Stocks face a soft start after overnight declines on US and European markets, but strength in iron ore and industrial metals should cushion any fall.
The September SPI 200 futures contract ended the night session nine points or 0.2% weaker at 4322 as spot iron ore's biggest ever one-day rise spared Rio Tinto and BHP from the worst of the overseas selling.
US stocks closed at their lows as caution set in at the start of a week where Germany's constitutional court could scupper Europe's rescue plan for Spain and Italy, and the US Federal Reserve may disappoint investors betting on QE3. A day-long fade dragged the S&P 500 0.62% from its highest close since 2008. The Dow dropped 52 points or 0.39% and the Nasdaq fell 1.03% as an analyst downgrade for Intel sapped enthusiasm for the tech sector.
"After some significant moves last week, Monday was more of a waiting game as the markets looked toward the news coming out of the Fed and the German constitutional court later this week," the head of US rates strategy at RBC Capital Markets told Fairfax.
Soft trade data out of China pressured mining stocks, but Rio Tinto and BHP were cushioned by a 6.7% bounce in iron ore, its biggest one-day move, on the back of Friday's announcement of US$150 billion of infrastructure spending to boost the Chinese economy. The benchmark spot iron ore contract rallied US$6 to US$95 per metric tonne and Chinese steel futures hit a two-week high. Read more here. In US trade, Rio Tinto eased 0.58% and BHP fell 0.83%.
European markets edged lower as Greece's problems came back under the spotlight. Greek Prime Minister Antonis Samaras was due to meet creditors after failing to get his coalition partners to agree to spending cuts necessary to secure further bailout funds. Nonetheless, the Athens General Index jumped 4.7% following weekend reports that German Chancellor Angela Merkel will allow Greece more flexibility in obtaining more aid. Germany's DAX eased 0.01%, France's CAC 0.37% and Britain's FTSE 0.03%.
Copper, aluminium, zinc, tin and lead pushed to four-month highs as industrial metals continued to benefit from Friday's Chinese infrastructure announcement. Three-month copper broke above the US$8,000-per-tonne level in London for the first time since mid-May. In London, copper advanced 1%, aluminium 4.3%, lead 1.2%, nickel 1.6%, tin 4.2% and zinc 2.3%. US copper for December delivery was recently up three cents or 0.7% at US$3.67 a pound.
Oil was lately little changed despite a warning from Saudi Arabia that market fundamentals do not justify current prices. West Texas crude for October delivery was lately down 16 cents or 0.2% at US$96.26 a barrel after falling as low as US$95.34 following comments from the Saudi oil minister.
Gold gave back some of last week's 3.1% rise as traders locked in profits ahead of the German constitutional court decision tomorrow night and Fed announcement on Thursday. Gold for December delivery was recently down $12.60 or 0.7% at US$1,727.90 an ounce.
TRADING THEMES TODAY
MINERS TO SUPPORT?: We may be in for a repeat of yesterday's pattern on the ASX, where strength in the miners offset weakness pretty much everywhere else. You would expect this morning's outlook to be gloomier after a 0.6% drop in the S&P 500, but big moves in iron ore and base metals over the last two sessions should fireproof our market against much of the downside. That said, the ore miners are mostly well off their lows, so the easy rebound money has likely been made. Defensive sectors copped it yesterday but may come back into vogue if investors follow the overnight pattern in the US ahead of this week's two big "event risks" in Germany and the US.
ECONOMIC NEWS: Monthly business confidence figures are due at 11.30am EST. The highlights of a quiet night ahead overseas include British and US trade balance data and the economic optimism index in the US.
