US new home sales fell by 1pct to a 312,000 annual rate in June. Economists had tipped a result near 320,000. US consumer confidence surprisingly rose from 57.6 to 59.5 in July, ahead of forecasts centred on a result near 56.0. The Case-Shiller home price index for 20 cities was unchanged in seasonally adjusted terms in May but the 10-city index rose 0.1pct. And the Richmond Fed manufacturing index eased from +3 to -1 in July.

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European shares were mixed on Tuesday as investors across the globe focussed on the budget and debt negotiations between the US Congress and White House. Weak earnings results also weighed on sentiment with shares in Swiss bank UBS down 2.9pct. The FTSEurofirst index fell by 0.3pct but both the German Dax and UK FTSE managed to eke out 0.1pct gains. In London trade shares in BHP Billiton fell by 0.9pct but Rio Tinto rose less than 0.1pct.

US sharemarkets slumped on Tuesday, selling off in late trade to finish near the day´s lows. Investors remain nervous about the ongoing, and unproductive, budget talks. Earnings results also weighed on markets. Shares in 3M fell by 5.6pct, hurt by weaker sales in its display and graphics division. And shares in Netflix fell 5.2pct after the video rental company reported softer subscriber growth. The Dow Jones fell by 91pts or 0.7pct with the S&P 500 down by 0.4pct and the Nasdaq lower by almost 3pts or 0.1pct.

US treasuries rose on Tuesday (yields lower), reversing the previous day´s losses as traders focussed on the ongoing political wrangling over the budget deficit and debt ceiling. US 2yr yields fell by 1pt to 0.395pct and US 10yr yields fell by 4pts to 2.955pct.

The US dollar continued to fall again major currencies on Tuesday on the growing belief that the US credit rating will be downgraded even if a debt and deficit deal is done. The Euro was volatile - falling from US$1.4520 to US$1.4455 in European trade before recovering to near the day´s highs and then closing in New York at US$1.4510. The Aussie dollar rose from near US109.10c to just below US109.70c, ending US trade near US109.50c. And the Japanese yen strengthened from near 78.15 yen per US dollar to JPY77.85, before ending US trade near JPY77.90.

Benchmark crude oil prices rose in line with other commodities on Tuesday as the greenback fell. A weaker US dollar improves the purchasing power of buyers in Europe and Asia. But oil prices were choppy in the thin trading conditions. Nymex crude oil rose by US39c or 0.4pct to US$99.59 a barrel and London Brent crude rose by US34c to US$118.28 a barrel.

Base metal prices rose on the London Metal Exchange on Tuesday in response to a weaker US dollar. Metals rose by between 1.3-2.5pct with zinc faring best with aluminium up the least. And the gold price closed at fresh record highs with Comex gold up by US$4.60 an ounce to US$1,616.80.

Ahead: In Australia, the Consumer Price Index is released. In the US, data on durable goods orders is released.

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