US housing starts fell by 5.0pct to a 549,000 annual rate in June, below forecasts centred on a result near 580,000. But permits actually rose 2.1pct to 586,000 - above expectations.

Of the 30 US companies that reported earnings before the open of trade, 19 beat market expectations, nine fell short and two were in line.

European shares were mixed on Tuesday with mining stocks higher in response to higher metal prices but investors were cautious on banking stocks . In London trade shares in BHP Billiton rose by 3.1pct and Rio Tinto was up 4.1pct. The FTSEurofirst index rose by 0.04pct with the UK FTSE down 0.2pct and German Dax lost 0.7pct.

US sharemarkets fell at the open but then trended higher over the day to finish with solid gains. There was optimism that the US Senate would vote to extend benefit payments to the unemployed. The Dow Jones rose by 75 points or 0.7pct with the S&P 500 up 1.1pct, and the Nasdaq lifted 24 points or 1.1pct. After the bell Yahoo reported earnings of 15c a share, slightly above consensus. Apple reported earnings of US$3.51 a share, above forecasts of US$3.11.

US treasuries were little-changed on Tuesday. Soft housing starts data was balanced by a firmer US sharemarket. Analysts are awaiting testimony by Federal Reserve chairman Ben Bernanke on Wednesday. US 2yr yields fell 1pt to 0.585pct and US 10yr yields fell 1pt to 2.95pct.

Major currencies again went their own way against the US dollar on Tuesday. The Euro eased from around US$1.3020 to US$1.2845 in European trade before ending US trade at US$1.2880. The Aussie dollar lifted from lows near 87.15c in European trade to end the US session near its highs at US88.40c. And the Japanese yen eased from 86.75 yen per US dollar to end US trade near its lows at JPY87.50.

US crude oil prices rose for the second day as investors continued to drift back to equities and commodities. Traders were also eyeing the formation of a tropical depression that could affect oil operations in the Gulf of Mexico. The Nymex crude oil contract rose by US90c or 1.2pct to US$77.44. And London Brent crude rose by US60c to US$76.22 a barrel.

Base metal prices posted firm gains on the London Metal Exchange on Tuesday, the exception being aluminium, down 0.1pct. Other metals rose 1.7-3.7pct on optimism that European banks would pass stress tests. And the Comex gold price rose for the first day in three, up by US$9.80 an ounce to US$1,191.70. Range was from US$1,175.10 to US$1,193.70

Ahead: In Australia, BHP Billiton releases June quarter production data. Woolworths releases June quarter sales. US Federal Reserve chairman Ben Bernanke delivers testimony on the economy.

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