A mixed night on Wall Street and commodity markets has Australian shares pointing moderately lower this morning.
The September SPI 200 futures contract ended the night session 12 points or 0.3% in the red at 4301 as BHP and Rio Tinto retreated in US trade after Shanghai steel futures hit an all-time low yesterday and iron ore its weakest level since late 2009.
US stocks sank following a third straight monthly decline in manufacturing but pared losses as market heavyweight Apple rallied on hints that the iPhone 5 is coming soon. The S&P 500 closed two points or 0.12% underwater and the Nasdaq advanced 0.26%. The Dow - which doesn't count Apple among its component companies - trimmed a triple-digit decline to a loss of 55 points or 0.42%.
Defensive sectors telecoms and consumer staples outperformed as the market struggled for direction ahead of Thursday's European Central Bank meeting. The ECB is expected to distribute its plan to ease the euro-zone's long-running sovereign debt crisis to national banks in the next day.
"We're not going to get any definitive direction so long as everyone is waiting around on the Fed and ECB," the president at Boston Advisors in the US told Reuters. "Things seem very soft right now, and until that changes the market may have a hard time getting out of the range we've been in."
Manufacturing in the US followed the global trend, contracting for a third straight month in August. The Institute for Supply Management manufacturing index fell to 49.6%, its worst result since July 2009.
European markets hit reverse as US stocks sagged and Moody's placed the European Union's Aaa debt rating on negative watch. Germany's DAX fell 1.17%, France's CAC 1.58% and Britain's FTSE 1.5%
BHP and Rio Tinto retreated in overseas trade as iron ore hit a new low yesterday. The benchmark ore price in China fell 2.5% or US$2.21 to $US86.90 per metric tonne after steel futures in Shanghai hit their lowest level since bourse trading began in 2009. In US trade, BHP fell 1.26% and Rio Tinto lost 1.53%.
"Some people thought iron ore prices had hit the bottom, but I think Friday's rebound was temporary and prices may drop further unless we see big policies to support the economy," an iron ore trader based in eastern China's Shandong province told Reuters.
Oil was dragged lower by a rising US dollar and weak US manufacturing data. West Texas crude for October delivery was recently down $1.02 or 1.1% at US$95.45 a barrel.
Copper advanced as traders continued to bet that weak economic news from around the globe increases the prospects for monetary easing. In London, copper added 0.3%, aluminium 0.9%, lead 1.5% and zinc less than 0.1%. Nickel eased 1.7% and tin 0.8%. US copper for September delivery was recently up three cents or 0.75% at US$3.47 a pound.
Gold edged to a five-month high and silver extended recent gains. Gold for December delivery was lately up $10.90 or 0.6% at US$1,698.50 an ounce. Silver for December delivery put on 95 cents or 3% at US$32.39 an ounce.
TRADING THEMES TODAY
ORE AND GDP: Mixed leads for the day, with the US paring its losses due to Apple - a factor that has little relevance for our market. Further declines in the price of iron ore yesterday appear to dash hopes of a quick rebound and may see a resumption of pressures on the big miners and the likes of ARI, BSL, FMG, AGO and MGX. With the strength of the Australian economy attracting international attention as the mining boom fades, domestic economic data may carry more weight than usual - today's main event is the 11.30am EST release of quarterly GDP data (see below). Biotechs and small caps were among the standouts in the US during a shapeless session where defensive sectors also outperformed.
GDP: Quarterly growth figures are due at 11.30am EST and the expectation is that they will follow the recent weakening global trend. Economists expect growth to have slowed to 0.8% in the June quarter from 1.3% over the first three months of the year. Anything less than that may compound concerns that strains in commodity markets are about to pull the rug from under the Australian economy.
ECONOMIC NEWS: The services index is due at 9.30am EST, followed by quarterly GDP figures at 11.30am. Europe has services data due tonight, plus several bond auctions. Revised non-farm productivity and unit labour costs are the highlights of a quiet session ahead in the US.
