The share market's three-day winning streak faces early pressure this morning after a Greek-bailout relief rally largely fizzled out in the US and Europe.
The March SPI 200 futures contract ended the night session 19 points or 0.4% weaker at 4254 as futures traders bet that the XJO overshot to the upside yesterday after European leaders approved a second bailout for Greece.
US blue chips hit their highest level since 2008 overnight before paring gains. The Dow cracked 13,000 for the first time in nearly four years and finished 16 points or 0.12% ahead at 12,966. The S&P 500 briefly exceeded its highest close since 2008 before cutting its rise to 0.07%. The Nasdaq fell 0.11%.
"We're near important technical levels," the chief investment strategist at Commonfund in the US told Bloomberg. "Those eternal gloom and doomers are still saying it would take a close above those levels to convince them. Was there any surprise in Europe kicking the can down the road? It's a token positive, but it doesn't solve the long-term issue."
The reversal came as scepticism grew over the outlook for Greece despite yesterday's decision by euro-zone finance chiefs to approve a US$173 billion financial package to avoid a disorderly default. An analysis prepared for European policymakers reportedly concluded that the latest austerity plan risked undermining growth so severely that Greece will be unable to reduce its debt burden over the lifetime of the latest bailout.
European markets had pre-empted a Greek deal with a four-day rally and gave up some of those gains last night. Britain's FTSE eased 0.29%, Germany's DAX 0.58% and France's CAC 0.21%. The Athens General Index dropped 3.5%.
"Sometimes it's better to travel than to arrive," a strategist at Commerzbank in London told MarketWatch. "There was confidence that the deal would be struck and now markets have started to recognise that the positive outcome for the bailout will not materialise ultimately. There is fear that at some time in the future Greece will be forced to beg for more money or default. One of these outcomes is inevitable. This is just another page being turned and there are more unexplained questions that need to be resolved."
Also starting to weigh on sentiment was the potential impact of a new nine-month high in oil overnight. Crude for March delivery was lately up $3.50 or 3.4% at US$106.14 a barrel as speculators bet that a Greek deal and Iranian export bans against France and the UK will support higher prices.
Metals also rallied as the US dollar receded. Gold for April delivery put on $32.50 or 1.9% to US$1,731 an ounce.
Industrial metals continued to benefit from monetary easing in China over the weekend. In London, copper added 2.65%, aluminium 3.3%, lead 3%, nickel 3.3%, tin 3.1% and zinc 3%. US copper was recently up 0.9%.
TRADING THEMES TODAY
BUTTING AGAINST RESISTANCE: Hopes that a Greek deal would help global equity indexes smash through overhead resistance appeared to fade overnight as traders who bought the rumour of a deal sold the news. Still, no major technical damage was done and we may see some buying in our market today after an initial swoon. Airlines had a shocker in the US last night as the soaring price of oil started to bite - that's something to watch out for in the weeks ahead. An index of US airlines plunged 5.5%. Resource stocks and a few defensive sectors offered pockets of strength.
CHINESE MANUFACTURING: Today brings HSBC's influential monthly flash manufacturing update from China. This survey has flagged contraction in manufacturing in six out of the last seven months and sparked a sell-off on the Australian market when the result came in weaker than expected this time last month. Last month's reading was 48.8. The official government report, which focuses on larger businesses, has been more bullish lately, suggesting there is room for a positive surprise today. The data is due at 1.30pm EST.
ECONOMIC NEWS: Rival leading indexes from the Conference Board and Melbourne Institute are due at 10am and 10.30am EST, respectively. The quarterly wage price index is due at 11.30am. The HSBC Flash Manufacturing PMI is due at 1.30pm (see above). Manufacturing figures are also due in Europe tonight, while the main interest in the US is in existing-home sales.
