Australian shares face a cautiously positive start despite another flat finish on Wall Street and declines in key commodities as traders await tonight's US Federal Reserve policy statement.
The September SPI 200 futures contract shrugged off falls in iron ore, metals and oil to rally seven points or 0.2% to 5014 overnight.
US stocks erased early gains on below-average volume as traders hesitated to take positions ahead of a much-anticipated Fed rate announcement and GDP data tonight and the monthly jobs report on Friday. The S&P 500 ended the session 0.04% or less than a point ahead after earlier gaining as much as 0.5%. The Dow dipped one point or 0.01%, while the Nasdaq was the pick of the major benchmarks at +0.47%.
"We're waiting again to hear what the Fed has to say because everybody's on tenterhooks," a fund manager at Alpine Woods Capital Investors in the US told Bloomberg. "Earnings have been a mixed bag but I would say mostly positive."
The night's economic reports were mixed. A gauge of house prices delivered its biggest year-on-year rise in 13 years during May. The S&P/Case-Shiller index of property values surged 12.2% from May 2012. Less positively, consumer confidence dipped from June's five-year high. The Conference Board index eased to 80.3 this month from an upwardly revised 82.1.
Cyclical stocks outperformed the overall market. The Morgan Stanley Cyclical Index rallied 0.55% and the Dow Jones Transportation Average put on 0.32%.
Energy and resource stocks led the declines as a rising US dollar pressured commodities. Both sectors lost about 0.4%. BHP gave up 1.65% in US trade and Rio Tinto lost 0.66% as the price of spot iron ore for import to China declined for a second session, falling 80 cents at US$$130.90 per dry metric tonne.
Industrial metals traders continued to reduce holdings ahead of tomorrow's monthly Chinese manufacturing update. Copper and aluminium slumped to three-week lows in London. Copper lost 2.1%, aluminium 1.2%, lead 1.7%, nickel 1.2%, tin 0.75% and zinc 0.5%. US copper for September delivery was recently down seven cents or 2.1% at US$3.04 a pound.
"Sentiment right now is not very much in favour of commodities," a Commerzbank analyst told Reuters. "The whole industrial metals complex is under pressure and it is very much about China."
Gold fell for the fourth session in the last six but again found support near the US$1,315 level that has offered a floor for the last week. Gold for December delivery was recently down $3.10 or 0.2% at US$1,326.50 an ounce.
Oil dropped below US$103 for the first time in three weeks as the decline in US consumer confidence raised demand questions. West Texas Intermediate crude for September delivery was lately off $1.42 or 1.4% at US$103.12 after settling at US$102.86 a barrel.
Upbeat economic data helped the major European markets inch higher. Reports last night showed German consumer confidence at its highest in six years and Spanish GDP likely declined by just 0.1% last quarter, the best reading in nearly two years. Germany's DAX edged up 0.14%, France's CAC 0.46% and Britain's FTSE 0.16%.
TRADING THEMES TODAY
WAITING GAME CONTINUES: Another low-volume fizzer of a night on Wall Street appears to offer our market minimal direction, but futures traders remain bullish after RBA Governor Glenn Stevens yesterday hinted at a rate rise next Tuesday. The possibility of further cuts was enough to turn the share market around yesterday and it should put a floor under trading today, despite a fairly grim night on commodity markets. Industrial metals were particularly weak as traders prepare for what is expected to be a soft Chinese manufacturing report tomorrow. World markets have been in a holding pattern this week but the fireworks - if there are going to be any - should start tonight with the Federal Reserve policy statement, GDP and private payrolls reports.
ECONOMIC NEWS: Monthly private-sector credit figures are due at 11.30am EST. Europe releases a raft of data tonight, including unemployment figures and various regional measures. A potentially huge night in the US includes a Federal Reserve policy statement, advance quarterly GDP, ADP non-farm employment change, advance GDP price index, employment cost index, Chicago PMI and crude oil inventories.
