Morning traders. Good to be back. Many thanks to Gttrain and Eric for keeping the day trading forum ticking over.
Market wrap:
A late comeback on Wall Street has Australian shares aiming modestly higher this morning despite further signs of a slowdown in China.
The September SPI 200 futures contract rallied eight points or 0.2% to 5016 as US stocks broke positive in the final half hour of trade on Friday and iron ore and gold edged ahead.
Yield stocks helped lead a turnaround as the S&P 500 turned a mid-morning 14-point fall into a final gain of two points or 0.1%. The Dow was off as much as 150 points before rallying steadily to close three points or 0.02% in the black for a fifth straight winning week.
The recovery came as traders parsed another mixed bag of corporate earnings and anticipated a Federal Reserve meeting this week. The Fed commences a two-day meeting tomorrow amid speculation about when it will start to reduce current levels of stimulus, which include record low interest rates and a monthly bond-buying program.
"The market has been so used to the pace of accommodation and any reduction in the accommodation could be a slight drag in the short term," a global market strategist at JPMorgan Funds in the US told Bloomberg. "The market is in the process of an adjustment to rising rates, coming to the realisation that rising rates do not mean the death of equities."
Yield sectors health and telecommunications led the gains as traders bet that the Fed will signal no change yet to its policy settings. A majority of economists polled by Bloomberg expect the central bank to start to reduce its bond buying in September.
BHP and Rio Tinto shrugged off declines across most commodity stocks in US trade as the price of iron ore continued to improve. BHP advanced 0.77% and Rio added 0.58%. Spot iron ore for import into China increased by 50 cents to US$132.60 per dry metric tonne on Friday despite news of a government crackdown on over-production. Chinese authorities ordered more than 1,400 companies across 19 industries to cut excess capacity late last week in a signal that the government is prepared to put economic restructuring ahead of growth. Data released over the weekend showed a slowdown in corporate profits last month and a decline in profits. Read more here.
Oil and base metals turned lower on Friday following news of the Chinese cuts, which are expected to impact factory activity. West Texas Intermediate crude oil for September delivery fell $1 or 0.95% to a two-week low of US$104.49 a barrel and a first losing week in five.
"The news out of China that they are forcing a cut in excess industrial capacity is a very bearish factor for crude oil," John Kilduff of Again Capital told Fairfax.
Copper fell sharply as the industrial cuts compounded last week's soft Chinese manufacturing report. US copper for September delivery slumped eight cents or 2.6% to US$3.10 a pound. In London, copper lost 2%, aluminium 1.6%, lead 1%, nickel 2.3%, tin 0.9% and zinc 1.2%.
Gold followed equities higher late in the session for a third straight weekly gain. Gold for December delivery settled $7.60 or 0.6% lower at US$1,321.90 an ounce before jagging to US$1,334 in late trade for a gain of $4.50 or 0.3%.
European markets closed mixed in choppy action. Germany's DAX dropped 0.65%, France's CAC added 0.33% and Britain's FTSE lost 0.5%.
TRADING THEMES TODAY
CONSOLIDATING THE GAINS? A busy week is likely to get off to a low-key start after Friday's Wall Street session failed to offer strong leads. While it was a positive for our market that US traders continued to "buy the dip", any enthusiasm is likely to be capped by a third straight decline in Shanghai on Friday and weak data released over the weekend as the Chinese government tries to engineer a soft landing for the economy. The market should liven up later in the week as the Fed and European Central Bank sit and China releases final manufacturing reports for July. Meantime, the speculative end of the market seems to have woken from its slumbers and is offering trades once again.
ECONOMIC NEWS: No significant domestic news scheduled today. Pending home sales provide the only real interest in the US tonight.
