Market wrap: Local shares will open weaker for a third straight day after Wall Street closed at a seven-month low and oil and industrial metals prices continued to slide.
The June SPI futures contract closed 37 points or nearly 0.9% lower at 4301, suggesting our market will open near the 2010 closing low set on May 25.
Wall Street began the session in positive territory after Hungary backed away from Friday's default threat and German factory orders showed there is still economic growth in Europe. But the major indexes turned south after lunch and closed under the 2010 February low.
The benchmark S&P 500 dropped 1.35%, with significant losses in financial and industrial stocks. The Dow fell 115 points or 1.16% to 9,816 and the Nasdaq was hit hardest after losses in key tech stocks, falling 2.04%.
"Despite some mildly positive news from Germany and Hungary, there's been a lack of anything too positive to give the market a push and give investors more confidence to step in and do some bargain hunting," the chief investment officer at Philadelphia Trust told Bloomberg.
Goldman Sachs and Bank of America spearheaded falls in the financial sector after news that Goldman has been subpoenaed for failing to comply with requests for documents in a federal enquiry into its trading and the Bank of America has agreed to pay US$108 million to settle government accusations that it over-charged customers.
The euro pared losses against the U.S. dollar after manufacturing activity unexpectedly increased in Germany for a second month but the U.S. dollar index continued to advance, pressuring dollar-denominated commodity prices.
Oil see-sawed in and out of positive territory with U.S. equities but was recently lower. Crude for July delivery was off 24 cents or 0.34% at $71.20 a barrel.
Precious metals provided a bright spot amid the gloom, with gold and silver surging. Gold briefly topped its May 12 high and was recently trading near that mark. The spot price was up $20.30 or 2% from Friday's New York close at $1,240.30 an ounce.
The rout in industrial metals stretched into a fifth session as investors continue to abandon "risk assets". Copper and aluminium hit eight-month lows, zinc an 11-month low and nickel and tin four-month lows.
"I think the European debt contagion threw a lot of cold water on everyone's [recovery] hopes, but in the short term, I think we are still reacting to last week's [U.S.] jobs report," a futures analyst at Optionsellers.com told Reuters. "That certainly rattled a lot of people."
Copper closed 2% lower in New York. In late trade in London, aluminium was off 0.6%, lead 3.2%, tin 2.2% and zinc 1%. Nickel had recovered to trade 2.5% higher.
Falls among mining stocks helped steer the major European indices lower. Britain's FTSE fell 1.11%, Germany's DAX 0.57% and France's CAC 1.21%.
TRADING THEMES TODAY
GOLD: A strong night for the true believers. A new high in place and the spot price holding its ground within striking distance. U.S. market commentators said the move was attracting momentum players, as well as conservative investors looking for the safest place to park their money while equity markets rumble lower. An index of U.S. precious metals miners rallied 1.9% overnight, suggesting our goldies may provide a glint of green among the red today.
TESTING SUPPORT: The May 25 closing low on the XJO, 60 points south of last night's close, could face a quick test this morning. Last night's U.S. trade was ominous because there was a little good news in the market but the old index support levels evaporated anyway. Not a hint of a bounce yet. Caution should prevail here.
ECONOMIC NEWS: Monthly business confidence figures are due at 11.30 am. A quiet start to the week continues in the U.S. tonight with an economic optimism index the main event, plus speeches from a couple of members of the Federal Reserve.
