A tentatively positive start is likely after US stocks inched to a fourth night of gains despite more grim European economic news.
The September SPI 200 futures contract ended the night session seven points or 0.2% ahead at 4287 during a lacklustre night that produced minimal change in overseas equities and oil and metals.
The S&P 500 followed European stocks lower at the open before reversing course for a final gain of 0.06% and a new three-month closing high. The Dow added seven points or 0.05% and the Nasdaq lost 0.15%. Trading volumes were well below average as traders struggled for reasons to push the market one way or the other after a nine-week rally that has carried the S&P 500 up nearly 10%.
"We're seeing a lot of indication that things are not as bad as we thought they were, but the question is, how good are they?" Bruce McCain, chief investment strategist at Key Private Bank in the US told MarketWatch. "We've had a pretty strong market rally for simply going from 'bad' to 'less bad'. If it's actually getting 'good', then we need to be prepared to put some money to work, but it seems like it is too early."
Earnings results were mixed, with a profit hike from Hewlett-Packard offsetting downbeat overseas sales from McDonald's and disappointing earnings from Priceline. Meanwhile Tuesday's flare-up of enthusiasm for QE3 was dampened by Federal Reserve Bank of Dallas President Richard Fisher who said the Fed had done enough and further stimulus would be ineffectual.
The highlight of a thin night for US economic news was a 1.6% rise in productivity last quarter, topping expectations for an increase of 1.3%. The rise was largely due to a 2% rise in output.
European markets began the night in the red as economic news painted a grim outlook for the region, but the major indexes pared losses when Wall Street turned higher. German industrial production and imports declined, France's central bank forecast the country will lapse back into recession this quarter and the Bank of England cut its growth outlook for Britain. Germany's DAX closed near flat at -0.03%, France's CAC lost 0.43%, Britain's FTSE put on 0.08% and Italy's FTSE MIB added 0.07%.
The drip-feed of glum news from Europe kept a lid on industrial metals ahead of two days of Chinese economic updates. In London, copper pulled back from a one-week high, easing 0.4%, nickel lost 0.1%, tin 0.4% and zinc 0.2%. Aluminium advanced 0.2% and lead less than 0.1%. US copper for September delivery was recently down two cents or 0.5% at US$3.42 a pound.
"China's macro data [today] and the trade data on Friday are fairly important for direction as it's a confused picture for copper," a Standard Chartered analyst told Reuters. "Demand is not that bad: in our view it's growing at about 5%, and China's imports have been surprising on the upside so it'll be interesting to see how long that carries on. Sentiment on the ground is pretty downbeat though."
Gold edged up on continued expectations of inflationary monetary easing in Europe. Gold for December delivery was lately up $2.10 or 0.1% at US$1,614.90 an ounce.
Oil traded at a two-month-plus high before fading to its first loss in four sessions. West Texas crude for September delivery was recently down 25 cents or 0.3% at US$93.42 a barrel.
TRADING THEMES TODAY
RALLY TAKES A BREATHER: World markets were overdue a pause to consolidate three days of strong gains. US action sounded no obvious warning bells or cause for alarm, but nor did it offer much reason to go in hard today. The tone should remain cautiously positive, at least until a busy day of economic news gets underway at 11.30am EST. The market may be more volatile than usual, with domestic jobs data and Chinese inflation figures in the morning and then Chinese industrial production and other data at 3.30pm. US sector analysis offered few leads last night - airlines and other transport stocks benefitted from the modest retreat in oil and there appeared to be some rotation from cyclical sectors into telecoms, consumer stocks and insurers, suggesting moderating risk appetite.
CHINA AND EMPLOYMENT: A busy session for economic news includes local jobs and two shots of Chinese economic data. 11.30am EST brings the monthly Australian employment figures and unemployment rate. The unemployment rate is expected to tick up a tenth of a percentage point to 5.3% despite a forecast increase in positions of around 10,200. Also due at 11.30am are Chinese consumer inflation figures that are expected to show another decline from 2.2% to 1.7%. Finally, 3.30pm brings the monthly update on industrial production, retail sales and fixed asset investment.
ECONOMIC NEWS: See above for domestic/Chinese news. Europe has trade data due tonight. The US has a full menu of economic news for the first time this week, including trade balance, weekly jobless claims, wholesale inventories, natural gas storage and a bond auction.
