Market wrap: A glum night for industrial metals points to a flat start for local equities despite a second positive session on Wall Street.
The June SPI futures contract closed 6 points lower at 4480 as traders weighed healthy gains for European equities and oil and a modest advance on Wall Street against weakness in gold and multi-month lows for several base metals.
Trade in the U.S. began strongly, faded into the red by lunchtime, then recovered as investors absorbed a heavy schedule of domestic economic reports. The benchmark S&P 500 index closed 0.41% higher and the Nasdaq surged 0.96% but the blue-chip Dow could only manage 6 points or 0.06%.
The session's lowest point came as the euro fell 0.8% towards a four-year low amid speculation of intervention by the European Central Bank to boost liquidity in the European financial system.
"There has been speculation in the past day or so that the ECB is going to have to roll out some kind of debt guarantee program," a portfolio strategist at a U.S. investment firm told Bloomberg. "That signals to the markets that maybe the ECB knows something that the market doesn't, suggesting that conditions are worse than we know about."
Economic reports delivered a mixed but mostly positive picture of the health of the U.S. economy ahead of tonight's much-anticipated jobs report. Jobless claims decreased, the private sector showed jobs growth and service industries expanded last month for a fifth consecutive month. However, retail sales were mixed as cool weather and a public holiday were blamed for a second month of slowing demand, and April factory orders were below expectations.
Several Australian miners listed on U.S. exchanges were sold off after Freeport and Codelco, the world's two largest copper producers, warned that China's plans to cool its economy threatened the outlook for the metal. Codelco Chief Executive Officer Diego Hernandez told Bloomberg the copper market will be "volatile" as China clamps down on its property market.
BHP, Rio Tinto and Alumina all lost ground in U.S. trade as industrial metals continued yesterday's ominous slide. Aluminium, zinc, lead and nickel fell to multi-month lows and copper tumbled nearly 3% in New York. In late trade in London, copper was off 2.1%, aluminium 1.8%, lead 3.6%, nickel 5.3%, tin 1.1% and zinc 3.4%.
Crude oil raced higher after the weekly U.S. stockpile report came in better than expected. Crude futures were recently up $1.84 or 2.5% at $74.67 a barrel.
Gold was hit by profit-taking as a stellar two-week streak ran out of steam. The spot price was recently down $16.20 or around 1.5% from Wednesday's New York close at $1,207.80 an ounce.
Earlier, the major European markets closed higher as they played catch-up with yesterday's big gains on Wall Street. Britain's FTSE added 1%, Germany's DAX 1.2% and France's CAC 1.6%.
TRADING THEMES TODAY
GIVING SOME BACK: It felt like there was real strength in our market yesterday for the first time in weeks. Wall Street looks eager to put European woes behind it and focus instead on the improving domestic outlook - provided of course that tonight's jobs numbers meet expectations. However, it's hard to be bullish about the outlook for our market today after last night's overseas falls in gold, base metals, BHP, RIO and AWC. This morning's futures number looks optimistic, so I'll wait for weakness later in the session to offer bounce opportunities.
ECONOMIC NEWS: There is nothing scheduled locally today. Non-farm employment change and the unemployment rate are the two big numbers in the U.S. tonight. Expectations are once again high for evidence of jobs growth. Elsewhere, G20 Finance Ministers and Central Bank Governors meet today to discuss a range of global issues including the European crisis and, banking reforms.
