Market wrap: The outlook for local shares this morning hangs on US politicians reaching a 12th-hour agreement on the US debt ceiling before today's opening bell.
The Australian September SPI futures contract ended last week 3 points or 0.1% stronger at 4590, but that was before an announcement late Friday US time that negotiations over the debt ceiling had collapsed. US politicians were this morning racing the clock to craft a compromise deal and avert a potential bloodbath on Asian share markets, but a Republican deadline set for 6 am AEST passed without an announcement. Read more here.
US shares finished mixed on Friday. Strong earnings in the tech sector fired the Nasdaq to a 10-year high and helped the S&P 500 inch ahead, but a disappointing report from Caterpillar dragged the Dow into the red. The closing stats were: Nasdaq +0.86%, S&P 500 +0.09%, Dow -0.34%.
"You're seeing fast money gravitate to the large-cap tech names, viewing them as better able to withstand slower economic growth," a manager at Security Global Investors in the US told Bloomberg. "There are a couple stocks weighing on the Dow where the earnings came out a little less than expected but overall, earnings have been pretty good."
Shares in market heavyweight Caterpillar slid nearly 6% after the equipment maker attributed missed profits to slowing demand from China and Japan. Tech giant AMD jumped 19% after upgrading its profit outlook.
US sectors were mixed, with strength in IT, property trusts, gold/silver miners and industrials offset by weakness among financials, insurers and airlines as the price of oil broke back through US $100 a barrel. In US trade, BHP eased 0.7%, Rio Tinto put on 0.65% and Alumina added 0.2%.
Oil surfed the renewed appetite for risk for a fourth straight session. Crude for September delivery traded as high as US $100.19 a barrel before closing 67 cents or 0.7% stronger at US $99.81 a barrel.
Industrial metals mostly improved, with copper rallying for a fourth straight week despite a flat close in London on Friday. In London, aluminium rallied 1.9%, lead 0.1%, nickel 0.1% and zinc 1.5%. US copper put on 0.4%.
Gold turned higher following three days of falls as the stand-off over raising the US debt ceiling continued. Gold for August delivery added $12.60 or 0.8% at US $1,599.60 an ounce. September silver rallied $1.15 or 3% to US $40.10 an ounce.
The major European markets advanced as a relief rally following a second bailout package for Greece continued to lift beaten-up regional banks. Britain's FTSE gained 0.6%, Germany's DAX 0.5% and France's CAC 0.68%.
TRADING THEMES THIS WEEK
DEBT TALKS TEETER: Our market is in for a torrid start to the week unless US politicians announce a deal to raise the US debt ceiling this morning - or at the least a holding statement that promises an agreement is pending. Talks broke down on Friday but resumed over the weekend, with the express aim of securing a deal before Asian markets open this morning. The prospect of a US default seems absurd but Treasury Secretary Tim Geithner says the House of Representatives must have a plan before it tonight to meet the deadline of next Tuesday. The danger is that politicians playing hard-ball will be willing to let Asian markets slide this morning to give themselves greater leverage in negotiations.
US EARNINGS SEASON: If debt talks reach a successful conclusion, the spotlight in the US will swing back to what has been a generally upbeat earnings season. Of the 143 companies in the S&P 500 that have released earnings, 75% have topped analysts' expectations, according to MarketWatch. This week is one of the biggest this quarterly reporting season. Potential highlights include Chevron, Valero Energy, Exxon, Netflix, Lockheed Martin, Ford, Boeing and Amazon.
ECONOMIC NEWS: This week's local calendar includes: the quarterly producer price index (11.30 am AEST today); monthly leading index, speech by Reserve Bank Governor Glenn Stevens (tomorrow); quarterly consumer price index (Wed); and monthly private sector credit (Fri). Friday's second-quarter GDP is the week's main scheduled news event in the US. Other key releases include: new home sales, consumer confidence (tomorrow night); durable goods orders (Wed); weekly jobless claims (Thu); and employment cost index, Chicago PMI and consumer sentiment (Fri).
