Market wrap: Australian stocks appear likely to open cautiously higher as traders balance a fifth winning session on Wall Street on Friday against declines in oil and most base metals.
The December SPI futures contract closed 8 points or 0.2% ahead at 4163 on Saturday morning as US stocks sealed their longest rally in two months.
The S&P 500 put on 0.57% on Friday for a rise of 5.4% for the week. The Dow rallied 76 points or 0.66% and the Nasdaq 0.58%.
Market sentiment continued to be driven by optimism about this week's two-day Federal Reserve meeting and hopes that Europe is managing its sovereign debt crisis better. Share valuations in the US are at two-year lows.
"The stock market is extremely undervalued," the chief investment officer at Highmark Capital Management in the US told Bloomberg. "As things begin to improve, the market can rise back to a more normal valuation. The fact that we got some moderation in terms of thinking about the [European Central Bank] and how it's going to address the crisis helped reduce some of the risk."
However, some of the optimism drained away on Friday as a meeting of European finance ministers underlined divisions within Europe over how to tackle debt issues. The meeting ended with little progress as Greece was told it will not receive fresh aid unless it pares its budget deficit.
US retail stocks received a leg-up from an improvement in consumer sentiment. A preliminary gauge of sentiment rose to 57.8 from 55.7 last month, ahead of the median economist's estimate.
A deterioration in risk appetite was marked by declines in oil and most base metals and rises in precious metals and the US dollar. Oil finished at its lowest level for the week as late news from the European finance meeting failed to lift sentiment. Crude for October delivery declined $1.50 or 1.7% to US$87.90 a barrel.
Copper locked in a second straight losing week, but aluminium squeezed out a gain. In London, copper fell 0.3%, lead 1.1%, nickel 1.3%, tin 1.4% and zinc 1.3%. Aluminium added 0.1%. US copper fell 0.6% on Friday and 1.8% for the week.
Buyers returned to precious metals after two days of losses. Gold for December delivery rallied $33.50 or 1.9% to US$1,814.90 an ounce. December silver added $1.20 or 3% at US$40.71 an ounce.
The major European markets ended mixed as news of divisions began to leak from the meeting of finance ministers. Britain's FTSE put on 0.58% and Germany's DAX advanced 1.18%, but France's CAC fell 0.48%.
TRADING THEMES THIS WEEK
FED TO MAN THE PUMPS?: The US Federal Reserve holds an extended two-day meeting this week which is is widely expected to deliver some sort of fresh stimulus for the flagging US economy. The Fed's participation in last week's European Central Bank liquidity plan for Europe increased expectations for this week's meeting, but the market may have largely anticipated any news during last week's five-day rally. The Fed announcement is due on Wednesday night.
EUROPEAN FALLOUT: The meeting of European finance ministers that began on Friday appears to have been a fizzer, with the continent no closer to cohesive action on the debt crises afflicting several member nations. Greece was told it has to do more to earn the next instalment of its aid package, while ministers dismissed calls from the US for further stimulus. Greece has said it will run out of money by the middle of next month. Greek Prime Minister George Papandreou is due to address an IMF/World Bank gathering tomorrow night.
CHINESE MANUFACTURING RECOVERING?: This week delivers two economic indicators from Australia's most important trading partner: the leading index of economic indicators on Wednesday and the more-important monthly manufacturing report on Thursday. The latter recorded a second straight month of contraction last month but improved from July. Investors will look for evidence that the mid-year contraction was just a wobble.
ECONOMIC NEWS: A relatively light week for scheduled domestic economic news includes: the minutes from the last Reserve Bank meeting (tomorrow); and competing leading indexes on Wednesday and Friday. Highlights this week in the US include: the home builders' index (tonight); housing starts (tomorrow); existing home sales, FOMC announcement (Wed); and weekly jobless claims and leading indicators (Thu).
