Shares face a tepid start as falls in key commodities offset skinny gains on Wall Street amid tentative signs of progress on the debt ceiling stand-off.
The December SPI 200 futures contract eased 23 points or 0.4% to 5117 as oil and metals were pressured by a jump in the US dollar as Janet Yellen was nominated to succeed Ben Bernanke as head of the US Federal Reserve.
The S&P 500 pared its worst two-session slump since June with a rise of one point or 0.03% overnight. The Dow put on 26 points or 0.18% while the Nasdaq lost 0.46%.
"Today's reaction is favourable based on Yellen's nomination, and secondly there seems to be some thawing of the rhetoric which sets the stage for a resolution that could come before the deadline," Terry Sandven, chief equity strategist at US Bank Wealth Management, told Bloomberg. "That's positive for the broad equity market."
Leaders of both parties in the House of Representatives met overnight and President Barack Obama arranged meetings with leading Republican politicians to discuss the government shutdown and October 17 debt ceiling deadline. Read more here. The meetings raised hopes of an end to the stand-off that has partially closed the federal government for nine days and that threatens to push the government towards default if a new borrowing limit is not approved.
There was minimal reaction to the release of the minutes from the last Federal Reserve meeting, where the central bank unexpectedly opted to leave its US$85 billion a month bond-buying program unchanged. The minutes confirmed that most board members still favour tapering the program before the end of the year. Read more here.
Commodities hit reverse as the US dollar responded to the Fed minutes and the nomination of Yellen, widely seen as likely to continue Bernanke's inflationary policies as Chairman of the world's most powerful central bank. The US dollar index, which measures the greenback against a basket of foreign currencies, was lately up 0.48%.
Copper slumped to a three-week low as the rising greenback undermined demand for dollar-denominated commodities. US copper for December delivery fell nearly seven cents or 2% to US$3.23 a pound. In London, copper lost 1.9%, aluminium 0.4%, lead 0.9%, nickel 1.7% and tin 0.6%. Zinc closed flat.
Oil dropped to a three-month low following an unexpectedly large increase in US stockpiles last week. West Texas Intermediate crude oil for November delivery was lately down $2.05 or 2% at US$101.44 a barrel. Last week's Energy Information Administration report showed a rise in crude supplies of 6.8 million barrels, versus analysts' expectations for an increase of 2.2 million barrels.
Gold dropped below US$1,300 an ounce before partly recovering. Gold for December delivery was recently down $19.10 or 1.4% at US$1,305.50 an ounce.
The big two Australian miners closed mixed in US action. BHP rallied 0.6% while Rio Tinto lost 0.38%. Spot iron ore for import to China yesterday inched up 10 cents to US$131.80 per dry metric tonne.
European markets closed in the red following a mid-morning plunge on Wall Street. Germany's DAX dropped 0.45%, France's CAC 0.16% and Britain's FTSE 0.44%.
TRADING THEMES TODAY
GLIMMERS OF HOPE BUT NO RESOLUTION: Wall Street arrested this week's sharp sell-off overnight but not in the most convincing fashion. The Yellen nomination and some more jawboning in Washington proved just enough for a positive close but there was little appetite for risk. Our market anticipated something better yesterday and therefore likely has to give back a little today. Financials and consumer stocks did much of the lifting in the US, while resources and biotechs were broadly weaker. Small caps fell 0.35% but remain close to record levels. Back home, the volatile monthly jobs update is due at 11.30am EST. Until then, commodity declines are likely to weigh.
ECONOMIC NEWS: The monthly inflation expectations report is due at 11am EST, followed by the more significant monthly employment change/unemployment rate update at 11.30am. Central banks from Europe, the UK and Japan are in action tonight, making speeches or considering rates. The US has speeches due from two Fed members.
