U.S. STOCK MARKETS

Consumer discretionary and energy shares led a modest rebound in U.S. stocks after data showed home prices fell less than expected in April. The Dow Jones Industrial Average climbed 32.01 points, or 0.3%, to 12534.67.

Chevron paced the blue chips' gains with a 1.9% advance. The average had started the week with a 138-point drop amid doubts of further progress on Europe's debt crisis.

The Standard & Poor's 500-stock index advanced 6.27 points, or 0.5%, to 1319.99, led by consumer discretionary stocks such as University of Phoenix operator Apollo Group, which jumped 10% after reporting quarterly results that topped analysts' expectations.

The Nasdaq Composite added 17.90 points, or 0.6%, to 2854.06. Homebuilder PulteGroup jumped 5.3% and Lennar advanced 3% after S&P Case-Shiller's 20-city index showed home prices fell 1.9% from a year earlier in April, less than the 2.4% decline forecast by economists in a Dow Jones Newswires poll.

Other readings on the domestic economy fell short of expectations. Consumers' mood on the economy soured more than expected in June, darkening for the fourth month in a row, according to the Conference Board's preliminary consumer confidence index.

Economic activity among manufacturers in the central-Atlantic region contracted in June after months of slowing expansion, according to the Federal Reserve Bank of Richmond's manufacturing general-business index.

In other corporate news, News Corp. climbed 8.3% after The Wall Street Journal reported the company is considering splitting its film and entertainment business from its newspaper and publishing arm, which owns Dow Jones Newswires and The Wall Street Journal.

Hard-drive maker Seagate Technology rose 3.7% after S&P said the company will replace Progress Energy in its 500-stock index Friday. Progress plans to be acquired by Duke Energy.

EUROPEAN STOCKS, BOND MARKETS

A sharp rise in Spanish borrowing costs at a debt auction and disappointing U.S. data dragged European stock markets lower Tuesday, while Spain's banking sector struggled further after a fresh round of downgrades from Moody's Investors Service.

The Stoxx Europe 600 index closed 0.1% lower at 242.60 after a choppy session, extending losses into a fourth straight day. The index Monday put in its worst performance since the beginning of June as hopes faded that European leaders can produce a credible plan to contain the region's debt crisis when they gather Thursday in Brussels for a two-day summit.

Spanish banks, such as Banco Popular Espanol SA, off 7.1%, and Bankia SA, 8.7% lower, attracted market attention after Moody's late Monday slashed the credit ratings of 28 institutions in Spain by one to four notches.

BBVA SA dropped 1.7% and Banco Santander SA lost 1.5%, while the IBEX 35 index fell 1.4% to 6,528.40. German utilities, on the other hand, lent support to the pan-European index as E.ON AG gained 3.3% after Bank of America Merrill Lynch lifted the stock's rating to buy from neutral, while RWE AG rose 2.9% after an upgrade to neutral from underperform by the same bank.

Spain's sovereign-debt problems took center stage again, after the government sold 3.08 billion euros of short-term debt at sharply higher borrowing costs than at debt sales last month.

The yield on 3-month bills nearly tripled to 2.36%, while yields on 6-month paper almost doubled. Yields on 10-year Spanish government bonds rose 24 basis points to 6.83% in the secondary market, according to electronic trading platform Tradeweb.

Markets were jittery ahead of the European Union summit at the end of the week. An outline published on the EU website Tuesday called for increased fiscal integration and a move toward a European banking union.

An alleged remark by German Chancellor Angela Merkel in a meeting with coalition partners put added pressure on the euro in late trade, analysts said.

A Reuters report, citing participants in the meeting, said Ms Merkel was quoted as saying she doesn't think Europe will have shared total debt liability as long as I live. A surprise improvement in German confidence data gave the markets an early boost.

The German DAX 30 index inched 0.1% higher to 6,136.69. The CAC 40 index closed 0.3% lower at 3,012.71, as Credit Agricole SA lost 1.8% and Societe Generale SA dropped 1.5%.

Banks also weighed on the U.K. FTSE 100 index, which declined 0.1% to 5,446.96. Royal Bank of Scotland Group PLC gave up 3.8% after recent struggles to fix a software glitch.

ASIA-PACIFIC STOCK MARKETS

Asian stocks fell Tuesday, with Japan's index down for a third straight trading day, as a downgrade of Spanish banks intensified pressure on a European Union meeting later this week to help solve the continent's ongoing crisis. Japan's Nikkei lost 0.8% to 8663.99.

The strengthening yen was a factor, but investors were also riled after a parliamentary select committee approved a bill to double the consumption tax by 2015.

Shares in Japanese electronics company Ricoh dropped 1.7%, as investors reacted badly to its acquisition of unlisted German IT Service company ADA-Das SystemHaus GmbH.

Nippon Electric Glass dropped 7.8% after the company released a first quarter operating profit forecast of Y6 billion, compared to a previous forecast range of Y2.5 billion-Y7.5 billion.

Hong Kong's Hang Seng Index carved out a 0.5% gain to 18981.84. Telecoms companies helped pull the market up, with China Unicom and China Mobile up 0.8% and 0.9%, respectively.

The weakest performer was gaming company Sands China, which sank 5.8% due to fears over the growth of Macau's gaming industry.

South Korea's Kospi dropped 0.4% to 1817.81 despite a recovery in technology stocks that were heavily sold Monday. Samsung Electronics was up 0.6%, while memory chipmaker SK Hynix gained 0.2%. Also in South Korea, Samsung Engineering climbed 0.6% on news that it received a 2.4 trillion won ($2.1 billion) order to build a coal-fired power plant in Kazakhstan for Balkhash Thermal Power Plant. China's Shanghai Composite ended flat at 2222.07.

COMMODITIES

Aluminum prices fell to a two-year low on the London Metal Exchange Tuesday, pressured by a mix of technical and fundamental factors that are weighing on the broader base-metals complex, given growing concerns about the health of the global economy.

LME aluminum for delivery in three months hit a low of $1,839 a metric ton, a level last seen in June 2010. Meanwhile, LME zinc and lead for delivery in three months were similarly lower, dipping to a nine-month low of $1,776/ton and a near-two year low of $1,760/ton, respectively.

U.S. light, sweet crude futures for August delivery got a boost Tuesday from their European oil counterpart, recovering from earlier losses and settling at $79.36 a barrel, up 15 cents.

The jump followed choppy trading throughout the day in U.S. futures, even as Brent futures rose substantially. Brent settled at $93.02 a barrel, up $2.01, or 2.2%, after earlier hitting $93.17.

North Sea Brent crude oil gained on concerns over tightening supplies due to a strike in Norway and the impending Europe Union embargo on Iranian crude-oil imports.

Gold futures fell in quiet trading amid rising anxiety about Europe's banking crisis as investors remain skeptical about the upcoming European Union summit. The most actively traded contract, for August delivery, settled $13.50, or 0.9%, lower at $1,574.90 a troy ounce on the Comex division of the New York Mercantile Exchange. Compiled from MORRISON SECURITIES PTY. LTD.