Shares are likely to open under mild pressure after European concerns pushed US stocks lower and a rampant US dollar pressured oil and metals.
The March SPI 200 futures contract ended the night session eight points or 0.2% weaker at 4886 as BHP and Rio Tinto lost ground in overseas trade during a negative night for resource stocks.
The S&P 500 cut an initial loss of 15 points to three or 0.21% as traders continued to view weakness as a buying opportunity. The Dow pared a decline of 132 points to 43 or 0.3%. The Nasdaq lost 0.11%.
"We've moved so far so fast that the market's just looking for any kind of sign to take something off the table," the chief investment officer at Westwood Holdings in the US told Bloomberg. "The market really needs a positive catalyst to take it higher."
Resource stocks led the decline after a downbeat outlook for the European economy from European Central Bank President Mario Draghi fuelled a retreat from risk assets. The US dollar index surged 0.58% and dollar-denominated oil and metals slipped. BHP dropped 0.72% in US trade and Rio Tinto lost 0.31% following a flat session for iron ore yesterday ahead of next week's Chinese Lunar New Year holiday.
The ECB and Bank of England left their benchmark lending rates on hold overnight, as expected, but investors were troubled by comments by Draghi about the negative impact of the recent surge in the euro on the economy. The euro this month hit a 14-month peak against the greenback and a three-year high against the yen. France's CAC slid 1.15%, Britain's FTSE 1.07%, Italy's FTSE MIB 1.22% and Spain's IBEX 35 0.51%. Germany's DAX clung to a gain of 0.15%.
The night's US economic data failed to lift spirits. First-time claims for unemployment benefits declined less than predicted last week and productivity deteriorated last quarter. Jobless claims fell by 5,000 to a seasonally-adjusted 366,000, versus expectations of a figure around 360,000. Productivity fell 2.0% year on year, the worst slump in two years.
Oil dipped to its lowest settlement level in two weeks as the rising greenback made dollar-denominated assets more expensive for overseas buyers. West Texas crude for March delivery was recently down 83 cents or 0.9% at US$95.80 a barrel.
Copper continued to fall back from Monday's three-month high. US copper for March delivery was recently down one cent or 0.2% at US$3.73 a pound. In London, copper fell 0.5%, aluminium 0.6%, lead 0.6%, nickel 0.9%, tin 0.8% and zinc 0.5%.
Gold swung in a US$20 range as traders digested Draghi's remarks, before settling lower. Gold for April delivery was lately down $6.30 or 0.4% at US$1,672.50 an ounce.
TRADING THEMES TODAY
STEADY AS SHE GOES: No change overnight in the recent pattern of this rally: some traders are looking for a reason to take profits, others view weakness as a buying opportunity. So long as traders keep buying the dips, the rest is just noise. Last night's action was largely currency-driven. US shares and global commodities have a broadly inverse relationship with the greenback, so strength in the latter tends to mean weakness in the former. The Aussie caught some of the downdraught and is this morning sitting near a three-month low of US$1.0283. That may have implications for some companies with significant currency exposure.
ECONOMIC NEWS: The Reserve Bank releases its quarterly monetary policy statement at 11.30am EST. China is due to release trade balance figures today (exact time uncertain but they usually come out around lunchtime). China also has inflation figures scheduled for 4.30pm. Europe's Economic Summit continues tonight. Tonight's highlights in the US are the trade balance and wholesale inventories.
