MORNING REPORT
(7am AEDT)

US Federal Reserve Chairman Ben Bernanke has pledged to take further steps to support an economy that was ´´close to faltering´.´ Bernanke was providing testimony to the Joint Economic Committee.

US factory orders fell 0.2pct in August, close to expectations. Non-defence capital equipment excluding aircraft rose by 0.9pct. US chain store sales rose 4.1pct in the latest week on a year earlier. Sales fell 0.1pct in September from August.

France and Belgium have come to the rescue of banking conglomerate Dexia SA, creating a ´´bad bank´´ and providing financing guarantees.

European shares fell again on Tuesday on worries that the problems at Dexia could spread through the European financial system. The FTSEurofirst index fell by 2.7pct with the German Dax lower by 2.3pct while the UK FTSE lost 1.0pct.

US sharemarkets spectacularly rallied in the final 50 minutes of trade on Tuesday to close higher. Earlier, testimony from the Federal Reserve chief failed to boost investor sentiment. And shares in Apple fell by around 3pct on some disappointment with the release of the new iPhone 4S. After being down 200 points with 50 minutes to trade, the Dow closed higher by 153pts or 1.4pct with the S&P 500 up 2.2pct and the Nasdaq rose by 69 points or 3.0pct.

US treasuries eased on Tuesday (yields higher) as traders elected to take profits on safe-haven assets such as government bonds and gold. US 2yr yields were up 3pts to 0.26pct and US 10yr yields rose by 7pts to 1.83pct.

Major currencies were mixed against the US dollar over the European and US sessions on Tuesday. The Euro rose from lows near US$1.3145 to US$1.3310, ending the US session near US$1.3330. The Aussie dollar fell from highs around US95.40c to US93.95c, rebounding strongly in late trade to end the session near US95.60c. And the Japanese yen eased from 76.55 yen per US dollar to JPY76.95, ending US trade near JPY76.90.

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US crude oil prices fell to fresh 12-month lows on Tuesday in line with other commodities as investors continue to fret about the health of the global economy. Nymex crude oil fell by US$1.94 or 2.5pct to US$75.67 a barrel and London Brent crude fell by US$1.92 to US$99.79 a barrel

Base metal prices fell between 1.3-3.9pct on Tuesday, the exception being tin, up 2.4pct. And the Comex December gold price slumped by US$41.70 an ounce or 2.5pct in response to profit-taking, settling at US$1,616.00.

Ahead: In Australia, retail trade figures and the Performance of Services index are released. In the US, the ISM services index is released together with the ADP employment index and Challenger job lay-off index.

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