The Commerce Department upwardly revised its estimate of September quarter growth from 2pct to 2.5pct. The increase in growth was largely a reflection of stronger spending and a pickup in exports than previously anticipated. US existing home sales fell 2.2pct in October after a 10pct rise in September.

The FOMC minutes suggested the Federal Reserve considered even more drastic options to stimulate the economy. Economic growth forecasts for 2011 were revised lower while unemployment was expected to rise more than previously forecast.

The euro zone composite PMI rose from 53.8 to 55.4 in November. The data suggested that manufacturing activity accelerated sharply in November.

European shares fell to a six-week low on Tuesday. The escalated tensions in the Korean peninsula resulted in a sharp sell-off of commodity stocks. Banking stocks also continued to slide as worries over the euro zone debt issues weighed on sentiment. The FTSEurofirst index fell 1.3pct, the UK FTSE fell 1.8pctpct and the German Dax lost 1.7pct.

US sharemarkets slumped on Tuesday as the artillery exchange in the Korean peninsula rattled markets. Commodity stocks were sharply lower. The CBOE volatility index rose 13pct. At the close of trade, the Dow Jones was lower by 142pts, the S&P 500 lost 1.4pct and the Nasdaq fell by 37pts or 1.5pct.

US treasuries rallied (yields lower) on Tuesday as investors piled into safe haven assets on worries of further military action by North and South Korea. Concerns over possible contagion from debt trouble in Europe also supported treasuries. US 2yr yields fell 2pts to 0.45pct and US 10yr yields fell 4pts to 2.77pct.

The US dollar rallied against a basket of currencies as the escalated tensions in Asia saw investors head to the safety of the greenback. The Euro fell to a two-month low from highs near US$1.3595 to US$1.3360, heading into the US close near US$1.3370. The Aussie dollar fell from highs around US98.90c to US97.10c, heading into the US close near US97.25c. And the Japanese yen is currently around 83.10 yen per US dollar after trading from JPY83.80 to JPY82.80.

US crude oil prices fell on Tuesday as the US dollar strengthened on Korean political tensions. The Nymex crude oil contract fell by US47 cents to US$81.27 a barrel.

Base metal prices fell on the London Metal Exchange following the exchange of artillery fire between North and South Korea. Copper lost 1.7pct, while other metals lost between 1.5pct-2.4pct. And the gold price recorded healthy gains on Tuesday, with Comex gold futures up US$17.20 an ounce to US$1,375.

Ahead: In Australia, construction work for the September quarter is released. In the US durable goods, personal spending/income and the PCE deflator are released.

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