US producer prices rose by 0.8pct in January - in line with consensus. Over the year producer prices were up 3.6 per cent. Core PPI (excluding food and energy) gained by 0.8pct - marking the biggest monthly rise since October 2008. US industrial output unexpectedly fell by 0.1pct in January as a return to normal winter temperature caused a sharp fall in utility output.

US housing starts surged by 14.6pct in January after sliding by 5.1pct in December. However new building permits dropped by 10.4pct, partially reversing Decembers 15.3pct gain.

The minutes of the US Federal Reserve´s January meeting highlighted growing confidence in the US economic recovery, although the pace was not fast enough to significantly lower the unemployment rate.

European shares rose to a 29-month high for the third successive day on Wednesday. The European banking sector recorded healthy gains up 2.9pct. The world´s third largest brewer, Heineken (up 3.1pct), beat forecasts with its 2010 results. The broader FTSEurofirst index rose 0.8pct similarly the UK FTSE rose 0.8pct. The German Dax was higher by 0.2pct.

US sharemarkets bounced back on Wednesday following upbeat earnings. The world´s number two personal computer maker, Dell jumped 12pct after far surpassing analyst estimates. Energy shares rose in line with a higher oil price. At the close of trade, the Dow Jones index was up 61pts or 0.5pct with the S&P 500 higher by 0.6pct and the Nasdaq gained 21pts or 0.8pct.

US treasuries eased on Wednesday (yields higher), following the release of the Federal Reserve´s January policy meeting. US 2yr yields rose 1pt to 0.84pct and US 10yr yields gained 1pt to 3.62pct.

The US dollar fell against major currencies as tensions in the Middle East remained in focus. The Euro rallied from lows near US$1.3460 to US$1.3575 and was near US$1.3570 in late US trade. The Aussie dollar rose from lows around US96.65c to US100.55c, and was near US100.40c in late US trade. And the Japanese yen traded between 83.95 yen per US dollar and JPY83.50, and was around JPY83.60 in late US trade.

US crude oil prices rallied after Israel´s foreign minister said two Iranian warships planned to sail through the Suez Canal en route to Syria. US crude oil inventories rose by 860,000 barrels in the past week. The Nymex crude oil contract rose by US67c or 0.8pct to US$84.99 a barrel.

Base metal prices eased on the London Metal Exchange on Wednesday as concerns of further monetary policy tightening in China drove prices lower. But the gold price rose on safe-haven demand following the tensions in the Middle East. The Comex gold futures price rose by US$1.00 an ounce to US$1,375.10.

Ahead: In Australia, Reserve Bank Assistant Governor Lowe delivers a speech. In the US, housing starts, consumer prices and the leading indicators index are released.

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