US new home sales fell by 0.7pct to a seasonally adjusted annual rate of 298,000 units - the lowest reading since February. In the 12 months to July new home sales rose by 6.8pct. The Richmond Fed manufacturing index fell From -1 to -10 in July - marking the lowest reading in more than a year. New orders and shipments weakened sharply.

[Kick off your day with our newsletter]

European shares rallied for a second session on Tuesday. However volumes were low and the rally was led by defensive stocks. Markit´s composite euro zone PMI - a broad measure of private sector activity which combines services and manufacturing data - was flat at 51.1 in August. The FTSEurofirst index rose by 0.8pct but while the German Dax gained 1.1pct and the UK FTSE lifted by 0.7pct.

US sharemarkets rallied on Tuesday as investors bet on another round of stimulus. The weak economic data on housing and manufacturing added to speculation that further support by the Fed was likely. Volumes were healthy with over 9.35 billion shares traded. Financial stocks which were initially lower turned around with the S&P Financials Index gaining 3.2pct. The Dow Jones rose by 322pts or 3.0pc. The S&P 500 was up by 3.4pct and the Nasdaq rose 101pts or 4.3pct.

US treasury prices fell (yields higher) on Tuesday. Traders waited on the annual Fed conference later this week where policymakers may decide on a further round of stimulus. US 2yr yields were up 1pt at 0.221pct and US 10yr yields rose 5pts to 2.158pct.

The US dollar eased against the Euro and commodity currencies on Tuesday on growing expectations of further stimulus for the US economy. The Euro rose from lows near US$1.4370 to near US$1.4495, ending the US session at US$1.4440. The Aussie dollar rose from lows around US104.55c to US105.30c, ending US trade near US105.20c. And the Japanese yen held in a tight range from 76.80 yen per US dollar to JPY76.45, ending US trade near JPY76.70.

Global crude oil prices rallied on Tuesday. Traders bet on hopes that the US Fed might indicate fresh stimulus measures later this week. Disruptions to oil exports from Nigeria also supported crude prices. US Nymex crude oil rose by US$1.32 or 1.6pct to US$85.44 a barrel. London Brent crude rose by US95c to US$109.31 a barrel.

Base metal prices were generally higher on the London Metal Exchange on Tuesday, with the exception of Nickel which fell by 0.9pct. Other metals rose by between 1.5-3.3pct. But the gold price fell with Comex December gold down by US$30.60 an ounce or 1.6pct to US$1,861.30.

Ahead: In Australia, construction work done for the June quarter is released. Asciano, BHP Billiton, Downer EDI, Pacific Brands, Qantas, Suncorp Metway, SevenWest Media, Southern Cross Media and Wotif.com report profit results. In the US, durable goods orders are released.