Stocks face a soft start after falls in commodity prices and the big two miners in overseas trade offset slender gains on Wall Street.
The September SPI 200 futures contract ended the night 10 points or 0.2% weaker at 4342 as US stocks continued to tread water ahead of Friday's speech by Federal Reserve Chairman Ben Bernanke.
The Dow pared a 38-point rally to a final gain of four points or 0.03% despite upbeat economic news. The S&P 500 put on one point or 0.08% and the Nasdaq squeezed out a fourth straight advance, rising 0.13%.
"You are right in that narrow little lane where nothing needs to move at this point," Madelynn Matlock of Huntington Asset Advisors in the US told Bloomberg. "People are actually waiting if anything comes out of Bernanke's speech that is totally not expected. I don't see any big initiative out of the Fed at this point. The economy is good enough that it's not a disaster, yet it is slow enough that there's no reason to crank up the anti-inflation machine."
With US traders measuring economic data by its likely impact on further quantitative easing, stocks gave up most of their gains after the Fed's Beige Book painted a slightly improved picture of the economy, GDP was revised higher and the number of pending house sales increased.
"The economic data did little to support the view that Fed Chairman Ben Bernanke will announce new measures this Friday," a senior currency strategist at Forex.com told MarketWatch.
The "Beige Book", which compiles anecdotal evidence on the economy, said there was "gradual" improvement over the last month with more districts showing "modest" or "moderate" growth than previously. The US dollar rose and bonds fell after the data was released.
GDP for the June quarter was revised upwards to 1.7% from an initial estimate of 1.5%. Housing news continued to improve, with an index of pending house sales increasing by 2.4% last month.
Australia's big two miners continued to decline in overseas trade after yesterday's 6.7% plunge in the price of iron ore (read more here). In US trade, Rio Tinto fell 2.8% and BHP 1.1%.
Oil and metals eased as a rising US dollar impacted demand for dollar-denominated commodities. Copper dropped to its lowest level of the week and tin slumped more than 5% after Indonesian giant PT Timah restarted spot sales following last week's 13% jump in the metal. In London, copper dropped 0.85%, aluminium 1.25%, tin 5.2% and zinc 0.85%. Nickel gained 0.3% and lead less than 0.1%. US copper for September delivery was recently down three cents or 0.9% at US$3.43 a pound.
Gold retraced as strength in the dollar reduced demand for alternative stores of wealth and as the night's economic data was seen as reducing the prospects for inflationary stimulus measures in the US. Gold for December delivery was lately off $11 or 0.7% at US$1,658.70 an ounce.
Oil was squeezed by a jump in US inventories and the damage-free passing of Hurricane Isaac through the Gulf of Mexico. Isaac was downgraded to a tropical storm after reaching the mainland in southern Louisiana and appears to have missed oil operations in the Gulf. West Texas crude for October delivery was recently down $1.21 or 1.3% at US$95.12 a barrel.
European markets closed mixed in choppy trade with miners and banks the biggest drags. Germany's DAX rallied 0.11%, France's CAC fell 0.51% and Britain's FTSE lost 0.56%.
TRADING THEMES TODAY
ROTATION TO CONTINUE?: With US stocks locked in a holding pattern ahead of Jackson Hole, the precipitous slump in the price of iron ore may be the biggest issue for the ASX today. Rio and FMG are well and truly under the pump and BHP has not avoided the bloodbath. The dollar is also feeling the pressure as overseas commentators question whether its strength is justified as commodity prices ease. The result may be a continuation of this week's trend away from the miners into defensive stocks such as health, telecoms and utilities. That said, iron ore looks like it is entering the capitulation phase and a sharp rebound may be in the offing soon. There will be opportunities in Australia's beaten-up iron ore miners but timing will be key.
ECONOMIC NEWS: Monthly building approvals and quarterly private capital expenditure figures are due at 11.30am EST. Europe has an Italian bond auction, German unemployment and retail data tonight. The US, which has paid little heed to economic news this week, has weekly unemployment claims, personal spending and income and the core PCE price index.
