US new home sales soared by 17.5pct to 329,000 in December. It was the biggest increase in sales in 18 years and highest level of sales in eight months.

Reserve Bank New Zealand has kept the cash rate at 3.0pct.

The US Federal Reserve kept the federal funds target rate unchanged between zero and 0.25pct. The Fed will continue expanding its holdings of securities as outlined in November. The Fed says that ´´economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions.´´

European shares rose on Wednesday as investors became more optimistic about the outlook for the US economy. Investors also embraced a proposal by President Obama to cut the corporate tax rate. The FTSEurofirst index rose by 0.8pct, with the UK FTSE up 0.9pct and German Dax higher by 1.0pct.

The US Dow Jones index broke through 12,000 points on Wednesday for the first time since June 2008. Investors were encouraged by economic data, corporate earnings and President Obama´s State of the Union address. At the close of trade the Dow Jones index was up 8pts or 0.1pct with the S&P 500 up 0.4pct and the Nasdaq was higher by 20pts or 0.7pct.

US treasury prices hit session lows (yields higher) following the Federal Reserve statement. A better-than-expected result on new home sales and increased supply of bonds combined to weigh on prices. On Wednesday US$35 billion of five-year notes were sold and $29 billion of seven-year notes will be sold on Thursday. US 2yr yields rose 5pts to 0.64pct and US 10yr yields rose 9pts to 3.43pct.

The US dollar was mixed against major currencies over European and US trade but gyrated after the Federal Reserve decision. The Euro held between US$1.3650 and US$1.3715 over European and US trade and was near US$1.3690 in late US trade. The Aussie dollar eased from US99.95c to US99.30c in European and US trade but was near US99.80c in late US trade. And the Japanese yen eased from 82.00 yen per US dollar to near JPY82.55, and was near JPY82.30 in late US trade.

US crude oil prices rose on Wednesday as investors became more optimistic about global economic conditions. The Nymex crude oil contract rose by US$1.14 to US$87.33 a barrel.

Base metal prices rose on the London Metal Exchange on Wednesday as investors embraced growth assets like equities and commodities. Zinc rose 2.7pct, lead rose 2.5pct and nickel rose 2.3pct. The Comex gold futures price rose by US70c an ounce on Wednesday to US$1,333.00. After the Fed decision spot gold rose to US$1,343.00 an ounce.

Ahead: In Australia, the Prime Minister will detail the cost of the floods to the Federal Budget. In the US, weekly jobless claims, durable goods orders and pending home sales data is released.