Stocks appear destined to open at their lowest level in two months after another grim night for commodities and overseas equities as Greece resigned itself to new elections.
The June SPI 200 futures contract ended the night session 32 points or 0.7% weaker at 4241 as the big Australian miners were dragged down by a fresh wave of multi-month lows for key commodities. Standard & Poor's index of raw materials declined for a tenth session - its longest losing streak since 1998.
US stocks fell for the eighth night in the last ten after Greece's President said his country will have to hold fresh elections next month after the collapse of the latest talks on forming a coalition government. The S&P 500 closed at a three-month low, falling 0.58% to 1,331 - below technical support at 1,335. The Dow dropped 63 points or 0.5% and the Nasdaq lost 0.3%.
Pundits said Greece's failure to form a working government will prolong the latest bout of euro-jitters and raises the prospect that the next round of voting will effectively be a referendum on staying in the euro. Developments in Greece took the shine off some generally supportive economic news in the US and Europe.
"The politics in Greece is very frustrating for the market," a senior strategist at RidgeWorth Capital Management in the US told Bloomberg. "While the overall economic data in the US was mixed to positive, the risk related to Greece remains a concern on the minds of investors."
Retail sales in the US increased by 0.1% last month. A survey showed optimism among house-builders at its highest since the GFC. Manufacturing in the New York region recovered this month and business inventories increased 0.3% in March.
European markets got an early boost from news that the German economy grew faster than expected last quarter. GDP increased by 0.5% following a 0.2% drop in the final quarter of 2011. France also avoided a technical recession, growing 0.1%. However, the market bounce didn't last as Greece's political stalemate helped push Germany's DAX to a loss of 0.79%, France's CAC 0.61% and Britain's FTSE 0.51%.
Resource stocks were sold off on both continents as oil and gold slumped to new lows for the year and copper hit a four-month low. In US trade, Rio Tinto fell 4.22% and BHP lost 2.51%. Alumina bucked the trend, rising 1.91%.
Oil faded with equities in the last few hours of US trade as the US dollar climbed to its highest level since January. West Texas crude for June delivery was recently down $1.67 or 1.8% at US$93.11 a barrel.
Gold retreated for a third night to its weakest price since late December. Gold for June delivery was lately off $17.10 or 1.1% at US$1,543.80 an ounce. Silver also hit its lowest level of the year, with the July contract shedding 67 cents or 2.4% at US$27.68 an ounce.
"The commodity sector is being hit with massive liquidation of funds as investors' fears regarding a slowing global economy and potential European sovereign issues trump all else," the editor of the 7:00's Report told MarketWatch.
Nickel and zinc bucked the downtrend in metals but the retreat stretched into a third night for others. In London, copper lost 1.1%, aluminium 0.1%, lead 1.3% and tin 0.5%. Nickel added 1% and zinc 0.4%. US copper for July delivery was recently down six cents or 1.6% at $3.50 a pound.
TRADING THEMES TODAY
RESOURCES UNDER PRESSURE: Our resource-heavy market is in for another tough session as hedge funds continued to liquidate "risk assets" overnight. If anything it's remarkable that the XJO has been as resilient as it has when you compare it to where oil, gold and copper are trading for the year. Currency movements account for some of the strength and this morning finds the dollar down at 99.37 US cents. Today's XJO open is likely to take out the horizontal support at around 4250, suggesting further falls are possible. In the US, the S&P 500's close under 1,335 was also a worry - especially given the volume of positive economic news released last night. Preserve your capital and wait for better times.
ECONOMIC NEWS: Consumer sentiment figures are due at 10.30am EST, followed by the wage price index at 11.30am. ECB President Mario Draghi is due to deliver a speech tonight. Highlights in a busy night in the US include the minutes from the last Federal Reserve meeting, building permits, housing starts, industrial production, capacity utilisation, mortgage delinquencies and crude oil inventories.
