The share market is likely to open little changed after gains in key commodities and Australia's big two miners offset shallow falls in US stocks on Friday.
The September SPI 200 futures contract closed flat at 5004 on Saturday morning as a fourth loss in five sessions saw Wall Street break a six-week winning streak.
The S&P 500 eased six points or 0.38% for a weekly loss of around 1.5%, the index's largest decline since June. The Dow cut a mid-morning fall of 152 points to a final loss of 72 points or 0.47% and the Nasdaq dropped 0.25%.
With little economic news to provide direction last week, analysts said the market was simply consolidating the previous week's run to record levels as well as the likelihood that the Federal Reserve will pare back its stimulus program before year-end.
"It's been a combination of tapering and just trying to digest the new highs," the chief investment officer of the Mutual Fund Store in the US told Bloomberg. "It's been a slow news week. It's just a matter of the normal digestion process and people trying to get comfortable with how quickly and how far we've come."
Companies leveraged to the Chinese economy enjoyed substantial gains after data released on Friday showed factory activity accelerated last month. Iron ore and coal miner Cliffs Natural Resources backed up an 8.91% rally on Thursday with a jump of 10.63% on Friday. Rio Tinto surged 5.02% and BHP added 2.61% in US trade. July Chinese factory output was 9.7% stronger than the same time last year, ahead of forecasts. Retail sales were up 13.2%.
Materials was the strongest of S&P 500's industry groups, helping the Morgan Stanley Cyclical Index buck the overall downtrend with a rise of 0.31%. Telecoms led the declines as yield stocks remained under pressure.
Copper hit a two-month high as a fourth advance delivered its biggest weekly gain in 11 months. Tin marked a four-month high as most industrial metals reached their strongest levels in about two months. US copper for September delivery put on four cents or 1.2% at US$3.31 a pound. In London, copper gained 1.2%, aluminium 1.7%, lead 1.9%, nickel 2.4%, tin 1.7% and zinc 2.6%.
"The numbers out of China suggest that things are getting better," the chief executive of commodity research firm Barratt's Bulletin told Reuters. "Base metals are getting a good lead with that and if we can maintain these levels we could be in for a good run."
Oil erased most of its losses for the week as record Chinese imports soothed demand concerns. West Texas Intermediate crude for September delivery rallied $2.63 or 2.5% to US$106.03 a barrel, a weekly loss of 0.9%. Data last week showed China's crude oil imports hit a fresh record of more than 6.1 million barrels a day last month.
Gold inched higher for a third night to close the week little changed. Gold for December delivery advanced $3.60 or 0.3% to US$1,313.50 an ounce. September silver rallied 32 cents or 1.6% to US$20.51 an ounce.
"Both gold and silver broke their short-term downtrends, which we interpret as a sign of growing investor interest," Commerzbank analysts told MarketWatch. "It would help the prices to bottom out if both metals could stay above the psychologically important thresholds of US$1,300 and US$20 per troy ounce, respectively."
Corporate earnings surprises and signs of improvement in the overall economy helped the major European markets rally for a second day. Germany's DAX gained 0.24%, France's CAC 0.31% and Britain's FTSE 0.82%.
Spot iron ore for import to China was quoted unchanged at US$133.10 per dry metric tonne due to holidays in Singapore on Friday.
TRADING THEMES THIS WEEK
EARNINGS SEASON CRANKS UP: The spotlight should swing back to domestic corporate performance this week as the local earnings season gets into gear. Among the heavyweights due to report this week are Commonwealth Bank, AMP, Wesfarmers and Newcrest. The calendar includes: COF, UGL (today); SGP (tomorrow); CBA, CPU, CRZ, CSL, EVR, LEI, OZL, PRY, SAI, SGN, SKC, SXL, WOR (Wed); AMP, GMG, MCE, NPX, WES (Thu); and DUE, PXS, STO, YAL (Fri). NCM is due to report Saturday. (Sources: BRR, Income Investor.)
SECOND-GUESSING THE FED: US stimulus addicts will likely remain fixated on when exactly Ben Bernanke is going to cut back on their monthly hits. Fewer Fed officials are lined up to speak this week, which can only help. Plus, Wall Street finally has some substantial economic data to assess after a week of thin fare. See "Economic News" below for more details. Bear in mind that with the Fed explicitly tying its stimulus program to economic performance, upbeat economic data will not necessarily be viewed as good for the market in the short term because an improving economy requires less stimulus.
ECONOMIC NEWS: A light domestic calendar this week includes: business confidence (tomorrow); wage price index (Wed); and inflation expectations (Thu). US highlights include: retail sales (tomorrow); producer price index/core PPI (Wed); consumer price index/core CPI, industrial production, Philly Fed, three speeches by Federal Reserve Bank of St Louis President James Bullard (Thu); and housing starts and consumer sentiment (Fri).
