A flat start to trade is likely after a disappointing US jobs report and weak European data dragged on overseas stock indexes.
The June SPI 200 futures contract ended the night session three points or 0.1% ahead at 4432 as oil and metals were pressured by a rising US dollar.
The Dow pulled back from Tuesday's four-year high after a private payrolls report showed US employers hired the lowest number of workers in April in seven months. However, the blue-chip index recouped most of its initial 86-point fall, closing just 11 points or 0.08% lower. The broader S&P 500 lost 0.25% and the tech-heavy Nasdaq added 0.31%.
ADP's private-sector payrolls report, viewed as a strong indicator for tomorrow night's official monthly government employment data, showed 119,000 new hires last month, well down on average increases of around 200,000 through the first quarter of the year. US factory orders suffered their biggest decline in three years during March, falling 1.5%. The data continued a recent trend towards negative surprises - the Citigroup Economic Surprise Index, which rates the accuracy of economists' forecasts, is at its lowest level since October.
"The labour market is weak at best," the chief investment officer for Fifth Third Asset Management in the US told Bloomberg. "While we thought that we were gaining some momentum, more recent data suggest that things are sluggish. If we start to see a cascade of negative news, the market is going to be vulnerable."
Also affecting sentiment was a wave of troubling European economic news that underlined the impact of austerity measures. Unemployment rose to a euro-zone record of 10.9%. Manufacturing activity contracted faster than expected last month. Unemployment in Germany unexpectedly increased. The triple whammy helped push Germany's DAX down 0.75%, Italy's FTSE MIB 2.6%, Spain's IBEX 35 2.55% and Britain's FTSE 0.93%. France's CAC clung on to a gain of 0.42% following the May Day holiday.
A "risk-off" session on commodity markets saw declines in oil and metals. West Texas crude was crimped by demand fears after the US jobs report and by a sixth straight increase in US weekly inventories. Crude for June delivery was recently off 79 cents or 0.7% at US$105.37 a barrel.
Copper led a retreat in industrial metals following yesterday's soft Chinese manufacturing report and an overnight report of contraction in European output. In London, copper lost 1.6%, aluminium 1.3%, lead 2.3%, nickel 2%, tin 0.9% and zinc 1.3%. US copper for July delivery was recently down six cents or 1.6% at $3.78 a pound.
Gold eased for a third straight session. Gold for June delivery was lately down $8.10 or 0.5% at US$1,654.30 an ounce.
TRADING THEMES TODAY
CONSOLIDATION?: There was plenty for both bulls and bears in last night's overseas action. Bears will point to deteriorating economic signals from both Europe and the US, while bulls will applaud Wall Street's willingness to buy the dip in the face of so many negatives. Domestic futures traders don't seem overly perturbed by overseas events, perhaps because the ASX pretty much ignored Wall Street's positive lead yesterday and therefore doesn't have much to give back. Still the overnight weakness in oil and metals will likely feed into resource stock prices today and local banks were pressured yesterday by ANZ's talk of tightening margins. It will be interesting to see if the ASX can hold the line today following Tuesday's rate cut.
ECONOMIC NEWS: Services data dominates the early outlook today, with the Australian services index due at 9.30am EST and China's services PMI at 11am. Japanese trade is suspended today for a public holiday. The European Central Bank has a rates announcement scheduled tonight. A busy night ahead in the US includes weekly jobless claims, services PMI, preliminary non-farm productivity and unit labour costs and natural gas storage.
