A mixed night for US stocks and commodities has handed the Australian share market a chance to break a five-session losing run despite a downbeat reaction to BHP's full-year earnings announcement.
The September SPI 200 futures contract rallied 13 points or 0.2% to 5064 as upbeat retail sales helped the S&P 500 advance for the first time in five nights. Shares in ASX heavyweight BHP fell 2.05% in US trade and 1.66% in the UK after the miner missed its earnings target and announced plans to expand its Canadian potash business.
A late sell-off curbed gains ahead of the release tonight of the minutes from the last Federal Reserve meeting, but the S&P 500 held on to a closing gain of six points or 0.36%. The Dow slipped to a loss of eight points or 0.05% while the Nasdaq rallied 0.69%.
"It's just been a pretty down couple of weeks," a portfolio manager at Cabot Money Management in the US told Bloomberg. "Sentiment just went a little bit too far in one direction, and this tends to happen that we have a bounce back."
Market sentiment was lifted by positive earnings news from retailers Best Buy and JC Penney and an analyst's upgrade for Urban Outfitters. A report showed sales at US stores increased by 0.2% this month for an annual improvement of 3.4%. The sales report helped soothe concerns that recent increases in mortgage rates, which are tied to rising Treasury yields in the US, were undermining consumer spending. Bond yields retreated from two-year highs overnight. Read more here.
Commentators said traders remained reluctant to make big bets ahead of the release tonight of the minutes from the Fed meeting on July 30-31, which will be scrutinised for clues to the timing of the much-anticipated "taper" in bond buying. A Bloomberg survey of economists showed 65% expect the Fed to announce it is winding back its asset purchases from next month.
Small caps were among the standouts in the US, with cyclical stocks, biotechs and precious metals miners well supported. The Russell 2000 index of small caps rallied 1.51%, Morgan Stanley Cyclical Index 0.76%, Nasdaq Biotechnology Index 1.24% and Philadelphia Gold/Silver Index 3.31%.
Rio Tinto edged up 0.29% as iron ore ended yesterday's session little changed. Spot ore for import to China dipped 20 cents to US$139 per dry metric tonne.
Gold edged higher for an eighth night in ten, helped by solid seasonal demand from Asia. Gold for December delivery was lately ahead $5.30 or 0.4% at US$1,371 an ounce.
A volatile night on oil markets saw West Texas Intermediate crude drop below US$105 a barrel for the first time in five weeks as the September contract expired. Crude oil for September delivery fell $2.18 or 2% to US$104.92 a barrel.
Trade in industrial metals was thin ahead of tomorrow's Chinese manufacturing report. US copper for September delivery was recently off less than 0.1% at US$3.33 a pound after giving up earlier gains. In late trade in London, copper was up 0.1% and tin ahead 0.3%. Aluminium was down 0.5%, lead 0.8, nickel 0.7% and zinc 0.5%. (Note: not closing prices.)
The major European markets extended Monday's losses. Germany's DAX dropped 0.79%, France's CAC 1.35% and Britain's FTSE 0.2%.
TRADING THEMES TODAY
TESTING TIMES: A five-day sell-off would normally offer a positive counter-reaction about now, but the market's fate rests heavily on the response to last night's poorly-received profit report from BHP. The "Big Australian" is battling CBA for the title of the ASX's largest company by market capitalisation and therefore has the capacity to move the entire market if the reaction is sufficiently negative. Elsewhere, another big day for earnings includes: ABC, AIO, APA, BLD, CWP, GWA, IIN, ILU, PPX, RIC, SUL, SUN and WPL (source: Fairfax). At the spec end, it will be interesting to see how the recent bullish mood survives the spectacular slide in FAS yesterday. At the least, yesterday's events will have shown a lot of new traders that spec bull runs are not a one-way bet. Such lessons can seem expensive but their value is priceless.
ECONOMIC NEWS: Leading indexes from Australia and China are due at 11.30am EST and noon, respectively, but neither usually has much market impact. The action should start to pick up in the US tonight with the release of the July Fed minutes, existing home sales and crude oil inventories.
