Shares face a subdued open after further evidence over the weekend of a slowdown in China compounded a soft end to the week on Wall Street as economic data and earnings disappointed.
The June SPI 200 futures contract eased three points or 0.1% to 5104 on Saturday morning as most US stocks ended lower and base metals dropped ahead of a three-day Chinese holiday this week.
The S&P 500 fell three points or 0.2% on Friday after GDP data under-performed expectations and consumer sentiment deteriorated. The Nasdaq lost 0.33%, while a post-earnings rise in Chevron helped the Dow edge up 12 points or 0.08%.
"What's happening... is a little bit of jitters on the economic front and a little bit of jitters on the earnings front," the chief executive of Sarhan Capital told MarketWatch.
Economic growth in the US cranked up to 2.5% last quarter from 0.4% at the end of last year but fell short of the 3-3.2% rate tipped by economists. Analysts predict that growth will slow to less than 2% this quarter as government "sequester" spending cuts kick in. A separate report showed consumer sentiment declined to a three-month low this month. The UMich-Thomson Reuters gauge fell to 76.4 from a final March reading of 78.6.
BHP and Rio Tinto lost ground as materials fared the worst of the 10 S&P industry groups. Technology and consumer staples were the only industry groups to advance. Rio dropped 2.02% and BHP lost 0.54%. The Russell 2000 index of small caps gave up 0.53% and the Morgan Stanley Cyclical Index 0.43%.
Profit growth at Chinese industrial companies slowed last month, according to data released over the weekend, another sign the economy appears to be losing momentum. Net income was up just 5.3% from a year earlier, compared to growth of 17.2% over the first two months of the year, the National Bureau of Statistics said on Saturday. Read more here. The Shanghai Composite dropped 0.97% on Friday and is set to record its third straight losing month.
Industrial metals turned sharply lower on Friday as traders closed positions ahead of this week's three-day Labour Day holiday in China. US copper for May delivery sagged six cents or 1.9% to US$3.18 a pound. In London, copper dropped 2.1%, aluminium 3.3%, lead 1.9%, nickel 1.55%, tin 1.6% and zinc 2%.
Oil ended its first winning week in four on a soft note, held back by the weak US GDP reading. West Texas crude for June delivery fell 86 cents or 0.9% to US$92.78 a barrel but still finished the week ahead by more than 5%.
Gold ended the session virtually unchanged following a late recovery after settlement. Gold for June delivery finished 20 cents or 0.1% higher at US$1,462.20 after earlier settling at US$1,453.60 an ounce.
European markets broke a five-session winning streak. Germany's DAX dipped 0.23%, France's CAC 0.79% and Britain's FTSE 0.26%.
TRADING THEMES THIS WEEK
CENTRAL BANK WATCH: With the tone of the US earnings season well established as it enters its third week, the spotlight is likely to swing back to economic data and in particular how central banks in the US and Europe respond this week. The US has a packed schedule of economic news (see below), climaxing with the monthly jobs report on Friday night. The Federal Reserve is not expected to announce any policy changes on Wednesday night, but traders will scan the policy statement for clues as to how the recent deterioration in economic data has affected the Fed's timetable for its stimulus program. The European Central Bank has more on its plate as economic data continues to worsen. Speculation is running that the bank will cut rates at Thursday's meeting.
ASIAN HOLIDAYS: The market will miss two of its major intraday leads for much of this week with Chinese trading suspended for the next three days for Labour Day holidays and Japan closed today and Friday. Despite the holidays, China is due to released manufacturing reports on Wednesday and Thursday and a services index on Friday.
ECONOMIC NEWS: This week's domestic schedule includes: private sector credit (tomorrow); manufacturing index, new homes sales (Wed); building approvals, import prices (Thu); and the services index (Fri). US highlights include: personal income, consumer spending (tonight); consumer confidence (tomorrow); ADP payrolls, manufacturing index, construction spending (Wed); weekly jobless claims, trade deficit (Thu); and non-farm payrolls, unemployment rate, services index and factory orders.
