ukraine border. Shares in oil producers also fell as plentiful global supplies of crude put downward pressure on prices. Shares in Target lost 4.4 per cent after cutting its profit outlook. After being down by 200 points at one stage, the Dow Jones index ended lower by 140 points or 0.8 per cent with the S&P 500 index down by 1 per cent while the Nasdaq lost 31 points or 0.7 per cent
US treasury prices were little changed on Tuesday as firm economic data balanced geopolitical fears. US 2-year yields fell by 1 point to 0.464 per cent while US 10-year yields were flat at 2.485 per cent.
The euro and commodity currencies eased against the US dollar over European and US sessions on Tuesday as investors adopted a 'safe-haven' posture. The euro fell from highs near $US1.3425 to around $US1.3360, before ending US trade near $US1.3375. The Australian dollar fell from highs near US93.40c to lows near US92.90c, ending the US session near US93 cents. And the Japanese yen eased from 102.45 yen per US dollar to JPY102.90, ending US trade near JPY102.57.
World oil prices fell on Tuesday as investors fretted about high global supplies of crude and soft demand. Fears about supply disruptions in the Middle East, eastern Europe and Africa continue to recede. Brent crude fell by US80 cents or 0.8 per cent to $US104.61 a barrel and the US Nymex price fell by US91 cents a barrel to $US97.38 a barrel.
Base metal prices fell by up to 1.7 per cent on Tuesday with lead down the most. But tin bucked the trend, up by 0.4 per cent. Gold prices fell on Tuesday as the US dollar rose with the December Comex gold futures quote down by $US3.60 or 0.3 per cent to $US1,285.30 per ounce. But in after-hours trade the spot price was near $US1,287.70 an ounce. Iron ore rose by US10c on Tuesday or 0.1 per cent to $US95.50 a tonne.
Ahead: In Australia, no major economic data is scheduled. In the US, trade data is released together with weekly housing finance data.
Craig James is chief economist at Commsec.