Market wrap: Australian stocks are poised for a soft open after further moves to slow China's economy dragged Wall Street and key commodities lower on Friday.
Futures traders expect our market to start the week 18 points weaker after the March SPI futures contract closed at 4516. Wall Street was lower on Friday but modestly higher for the first week in five as traders speculated that the European Union will come up with a clear plan to aid debt-laden Greece.
The Dow plunged 160 points in early trade but pared losses to 45 points or 0.44% by the close. The broader S&P 500 dropped 0.27%, while the tech-heavy Nasdaq rallied 0.28% on gains in bellwether stocks.
Hurting sentiment on Friday was news that the People's Bank of China has raised the ratio of reserves that banks must set aside by 0.5 percentage points - the second such action this year. The move followed the release of data a day earlier showing heavy lending and accelerating property prices. The surprise announcement came after the close of trade in Shanghai and on the eve of the week-long Chinese New Year holiday.
Other factors weighing on U.S. trade were sluggish European Union GDP numbers and weaker-than-expected data on domestic consumer sentiment and business inventories. However, retail sales data were surprisingly strong.
"You have the lingering issue of the sovereign debt issue, you have questions regarding growth in Europe, questions concerning one of the main engines of growth, which is China," a U.S. market strategist told Reuters. "It all adds to uncertainty in the market."
There were winners and losers in U.S. trade. The former included airlines +1.7%, biotechs +1.1% and REITs +0.9%, while the latter featured financials -0.8%, oilers -0.7% and gold/silver miners -0.7%.
The U.S. dollar hit an eight-month high against the euro after the weak EU GDP data and on ongoing concerns about the fate of Greece and other debt-burdened EU members. The dollar index spiked 0.5%, triggering a pullback on commodity markets.
Crude oil futures slipped 1.5% to $74.13 a barrel, weighed down by news of a rise in U.S. inventories and fears of a slowdown in China. Gold came under early pressure but recovered most of its losses by the end of the session. The spot price closed at $1,092.40 an ounce, just 20 cents lower than Thursday's New York close.
In London, copper and zinc lost ground but other industrial metals edged higher despite the headwinds. Copper fell 2.1% and zinc 0.7%, tin and lead were flat while aluminium gained 0.1% and nickel rallied 1.6%.
European markets closed lower on Friday but ahead for the week. Britain's FTSE lost 0.37%, Germany's DAX 0.06% and France's CAC 0.5%.
TRADING THEMES THIS WEEK
CHINA SLOWDOWN: For better or worse, our wagon is firmly hitched to the Chinese growth story. Friday's surprise move to curb bank lending is another sign that China is determined to rein in its runaway economy. Old news? Let's see how our market responds.
PRESIDENT'S DAY HOLIDAY: U.S. markets are closed tonight for the President's Day holiday, so our market will look elsewhere for cues tomorrow. With European debt issues still weighing on the market, traders will look to the two-day meeting of EU finance ministers in Brussels starting tonight for concrete action, rather than platitudes.
EARNINGS SEASON: A huge week of earnings results lies ahead. There are too many companies reporting to list here but among the key results are: BSL, BEN (today); OST, FGL, CPA (Tue); CSL, CCL, BXB, AXA (Wed); WES, QAN, ASX, LGL, WOR, STO, MAP, AMP (Thu); and FMG, BBG (Fri). For more companies, try: http://www.egoli.com.au/researchtools.asp and http://www.brr.com.au/events/filter/results.
ECONOMIC NEWS: A slow start to the week with nothing scheduled today here or in the U.S. Tomorrow brings local business confidence data and the latest RBA minutes. The U.S. has a heavy schedule of data for the rest of the week after traders return to their desks on Tuesday.
