Market wrap: A choppy week's trade faces another reverse after US shares sank during a night of political wrangling and lowered profit outlooks.
The September SPI futures contract ended the night session 16 points or 0.3% weaker at 4526, cushioned by gains in Australian mining stocks in US trade and advances in metals.
The Dow sank for a third straight night, losing 92 points or 0.73% after industrial giant 3M lowered full-year earnings. The S&P 500 was ahead in mid-afternoon but faded to a loss of 0.41% in the final hour of trade. The Nasdaq dropped 0.1%.
"We have multiple sources of uncertainty, including what's happening in Washington with the debt ceiling," the co-chief investment officer at Westwood Management in the US said. "The longer the uncertainty goes on, the greater the risk is that it will negatively affect businesses."
The stand-off over raising the US debt ceiling continued. Republicans are pressing for a vote tonight in the House of Representatives on their two-step plan, but President Obama warned that he will veto the proposal even if it is passed by Congress. Democrats continued to push an alternative proposal.
A generally positive US earnings season delivered some disappointments overnight. 3M blamed the Japanese tsunami for missing analysts' earnings estimates. Economic bellwether UPS lost ground after warning this quarter will be "fairly slow". AK Steel fell heavily after the company warned the rising costs for raw materials would impact earnings.
Commodities were boosted by a sliding US dollar. The dollar index neared a three-month low as the political impasse weighed on buyer interest.
Gold marched to yet another record settlement as traders hedged against the falling dollar. Gold for August delivery was recently ahead $7.60 or 0.5% at US $1,619.80 an ounce. September silver put on 55 cents or 1.4% at US $40.92 an ounce.
Copper broke a four-day losing run as a strike at BHP's Escondida mine in Chile, the largest in the world, raised supply concerns. Escondida produces almost 7% of the world's mined copper. In London, copper added 1.9%, aluminium 0.9%, lead 1.7%, nickel 1.4%, tin 1.1% and zinc 2%. US copper was recently up 1.7%. In US trade, Rio Tinto put on 1.1%, BHP 0.5% and Alumina 0.1%.
Oil suffered wild swings in both directions but was lately trading little changed. Crude for September delivery was recently up 6 cents or 0.1% at US $99.24 a barrel.
The major European markets were again mixed as the US political impasse kept buyers on the sidelines. Britain's FTSE put on 0.08%, Germany's DAX added 0.07% and France's CAC fell 0.66%.
TRADING THEMES TODAY
ONE STEP BACK: The ups and downs are set to continue today after another negative session in the US. The deadlock in Washington appears to offer no easy solution, so we can expect at least a few more days of choppy action as hope and fear ebb and flow. Metals miners may find some support today in overnight strength in metals as the US dollar continued its swan-dive. The Australian dollar is up more than a cent at US $1.0957 this morning.
INFLATION: The Reserve Bank's recent neutral stance on interest rates may be tested this morning with the 11.30 am AEST release of quarterly inflation figures. The last quarterly consumer price index reading of +1.6% kept inflation above the central bank's target range. Economists are predicting the latest reading will drop to around +0.7%. Rising interest rates are seen as broadly negative for stocks, so the lower the CPI number the better the likely market reaction.
ECONOMIC NEWS: Quarterly CPI and trimmed CPI readings are due at 11.30 am AEST (see above). Tonight's US schedule includes durable goods orders, core durable goods, the Federal Reserve's beige books and weekly crude oil inventories.
