Market wrap: A negative start is likely after Federal Reserve chairman Ben Bernanke doused hopes of imminent stimulus spending in the US, sending US shares lower.
The September SPI futures contract ended the night session 9 points weaker at 4458 but trimmed heavier losses after Google posted a knockout earnings report shortly after regular US trading finished this morning. Shares in the search engine were recently up 11.5% in after-market trade, raising expectations for tonight's trade in the US.
US stocks fell to their lowest level this month after further testimony from Bernanke quashed any optimism that the central bank was ready to launch a QE3 stimulus program. Bernanke said the Fed was not ready to take any action "at this point".
The Dow was ahead more than 90 points in early trade after a well-received earnings report from JPMorgan Chase and upbeat economic news but faded to finish 54 points or 0.44% in the red. The S&P 500 lost 0.67%, led by falls in miners, industrials and tech stocks, and the Nasdaq dropped 1.22%.
A raft of US economic reports delivered mostly good news. Jobless claims fell more than predicted and retail sales improved against expectations. JPMorgan offered hope for the battered US banking sector by reporting its strongest half-year profit. Shares in the bank rallied 1.8% against the general trend in the sector. However, the ongoing stand-off in Washington over the US debt ceiling continued to weigh on sentiment.
"The market is going to be volatile until we get the situation in Washington resolved," a fund manager for RidgeWorth Capital Management in the US told Bloomberg. "Earnings have been coming in pretty good and corporate balance sheets are in great shape. The economic data reports were positive."
Commodity prices were pressured by a rising US dollar, but gold eked out another record in choppy trade. Gold for August delivery was recently ahead $1.50 or 0.1% at US $1,587 an ounce after earlier trading as high as $1,594.90 an ounce.
Oil turned sharply lower after Bernanke's testimony, losing more than US $4 in around an hour. Initial losses have moderated to leave oil for August delivery down $2.17 or 2.2% at US $95.88 a barrel.
Industrial metals closed little changed but mostly lower on low volume as the market continues to struggle for direction amid conflicting signals. In London, copper eased 0.1%, aluminium 0.3%, lead 1.1%, tin 0.3% and zinc 0.2%. Nickel put on 0.5%. US copper was recently off 0.4%.
The major European markets fell again as a bond auction confirmed Italy's borrowing costs rising sharply. Britain's FTSE lost 1.01%, Germany's DAX 0.73% and France's CAC 1.11%.
TRADING THEMES TODAY
TESTING THE JUNE LOW: Looks like we're heading lower for the fourth day out of five this week after Fed chairman Ben Bernanke confirmed overnight what has been obvious to all but the most optimistic trader: the Fed is loathe to dole out any more magic pudding unless it has no choice. The news pulled the rug from under another nascent rally in the US, although local traders can take some hope from Google's earnings report, posted immediately after this morning's US market close. The search giant is not significant enough in the US corporate framework to fuel a real change in sentiment, but taken with this week's results from Alcoa and JPMorgan Chase it's further confirmation that corporate profits are weathering the recent downturn in the US. Wall Street looks like it wants to rally if it can catch a break in the recent run of glum news. Our market rebounded nicely yesterday when it neared the June lows. Look for those to provide support again today.
ECONOMIC NEWS: No local news scheduled today. Another busy session tonight in the US includes the consumer price index, core CPI, preliminary consumer sentiment, preliminary inflation expectations, Empire State manufacturing index, industrial production and capacity utilisation rate. Arguably the most important bulletin will be the results of the latest European bank stress tests.
