A cautiously positive start to trade is likely after Wall Street shook off a downbeat economic outlook from the European Central Bank.
The December SPI 200 futures contract ended the night session 13 points or 0.3% higher at 4528, reversing yesterday's modest retreat on the benchmark stock index.
US stocks overcame early weakness to finish at their highs for the session as weekly jobless claims fell and investors awaited fresh news on budget talks. The S&P 500 advanced 0.33% and the Dow added 40 points or 0.3%. The Nasdaq put on 0.51% as Apple clawed back some of Wednesday's heavy fall.
"We're in a no man's land here," the president of US hedge fund Platinum Partners told Bloomberg. "The market has been looking for some direction. It's really the fiscal cliff that's going to drive things here. Europe is an enormous question. If Europe continues in its doldrums, there are all kinds of implications. People were hoping that [ECB President Mario] Draghi could be a bit more optimistic."
The session began on a soft note after the ECB cut its growth outlook and left its key lending rate unchanged. "Weak activity is expected to extend into next year," Draghi warned as his economists further reduced already-low growth targets through to 2014.
Draghi's remarks had more impact in the US and on currency and commodity markets than in Europe, where improved factory orders helped Germany's benchmark stock index reach its highest level since 2008. The DAX put on 1.08%, France's CAC 0.32% and Britain's FTSE 0.15% after German factory orders surged 3.9% in October, well ahead of expectations.
US jobless claims improved as the after-effects of Hurricane Sandy continued to wear off. First-time claims declined 25,000 to 370,000 last week, their lowest level in a month.
The ECB's downbeat assessment for the European economy fuelled a rally in the US dollar that undermined demand for dollar-denominated commodities such as oil and metals. West Texas crude for January delivery fell for a third day, recently trading $1.51 or 1.7% weaker at US$86.37 a barrel.
Industrial metals reversed Wednesday's gains. US copper for December delivery was recently down four cents or 1.1% at US$3.64 a pound. In London, copper lost 1.05%, aluminium 1%, lead 1.2%, nickel 2.1%, tin 0.1% and zinc 0.2%.
Gold, a traditional haven in times of economic trouble, edged back towards US$1,700 an ounce despite competition from the rising greenback. Gold for February was lately up $5.40 or 0.3% at US$1,699.30 an ounce after earlier cracking US$1,700.
The managing director at Global Hunter Securities in the US told MarketWatch the recovery in gold was "based on bargain hunting along with European Central Bank cutting its economic growth forecast. So, a little safe-haven action, coupled with the end of short-term profit taking."
TRADING THEMES TODAY
THIRD WEEK OF GAINS?: The XJO has lost momentum this week, but overnight gains on Wall Street and in Europe should be enough to squeeze out a third straight weekly advance. The mood on Wall Street improved as the night went on, finishing with a late push to session highs as budget talks produced no real impetus either way. The benchmark small-cap index in the US has been stuck in a holding pattern for the last five sessions, but that compares pretty favourably with the weakness in the Small Ords this week. Risk appetite at the speculative end of the market remains subdued. Oil and most metals declined overnight, which may hold back the resource sector today.
ECONOMIC NEWS: The monthly construction index is due at 9.30am EST, followed by the trade balance at 11.30am. Europe has industrial production data out tonight and ECB President Mario Draghi is due to address a conference in Hungary. Jobs are the main event tonight in the US: non-farm employment change and unemployment rate. Also due: preliminary consumer sentiment and inflation expectations, plus hourly earnings.
