Market wrap: A positive start to trade is likely after a choppy overseas session featuring a successful Italian bond auction, a fall in US unemployment claims and confusion over France's credit rating.
The December SPI 200 futures contract ended the night session 22 points or 0.5% stronger at 4286 as most US stocks finished ahead and oil surged to a new three-month high.
The S&P 500 rallied 0.86% overnight, recouping some of Wednesday's heavy fall as the yields on near-term Italian bonds dropped back under 7% amid reports of European Central Bank buying. The Dow clawed back 113 points or 0.96% and the Nasdaq added 0.11%.
The session began brightly after an Italian bond auction was over-subscribed and sold below the 7% level seen as critical to Italy's chances of avoiding an EU bailout. Also helping sentiment was a fall in weekly jobless claims in the US to a seven-month low.
"[US] economic data will come back into focus as we shift our vision away from the political fear in the euro zone," the chief investment strategist at UBS Wealth Management Americas told Bloomberg. "As we remove uncertainties, the market starts focusing less on the risk scenarios. In the US, a decline in claims is very positive."
The market overcame a mid-session wobble after ratings agency Standard & Poor's mistakenly issued a message to some subscribers that said France had lost its AAA credit rating. S&P attributed the error to a computer problem and later reaffirmed France's AAA rating with a stable outlook.
Earlier, European markets ended mixed as Greece named Lucas Papademos, a former vice-president of the European Central Bank, to lead its new government, while reports from Italy suggested that former European Union commissioner Mario Monti is being lined up to replace Prime Minister Silvio Berlusconi. Britain's FTSE fell 0.28%, France's CAC lost 0.34% and Germany's DAX added 0.66%.
Commodity markets once again pointed in different directions, with oil strong but most metals weak. Oil's surge to a fresh three-month-plus high showed surprising resilience in the face of a downbeat forecast from the International Energy Agency and signs of slowing demand from China. The IEA downgraded its 2011 and 2012 forecasts for daily global oil demand and China's October oil imports were 1.6% weaker than the previous month. Nonetheless, light, sweet crude for December delivery was recently up $1.95 or 2% at US$97.69 a barrel.
Gold retreated as developments in Europe boosted risk appetite, reducing demand for safe havens. Gold for December delivery was lately down $30.20 or 1.7% at US$1,760.20 an ounce.
Copper dropped for a fifth straight night as industrial metals demand continued to be depressed by turmoil in Europe. In London, copper fell 2%, lead 1.5%, tin 2.5% and zinc 2.2%. Aluminium rallied 1% and nickel 0.5%. US copper was recently off 2.4%.
"What you're seeing in the copper market is an expression of the feeling that things are not going to get better any time soon, and that the risks are certainly favouring the downside and certainly favouring Italy not being able to refinance its debt," a managing director with TrendMax in the US told Reuters.
TRADING THEMES TODAY
REBOUND BUT UNCONVINCING: Events on overseas markets last night raise more questions than answers. Strength in the oil market is saying all is well and risk appetite remains strong, while Dr Copper notched a fifth straight loss and is on track for its worst week in seven. They can't both be right about the outlook. Italy's bond auction went well, but how much of that was down to the European Central Bank? The ECB doesn't have the muscle to prop every Italian bond auction, so it remains to be seen whether last night's sale was a decisive turning point or a blip. European markets were mixed. I don't know what to make of it all but it doesn't offer any clear message for today's action on the ASX. I guess we wait and trade the trade.
ECONOMIC NEWS: No scheduled domestic reports today. A slow week in the US wraps up tonight with preliminary consumer sentiment and inflation expectations.
