Stocks face a weak open after disappointing US retail sales and rising European bond yields helped push Wall Street into the red overnight.
The June SPI 200 futures contract ended the night session 15 points or 0.4% off at 4051 as oil and copper turned lower and attention switched to Sunday's election in Greece.
US stocks, ahead for much of the morning, faded in afternoon trade before a late up-tick softened the falls. The S&P 500 lost 0.7%, the Dow 77 points or 0.62% and the Nasdaq 0.86%.
"In a world that still has more uncertainty than we care to count, you keep going back and forth between hope and disappointment," the chief investment strategist at the private-banking unit of KeyCorp in the US told Bloomberg. "It's a process of taking out excessive optimism."
Retail sales in the US declined for a second month for the first time in two years. Sales dropped a seasonally-adjusted 0.2% last month and downward revisions were made to figures for March and April. A 2.2% decline in fuel purchases accounted for much of the weakness, according to the Commerce Department.
European markets finished mixed as Italy's borrowing costs jumped and industrial production across the euro-zone declined to its weakest level since September 2010. The yield on Italian one-year treasuries spiked from 2.34% at an auction last month to 3.972% at an auction overnight, raising fears ahead of an auction of 10-year bonds tonight.
"Today's sale underscores the externally-driven deterioration in Italy's perceived creditworthiness," the managing director of Spiro Sovereign Strategy in the UK told Bloomberg. "Contagion is back with a vengeance and Italy is bearing the brunt of the fallout from Spain's request for external assistance."
Germany's DAX fell 0.14%, France's CAC 0.55% and Italy's FTSE MIB 0.65%. Britain's FTSE edged up 0.18%.
A decline in the US dollar helped gold extend its rally to a fourth night, but couldn't keep oil and copper in positive territory. Gold for August delivery was lately up $4.70 or 0.3% at US$1,618.50 an ounce.
Oil resumed its downtrend as weak retail sales clouded the economic outlook in the US. West Texas crude for July delivery dropped 90 cents or 1.1% to US$82.42 a barrel.
"It's the general economic gloom, with the poor retail-sales figures the latest in a long line of darkening data, and I very much doubt the last," a senior oil-market analyst at the International Energy Agency told MarketWatch.
Copper squeezed out a gain in UK trade but fell away in thin US action as traders stuck to the sidelines ahead of an Italian bond auction tonight and Greece's Sunday election. In London, copper added 0.1%, lead 0.2% and zinc 0.2%. Nickel fell 1.1%, tin 0.8% and aluminium 0.2%. US copper for July delivery was recently down two cents or 0.6% at US$3.32 a pound.
TRADING THEMES TODAY
WAITING FOR GREECE: As always, there was something for both bulls and bears last night. US economic data continued to sour as the global climate deteriorates but European markets were remarkably resilient, considering the warning signs flashing in bond markets. With Spain joining the official list of basket cases on the weekend, Italy is now firmly in the firing line. This weekend's Greek election has cast a long cloud, so it will be a relief to finally put it behind us - assuming, of course, they vote for sanity and avoid another deadlock. Most US sectors lost ground overnight, but airlines found support, gold/silver miners were stable and defensives fared better than cyclicals.
ECONOMIC NEWS: Inflation expectations data is due at 11am EST. OPEC meets tonight and Italy holds a 10-year bond auction. Highlights in the US include the consumer price index and core CPI, weekly jobless claims, current account and natural gas storage.
