US consumer confidence jumped from 49.9 to 56.0 in October - marking the highest level since July and underpinning the recent rise in consumer spending. The International Council of Shopping Centres said sales rose 1.7pct last week - the biggest gain since June. US home prices fell 0.6pct in Sept and declined by 1.2pct in the September quarter.

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European shares recorded healthy gains on Tuesday however volumes were light. Investors were hopeful that fresh progress would be made at the latest euro zone finance ministers meeting. Markets dipped in early trade as after a news report that ratings agency Standard & Poor´s would lower its outlook on France´s AAA credit rating to negative within 10 days. In addition Italy´s borrowing costs hit a euro lifetime high of 7.89pct up from the 4.93pct it paid in late October to sell 3yr bonds however demand was healthy. The FTSEurofirst index rose by 0.8pct with the UK FTSE up by 0.5pct while the German Dax was higher by 1pct.

US shares rallied on Tuesday for a second consecutive session as the upbeat US consumer confidence reading supported investor sentiment. However financial shares limited the advance with the S&P financial index down 0.4pct. Shares of Bank of America fell 3pct and were on track for their weakest close since March 2009. At the close of trade, the Dow Jones was higher by 33pts or 0.3pct with the S&P 500 up 0.2pct and the Nasdaq was lower by 12pts or 0.5pct.

US treasuries fell on Tuesday (yields higher) as the pickup in US consumer confidence supported the shift away from safe-haven assets, however worries about the euro zone crisis capped gains. US 2yr yields were steady at 0.258pct and US 10yr yields rose by 3pt to 2.00pct.

Major currencies rallied against the greenback on Tuesday. The Euro hit early highs near US$1.34.35 before falling to around US$1.3295 and headed into the US close near US$1.3330. The Aussie dollar rose from lows around US99.40c to US100.60c, and was near US100.25c in late US trade. And the Japanese yen traded between JPY78.05 yen per US dollar and JPY77.60, ending US trade near JPY77.85.

US crude oil prices rallied on Tuesday driven by the stronger than expected reading on consumer confidence. Escalating tensions in Iran also drove demand after an attack by Iranian protesters on two British embassy compounds in Tehran. Nymex crude oil rose by US$1.58 or 1.6pct to US$99.79 a barrel and London Brent crude rose by US$1.82 to US$110.82 a barrel.

Base metal prices were mixed on the London Metal Exchange on Tuesday as fears of a Euro zone recession offset the improving economic conditions in the US. And the gold price recorded modest gains on the back of the weaker US dollar. The Comex gold price rose by US$2.60 an ounce or 0.2pct to US$1,713.40.

Ahead: In Australia, CAPEX figures, Private sector credit and RP data home prices are released. In the US, pending home sales and the Federal Reserve Beige book are released.