Market wrap: Wall Street finished mixed overnight, but a slide in commodity prices is likely to weigh on Australian trading today.
With 30 minutes left to trade, local futures traders were pricing in a flat start to the day on the ASX. The SPI was down 1 point at 3748.
In the US, a rotation out of energy and materials stocks into traditional defensives dragged the Dow Jones index and S&P 500 into positive territory. Analysts said a morning fall to the important 8200 support level on the Dow triggered automated institutional buying. The Dow finished the day 0.53% higher. The S&P added 0.26% and the Nasdaq lost 0.51%.
Precious metal miners, oilers and mining services companies finished in the red. REITs, utilities and airlines advanced.
Commodities fell as investors bet that leaders at this week's G8 meeting will attempt to prop up the US dollar, undermining demand for commodities as a hedge. Demand worries and seasonal factors are also coming into play.
Crude oil futures slumped 2.5% to their lowest level in nearly six weeks, recently trading at $64.18. Gold followed oil south to its lowest level in two weeks, recently off 0.5% at $924.70. Base metals pared losses before the close in US trade but most finished more than 2% lower.
So no bloodbath overseas but no real bounce either. Key European markets lost around 1% each and the mining-heavy Canadian index dropped almost 2.5%.
There's a Reserve Bank interest rate announcement due at 2.30 today but no change is expected.
TRADING THEMES TODAY
FADING COMMODITIES: Mining, materials and energy companies were thumped in US and Canadian trade (eg, PDN down 8.11%) and we can expect something similar for many local plays. Ugly if you're currently holding but a possible bounce-trade set-up for others. There was a good wage to be made yesterday on bounces in the likes of MMX, CVN and ICN once the selling was exhausted, so I'll look for similar set-ups this morning.
DEFENSIVES: In the US, investors switched out of cyclical plays into utilities, health companies, REITs, etc. Could be a pointer for where the gains will come in our market today.
UNCERTAINTY: Although it was good to see key US indexes finish in the green, the rotation into defensives suggest a lack of confidence about the market's direction. It's always worth paying attention to the big boys. If they have no confidence in the short-term direction, is this a good time to hold much overnight? Stay nimble.
