US new home sales fell by 12.4pct to a 276,000 annual rate in July. Economists had tipped a decline to 330,000. Home prices were down 4.8pct on a year ago while new home supply equated to 9.1 months of current sales. Meanwhile US durable goods orders rose 0.3pct in July after a 0.1pct fall in June. Economists had tipped a 2.8pct gain.

European shares fell to five-week lows on Wednesday in response to another batch of disappointing US economic data. The FTSEurofirst index fell by 0.8pct while the UK FTSE lost 0.9pct and the German Dax fell by 0.6pct. A surprise lift in the German Ifo business sentiment index to three-year highs supported German shares. In London trade shares of BHP Billiton fell by 2.0pct after posting earnings data.

US shares posted modest gains in volatile trade on Wednesday. While economic data disappointed, a perception that shares had become oversold drove indices higher. Shares in home-building company Toll Brothers rose 5.8pct after reporting its first profit in three years. The Dow Jones traded in a range of +57/-102 points, ending higher by almost 20pts or 0.2pct. The S&P 500 rose by 0.3pct and the Nasdaq gained almost 18pts or 0.8pct.

US treasuries fell on Wednesday (yields higher) as investors booked profits on recent strong gains. However an auction of US$36 billion of five-year notes met with strong demand. US 2yr yields rose by 5pts to 0.52pct and US 10yr yields were higher by 5pts to 2.54pct.

The Euro and commodity currencies weakened in European trade before clawing back lost ground in US trade. The Euro fell from highs near US$1.2715 to US$1.2610, ending US trade near US$1.2650. The Aussie dollar fell from highs near US88.90c to US87.70c, ending US trade near US88.40c. And the Japanese yen eased from 84.15 yen per US dollar to JPY84.85, ending US trade near JPY84.55.

US crude oil prices rose for the first time in six days as traders shrugged off weak economic data and higher inventories to engage in bargain hunting. Crude and product stocks in the US hit a record weekly high of 1.13 billion barrels in the latest week. The October Nymex crude oil futures contract rose by US89c or 1.2pct to US$72.52. London Brent crude rose by US$1.10 to US$73.48 a barrel.

Base metal prices fell again on the London Metal Exchange on Wednesday, in response to weaker-than-expected data on US durable goods orders and reduced demand for ´riskier´ assets. Lead lost 2.6pct and nickel fell 2.5pct with other metals down 0.5-1.9pct. But the Comex gold price bucked the trend, lifting in response to safe-haven buying. Comex gold rose by US$4.90 an ounce to US$1,233.40.

Ahead: In Australia, capital expenditure data is released. Earnings results are expected from Woolworths, IAG, Virgin Blue, Santos and Toll. In the US weekly jobless claims data is released.