Futures traders expect Australian shares to start the day in the red after central bank stimulus worries pushed US stocks lower for a third night.
The September SPI 200 futures contract ended the night session nine points or 0.2% weaker at 4957 amid concern over the outlook for the Federal Reserve's stimulus program and a potential end to the rate-cut cycle here in Australia.
US stocks fell sharply at the start of trade before paring losses as the session advanced. The S&P 500 retreated six points or 0.38% to extend its three-day loss beyond 1%. The Dow trimmed an initial 97-point fall to a final loss of 48 points or 0.31%. The Nasdaq lost 0.32%.
In the absence of fresh economic data overnight, Wall Street remained fixated on the looming end of the Fed's $85-billion-a-month bond-buying program. Several Fed officials this week signalled that the central bank could start to wind down the program as early as next month after US stocks hit record levels last week. The president of the Cleveland Fed Bank said overnight the Fed will reduce its asset purchases if the employment market continued to improve.
"People were concerned about the extent of the rally in the short term and some people are talking about equities being too expensive relative to the underlying fundamentals," the managing director at Wedbush Equity Management in the US told Reuters. "And of course, the big story, the next big piece of news one would think is the taper tantrum."
Financial companies were the worst of the S&P 500's 10 industry groups, falling 0.7%. The Dow Jones Transportation Average dropped 0.72% to a fourth straight loss. Australia's big two miners enjoyed conflicting fortunes in Us trade - BHP slipped 0.36% while Rio Tinto edged up 0.17%.
A rebound in iron ore accelerated yesterday with a fourth straight price rise. The spot price for ore for import to China increased by $1.70 to US$133.70 per dry metric tonne. The rise came despite a soft day for Asian equities, which included a 4% plunge for Japan's Nikkei share index. The ASX 200 dived 94 points or 1.8% to its biggest loss in six weeks as a change in the wording of the Reserve Bank's policy statement on Tuesday hinted that the long run of rate cuts may be at an end.
Oil followed US stocks lower after rival weekly US supply reports offered conflicting pictures of energy demand. West Texas Intermediate crude oil for September delivery was lately down $1.06 or 1% at US$104.24 a barrel.
Gold broke a six-session losing streak as the US dollar remained under pressure. Gold for December delivery was recently up $3.90 or 0.3% at US$1,286.40 an ounce.
Copper led a cautious rally in most base metals ahead of Chinese economic data today and tomorrow. US copper for September delivery was recently up one cent or 0.3% at US$3.18 a pound. In London, copper added less than 0.1%, aluminium 0.5%, nickel 1.8% and tin 0.1%. Lead eased 0.2% and zinc 0.5%.
European markets were mixed. France's CAC rallied 0.13% but Germany's DAX lost 0.48% and Britain's FTSE fell 1.41%.
TRADING THEMES TODAY
YIELD STOCKS UNDER PRESSURE: Our market copped a hiding yesterday as investors pulled money out of rate-sensitive sectors after the RBA became the latest central bank to hint that the era of easy money may be coming to an end. Local shares appeared to pre-empt a much worse night on Wall Street than eventuated, but our futures number this morning suggests caution. This retrace may have further to run. Potential market-moving economic releases today include domestic employment figures at 11.30am EST and Chinese trade figures some time around lunch (exact time uncertain). Gold managed a positive close, but stock traders in the US remained unconvinced, pushing an index of miners down another 0.37%.
ECONOMIC NEWS: Jobs figures are due at 11.30am EST. The Bank of Japan is due to issue a monetary policy statement this morning, exact time uncertain. China is due to release monthly trade figures, also time uncertain but likely around lunchtime EST. The light run of US data continues tonight with weekly jobless claims and natural gas storage.
