US mortgage applications fell by 0.8pct in the past week - marking the fourth straight week of declines. However the MBA purchase index (a early indicator of home sales) rose 2.4pct. Borrowing costs on a 30-year fixed-rate mortgage averaged 4.38pct - the lowest level in records going back 20 years.

European shares fell to a three-week closing low on Wednesday. Banking stocks led the declines on persistent concerns about European debt. BP shares rallied 3.9pct after it announced that it was to restructure operations in the wake of the Gulf of Mexico spill. The FTSEurofirst index fell 0.5pct with the UK FTSE lower by 0.2pct and the German Dax lost 0.5pct.

US sharemarkets eased modestly on Wednesday. Investors took a breather following the four-week rally and given the lack of top-tier economic data. Hewlett-Packard rose 2.2pct after the technology firm forecast 2011 profits above current estimates. Discount retailer, Family Dollar Stores gained 1.6pct after recording an above consensus quarterly profit, and providing a bullish outlook. The Dow Jones fell 23pts or 0.2pct with the S&P 500 down 0.3pct and the Nasdaq lower by 3pts or 0.1pct.

US treasuries fell (yields higher) on Wednesday, as traders locked profits following the recent rally. The $29 billion auction of seven-year notes found strong demand, with a bid to cover ratio of 3.04 and a record low yield of 1.89pct. US 2yr yields rose 1pt to 0.44pct and US 10yr yields gained 4pts to 2.51pct.

The Euro rallied to fresh five-month highs against the greenback, as the US dollar fell for the fourth straight session. The Euro rallied from lows near US$1.3575 to US$1.3645, ending US trade near US$1.3625. The Aussie dollar rose from lows near US96.75c to US97.30c, closing US trade near US96.80c. The Japanese yen held between 83.50 yen per US dollar and JPY83.85, ending US trade near JPY83.65.

US crude oil prices rallied on Wednesday, following the release of the weekly inventory data. US crude inventories fell by 475,000 barrels, while gasoline stockpiles fell by 3.5 million barrels. The Nymex crude oil contract rose by US$1.68 to US$77.86. London Brent crude rose US$1.67 to US$80.38 a barrel.

Base metal prices were higher on the London Metal Exchange on Wednesday. The strength in yesterday´s Chinese manufacturing data (which hit a five-month high) supported the bid for commodities. Copper and Aluminium gained 1.4pct while the other metals rose between 0.3-0.8pct. And the weak US dollar resulted in the Comex gold price hitting a fresh all-time high, touching US$1,314.80 an ounce before closing up US$2 an ounce to $1310.30.

Ahead: In Australia, private sector credit, building approvals and the Reserve Bank financial stability review are released. In the US September quarter GDP is released.