Market wrap: A flat start to trade is likely after falls in mining stocks during a soft session for oil offset a rally in US banks overnight.
The March SPI futures contract closed the night session 7 points or 0.15% higher at 4804 as losses for BHP and Rio Tinto in US trade weighed on the outlook for the share market today.
Wall Street advanced for the first night in three as an upbeat outlook from Bank of America boosted financial stocks and oil weakened on the prospect of production rises and hopes that Libyan leader Moammar Gadhafi might stand aside. The Dow rallied 124 points or 1.03%, the S&P 500 put on 0.89% and the Nasdaq 0.73%.
Financial stocks accounted for much of the Dow's gains after the promise of higher dividends and share buybacks from Bank of America underlined upside in the sector as the housing market emerges from the doldrums. CEO Brian Moynihan said the bank's residential mortgage business was in "recovery mode".
"Investor confidence is back, driven in part by positive comments from Bank of America," a money manager at SunAmerica Asset Management in the US told Bloomberg. "Many have been concerned about a spike in oil prices, which we don't see evidence of today as oil supplies continue to be strong. But ongoing disruptions in the Middle East and renewed concerns about the euro could limit upside in the market."
The US dollar recovered ground, pressuring commodity prices as European debt concerns undermined the euro. Yields on Portuguese and Irish debt hit record levels overnight as traders questioned the European Union's ability and will to deal with sovereign debt problems.
Oil futures eased from yesterday's 29-month high on reports that OPEC members are considering increasing production to cover lost output from strife-torn Libya. Also weighing on oil were reports that Libyan leader Gadhafi was looking for a way to stand down and leave the country. Crude futures were recently down 68 cents or 0.65% at $104.76 a barrel.
Gold followed oil lower as the greenback rallied and demand for defensive plays ameliorated. Gold for April delivery was recently down $5.30 or 0.4% at $1,429 an ounce. However, silver shook off early weakness to rally 18 cents or 0.5% to $36.05 an ounce.
Copper inched off yesterday's two-week low but tin, zinc and nickel touched their lowest levels in more than a month as oil's impact on future economic growth continued to command attention. In London, copper rallied 0.4%, aluminium 1.8%, lead 0.1% and zinc 0.4%. Nickel fell 1.6% and tin 0.5%. In US trade, BHP fell 1.35%, Rio Tinto 1.3% and Alumina 1%.
The major European markets turned positive late in the session to overcome losses among mining stocks. Britain's FTSE added 0.02%, Germany's DAX 0.04% and France's CAC 0.64%.
TRADING THEMES TODAY
CAUTIOUS RECOVERY: Healthy overnight gains in the US are not fully reflected in our futures outlook for today partly because we pre-empted some of the rise yesterday and partly because mining stocks continued to slide in overseas trade last night. Substantial gains in US bank stocks suggest that financial stocks will provide most of the upside on our market this morning. Airlines and transport stocks also snapped back in the US overnight on signs of a pause in oil's parabolic rally. The central theme of the last few weeks remains the same today: shares will likely retain their inverse relationship with rising oil.
ECONOMIC NEWS: Monthly consumer sentiment figures are due at 10.30 am. Reserve Bank Assistant Governor Phil Lowe is due to address an Australian Industry Group Forum at the same time. Monthly home loans are due at 11.30 am. A slow week continues tonight in the US with crude oil inventories and wholesale inventories. Treasury Secretary Tim Geithner is due to testify on the budget for international programs before the House Appropriations Committee.
