Market wrap: A mildly negative start to local trade is likely after a pause in the three-day rally in US stocks as the price of oil punched through US$105 a barrel.
The June SPI futures contract ended the night session 9 points or 0.19% weaker at 4667 following a moderate equity retreat in Europe and on Wall Street and losses for the big Australian miners in US trade.
US stocks drifted lower after their strongest three-session rally in three months. The Dow traded in a tight 48-point range after weeks of unusual volatility, closing 18 points or 0.15% lower. The S&P 500 dropped 0.36% and the Nasdaq 0.31%.
Oil rallied nearly 2% after a US fighter plane crashed overnight in Libya, further violent protests took place in Syria and Yemen lurched closer to civil conflict. Crude for May delivery was recently ahead $1.82 or 1.8% at US$104.92 a barrel after earlier trading above $105.
"Oil much over $100, with more to come if Middle East oil supplies are disrupted, is going to be hard for the stock market to swallow," a partner at Cubic Financial Advisors in the US told MarketWatch. "Many companies are already struggling with rising raw material costs, not to mention hard-pressed consumers... There is a lot of doubt in the market and global situation."
Earlier, European stocks slipped as sovereign debt concerns commanded investor attention. Portugal's main opposition party rejected government austerity measures, raising the prospect that the government could fall if it loses a vote on the package later today. Irish and Greek bonds slumped after divisions emerged among European Union finance chiefs over a rescue fund for the union's indebted nations. Portugal's PSI 20 index fell 1.53%, Britain's FTSE 0.4%, Germany's DAX 0.52% and France's CAC 0.3%.
A rebound in industrial metals did not stem modest losses in the big two Australian miners in US trade. BHP fell 1% and Rio Tinto 0.9%. Alumina rallied 0.8%.
Copper volumes were low as the market seeks a direction after the recent pullback but most metals eked out gains. In London, copper rallied 0.9%, aluminium 0.9%, lead 1.3%, tin 1.35% and zinc 2.1%. Nickel eased 1.2%. US May copper was recently up 0.7%.
Gold initially inched to a fifth straight gain in muted trade but recently turned negative. Gold for April delivery was down 40 cents or 0.03% at $1,426 an ounce. May silver added 38 cents or 1.05% at $36.38 an ounce.
TRADING THEMES TODAY
TAKING A BREATHER: No real surprise to see a mild pullback in the US overnight after the strongest three-day rally since December. The opportunity for quick profits was always likely to tempt some, given the level of uncertainty around at present. Our market has been remarkably efficient at pre-empting broader moves overseas these last few weeks and took its medicine yesterday. I doubt we'll see much movement today, but in this event-driven market, anything is possible.
b>EYES BACK ON OIL: The UN intervention in Libya was always likely to encourage anti-government movements in other Arab nations, and so it is proving, with protests gathering pace in Syria, and Yemen's president facing calls to stand down after a group of generals backed the protest movement. The result was another lurch higher in the oil price overnight - great for energy stocks but broadly negative for equities in general, due to higher input costs for some companies and additional pressure on the consumer purse.
ECONOMIC NEWS: Another relatively quiet 24 hours lies ahead for scheduled news. There's nothing significant scheduled here today. Tonight the US has new-home sales, crude oil inventories and a speech on community banking by Federal Reserve Chairman Ben Bernanke.
