Wall Street's worst session of the year has Australian shares pointed lower today, but an austerity vote in the Greek parliament may change the outlook before the opening bell.
The March SPI 200 futures contract declined 19 points or 0.4% to 4199 on Saturday morning but traders will this morning keep a close watch on Greece, where lawmakers are due to vote on austerity measures necessary to secure a second bailout package at around midnight in Athens or 9am AEST.
US stocks fell on Friday as support for Greece's austerity plan crumbled and consumer confidence in America unexpectedly weakened. The major indexes finished lower for the first time in six weeks and the Dow suffered its biggest fall of the year, losing 89 points or 0.69%. The S&P dropped 0.69% for a weekly loss of 0.2%.
European markets slumped as EU finance ministers refused to sign off on a second bailout until Greece's parliament ratifies austerity measures. The falls intensified after one of the three political parties supporting Greece's coalition government said it would not support this morning's vote. Britain's FTSE gave up 0.73%, Germany's DAX 1.41% and France's CAC 1.51% as banks exposed to Greek debt were sold off.
"We've had a flip-flop that triggered global selling," the chief market strategist at DA Davidson in the US told Bloomberg. "Investors are responding to the sudden change in direction or the lack of resolution of the Greek/European problem that they felt was resolved."
Wall Street's "fear gauge", the VIX, jumped 11.59% above the 20 level for the first time in two weeks as weak US consumer confidence added to concerns. A preliminary consumer-sentiment reading dropped to 72.5 this month from 75 in January.
Metals and oil were hit by a retreat from risk assets as the US dollar and treasuries rallied. Oil fell as low as US$97.32 a barrel after the International Energy Agency cut its demand outlook. US crude for March delivery ended the session 79 cents or 0.8% weaker at US$99.05 a barrel.
Copper fell off a five-month high and other base metals slumped. In London, copper lost 3.3%, aluminium 1.7%, lead 3.6%, nickel 3.4%, tin 1.4% and zinc 3.25%. US copper fell 2.9%.
Gold finished well off its lows for the session but 0.9% down for the week. Gold for April delivery retreated $17.70 or 1% to US$1,725 an ounce.
TRADING THEMES THIS WEEK
GREECE STARES INTO THE ABYSS: This week's first obstacle may well have been overcome by the time some read this: a vote on austerity measures in the Greek parliament at around midnight Athens time or 9m AEST. A "no" vote would push Greece towards default, but the package seems to be expected to pass, even without the support of one of the government's junior parties. A "yes" vote may fuel a relief rally on world markets, although any over-exuberance should be viewed with some caution - world markets in general appear overbought and due for a pullback.
SPOTLIGHT SWINGS BACK TO US RECOVERY?: A frugal diet of US economic reports last week allowed investor attention to stick on the never-ending Greek tragedy. This week's US menu is much fuller and will hopefully continue the recent trend for positive surprises. This week's key reports are likely to be retail sales tomorrow, regional manufacturing, industrial production and the minutes from the last Federal Reserve meeting on Wednesday and jobless claims, housing starts and more manufacturing on Thursday. See below for more details.
EARNINGS SEASON: The domestic earnings season is in full swing. Big names among this week's reporting companies include: LEI, JBH (today); CBA, CRZ, FMG, OZL, PRY, WRT (Wed); AMP, ASX, AWC, GMG, QRN, QAN, WBC (Thu); and BBG, SGM, SPT and STO (Fri). (Sources: Fairfax, BRR)
ECONOMIC NEWS: A solid week for domestic news includes: home loans at 11.30am EST today; business confidence (Tue); consumer sentiment, new motor vehicle sales (Wed); and employment change and unemployment rate (Thu). A busy US menu includes: retail sales, import prices, inventories (Tue); Empire state index, industrial production, capacity utilization, home builders' index (Wed); jobless claims, producer price index, core PPI, housing starts, Philly Fed (Thu); and consumer price index, core CPI and leading indicators.
