MORNING REPORT(8.00am AEDT)

Italy successfully sold 7 billion euros of bonds at an auction on Thursday with the yield on the benchmark 10-year bonds at 6.98pct, well off the highs of 7.56pct set a month ago. Italian Prime Minister Mario Monti was cautious: ´´Auctions held yesterday and today went rather well, this is encouraging but the financial turbulence absolutely isn´t over.´´

New claims for unemployment insurance in the US rose by 15,000 in the latest week to 381,000. But the four-week average of claims hit a 3-1/2 year low. The Chicago purchasing managers index eased from 62.6 to 62.5 in December but the result was well above the forecast of 61.0. And the pending home sales index rose 7.3pct to 100.1 in November. Economists had tipped a 2pct rise.

European shares rose on Thursday in response to a favourable Italian bond auction and encouraging US economic data. The FTSEurofirst index rose by 1pct with the UK FTSE up 1.1pct and German Dax up 1.3pct.

US shares posted firm gains in thin trade on Thursday. Economic data was stronger than expected while the Italian bond auction was successfully completed. Shares in Yahoo rose by 2.7pct on speculation that the Alibaba Group could make a bid for all of the internet search firm. At the close of trade, the Dow Jones was higher by 135 points or 1.1pct. The S&P 500 was up 1.1pct, and the Nasdaq was up by 24 points or 0.9pct.

US treasury prices rose in afternoon trade on Thursday (yields lower) as investors continued to embrace US government bonds - one of the best performing asset classes in 2011. US 2yr yields were steady at 0.27pct and US 10yr yields fell by 2pts to 1.90pct.

The US dollar eased against major currencies as investors again embraced riskier assets such as shares and commodities. The Euro rose from lows near US$1.2860 to around US$1.2960 and was near the highs US trade. The Aussie dollar rose from lows around US100.45c to near US101.40c, and was around US101.35c in late US trade. And the Japanese yen lifted from 77.87 yen per US dollar to JPY77.66, and was near JPY77.60 in late US trade.

World crude oil prices rose on Thursday. The US dollar was weaker, US economic data was positive, European and US sharemarkets rose and Iran continued its naval exercises in the Strait of Hormuz. The only offsetting factor was a sharp rise in US crude stockpiles last week. Nymex crude oil rose by US29c to US$99.65 a barrel and London Brent crude rose by US45c to US$108.01 a barrel.

Base metal prices were mixed on the London Metals Exchange on Thursday. Aluminium and copper fell around 0.5pct but other metals rose between 1-2pct. But the gold price fell for the sixth straight session with the Comex February gold price lower by US$23.20 or 1.5pct to a five month low of US$1,540.90 an ounce.

Ahead: In Australia, private sector credit data and the RP Data/Rismark home value index are released. In the US, the ISM manufacturing gauge for New York is released