Shares face a soft start after fiscal cliff worries overshadowed Greece's debt deal and upbeat economic news in the US, ending Wall Street's six-session winning run.
The December SPI 200 futures contract finished the night session 19 points or 0.5% in the red at 4454 after a warning that budget talks in Washington had made little progress helped tip US stocks decisively lower.
The S&P 500 drifted either side of break-even for much of the night until Democrat Senate Majority Leader Harry Reid told reporters he was "disappointed" with negotiations over the US$607 billion package of spending cuts and tax increases due to take force on January 1 unless politicians can find a compromise. "We only have a couple weeks to get something done so we have to get away from the 'happy talk' and do 'specific things'," Reid warned. The S&P 500 immediately plunged eight points and closed 0.52% lower. The Dow lost 89 points or 0.69% and the Nasdaq gave up 0.3%.
"The market remains fixated on what's going on in Washington," the chief market strategist at DA Davidson in the US told Bloomberg. "The lack of progress in resolving major fiscal cliff issues is topic A and trumping any kind of positive news whether it's coming out of Europe or positive economic reports."
Wall Street paid little heed to the night's economic data, which continued to defy gloomy expectations. Consumer confidence this month climbed to its highest level in four years, suggesting the man on the street is largely ignoring Washington's latest stand-off. House prices improved for a sixth month in September and orders for durable goods held steady last month despite the impact of Hurricane Sandy.
"The general trend [in economic data] is a little bit better than expected," the director of market and sector analysis at the Charles Schwab Center for Financial Research in the US told MarketWatch. "There is nothing that is extremely great that makes you think economic growth is going to explode in the near term, but there is economic growth and we're not falling back into recessionary territory."
European markets took their cue from the latest Greek debt deal announced yesterday, but pared gains as Wall Street failed to share the enthusiasm. Germany's DAX put on 0.55%, France's CAC 0.03% and Britain's FTSE 0.23%.
Strength in the US dollar on the back of positive economic data kept a lid on commodity prices in US trade. Gold lost some of its haven appeal after Greece secured another tranche of bailout money. Gold for December delivery was lately down $8.10 or 0.5% at US$1,741.50 an ounce.
A downgraded growth outlook and warning about the risk of a global recession from the Organisation for Economic Cooperation and Development helped push the price of oil lower. West Texas crude for January delivery was lately down 53 cents or 0.6% at US$87.22 a barrel after the OECD cut its global growth prediction for next year, citing a "hesitant and uneven recovery over the coming two years".
Copper weakened in the US but was better supported in UK trade as the Greek debt deal and US economic data lifted base metals. US copper for December delivery eased 0.1% or less than a cent to US$3.53 a pound. In London, copper added 0.1%, aluminium 1.1%, lead 1%, nickel 2.5%, tin 1.7% and zinc 0.2%.
TRADING THEMES TODAY
GETTING BACK IN LINE: Australian stocks yesterday pre-empted an overnight Greek-debt victory rally that was cancelled in the US due to lack of interest. Traders there were too busy watching Washington's latest game of brinkmanship. That likely means the ASX will give back a little of yesterday's gains, but futures figures suggest any retreat will be modest. Financials and miners copped a lot of the selling in the US. Small caps held steady and defensives provided most of the upside.
ECONOMIC NEWS: Quarterly construction work figures are due at 11.30am EST. Highlights in the US tonight include: new home sales, the Federal Reserve's "beige book" and crude oil inventories.
