A cautious open is likely after a jobs-inspired rally on Wall Street fizzled out as traders looked ahead to this week's start of a new US earnings season.
The December SPI 200 futures contract closed one point or less than 0.1% higher at 4493 on Saturday morning following a seven-day advance that has lifted the ASX 200 by more than 130 points.
An unexpectedly large drop in unemployment got US stocks off to a bright start on Friday, but the gains mostly dissipated by the close. The S&P 500 finished near flat at -0.03% after earlier rising as much as 10 points or 0.7%. A 2.13% decline in Apple was the main difference between the Dow, which gained 35 points or 0.26%, and the Nasdaq, which slid 0.43%.
The initial excitement was inspired by a drop in the jobless rate below 8% for the first time since President Obama took office. Unemployment declined to 7.8% from 8.1% in September as the economy created 114,000 new jobs. Employment figures for August and July were also revised higher.
"Today's trading is a pattern we've seen before this week, with a strong start and then we give up gains later in the day," the chief market strategist at DA Davidson in the US told Bloomberg. "There's still a lot of the dark cloud of the European financial situation hanging over the market, which sets the tone for the short-term intraday trading."
European markets caught the upswing on Wall Street and closed before Spain's Prime Minister Mariano Rajoy reiterated that his country has made no decision on whether to request a bailout. Germany's DAX advanced 1.27%, France's CAC 1.64%, Britain's FTSE 0.74%, Spain's IBEX 35 1.81% and Italy's FTSE MIB 2.35%.
Oil resumed its recent downtrend following Thursday's brief Syria-inspired rebound. West Texas crude for November delivery fell $1.79 or 1.95% to US$89.92 a barrel after earlier settling at its lowest level of the week. The contract has declined for three straight weeks and four of the last five.
Gold, often used as a defensive asset in times of economic trouble, was pushed lower by the jobs news in the US but finished off its low. Gold for December delivery ended the week $13.50 or 0.75% weaker at US$1,783 an ounce for a weekly loss of 0.4%.
Demand for industrial metals remained soft as China wrapped up a week-long national holiday. US copper for December delivery declined two cents or 0.5% to US$3.77 a pound. In London, copper eased 0.1%, aluminium 0.1%, lead 0.1%, nickel 2% and tin 0.4%. Zinc rallied 0.5%.
TRADING THEMES THIS WEEK
Q3 EARNINGS SEASON STARTS IN US: Wall Street is preparing for the start of the weakest earnings season since the dog-days of the GFC. Alcoa's earnings report tomorrow night marks the unofficial start of a season that is forecast to reveal a 2.6% decline in profits from the same time last year, according to a survey of analysts. Any decline in overall profitability would mark the end of 11 quarters of growth. Of course, when expectations are so low, upside surprises have more impact, so the next few weeks may not be as grim as recent caution on Wall Street implies. Read more here.
CHINA RETURNS FROM HOLIDAY: The ASX enjoyed an armchair ride last week with our major intraday trading lead - the Shanghai Composite - sidelined by a week-long national holiday in China. That may change this week as China re-opens for business. Industrial metals markets should also come back to life as Chinese buyers re-enter the market.
SPAIN TOPS EUROPEAN AGENDA: A series of meetings among European leaders this week may keep Spain and Greece near the top of the headlines. European finance ministers assemble in Luxembourg tomorrow to discuss tighter banking union and Spain's efforts to rein in its finances. Meanwhile, German Chancellor Angela Merkel visits Greece tomorrow, and Spanish Prime Minister Mariano Rajoy visits Paris on Wednesday to meet French President Francois Hollande. Read more here.
DAYLIGHT SAVING: Just a reminder that daylight saving has commenced in most of the southern states and ended in the US. The net result is that trade on Wall Street will now end at 8am EST and from tomorrow I'll aim to get the pre-market thread up about 15-20 minutes later.
ECONOMIC NEWS: A solid domestic schedule includes: job ads (10.30am EST today); business confidence (tomorrow); consumer sentiment (Wed); and inflation expectations, employment change, unemployment rate (Thu). A light week in the US includes: trade deficit, weekly jobless claims (Thu); and producer price index/core PPI and consumer sentiment (Fri).
