From Craig James, Commsec Chief Economist

MORNING REPORT (8am AEDT)

US industrial production rose by 0.7pct in October, well above forecasts centred on a gain of 0.4pct. US consumer prices fell by 0.1pct with core prices (excludes food and energy) up 0.1pct. Both results were broadly in line with forecasts.

Also in the US a key gauge of home-builder sentiment - the NAHB housing market - index lifted from +17 to an 18-month high of +20 in November. And capital inflows into the US totalled US$57.4 billion in September, down from inflows of US$89.3bn in August and compared with outflows of US$52.6bn in July.

European shares were mixed on Wednesday. Investors were encouraged by the appointment of a new technocrat government in Italy and firmer US economic data but were still focussed on rising sovereign bond yields. The FTSEurofirst index was flat with the French CAC up 0.5pct, but the German Dax eased 0.3pct while the UK FTSE lost 0.2pct.

US sharemarkets fell sharply at the start of trade, clawed back losses but then sold off in the last 50 minutes of trade after a warning by Fitch Ratings about the contagion risk of Europe on the ratings of US banks. The Dow Jones fell as much as 139pts in the morning, pushed into positive territory but sold off in late trade. The Dow Jones closed lower by 190pts or 1.6pct. The S&P 500 was down 1.7pct and the Nasdaq was lower by 46pts or 1.7pct.

US long-term treasuries rose on Wednesday (yields lower) after the warning by Fitch Ratings. US 2yr yields were steady at 0.25pct and US 10yr yields fell 5pts to 2.00pct.

The euro and commodity currencies eased from highs against the greenback during late European trade, recovered ground during US trade but sold off after the Fitch warning. The Euro rose from lows near US$1.3430 to near US$1.3555 and was near US$1.3470 in late US trade. The Aussie dollar lifted from lows near US100.60c to US101.80c, and was near US100.80c in late US trade. And the Japanese yen traded between 76.85 yen per US dollar to JPY77.05, and was near JPY77.00 in late US trade.

US crude oil prices rose on Wednesday in response to a proposal to reverse the Seaway pipeline to reduce high inventories at the key delivery point in Cushing, Oklahoma. Enbridge and Enterprise Products Partners said they plan to reverse the lines flow to send crude from Cushing to the Texas coast. The Nymex crude oil price rose by US$3.22 or 3.2pct to US$102.59 a barrel but London Brent crude fell by US30c to US$111.88 a barrel.

Base metal prices rose between 0.6-3.6pct on the London Metal Exchange on Wednesday in response to firmer US economic data. Nickel, zinc and tin were the best performers. But the gold price eased as investors trimmed demand for safe-haven assets. The Comex December gold price fell by US$6.90 an ounce or 0.4pct to US$1,774.30.

Ahead: In Australia, the Reserve Bank Governor gives opening remarks to a conference. Average weekly earnings figures are released. In the US, data on weekly unemployment claims, housing starts and the Philadelphia Federal Reserve survey are released.