Market wrap: Australian stocks are set to open modestly in the red after Wall Street succumbed to another round of weak economic reports overnight.
The local September SPI futures contract closed 23 points lower at 4485 this morning, suggesting our market will give back most of yesterday's gains at the opening bell.
Equities in the U.S. fell as investors headed for the sidelines ahead of tomorrow night's closely-watched GDP report. The S&P 500 slid for a second day, down 0.69% after orders for US-made durable goods fell last month and the Federal Reserve said the economic recovery slowed in some parts of the country. The Dow lost 40 points or 0.38% and the Nasdaq closed 1.04% lower.
"Most people feel that the economy is in a soft patch and the latest data points have been showing that," a New York-based fund manager told Bloomberg. "The earnings season has been good. However, investors will probably sit back and wait until we get more clarity."
Economists' expectations for a 1% rise in durable goods orders were thwarted by weak demand for aircraft. Instead the report showed a 1% fall. Also harming sentiment was a 4.4% drop in a measure of mortgage applications and anecdotal evidence in the Federal Reserve's Beige Book of an economy slowing in some regions.
The deteriorating economic outlook and a surprise rise in U.S. stockpiles pressured oil. Crude futures were recently down 62 cents or 0.8% at $76.88 a barrel.
The "tremendous build in crude-oil inventories even with some production shut down from [Tropical Storm] Bonnie... continues to paint a bearish fundamental picture for the energy complex," an analyst with Citigroup told clients in a note quoted on MarketWatch.
Falling stocks in warehouses and a reassuring outlook from the Peoples Bank of China helped copper mark a new 10-week high and most industrial metals rally. China's central bank said yesterday that economic growth might slow but there would be no double-dip recession. The remarks helped the Shanghai Composite Index rally 2.3% to a two-month high.
In overnight trade in New York, copper climbed 1.2% to its highest closing price since early May. In late trade in London, copper was up 1.6%, aluminium 0.6%, lead 1.4%, tin 0.6% and zinc 1.8%. Nickel was down 0.9%.
Gold inched higher after yesterday's sharp sell-off. The spot price was recently $1.20 higher than Tuesday's New York close at $1,162.80 an ounce.
The major European markets were mixed as the weak U.S. economic data took some of the shine off a six-day winning streak. Britain's FTSE fell 0.86% and Germany's DAX lost 0.46% but France's CAC closed 0.11% higher.
TRADING THEMES TODAY
FIVE TOO FAR: Our market shook off a weak lead from Wall Street yesterday, thanks largely to strength in Asia. A fifth straight winning session today is probably too much to ask. Last night's soft U.S. economic reports raised fears over tomorrow night's GDP report and that may mean a weak end to the trading week here and overseas as investors lock in profits from the recent strong run. The wild card today is Shanghai, which has had a rocket under it since the start of the month as fears of another downturn dissipate. Logic says we're going lower today but Shanghai just might drag us out of the red.
INDUSTRIAL METALS: A bullish night for metals considering the headwinds from falling U.S. equities and weak economic reports. The market is increasingly taking its lead from China, which staged a 2.3% equity rally yesterday after central bank officials ruled out the prospect of a double-dip recession. That bodes well for base metal uptake. Copper stockpiles monitored by the London Metal Exchange have fallen 18% this year to their lowest since November, signalling solid demand. Local metals miners should prove relatively resilient today.
ECONOMIC NEWS: Nothing significant scheduled locally today. Unemployment claims are the main event tonight in the U.S. Also due: natural gas storage.
