Shares are pointing lower for a third day after mild losses for BHP and Rio Tinto during a negative session on Wall Street and a downbeat outlook for the Australian economy from the Organisation for Economic Cooperation and Development.
The December SPI 200 futures contract retreated 26 points or 0.5% to 5342 as US stocks eased ahead of a speech this morning from Federal Reserve Chairman Ben Bernanke.
The S&P 500 swung through an 11-point trading range before closing four points or 0.2% in the red amid disappointing earning outlooks and continuing caution after the index failed to hold the 1,800 level on Monday. The Dow slipped nine points or 0.06% from Monday's record close. The Nasdaq lost 0.43%.
"We've had a big run. My suspicion is that the market might go sideways now for a little while before we encounter a year-end rally in December," Bruce Bittles, chief investment strategist at RW Baird, told Bloomberg.
Overnight, the Paris-based Organisation for Economic Cooperation and Development downgraded its outlook for the global economy and predicted Australian growth will remain below average next year. The OECD cut its global growth forecasts to 2.7% this year and 3.6% next year from predictions of 3.1% and 4% made in May. Australian growth is tipped to remain at 2.6% as the mining investment boom unwinds. Read more here.
Fed-watchers were reluctant to make big bets last night ahead of a speech from Fed chairman Bernanke at 11am AEST today. Bernanke is due to deliver the National Economists Club Annual Herbert Stein Memorial Lecture in Washington. Overnight, Bernanke's likely successor, Janet Yellen, defended the Fed's stimulus program. New York Fed President William Dudley said the economy was improving but not by enough to justify stimulus cuts.
Cyclical assets underperformed the broader market. The Dow Jones Transportation Average sagged 1% and the Morgan Stanley Cyclical Index lost 0.56%. Industrials and utilities were the worst of the S&P industry groups.
BHP lost 0.31% in US trade. Rio Tinto gave up 0.21%. Spot iron ore for import to China yesterday declined 70 cents to US$136.30 a dry tonne.
Oil edged above Monday's six-month closing low. West Texas Intermediate crude for December delivery was recently ahead 35 cents or 0.4% at US$93.36 a barrel.
Most base metals pared recent losses amid short-covering as the US dollar cut its gains. US copper for December delivery was recently up a third of a cent or 0.2% at US$3.16 a pound. In London, aluminium put on 0.6%, lead 0.5%, nickel 0.3%, tin 0.2% and zinc 0.6%. Copper dipped 0.1%.
Gold inched to a fourth gain in five sessions. Gold for December delivery was lately up $1.30 or 0.1% at US$1,273.80 an ounce after trading above US$1,278.
European markets fell further from multi-year highs after Germany's economic confidence measure missed expectations and the OECD outlook dampened risk appetite. Germany's DAX fell 0.35%, France's CAC 1.13% and Britain's FTSE 0.38%.
TRADING THEMES TODAY
WAITING FOR BERNANKE: There was no real improvement in the market mood overnight, with the OECD taking over the "wet blanket" from Carl Icahn. No panic in the air but plenty of caution. In times like these, US traders climb on to Uncle Ben Bernanke's knee and ask him to tell them everything is going to be all right. Fortunately, Ben is due to deliver a speech at 11am EST Australian time and that might be enough to change the current dynamic. US futures will tell us if has said what traders want to hear. Meantime, we can expect a soft start to Australian trade. On the domestic front, today's AGM line-up includes CAB, DLS, EHL, KMD, MYR and VAH.
ECONOMIC NEWS: The Melbourne Institute's leading index is due at 10.30am EST. Fed chairman Bernanke speaks at 11am, which will overshadow a panel discussion involving RBA Assistant Governor Guy Debelle at 11.30am. A busy night ahead in the US includes the minutes from the last Fed meeting, consumer inflation/core CPI, retail sales/core retail sales, existing home sales, business inventories, crude oil inventories and speeches by two Fed members.
