Market wrap: Australian stocks will open in the red this morning after a sharp drop in U.S. consumer confidence sapped resource sectors overnight.
Futures traders expect our market to open 54 points lower. The March SPI futures contract closed at 4664 after a resurgent U.S. dollar pressured commodity prices, sparking selling in U.S. resource stocks.
The S&P 500 closed 1.21% lower, the Dow dropped 101 points or 0.97% and the Nasdaq was off 1.28% after a shock plunge in consumer sentiment raised fears for sectors that depend on consumer spending. The Conference Board's index of consumer confidence dropped more than 10 points this month to 46 - well below the 54.8 reading expected by economists. The present situation index, which measures consumers' assessment of current conditions crashed to 19.4, its lowest level in 27 years.
Retail stocks were sold off despite some solid earnings results in the sector. Banks retreated 2.4%, precious metals miners 3.5% and oilers 1.6%.
There was mixed news from the housing sector, where prices in major U.S. cities rose a seasonally adjusted 0.3% in December but remain 29% off their 2006 peak.
"The pace of deterioration has stabilised for now," David Blitzer, chairman of the S&P Case-Shiller home-price index committee told MarketWatch. "However, the rate of improvement seen during the summer of 2009 has not been sustained."
The U.S. dollar surged to an eight-month high against major rivals as investors backed its "safe haven" status. The dollar index, which measures the greenback against a basket of six currencies, climbed 0.5% to its highest level since last June.
Crude oil futures retreated after two weeks of steady gains, recently trading 1.8% lower at $78.84 a barrel. Gold sagged for a second day back towards $1,100. The spot price was recently at $1,102.50 an ounce, down $10 on Monday's New York close.
Industrial metals were hit by the softening outlook in the U.S. and the increasing cost to overseas buyers as the dollar rises.
"Right now you can't escape the feeling that people think commodity prices are a bubble," Alex Heath, head of base metals at RBC Capital Markets told Reuters. "Everyone's concerned about a double-dip recession. Governments should take good care not to withdraw funding packages too quickly. It could snuff out this recovery."
In London, copper fell 2.9%, aluminium 1.6%, lead 4.3%, nickel 1.9%, tin 3.1% and zinc 3.1%.
European markets were hit by weak earnings results and soft German business sentiment. Britain's FTSE slid 0.7%, Germany's DAX 1.5% and France's CAC 1.3%.
TRADING THEMES TODAY
RALLY UNDER PRESSURE: The recent two-week rally faces headwinds today after last night's nasty consumer confidence readings in the U.S. and Germany. The readings may be no more than a blip on the slow path to recovery, but the market will need brighter economic news this week to put this rally back on track. I'll be back to bounce scalping today - looking for oversold shares pulling back to support levels in the first half hour of trade.
ECONOMIC NEWS: The ABS releases quarterly construction data and the quarterly wage cost index at 11.30 am. Flagging U.S. investor sentiment may be tested tonight by new home sales and Fed chairman Ben Bernanke's testimony before a House of Representatives committee. Crude oil inventories are also scheduled.
