Shares face another flat start after a Wall Street rally fizzled out despite strong economic data and the continuation of the Federal Reserve's stimulus program.
The September SPI 200 futures contract edged up two points or less than 0.1% to 5012 during a volatile session as US traders reacted to upbeat GDP/jobs figures and a "steady as she goes" policy statement from the Fed.
The S&P 500 rallied as much as 0.7% following the Fed statement, but surrendered its gains in the final hour to close unchanged. The Dow dropped 21 points or 0.13% and the Nasdaq held on to a rise of 0.26%.
The Federal Reserve policy statement at the end of its monthly two-day meeting offered no fresh clues as to when it will start to wind back its $85 billion a month bond-buying program. However, the central bank appeared to take a slightly more negative view of the economy, citing low inflation as a growing threat. Full text here.
"The [Fed] statement should come as no surprise," the head of US equity trading at RBC Global Asset Management in the US told Bloomberg. "The Fed will remain largely data dependent as to asset purchases, while noting persistently low inflation may be a risk to the economy. The mention of low inflation being a risk may push out expectations for tapering, but by and large, this statement reads as expected."
Earlier, shares rallied to record levels on the back of strong GDP and employment data. Economic growth accelerated last quarter as gross domestic product increased to an annualised rate of 1.7%, up from 1.1% over the first three months of the year and ahead of economists' expectations for a rate of 1%. Expectations for Friday's government jobs report were boosted after private payrolls operator ADP announced that companies added 200,000 workers last month. Economists polled by Bloomberg had anticipated a gain of 180,000.
The Australian dollar dropped below 90 US cents as currency traders weighed the upbeat economic data against the Fed's policy outlook. The Aussie was lately buying 89.88 US cents.
Oil roared back above US$105 a barrel as the US economic data generated optimism over energy demand. West Texas Intermediate crude for September delivery rallied $2.30 or 2.2% to US$105.38 a barrel.
Industrial metals were also well-supported, reversing Tuesday's sharp declines. US copper for September delivery was recently up eight cents or 2.5% at US$3.12 a pound. In London, copper bounced 2%, aluminium 1.6%, lead 2%, nickel 1.8%, tin 2.9% and zinc 0.4%.
Gold initially sank as stocks and the US dollar rallied, but clawed back most of its losses as the rallies in alternative stores of wealth faded. Gold for December delivery was lately down 90 cents or 0.1% at US$1,323.90 an ounce.
Iron ore eased for a third straight day ahead of today's Chinese manufacturing updates. Spot iron ore for import to China declined by $1 to US$129.90 per dry metric tonne. In US trade, Australian ore giant BHP fell 0.41% and Rio Tinto lost 0.04%.
TRADING THEMES TODAY
MUCH ADO ABOUT NOTHING: After all the anticipation, last night's Wall Street session didn't add up to much in the way of fresh leads for our market. US traders couldn't make up their minds whether bright economic news was a positive for the market or whether the Fed's policy statement marked a change or more uncertainty. Oil was a clear winner and industrial metals bounced back. Gold wobbled before recovering. The Aussie dollar dropped, as expected. However, markets move on quickly and the next potential game-changer is just a few hours away in the Chinese government's manufacturing report for July, due at 11am EST. Expectations are low, so there is potential for an upside surprise if the report can stay on the right side of the 50-point mark that separates expansion from contraction. Economists expect a reading around 49.8, down from 50.1 in June.
ECONOMIC NEWS: The AIG Manufacturing Index is due at 9.30am EST, followed by quarterly import prices at 11.30am and monthly new home sales (exact time uncertain). The session's big events are the 11am release of the July Chinese manufacturing PMI and the 11.45am release of the final version of HSBC's rival measure. The European Central Bank and Bank of England announce rate decisions tonight. Another buys night in the US includes weekly jobless claims, the ISM Manufacturing PMI, ISM manufacturing prices, Challenger job cuts, monthly construction spending, vehicle sales and natural gas storage.
