Morning traders. Thanks Trees and after-market regulars.
Market wrap:
Shares are poised for a flat open as the prospect of continued low interest rates offsets mild losses on Wall Street after soft commodity prices weighed on resource stocks.
The September SPI 200 futures contract edged up three points or less than 0.1% to 5649 as iron ore closed at its 2012 low, oil plunged 3% and US gold stocks sagged 3.6%.
A choppy night saw the S&P 500 set an intraday record in early trade, then fall as much as eight points before recovering to end the session one point or 0.07% weaker at 2,002.09. The Dow lost 30 points or 0.18%, while an all-time high for Apple helped the Nasdaq rally 18 points or 0.39%.
The early gains followed a round of upbeat economic signals. The Institute for Supply Management's manufacturing index soared to 59% last month, its highest level since early 2011, from 57.1% in July. New orders were the strongest since 2004. Construction spending increased a seasonally-adjusted 1.8% in July, almost twice the 1% improvement anticipated by economists. The final version of Markit's August manufacturing PMI was 57.9, just off the preliminary reading of 58 but comfortably above July's 55.8.
“The 2,000 area is still in play, and we’ve yet to move past it convincingly as it remains a speed bump in the short-term,” Joe Bell, senior equity analyst at Schaeffer’s Investment Research in the US, told
Bloomberg. "The manufacturing index was better than expected, but after that strong rally we had through much of August, the market is taking a bit of a breather.”
Trading volumes returned to more normal levels after falling to a six-year low towards the end of last month as institutional traders took summer holidays ahead of the Labor Day long weekend in the US. Bloomberg noted that volumes were below five billion shares for the last eight trading days of August for the first time since 2008.
A breakout in the US dollar index to 13-month highs pushed the Australian dollar lower and pressured alternative stores of wealth, including commodities. The dollar index, which measures the greenback against a basket of other currencies, has been rallying for two months on the improving economic outlook in the US relative to weak European growth. The Aussie was lately buying 92.83 US cents, down more than half a cent.
Iron ore extended its latest downleg, closing at the lowest point of the last downturn in 2012. Spot iron ore for import to China yesterday eased 40 cents to US$86.70 a dry tonne as analysts speculated that it could fall as low as US$75. BHP lost 0.63% and Rio Tinto 0.39% in US trade overnight.
Read more here.
Brent crude oil fell to an 18-month low as currency pressures and weak demand expectations took their toll. October Brent crude slumped $2.45 or 2.4% to US$100.34 a barrel. West Texas Intermediate crude oil for October delivery declined $3.08 or 3.2% to settle at US$92.88 a barrel, an eight-month low. The contract had lately pared its decline at US$93.27.
The NYSE Arca Gold Bugs index of US gold miners slid 3.6% as gold plumbed an 11-week low. Gold for December delivery dropped 1.7% to settle at US$1,265 an ounce and was recently trading at US$1,266.50.
The London Metal Exchange appeared oblivious to ructions elsewhere in the commodity space, with zinc recording a four-week high and aluminium close to its 18-month mark. Zinc rose 0.9% aluminium 0.6%, copper 0.5% and lead 0.3%. Tin lost 0.5% and nickel 1%. US copper for September delivery was recently off 0.1% at US$3.16 a pound.
European stocks gave up early gains as caution set in ahead of tomorrow night's European Central Bank meeting, where hopes are high for fresh stimulus measures. The Stoxx Europe 600 index dipped 0.03% as Germany's DAX gained 0.3%, France's CAC lost 0.04% and Britain's FTSE added 0.05%.
TRADING THEMES TODAY
COMMODITY PRESSURE: It says a lot about the changing face of the Australian economy - and the ASX - that our equity futures are positive after a dismal night in the commodity sector. It's make or break for iron ore in the short-medium-term after the spot price closed at the 2012 low. Oil and gold both fell off a cliff as the rally in the US dollar gained momentum. Base metals were resilient but could well play catch-up tonight. However, confirmation from the RBA yesterday that interest rates are likely to remain on hold for some time to come was enough to push the XJO to a six-year high. That 'safety net' should cushion the rest of the market from weakness in the resource sector ahead of today's potential market-moving economic news: twin Chinese services reports at 11am and 11,45am EST and the quarterly domestic GDP report at 11.30am.
ECONOMIC NEWS: The AIG Services Index is due at 9.30am EST, followed by quarterly GDP figures at 11.30am. RBA Governor Glenn Stevens is due to deliver a speech to a Committee for Economic Development of Australia Lunch in Adelaide at 1.20pm. China releases monthly services updates at 11am (CFLP) and 11.45am (HSBC). Tonight's US highlight is the Federal Reserve's Beige Book. Also due: factory orders and vehicle sales.
Good luck to all.
