Market wrap: The Australian share market is set to give back most of yesterday's gains after Wall Street sagged overnight under more weak economic data.
The September SPI futures contract closed 54 points weaker at 4392 as oil and European and U.S. equities retreated. Gold was little changed and copper pushed to a three-month high.
The Dow fell back towards 10,000 after last night's personal incomes report missed estimates, undermining the outlook for the consumer spending needed to get the economy back on track. The Dow closed 141 points or 1.39% lower at 10,010, unwinding most of the rise on Friday inspired by a speech by Federal Reserve chairman Ben Bernanke and stronger-than-expected GDP. The S&P 500 dropped 1.47% and the Nasdaq 1.56%.
The market opened lower and unwound throughout the night after the personal incomes report showed growth of 0.2%, below the 0.3% rate expected. Disposable income fell for the first time in five months. Morgan Stanley downgraded its forecast for economic growth through to year-end from 3-3.5% to 2-2.5%.
"Personal income is important here because the average consumer is really struggling with a lot of debt," the chief investment strategist at Robert W. Baird & Co told Bloomberg. "The pessimism in the market has gotten pretty acute."
The market is bracing for a heavy week of U.S. economic reports, including employment numbers, productivity, manufacturing and factory orders.
Investors once more turned away from equities and most commodities towards the perceived safety of government bonds and the U.S. dollar. The dollar index, which measures the greenback against six major currencies, rose 0.3% overnight and Treasuries rallied.
Oil slid as the dollar rallied and equities retreated. Crude futures were recently down $1.07 or 1.4% at $74.10 a barrel.
Gold endured another night of wild swings but finished little changed. The spot price was recently $1.10 weaker than Friday's New York close at $1,237 an ounce.
The London Metals Exchanged was closed for a bank holiday overnight but U.S. copper resisted the general downtrend, closing 1.5% stronger at a three-month high. Analysts pointed to short-covering after a break through a technical resistance level.
The major European markets eased overnight as traders factored in the early U.S. response to the economic reports. Germany's DAX fell 0.65% and France's CAC 0.58%.
TRADING THEMES TODAY
RALLY FLOUNDERS: So much for the Bernanke rally. He may be able to talk up an intraday bounce but the market sobered up pretty quickly when attention turned back to the numbers overnight. The whipsaws in this market are extraordinary. With a deluge of U.S. economic data to come this week, I'll mostly stick to intraday trading until the market finds a firmer footing.
COPPER: One bright spot overnight was the performance of copper in the US. With the London Metals Exchange closed, the focus switched to Comex trade in New York, where copper pushed to its highest level since early May. Volume was light but traders said there was momentum from Friday as traders speculated about further economic stimulus coming in the U.S. and Japan.
ECONOMIC NEWS: An unusually busy day for local action starts with a speech by Reserve Bank Assistant Governor Guy Debelle at the 'Risk Australia 2010 Conference' at 9 am. The rest of the news comes at 11.30 am: monthly retail sales, building approvals and private-sector credit, plus the quarterly current account. A heavy week for U.S. economic reports continues tonight with consumer confidence, the minutes from the last Federal Reserve meeting, regional manufacturing and a house-price index.
