A flat open is likely after the prospect of an end to the Federal Reserve's bond-buying program overshadowed strong jobs numbers in the US.
The March SPI 200 futures contract ended the night session four points or 0.1% weaker at 4712 as US stocks fell back from Wednesday's 11-week high and oil and most metals lost ground.
The S&P 500 eased 0.23% after the minutes from the last Fed meeting showed the central bank will likely end its bond-buying stimulus program before the end of the year. The Dow lost 22 points or 0.16% and the Nasdaq gave up 0.36%.
The Fed minutes revealed growing pressure within a divided Federal Open Market Committee to curtail the latest stimulus program as the US economy continues to drag itself out of its post-GFC malaise. "A few members expressed the view that ongoing asset purchases would likely be warranted until about the end of 2013," noted the minutes, quoted on Bloomberg. "Several others thought that it would probably be appropriate to slow or stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet."
The release of the minutes quashed a tentative rally after a private payrolls report beat expectations, raising hopes for tonight's monthly government jobs update. The economy added 215,000 private-sector jobs last month, according to ADP, the best result since last February. Economists had predicted a gain of around 150,000 new positions. The upside ADP surprise took the edge off a 10,000 rise in first-time jobless claims to 372,000, the highest reading in five weeks.
"The ADP number was pretty good, so now everybody is going to move their payrolls estimates up [for tonight]," an equity market strategist at Federated Investors in the US told MarketWatch. "We're making slow progress towards better numbers."
Precious metals, a traditional defence against inflationary programs like the Fed's bond-buying, dropped sharply as the Fed news drove the US dollar higher. Gold for February delivery was lately down $20.1 or 1.2% at US$1,668.70 an ounce. Silver for March delivery fell 88 cents or 2.8% to US$30.13 an ounce.
Most industrial metals gave back some gains following the fiscal cliff relief rally. US copper for March delivery was recently down three cents or 0.7% at US$3.71 a pound. In London, copper eased 0.6%, aluminium 2.1%, nickel 1.3% and zinc 2.45%. Lead rallied 2% and tin 2.2%.
Oil struggled for direction as traders weighed the rising US dollar and the prospect of future US budget squabbles against improving data from China. Yesterday's December Chinese services activity report showed a third straight month of improvement. West Texas crude for February delivery was lately down 15 cents or 0.2% at US$92.97 a barrel.
European markets were mixed as investors took a more sober view of the US's budget deal and began to focus on the next round of political wrangling. Germany's DAX eased 0.29%, France's CAC lost 0.35% and Britain's FTSE added 0.33%.
TRADING THEMES TODAY
CONSOLIDATION: World markets have come a long way in a short space of time and likely need at least a few days of to and fro to consolidate those gains. Overnight US traders were torn between signs that tonight's monthly jobs report should be a good 'un and news that the Fed may withdraw the lolly jar before the end of the year. The falls could have been much heavier, so it's a positive that everyone didn't rush for the exits at once. Gold and silver stocks cam under pressure in the US as traders moderated their expectations for inflationary pressures on the US economy - we'll likely see something similar here today. The Nikkei and Shanghai Composite re-open this morning with plenty of catching up to do since they last traded. That may provide some support for our market.
ECONOMIC NEWS: The services index is due at 9.30am EST. Europe also has services data out tonight. The main interest in the US tonight is the monthly employment report and unemployment rate. Also due: services PMI, crude oil inventories, natural gas storage and average hourly earnings.
