Shares face a flat start after a late rally on Wall Street failed to steady nerves following a volatile 24 hours for the dollar and a mixed night for commodities.
The June SPI 200 futures contract ended the night session three points or less than 0.1% stronger at 4786 as gains in US stocks, the big two Australian miners, oil, precious metals and the dollar were partly offset by falls in iron ore, industrial metals and European stocks.
A choppy night on Wall Street saw equities erase losses late in the session, breaking a two-day losing run. The S&P 500 closed 13 points or 0.81% higher at 1,622 after earlier falling briefly below 1,600. The Dow turned a 117-point plunge into a final gain of 80 points or 0.54% and the Nasdaq added 0.66%.
"US markets are going through a transition from being liquidity driven to a rally based on fundamental data and that's a very bumpy ride," a global market strategist at JP Morgan Funds in the US told Bloomberg. "Investors are trying to figure out whether we are now pricing in earnings and the jobs situation or whether it's still the Fed leading markets. So we're slowly taking off the training wheels and that makes things a little wobbly."
Stocks sold off mid-session after the European Central Bank cut its growth outlook for the rest of the year but left its key lending rate on hold. The ECB now forecasts a 0.6% decline in euro-zone GDP for 2013, down from a March prediction of -0.5%. The news combined with a slump in German manufacturing orders to push the DAX down 1.19%, France's CAC 0.61% and Britain's FTSE 1.3%.
The weekly US jobless claims report offered few clues to tonight's monthly jobs report, coming in right on target. First-time claims for benefits declined by 11,000 to 346,000 last week. The median forecast of economists polled by Bloomberg was a reading of 345,000.
Biotechs and small caps were among the stand-outs in US action. The Nasdaq Biotechnology Index rallied 3.03% and the Russell 2000 index of small caps gained 1.17%. Australia's big two miners also enjoyed gains despite a fall in the price of iron ore. BHP put on 0.65% and Rio Tinto added 1.05%. Spot iron ore for import to China yesterday fell $2.70 to US$113.90 per dry metric tonne.
The Australian dollar endured a wild ride, falling as low as 94.33 US cents before lately buying 95.95 US cents as the ECB's failure to advocate further monetary easing fuelled a surge in the euro and a plunge in the greenback. The greenback's decline helped gold rise to its strongest level since mid-May as investors sought alternative stores of wealth. Gold for August delivery was lately up $14.80 or 1.1% at US$1,413.30 an ounce.
Oil reached its highest level in more than a week. West Texas Intermediate crude for July delivery was recently up $1.04 or 1.1% at US$94.78 a barrel.
The mood on the London Metal Exchange was tainted by declining European equities and the ECB's "steady as she goes" approach. Copper fell 2.1%, aluminium 0.4%, lead 2%, nickel 0.8%, tin 1.4% and zinc 1.5%. US copper for July delivery was recently down 1.3% or four cents at US$3.33 a pound.
TRADING THEMES TODAY
PUNCH-DRUNK AND WARY: The market has broadly positive leads but you wouldn't know it from our futures figures. Hardly surprising, considering the market has played Whack A Mole with anyone brave enough to venture out of their burrows these last few weeks. The ASX appears heavily oversold and there were promising reversals last night in US equities and the Australian dollar, plus gains in oil and precious metals. However, Fridays aren't really made for heroism and caution is likely to prevail with tonight's US jobs report looming as one of those market events with the potential to set the tone for days/weeks to come.
ECONOMIC NEWS: The AIG Construction Index is due at 9.30am EST. German trade and industrial production figures are due tonight. The monthly jobs report is the main event tonight in the US. Also due: consumer credit and average hourly earnings.
