Market wrap: Australian stocks are likely to open little changed after a large rally on Wall Street faded as the session ended.
The September SPI futures contract ended the night session 2 points stronger at 4078 as weakness in industrial metals offset modest gains in oil and US equities.
US stocks surged at the open on optimism that Friday's gathering of central bankers at Jackson Hole will deliver news of fresh economic stimulus, but gave back most of their gains as German shares declined and news broke that Goldman Sachs CEO Lloyd Blankfein has hired a defence lawyer. The Dow closed 37 points or 0.34% ahead after earlier rallying as much as 202 points. The S&P 500 added just 0.03% as financial shares sagged and the Nasdaq put on 0.15%.
"The market remains very nervous and I expect a great deal of attention will be paid to [Federal Reserve chairman Ben] Bernanke's Jackson Hole address and his analysis of economic prospects," a senior strategist at RidgeWorth Capital Management in the US told Bloomberg. "Valuations are quite reasonable in the stock market, but until investors get a clearer sense of the potential downside risks they will be reluctant to buy."
Shares in Goldman Sachs slumped 4.7% in the final minutes of trade and continued falling in after-market action after Reuters reported that its CEO has hired the defence attorney who represented defendants in the Enron and WorldCom scandals. The news heightened concerns about the fallout from Goldman's role in selling sub-prime CDOs during the GFC and sparked a general retreat from financial shares. The S&P 500's financial sector fell 1.3%.
European shares mostly advanced as signs of impending leadership change in Libya helped companies exposed to the oil-rich nation. Britain's FTSE rallied 1.08% and France's CAC 1.14%, but Germany's DAX ended 0.11% lower.
Gold's record run breached the US$1,900 an ounce level for the first time and silver hit its highest level since May. Gold for December delivery was recently ahead $49.20 or 2.6% at $US1,901.10 an ounce. Silver for September delivery added $1.32 or 3.1% at US$43.76 an ounce.
West Texas crude oil rallied as traders bet that the possible resumption of the Libyan oil trade made WTI a better bet than Brent crude, Europe's benchmark. (Most of Libya's oil went to southern Europe.) Crude for September delivery was recently ahead $2 or 2.4% at US$84.41 a barrel.
Industrial metals were unsettled by yesterday's jittery session in Asia and largely ignored the improved tone in Europe and the US. In London, copper eased 0.8%, aluminium 0.4%, lead 1.4%, nickel 1.75%, tin 0.2% and zinc 1.6%. US copper was recently off 1%.
"The market players are very uncertain," an analyst at Commerzbank told Reuters. "Everything still seems to be on a shaky footing. Many are waiting on the sidelines and don't want to get in now."
TRADING THEMES TODAY
VOLATILITY RULES: Last night's overseas action confirmed the message from yesterday's choppy session on the domestic market: volatility remains at elevated levels and rallies are selling opportunities, for now at least. The US opened very bullishly, then spent most of the session finding reasons to take profits. The Goldman Sachs news was the final nail in the coffin. After yesterday's peculiar performance by the ASX, anything seems possible today. China's manufacturing report at 12.30 pm AEST will likely set the course for the rest of the session (see below).
GLOBAL SLOWDOWN?: Our market got a nasty shock this time last month when the HSBC China Flash Manufacturing purchasing managers' index unexpectedly sagged to a 28-month low. That news was compounded by weak manufacturing data later that night from Europe, heightening concerns that the global economy was slowing. The August reports commence today with China's PMI due at 12.30 pm AEST. This evening brings manufacturing and services reports from Germany, France and the rest of the euro-zone. Expectations are modest but a serious deterioration in the figures could be the trigger for another down-leg on world markets.
ECONOMIC NEWS: Reserve Bank Deputy Governor Ric Battellino is due to address the Economist's Bellwether gathering in Sydney at 2 pm AEST. The HSBC Flash Manufacturing PMI from China is due at 12.30 pm (see above). New-home sales and the Richmond manufacturing index are the main events tonight in the US.
