Futures traders anticipate a positive start to Australian trade despite a flat finish on Wall Street and declines in key commodities on Friday.
The March SPI 200 futures contract rallied 13 points or 0.3% to 5008 on Saturday morning as traders bet that the index will extend last week's gains ahead of a public holiday tonight in the US.
US stocks danced in and out of positive territory on Friday as a mixed bag of economic signals offered little direction and politicians continued to spar over a March 1 deadline for spending cuts. The S&P 500 closed 0.09% in the red but that was enough for a weekly gain of 0.1%, extending its longest weekly winning run in two years. The Dow inched up nine points or 0.06% but lost 0.1% for the week.
"At this point, it just looks like the market may be interested in pausing and pondering," the chief market strategist at Oppenheimer & Co in the US told Bloomberg. "Perhaps even a modest downside bias while we look to the March 1 deadline in Washington."
The main indexes hovered near break-even until a leaked email from a Wal-Mart executive suggested January 1 payroll-tax rises were having a big impact on consumer spending. An internal email from the company's vice-president of finance and logistics described this month's figures as a "total disaster" and "the worst start to a month I have seen in my 7 years with the company". US stocks fell sharply before regaining most of their losses.
Earlier economic data painted a mixed picture of the economy. A measure of consumer sentiment improved to its strongest level in three months as consumers put the fiscal cliff debate behind them. The preliminary February reading on the UMich-Reuters consumer-sentiment gauge was 76.3, up from a final January figure of 73.8.
Industrial production missed expectations, declining 0.1% last month, but the miss was partly due to an upwards-amendment to the previous month's reading. Meanwhile, a separate measure of manufacturing activity in the greater New York region showed the first expansion in seven months.
Energy stocks logged the biggest decline in the US as strength in the dollar fuelled a sharp retreat in dollar-denominated commodities. West Texas crude for March delivery sagged $1.23 or 1.3% to US$96.08 a barrel as traders cashed out ahead of the Presidents' Day long weekend.
Gold briefly dropped under US$1,600 an ounce for the first time since August as it suffered its worst week since June. Gold futures for April delivery fell $25.20 or 1.5% to US$1,610.30 an ounce for a weekly loss of 3.4%. The selling pressure came after a hedge fund associated with George Soros sold part of its stake in a gold fund and traders awaited developments from a G-20 meeting that was expected to discuss currency issues.
Industrial metals logged minimal changes as traders anticipated the return of Chinese buyers this week from a week-long public holiday. US copper for March delivery edged up 0.2% or less than a cent to US$3.74 a pound. In London, copper and tin dipped 0.1% and zinc dropped 0.6%. Aluminium put on 0.3%, lead 1.2% and nickel 0.4%.
Most European markets lost ground as a regional index closed flat for the week. Germany's DAX gave up 0.49%, France's CAC lost 0.26% and Britain's FTSE advanced 0.01%.
TRADING THEMES THIS WEEK
WALL STREET HOLIDAY: Some of the apparent bullishness in our futures this morning can be put down to the fact we have two days to trade before Wall Street resumes following tonight's Presidents' Day public holiday. Momentum here is strong and the market may log further gains, safe in the knowledge that Wall Street can't spoil the party tonight. Traders may also be anticipating a positive return to action in Shanghai from a week-long holiday, and the continuation of a generally-positive domestic earnings season (see below).
BIG WEEK FOR AUSTRALIAN EARNINGS: The upbeat tone of the latest domestic earnings season is expected to continue this week as around 90 major companies report. Among the big names reporting this week are BHP, AMP and QAN. Today's reports include: AHE, AJQ, AMC, AVB, BEN, BLY, BSL, CLO, IMD, IRI, ISS, LLC, MEO, NHF, OGC, PBG, PCL, PMP, SFH and SIR. (Sources: Fairfax, BRR) Read more here.
SEQUESTRATION DEADLINE LOOMS: The stock market has been oblivious to the prospect of US$85 billion in spending cuts due to come into force in the US on March 1 unless Congress forges another compromise. The current mood is so bullish that little may change this week, but there remains a danger that some traders will take profits while indexes around the world sit at multi-year highs. Read more here.
ECONOMIC NEWS: A solid week for domestic news includes: motor vehicle sales (11.30am EST today); minutes from the last RBA meeting (tomorrow); two leading indexes, wage price index (Wed); and testimony from Reserve Bank Governor Glenn Stevens before the House of Representatives Standing Committee on Economics (Fri). Highlights this week in the US include: home builders index (tomorrow); producer price index/core PPI, housing starts (Wed); weekly jobless claims, consumer price index/core CPI, existing home sales, Philly Fed and leading indicators (Thu).
