Shares are likely to open lower after a falling iron ore price weighed on the big Australian miners during a mixed night on Wall Street.
The March SPI 200 futures contract eased 10 points or 0.2% to 5278 as BHP and Rio Tinto retreated and the S&P 500 again failed to break through overhead resistance.
The benchmark index in the US stalled for a fourth time at the 1,850 level, paring its final gain to five points or 0.29% and closing at 1,844. The Nasdaq was the pick of the major indexes, rising 0.68% as Wall Street re-opened following the Martin Luther King Jr Monday public holiday. The Dow dropped 45 points or 0.27% following poorly-received earnings from components Verizon and Johnson & Johnson.
"In the short term, continued earnings growth is particularly important," James W Gaul, portfolio manager at Boston Advisors in the US, told Bloomberg. "We are no longer cheap, perhaps not even fairly valued at this point. Investor sentiment is quite optimistic. We need some positive news to get us going."
The S&P 500 is trading at a price/earnings ratio of 15.6, above the five-year average multiple of 14.1, according to Bloomberg. The index has risen 170% since the depths of the GFC.
Early overnight gains came after the International Monetary Fund upgraded its global growth outlook to 3.7% from 3.6%. GDP growth for the US was revised to 2.8% from 2.6%; Japanese growth to 1.7% from 1.2%; and Chinese growth to 7.5% from 7.3%. The report did not offer a specific target for Australia.
Asian stocks were boosted yesterday by news that China's central bank had injected cash into the financial system ahead of the Lunar New Year. The news helped the Shanghai Composite rally 0.84% back above the 2,000 level.
Iron ore plumbed a new seven-month low overnight. Spot ore for import to China declined $1.60 to US$123.20 a dry tonne. In US trade, BHP lost 1.12% and Rio Tinto 3.18%.
Oil pushed back above US$95 a barrel after the International Energy Agency raised its demand outlook. Demand will increase by 1.3 million barrels a day this year to 92.5 million barrels a day, the Agency said. West Texas Intermediate crude oil for February delivery was lately up 92 cents or 1% at US$94.88 after earlier settling at US$95.01 a barrel.
A directionless night on the London Metal Exchange saw copper edge higher on increased Chinese imports. Copper advanced 0.4%, lead 0.3%, nickel 1.2% and zinc 0.6%. Aluminium dropped 0.5% and tin 0.7%. US copper for March delivery was recently up 0.2% or a tenth of a cent at US$3.35 a pound.
Gold hovered near last week's five-week high. Gold for February delivery was recently up $1 or 0.1% at US$1,241.10 after settling at US$1,239.50 an ounce.
The major European markets ended a choppy session little changed. Germany's DAX added 0.15%, France's CAC gained 0.03% and Britain's FTSE fell 0.04%.
TRADING THEMES TODAY
MINERS TO WEIGH: Looks like another two-speed session ahead, with the falling iron ore price capping the big two mining heavyweights but no real reason for the overall market to move too far in either direction unless the economic reports (see below) contain a surprise. The 1,850 level on the S&P 500 is becoming a nuisance and may yet prove a short/medium-term high if the current earnings season doesn't pick up. Earnings have been okay, but 'okay' may not be enough to sustain current prices. China is less of a worry after yesterday's central bank-inspired bounce.
ECONOMIC NEWS: Two domestic reports scheduled today: consumer sentiment at 10.30am EST and consumer price inflation/core CPI at 11.30am. No major news scheduled in Europe or the US tonight.
