Asia

· Japan Flash Dec Manufacturing PMI Rises To 52.1 From Final 52 In Nov. Growth in Japanese manufacturing activity picked up slightly in December and output grew at the fastest pace since September, a survey showed on Tuesday, suggesting the economy is recovering from a recession in the third quarter. The Markit/JMMA flash Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 52.1 in December from a final 52 in November. The index remained above the 50 threshold that separates contraction from expansion for the seventh consecutive month. The output component of the PMI index rose to a preliminary 53.3 from 52.7 in the previous month. (Reuters)

· China's Manufacturing Activity Contracts At Year-End. The HSBC/Markit manufacturing purchasing manager's index's initial reading fell to 49.5 in December from November's final reading of 50. A reading above 50 indicates expansion, while one below 50 points to contraction on a monthly basis. China will release its official PMI reading for December in the new year. The state's official PMI came in at 50.3 for November. This morning's latest reading from HSBC marks a seven-month low. (BBC)

· China To Lower Import Taxes For Some Goods From January. China will adjust its import and export taxes from Jan. 1 as part of a larger effort to re-order trade to foster economic growth, the Finance Ministry said on Tuesday. To refine the mix of Chinese imports, China will levy provisional taxes at a rate even lower than that reserved for countries in the Most Favoured Nation category, a low-rate status given to particularly valued trading partners. Taxes will be lowered on imports of optical fiber-equipped communication devices, advanced manufacturing equipment and electric car parts. On the commodities front, the finance ministry said it would reduce import taxes on ethylene, ferro-nickel and coal products, while import tariffs for natural rubber will be raised. (Reuters)

· China's FDI Rises In November To Break Four Months Of Falls. China's foreign direct investment (FDI) rose on a cumulative basis in November, breaking four months of consecutive declines as foreign investors moved money into China's services sector at the expense of manufacturing. The Chinese services sector attracted $58.6b of FDI in the first 11 months of the year, up 7.9% from the same period a year ago and significantly outperforming manufacturing which saw a 13.3% decline as the balance tipped amid a broad economic slowdown. China drew $106.2b in foreign direct investment (FDI) in the first 11 months of 2014, the Ministry of Commerce said on Tuesday, up just 0.7% from a year earlier. Although in November alone, China attracted $10.4b in FDI, up 22.2% from a year earlier, the ministry said. (Reuters)

USA

· U.S. Factory Activity Growth At 11-Month Low In December: Markit. The U.S. manufacturing sector continued to expand in December but its growth rate hit an 11-month low, an industry report showed on Tuesday. Financial data firm Markit said its preliminary or "flash" U.S. Manufacturing Purchasing Managers Index fell to 53.7 in December, matching the 2014 January low when severe weather impacted economic activity. Economists polled by Reuters had expected the December reading at 55.2, which compares to November's 54.8 final reading. A reading above 50 signals expansion in economic activity. (Reuters)

· U.S. Fed Funds Rate Falls For 1st Time In Two Weeks. A key overnight borrowing cost for U.S. banks fell for the first time in over two weeks after the Federal Reserve cut an interest rate on a test program aimed to reach its rate target when it decides to tighten monetary policy, Fed data released on Tuesday showed. The effective or average interest rate on federal funds - the cost for banks to borrow excess reserves from each other - was 0.11%, up from 0.12% on Friday. This was the first decline in the Fed funds rate since Nov. 28, a day after U.S. Thanksgiving holiday, which the Fed funds rate fell to 0.08%. On Dec. 1, it rose to 0.13%, which was highest level since April 2013. (Reuters)

· U.S. Housing Starts Fall, But Trend Points To Recovery. U.S. housing starts fell in November as groundbreaking for single-family homes declined after two hefty increases, in what appeared to be a brief pause in a gradual recovery trend. Starts dropped 1.6% to a seasonally adjusted annual pace of 1.028 million units, the Commerce Department said on Tuesday. October's starts were revised up to a 1.045 million-unit pace. Despite November's fall, groundbreaking is up 7.7% compared to the first 11 months of 2013. Starts have averaged a 990,000-unit pace so far this year, up from an average 930,000-unit rate last year. (Reuters)

Europe

· Euro Zone Private Sector Ends 2014 With Weak Growth, More Price Cuts: PMI. Euro zone businesses are ending 2014 in slightly better shape than thought but growth remains weak and firms are still cutting prices to encourage trade, surveys showed on Tuesday. Markit's Composite Flash Purchasing Managers' Index, based on surveys of thousands of companies and seen as a good growth indicator, rose to 51.7 from a 16-month low of 51.1. That beat the forecast in a Reuters poll for a rise to 51.5 but was the second-lowest reading in over a year. A PMI covering the service industry rose to 51.9 from 51.1, beating expectations for 51.5, while the factory PMI posted a similar jump, coming in at 50.8. The Reuters poll had forecast 50.5. An index measuring factory output that feeds into the composite PMI held steady at 51.2. (Reuters)

· UK Inflation Falls Sharply In November To 12-Year Low. British inflation fell unexpectedly to its lowest level in more than 12 years in November, further easing a squeeze on consumers and leaving the Bank of England under no pressure to raise interest rates soon. Reflecting a slide in global oil prices that has pushed down inflation around the world, and raised concerns about deflation in some countries, the consumer price index rose by an annual 1.0% in November, compared with 1.3% in October, the Office for National Statistics said on Tuesday. Economists taking part in a Reuters poll had expected the CPI to slip back only to 1.2%. (Reuters)

· Italy October Global Trade Surplus Rises On Exports. Italy posted a trade surplus with the rest of the world of 5.397b euros in October, rising from a surplus of 3.847b euros in the same month of 2013 as exports increased, data showed on Tuesday. Imports fell 1.6% year-on-year in October, while exports rose by 2.9%, national statistics office ISTAT said. With European Union countries, Italy registered an October trade surplus of 1.373b euros, compared with a surplus of 1.042b euros in October 2013. Exports to EU nations in October were up 4.7% year-on-year and imports rose 3.1%. (Reuters)

· German Private Sector Grows At Slowest Pace In 18 Months In December: PMI. Germany's private sector grew at the slowest pace in 18 months in December as a pickup in manufacturing activity failed to offset declining momentum in services, a survey showed on Tuesday. Markit's flash composite Purchasing Managers' Index (PMI), which tracks activity in the manufacturing and services sectors that account for more than two-thirds of the economy, fell to 51.4 in December from a final reading of 51.7 in November. (Reuters)

· French Business Downturn Eases In December, Signs Of Bottoming Out: PMI. The French private sector downturn eased in December as the services industry came close to expanding, suggesting business conditions may have bottomed out, data compiler Markit said in a survey on Tuesday. Markit's preliminary services purchasing managers' index (PMI) rose to 49.8 in December from 47.9 last month, beating a consensus forecast for a 48.3 reading.(Reuters)

Currencies

· Dollar Slips On Expectations For Dovish Fed; Ruble Hits Lows. The U.S. dollar slipped against major currencies on Tuesday on expectations that the Federal Reserve would take a cautious tone on monetary policy, while a slide in oil prices pushed the Russian rouble to new lows and boosted the safe-haven yen. The dollar was last up 3.85 percent against the rouble to trade at 68.44 rubles. The euro was last up 0.6 percent against the dollar at $1.2511, not far from a more than three-week high of $1.2569. The dollar was last down 0.62 percent against the Swiss franc at 0.9597 franc, not far from an over three-week low of 0.9555. The dollar was last down 1.04 percent against the yen at 116.60 yen, holding near a session low of 115.58, which was the lowest since Nov. 17. (Reuters)

Commodities

· Brent Ends Below $60, U.S. Crude settles Up, Then Dips. Brent crude futures fell for a fifth straight day on Tuesday to end below $60 a barrel while U.S. crude finished a volatile session slightly higher as trading of expiring options helped defend the price above $55. U.S. crude's front-month settled up 2 cents at $55.93 a barrel. Its session low of $53.60 was the lowest since May 2009. Post-settlement, the front-month was down 70 cents at $55.21 by 4:45 p.m. EST. Brent's frontmonth settled down $1.20, or nearly 2%, at $59.86 a barrel. Its session low of $58.50 was the lowest since July 2009. The contract has lost more than 10% in five days of trading. (Reuters)

· Gold Steadies In Seesaw Trade As Oil, Dollar Recover. Gold was little changed on Tuesday, in a choppy session that took prices back below $1,200 an ounce as the dollar came off its lows and traders worried the U.S. Federal Reserve may remove the phrase "considerable time" before raising interest rates. Spot gold was up 0.1% at $1,193.86 an ounce by 3:23 p.m. EST (2023 GMT), with a session low at $1,188.41. Silver was down 2.5% at $15.71 an ounce, after sliding 5% on Monday. Platinum was down 1.2% at $1,190.509 an ounce and palladium was down 2.1% at $778.60 an ounce. (Reuters)