Australian Stock Market Report - Morning

US existing home sales rose by 5.6pct in November to a 4.68 million annual pace - marking the highest reading since June. However the result was less than markets had expected. Overall sales have fallen by 27.9pct over the past year.

The final reading on US GDP rose from a earlier estimate of 2.5pct to 2.6pct in the third quarter. The increase in consumer spending was revised down from a 2.8pct rate to 2.4pct. While both government spending and business investment were revised down modestly. The US Fed´s preferred measure of inflation the PCE index excluding food & energy rose at a annual rate of 0.5pct instead of the previously thought 0.8pct - marking the smallest increase since records began in 1959.

European shares edged higher on Wednesday in thin volumes. A report that China was ready to buy €4-5 billion of Portuguese sovereign debt helped reassure investors after Moody´s had said it was reviewing Portugal´s credit rating. The FTSEurofirst index rose by 0.3pct, with the UK FTSE up 0.5pct while the German Dax was lower by 0.1pct.

US sharemarkets managed to hold on to the previous session’s gains as volumes dried up. The CBOE volatility index fell 5.5pct to its lowest level since April. At the close of trade, the Dow Jones was higher by 26pts or 0.2pct with the S&P 500 up 0.3pct and the Nasdaq stronger by 4pts or 0.2pct.

US treasuries fell (yields higher) on Wednesday after the Federal Reserve completed is purchases for the week and traders waited on new supply. US 2yr yields rose by 1pt to 0.63pct while US 10yr yields rose 4pts to 3.35pct.

The US dollar rallied against the Euro on concerns that the Euro zone debt crisis will continue into 2011. The Euro fell from highs near US$1.3175 to US$1.3075, ending US trade near US$1.3095. The Aussie dollar rallied from lows near US99.60c to US100.10c, and was near US100.05c in late US trade. And the Japanese yen traded between 83.75 yen per US dollar and JPY83.40, and was around JPY83.55 in late US trade.

US crude oil prices rose to two-year highs on Wednesday. A sharp 5.3 million barrel slide in US crude oil inventories supported prices. US crude stockpiles have fallen by 19 million barrels in the past three weeks. The Nymex crude oil contract rose by US66 cents or 0.7pct to US$90.48 a barrel.

Base metal prices were mixed on the London Metal Exchange. Aluminium led the gains, rising 1.2pct. The laggard was Nickel which eased by 2.3pct. The gold price fell on the back of the strength in US dollar. Comex gold futures eased by US$1.40 an ounce to US$1,387.40.

Ahead: In Australia no economic data is released. In the US personal income, new home sales and durable goods orders are released.