A rebound in commodity prices and Wall Street's best session in seven weeks have Australian shares primed for a positive open this morning.
The June SPI 200 futures contract rallied 33 points or 0.7% to 4979 as gold pared its worst two-day collapse in 30 years and base metals edged higher.
Wall Street found the positives in a mixed bag of corporate earnings as economic data topped expectations. The S&P 500 bounced 23 points or 1.46% to recover most of Monday's 37-point fall, the heaviest decline of the year. The Dow gained 158 points or 1.08% and the Nasdaq added 1.51%.
A welcome break in the recent run of economic data disappointments saw a jump in housing starts, increased industrial production and a fall in consumer inflation. Housing starts increased 7% last month to the fastest rate since June 2008. Industrial production rose 0.4%, although the result was marred by declines in manufacturing and mining output. The consumer price index fell 0.2% on lower energy costs.
Also helping sentiment were upbeat earnings from Coca-Cola, BlackRock and Johnson & Johnson, offsetting disappointments from Goldman Sachs and Bancorp. Shares in Yahoo! were recently down 4.4% and Intel off 0.6% in after-market trade after both delivered earnings following the close of regular trade on Wall Street this morning.
"Fundamentally we feel good about the earnings that are coming through," a portfolio manager at BMT Asset Management in the US told MarketWatch. "It looks like it's going to be the same as the last few quarters. We hope and pray that Boston is a singular event, and that's all there is going to be."
The market overcame headwinds from a downgraded global growth outlook from the International Monetary Fund and falls in European stocks after German economic sentiment declined more than expected. The IMF cut its global growth expectations for the year to 3.3% from a forecast of 3.5% in January and urged European policy-makers to take aggressive action to stimulate the floundering euro-zone economy. Germany's DAX share index fell 0.38% last night, France's CAC 0.66% and Britain's FTSE 0.61% after Germany's closely-watched ZEW economic sentiment indicator slumped this month.
Gold briefly regained the US$1,400 an ounce level following its worst two-day slump since 1983, but pared gains as the session wore on. Gold for June delivery was lately up $12.90 or 1% at US$1,374 an ounce after running as high as $1,403.55. Silver, platinum and palladium also staged recoveries but struggled to retain gains. Silver for May delivery was recently up two cents or 0.1% at US$23.38 after earlier settling at US$23.63 an ounce.
Industrial metals found support in upbeat US housing data and a falling greenback. US copper for May delivery was recently up three cents or 1% at US$3.31 a pound. In London, copper rose 1.3%, aluminium 2.6%, lead 1.8%, nickel 0.3%, tin 0.3% and zinc 1.7%.
"The housing data was good, it shows the US recovery is consolidating," a T-Commodity consultant told Reuters. "From a long-term perspective the current copper price is exceptionally good for buyers but in the short term things might be a bit shaky."
Oil stabilised after losing 6% over three sessions. West Texas intermediate crude for May delivery was recently up 15 cents or 0.2% at US$88.89 a barrel.
TRADING THEMES TODAY
COMMODITIES STABILISE: The two-day commodities freefall eased overnight, which will lift some of the pressure on our market this morning. All eyes will be on gold, which hit its low during Australian trading hours yesterday and offered some nice entries. If you held overnight, you should be in the money, but it's worth nothing that the metal peaked at the start of US trade and has been making lower highs/lows over the last few hours. In other words, we may not have seen the bottom. Silver has given back nearly all of its bounce this morning. After-market earnings results from Intel and Yahoo! in the US seem to have disappointed but likely not by enough to alter the outlook for the Australian session.
ECONOMIC NEWS: The Melbourne Institute's leading index of economic indicators is due at 10.30am EST. A light night ahead in the US includes the Federal Reserve's beige book, crude oil inventories and a speech by US Treasury Secretary Jack Lew.
