A second night of losses on Wall Street amid disappointing economic data and falling commodity prices has Australian stocks pointed lower this morning.
The June SPI 200 futures contract ended the night session 11 points or 0.2% weaker at 4415 as declining oil and metals helped drag the big Australian miners lower in overseas trade.
US stocks ground lower ahead of tonight's monthly jobs report after a drop in first-time unemployment claims was overshadowed by a slowdown in growth in services industries. The S&P 500 lost 0.77% with commodity and technology the weakest of its 10 sectors. The Dow fell 62 points or 0.47% and the Nasdaq lost 1.16%
"The economic data has turned softer," the chief investment strategist at Raymond James in the US told Bloomberg. "I wouldn't be surprised to see the jobs report tomorrow disappoint. All that will do is allow the market to work off its overbought condition."
Service industries growth was slower than predicted last month. The Institute for Supply Management services-sector index fell to 53.5 from of 56 in March. Commentators were particularly troubled by a decline in the index's employment measure to a four-month low, which took the shine off a fall in weekly jobless claims to a one-month low.
A broad retreat across commodity markets weighed on mining stocks in the US. BHP fell 2.09%, Rio Tinto 3.33% and Alumina 4.19%.
West Texas crude slumped to a two-week low after a sixth straight increase in US weekly inventories left supplies at a 21-year high. Crude for June delivery was recently down $2.67 or 2.5% at US$102.55 a barrel.
Most industrial metals fell despite Indonesia announcing it will ban exports of 14 mineral ores from Sunday except from companies with local processing facilities. Commodities affected include copper, nickel, lead, zinc, gold and silver. Read more here. In London, copper lost 1.1%, aluminium 0.6%, lead 1.9%, tin 2.4% and zinc 1.4%. Nickel gained 0.6%. US copper for July delivery was recently down five cents or 1.3% at $3.74 a pound.
Gold declined for a fourth session as the night's positive economic news - the fall in first-time unemployment claims - was interpreted as a negative. Gold for June delivery was lately off $17.50 or 1.1% at US$1,636.50 an ounce.
"Jobless claims are down, which is a good thing," an analyst with CPM Group in the US told MarketWatch. "But gold investors tend to correlate that with potential for quantitative easing and that probability is reduced, which is bearish for gold."
Most European markets gave up initial gains as Wall Street turned south and the European Central Bank left rates on hold. ECB President Mario Draghi said rate cuts were not discussed at the central bank policy meeting. Germany's DAX eased 0.24% and France's CAC lost 0.09%. Britain's FTSE advanced 0.15%.
TRADING THEMES TODAY
CAUTION PREVAILS: US stocks continued to pull back from this week's four-year high as cautious traders cashed out ahead of tonight's jobs report. There has been a definite softening in US data over the last couple of months, but no sign yet of panic. Meanwhile, local traders who have long bemoaned the ASX's sensitivity to events on Wall Street will be pleased that our market has developed something of an independent streak lately as falling interest rates offer support. Not so long ago this set of overnight leads would have had our futures down at least 30 points. Oil and most metals sagged and there were fairly substantial falls in the big miners in the US. Small caps struggled here yesterday and that pattern was repeated in the US overnight, where the Russell 2000 index of small caps fell 1.47%.
RESERVE BANK OUTLOOK: Rate-watchers will keep a close eye on this morning's quarterly monetary policy statement from the RBA. The statement, due at 11.30am EST, should offer some clues as to whether this week's unexpected 50 basis points cut to the overnight cash rate was a sign of accelerating easing or intended to be a one-off short, sharp shock. Rate cuts are broadly supportive for equity markets because they bring money into the market in search of better returns while also reducing listed companies' costs of borrowing.
ECONOMIC NEWS: The Reserve Bank's quarterly monetary policy statement is due at 11.30am EST. Trading in Japan is once again suspended for a public holiday today. Europe has some retail and services data due tonight, but the main overseas interest lies in the US's monthly non-farm payrolls report and unemployment rate.
