A soft finish to Wall Street's worst week in four months has Australian shares pointing lower this morning, but weekend news of strengthening Chinese trade may improve the outlook.
The December SPI 200 futures contract closed 13 points or 0.3% in the red at 4475 on Saturday as oil and metals paced declines in most US equities. China announced its best trade data in several months later that day, raising hopes that the economy of Australia's biggest trading partner is firming after a year-and-a-half-long slowdown.
The S&P 500 extended its worst weekly loss since early June with a decline of 0.27% on Friday for a five-day fall of 2.2%. A 75-point advance on the Dow faded to a gain of three points or 0.02% and the Nasdaq lost 0.18%.
The mixed finish on Wall Street followed a round of mostly disappointing Q3 earnings results and caution over developments in Europe, which offset a recovery in US consumer confidence. Financials were the biggest drag as market heavyweights Wells Fargo and JP Morgan both retreated after investors found flaws in their reports despite strong headline numbers. AMD plummeted 14% after cutting its revenue outlook.
"You're in the midst of earnings season, which has been kind of blah," the chief investment officer at Stewart Capital in the US told Bloomberg. "I'm interested in what companies are seeing more than the macro data points because I think companies have a better pulse on what's really going on. Business is slow and most companies are not seeing an improvement in the near-future."
Consumer staples delivered the night's best performance after a gauge of consumer confidence delivered its strongest reading in at least five years. The University of Michigan-Thomson Reuters index rose to a preliminary October reading of 83.1 from a final September reading of 78.3.
Europe's benchmark share index faded to its fourth loss of the week following a report that the euro-zone rescue fund does not have enough money to rescue Spain if it requests a loan before the end of the year. The Stoxx Europe 600 Index lost 0.68% as Germany's DAX fell 0.68%, France's CAC 0.72%, Britain's FTSE 0.63% and Spain's IBEX 35 1.07%.
China's Saturday trade update contained upside surprises, with exports increasing more than expected and iron ore imports reaching a 20-month peak. Exports were 9.9% ahead of a year earlier, versus a 5.5% consensus in a survey of economists. Iron ore imports increased by 7.3% from the same month last year, the best result since last January. Read more here.And here.
Oil and metals took their cue from the downbeat mood on equity markets, rather than softness in the US dollar. West Texas crude for November delivery dropped 43 cents or 0.5% to US$91.64 a barrel but broke a three-week losing run with a weekly gain of more than 2%.
Gold eased as a bullish outlook on the US economy from a member of the US Federal Reserve encouraged traders to abandon havens for riskier assets and as core wholesale prices in the US stayed flat this month. Gold for December delivery eased $15.20 or 0.9% to US$1,755.40 an ounce and a weekly loss of 1.2%.
Trade in industrial metals was subdued ahead of China's monthly trade update on the weekend and this week's GDP report. US copper for December delivery eased five cents or 1.4% to US$3.70 a pound. In London, aluminium gave up 1%, lead 2%, nickel 3.2%, tin 2.6% and zinc 1.5%.
TRADING THEMES THIS WEEK
US EARNINGS SEASON ACCELERATES: On Wall Street economic news is likely to take a backseat to the deluge of company reports as the third-quarter earnings season has one of its two busiest weeks. The early tone has been soft - few real disasters but not much evidence that investors are finding fresh reasons to buy at these levels. The result last week was the biggest pullback on the S&P 500 in four months. Highlights this week include: Citigroup (tonight); IBM, Intel, Johnson & Johnson (Tue); AmEx, Bank of America, Halliburton (Wed); Google, Microsoft, Morgan Stanley (Thu); and GE and McDonald's (Fri).
CHINESE DELUGE: The weekend delivered promising signs that the Chinese economy may be stabilising after more than a year of deteriorating data, making this week's stream of economic data arguably of greater interest than usual. Highlights include: consumer and producer inflation (12.30pm EST today); foreign direct investment (tomorrow); and GDP, retail sales, industrial production and fixed asset investment (Thu).
ECONOMIC NEWS: A solid week in Australia includes: home loans, motor vehicle sales (11.30am EST today); minutes from the last Reserve Bank meeting (tomorrow); leading index (Wed); and business confidence (Thu). Highlights of a busy week in the US include: retail sales, Empire state index (tonight); consumer price index/core CPI, industrial production, home builders' index (tomorrow); housing starts (Wed); weekly jobless claims, leading indicators, Philly Fed (Thu); and existing home sales (Fri).
