A late pullback on Wall Street points to a muted start to local trade after the ASX 200 closed near a six-year high yesterday.
The June SPI 200 futures contract dipped 13 points or 0.25% to 5524 as BHP and Rio Tinto succumbed to overseas weakness among materials stocks after the price of iron ore declined.
A tight, range-bound session saw the S&P 500 break a four-session winning run with a fall of two points or 0.1% from record levels. The Dow dropped 43 points or 0.25% and the Nasdaq 12 points or 0.28%.
"There were a few disappointing earnings, and a deal between Valeant and Allergan fell through. So, markets are taking a pause," Kim Caughey Forrest, investment analyst at Fort Pitt Capital in the US, told MarketWatch. "Still, the bias in the stock market this year is upward. It seems like people are buying every dip, which are turning out to be very shallow."
Without any major economic releases to encourage buying, the market hovered either side of break-even until a final hour sell-off ahead of what is expected to be a downbeat GDP report tonight. Economists surveyed by Bloomberg predict that the US economy contracted over the first three months of the year as unusually tough winter weather suppressed activity.
Sector analysis showed a mild defensive bias, with telecoms and utilities advancing and retailers and mining stocks retreating. The Russell 2000 index of small caps lost 0.48%. BHP lost 1.34% in US trade and Rio Tinto 2.88% after spot iron ore for import to China yesterday slipped $1.30 to US$96.80 a dry tonne.
Gold stocks fell 1.82% as the metal extended its decline to a third session and a fresh three-and-a-half-month low. Gold for June delivery sagged $6.20 or 0.5% to settle at US$1,259.30 an ounce.
Oil retreated for a second night, falling further from Monday's five-week closing high ahead of tonight's weekly US inventory report. West Texas Intermediate crude oil for July delivery slid $1.39 or 1.3% to settle at US$102.72 a barrel and was lately trading at US$103.08.
Copper rallied in London but declined in the US as the overall market mood deteriorated. US copper for July delivery was recently off 0.25% or less than a cent at US$3.17 a pound. In London, copper put on 0.2%, aluminium 0.6% and tin 0.2%. Zinc declined 0.65%, lead 0.3% and nickel 0.9%.
European stocks were little changed despite news of an unexpected rise in German joblessness this month. Unemployment increased by around 24,000, reversing a fall of around 25,000 in April. The Stoxx Europe 600 index eased 0.05% as Germany's DAX dipped 0.02%, France's CAC edged up 0.05% and Britain's FTSE added 0.09%.
TRADING THEMES TODAY
TECHNICAL RETREAT: A lacklustre session on Wall Street offered no real reason to extend the rally, so some traders took profits in the final hour. It does not look like there was any deeper meaning to the selling - the market had climbed for four days and was sitting at record levels so a retrace was likely on technicals alone. While not sitting nearly as prettily, the XJO may also take a breather today without damaging the current uptrend. There was no relief for US gold stocks, therefore none to be expected here just yet. However, it's worth noting that yesterday's ASX sell-down in goldies was nothing like as brutal as the last dive, when shares were suffering double-digit losses some sessions. Wall Street should spark up again tonight, with plenty of data on tap.
ECONOMIC NEWS: Monthly new-home sales are due this morning, exact time uncertain. Quarterly private-capital expenditure figures are due at 11.30am EST. Wall Street has some meaty data ahead tonight, including preliminary quarterly GDP, preliminary quarterly GDP price index, weekly jobless claims, pending home sales and crude oil inventories.
