Australian shares are likely to open under mild pressure after modest declines in US stocks and key commodities as central bank "tapering" worries dampened risk appetite.
The September SPI 200 futures contract eased nine points or 0.2% to 5053 as a US Federal Reserve official warned that the central bank will soon start to wind back its stimulus program.
The S&P 500 retreated three points or 0.16% from Friday's record close, finishing near the middle of its overnight trading range. The Dow lost 46 points or 0.3%, while the Nasdaq continued its recent pattern of outperforming both, rising 0.09%.
Federal Reserve Bank of Dallas President Richard Fisher, a central bank hawk, said last week's fall in the unemployment rate brought the Fed closer to tapering its US$85 billion-a-month bond-buying program. Fisher urged colleagues at last week's policy meeting to prepare to taper this northern autumn. Read more here.
Unexpectedly strong services growth last month also raised questions over the timing of the Fed taper. The Institute for Supply Management's non-manufacturing index jumped to 56 last month from 52.2 in June, well ahead of the median forecast for a rise to 53.1.
"The comments today and the data today are not sufficient to say the Fed is really going to ramp down more aggressively," the chief investment officer of Greenwood Capital in the US told Bloomberg. "More than anything it's just people taking a break, catching their breath after a very aggressive run in the market."
Europe's benchmark share index pushed higher for a sixth night as fresh data raised hopes that the region's economy may be bottoming out. The Markit euro-zone Composite PMI increased to 50.5 last month from 48.7 in June, its first positive reading in a year and a half. A services gauge in the UK hit its strongest level in six and a half years. The Stoxx Europe 600 index advanced 0.19% to its highest level since May.
BHP and Rio Tinto edged higher in US trade as iron ore squeezed out a second straight advance. BHP put on 0.24%, Rio Tinto 0.84%. Spot iron ore for import to China improved by 10 cents to US$130.20 per dry metric tonne.
Gold was clouded by the talk of a wind-back of the Federal Reserve's inflationary stimulus program. Gold for December delivery was lately down $8.30 or 0.6% at US$1,302.20 an ounce.
Oil was pressured by reports of a resumption of production in Libya following protests at terminals for the last few weeks. West Texas Intermediate crude for September delivery was recently off 46 cents or 0.4% at US$106.49 a barrel.
Copper slipped back from Friday's one-week high during a mixed session for industrial metals following news of a pick-up in Chinese services activity over the weekend. US copper for September delivery was recently down less than a cent or 0.2% at US$3.17 a pound. In London, copper declined 0.4%, aluminium 0.5% and nickel 0.8%. Lead added less than 0.1%, tin 0.5% and zinc 0.2%.
"The data out of China has provided some reassurance that demand is not dropping off a cliff, but there are still some significant concerns about the Chinese economy and the knock-on effect for metals demand," an economist at Capital Economics told Reuters.
TRADING THEMES TODAY
WAITING FOR THE RBA: There are no alarm bells ringing this morning following a standard retrace on Wall Street following a push to record levels. The US economy continues to improve and Fed officials continue to express their personal opinions about when Bernanke should call time on the punch bowl. Fisher's views are well-known and his speech contained no real surprises. Any early decline on the ASX today will be cushioned by expectations of a cut to the cash rate this afternoon. The Reserve Bank will announce its decision here at 2.30pm EST. Before that, trade and job ad figures are due at 11.30am and may provide some direction. The big question this afternoon is how much of a rate cut is already baked into the market following a 10-session winning streak?
ECONOMIC NEWS: A busy day for domestic news includes the trade balance, job adverts and house price index at 11.30am EST, followed by the Reserve Bank's cash rate decision and rate statement at 2.30pm. Trade figures are the highlight of a light night tonight in the US. Also due: job openings, economic optimism and a speech by Federal Reserve Bank of Chicago President Charles Evans.
