The US National Association of Home Builders housing market index rose from +13 to +15 in July, above forecasts. Net capital outflows from the US totalled US$67.5 billion in May, compared with inflows of US$66.6bn in April.

European Central Bank president Jean-Claude Trichet has criticised the crisis management of euro zone countries saying that they need to improve ´´verbal discipline´´.

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European shares fell to four-month lows on Monday. Investors questioned whether the bank stress tests were realistic and also expressed concern that euro zone ministers may not agree on a second bail-out package for Greece when they meet on Thursday. Banking stocks were hard hit with the STOXX Europe 600 Banks index lower by 3.2pct. The FTSEurofirst index fell by 1.7pct with both the German Dax and UK FTSE down by 1.6pct.

US sharemarkets fell on Monday but finished well off their lows. Banks were lower as investors were wary of contagion risks of the European debt crisis. Shares in Bank of America fell by 2.8pct. The Dow Jones fell by 94pts or 0.8pct after being down 183 points in early trade. The broader S&P 500 was lower by 0.8pct and the Nasdaq eased 24.7pts or 0.9pct. After the bell shares in IBM rose by 2.3pct after reporting revenues of US$26.7 billion, above the consensus forecast of US$25.35bn.

US treasuries fell modestly on Monday (yields higher) as investors elected to take some profits on recent gains, especially as shares recovered from session lows. US 2yr yields rose by 1pt to 0.367pct and US 10yr yields also rose by 1pt to 2.92pct.

The Euro and commodity currencies lifted from their lows in US trade as the US sharemarket retraced its losses. The Euro recovered from lows near US$1.4015 to US$1.4120, ending the session near the highs.

The Aussie dollar fell in early European trade from US106.25c to US105.55c, before lifting and ending US trade near US106.00c. And the Japanese yen held broadly between 78.90 yen per US dollar to JPY79.15, before ending US trade near JPY79.05.

Benchmark crude oil prices fell on Friday on worries that ongoing financial instability in Europe will weigh on consumer and business activity and thus demand for energy. Nymex crude oil fell by US$1.31 or 1.3pct to US$95.93 a barrel and London Brent crude fell by US$1.21 or 1.0pct to US$116.05 a barrel.

Base metal prices were generally higher on the London Metal Exchange on Monday, the exception being nickel, down 1.5pct. Other metals rose 0.2-0.6pct but zinc soared 2.3pct. And the gold price hit record highs above US$1,600 an ounce, rising for the 11th straight day on safe-haven flows. Comex gold rose by US$12.30 an ounce to US$1,602.40.

Ahead: In Australia, the Reserve Bank releases minutes of the last Board meeting. Data on imports is also released. In the US, data on housing starts is released together with weekly chain store sales figures.

(From Craig James, CommSec Chief Economist)

This commentary is a general account of the day's trading and is not intended to be taken as a recommendation to buy, hold or sell any particular stock.