Futures traders expect Australian shares to open at a two-week high this morning despite a flat end to Wall Street's best week of the year on Friday.
The June SPI 200 futures contract last traded 30 points or 0.7% higher at 4315 on Saturday morning amid speculation that the ASX may play catch-up following a late rally in Shanghai on Friday and two days of relative under-performance for the local bourse at the end of last week.
US stocks stalled on Friday and the Dow broke its seven-session winning run after a drop in consumer confidence as rising oil prices began to bite. The Dow eased 20 points or 0.15% but finished the week 2.4% stronger. The S&P 500 rallied 0.11% to seal its best week of the year, a fifth straight weekly rise and its highest close since May 2008.
The market took a breather on Friday as traders assessed the effects of the recent run-up in oil. The cost of living in the US had its biggest increase in ten months in February and consumer confidence declined this month for the first time since August. Another report showed industrial output unchanged last month. All readings were worse than expected.
"The bugaboo in the background is oil prices," a manager at Huntington Asset Advisors in the US told Bloomberg. "I filled up my car yesterday and it hurts. Things are improving [in the US] at a slow, but steady pace. If oil prices pop up, it will be different story."
Oil rallied more than US$2 as a decline in the US dollar encouraged overseas buyers. April light, sweet crude gained $2.05 or 1.95% at US$107.16 a barrel.
Most base metals deteriorated as Shanghai copper stocks increased for a third week and US data missed targets. In London, copper eased 0.4%, lead 0.5%, nickel 2.1%, tin 1.6% and zinc 0.8%. Aluminium added 0.4%. US copper lost 0.3%.
Gold was little changed at the end of a negative week in which generally upbeat US economic news weighed on demand for hedges. Gold for April delivery advanced $1 or less than 0.1% on Friday to US$1,660.50 an ounce.
The major European markets pared gains after the weak US consumer confidence report but finished the session ahead. Britain's FTSE rallied 0.42%, Germany's DAX 0.19% and France's CAC 0.41%.
TRADING THEMES THIS WEEK
BREAKING THE RESISTANCE? With technical barriers falling one after the other in the US, is this the week our laggard market finally breaks out of its trading range? Futures traders expect it to take a significant first step this morning following Friday's late 1.3% surge in Shanghai. After that, much will depend on Thursday's Chinese manufacturing report (see below) and whether Friday's tepid US economic data represented a blip in the recent trend towards upside surprises or the first sign of a weakening in the economy following this month's jump in oil. US data is relatively light this week. European worries are currently on the back-burner.
CHINESE MANUFACTURING: The closely-watched preliminary HSBC reading on Chinese manufacturing conditions is due on Thursday. Expectations appear to be for a second month of modest improvement, with the index possibly edging into expansion for the first time since October. Last month's reading was 49.6, just below the 50-point level that separates contraction from expansion. Meanwhile, three of China's biggest banks are due to report earnings this week.
ECONOMIC NEWS: A light domestic schedule this week includes: the minutes from the last Reserve Bank meeting, leading indicators (tomorrow); and a leading index (Wed). Housing reports dominate a relatively slim week for US data. Highlights include: house-builder sentiment (tonight); housing starts (tomorrow); existing-home sales (Wed); jobless claims, leading indicators, house (Thu); and new home sales.
