A volatile end to Wall Street's worst month since May last year has Australian shares aiming lower, but upbeat Chinese manufacturing data released yesterday may cushion the fall.
The September SPI 200 futures contract fell 18 points or more than 0.3% to 5100 on Saturday morning as US traders squared the books on the last trading day of the month ahead of today's Labor Day market holiday.
A choppy, low-volume session saw US shares finish off their lows without ever gaining momentum as a possible attack on Syria and weak economic data capped risk appetite. The S&P 500 dropped five points or 0.32%, with the defensive utilities and consumer staples the only industry groups to advance. The Dow lost 31 points or 0.21% and the Nasdaq fell 0.84%.
"People [didn't] want to go into the weekend hugely exposed up or down, especially with this fear of Syria overhanging the market," a portfolio manager with Gabelli Funds in the US told Bloomberg. "There's a lot of concern of if we get involved in a bombing, how protracted will our involvement be. The market does not like uncertainty, and there's a lot of uncertainty as it relates to Syria."
The prospect of imminent US strikes against the Syrian government lifted over the weekend after President Barack Obama said he will seek approval from Congress for any action. Congress is not due to return from summer recess until next Monday, with a vote expected later that week. There is no guarantee that a divided Congress will rubber-stamp President Obama's proposal, according to MarketWatch.
Consumer data also weighed on market sentiment. Consumer spending increased by just 0.1% in July, two basis points below economists' expectations. A separate report showed consumer confidence fell from a six-year high last month. The Reuters/UMich final index of consumer sentiment dropped to a four-month low of 82.1 from 85.1 in July. Concerns were partly alleviated by an increase in the Chicago Business Barometer to 53 last month from 52.3 in July, broadly in line with expectations.
The gloomy mood pushed small caps to their lowest point in seven weeks. The Russell 2000 index slumped 1.56%. The Dow Jones Transportation Average, also seen as an important measure of the overall health of the market, fell 1.14%.
BHP and Rio Tinto finished mixed in US trade as iron ore eased from recent highs. BHP put on 0.67%. Rio Tinto fell 0.42%. Spot iron ore for import to China declined 60 cents to US$137.70 per dry metric tonne.
China's manufacturing sector is gathering pace, according to official data released yesterday. The National Bureau of Statistics and China Federation of Logistics and Purchasing said its Purchasing Managers' Index hit a 16-month high at 51 last month, up from a reading of 50.3 in July.
"The recovery is being driven primarily by domestic demand but international demand is picking up too as we can see from the jump in new export orders," the head of Greater China economics at Bank of America in Hong Kong told Bloomberg. "This will surely boost markets' confidence in China's recovery amid the turmoil in some emerging markets."
Oil continued to pare its Syrian risk premium, falling further from Wednesday's two-and-a-quarter-year high. West Texas Intermediate crude oil for October delivery slipped $1.04 or 1% to US$107.76 a barrel.
A third day of falls put another dent in gold's surge during August, but the metal closed 6.3% ahead for the month. Gold for December delivery dropped $16.90 or 1.2% to US$1,396.20 an ounce.
Most industrial metals dropped to three-week lows as a rising US dollar tempered demand. US copper for September delivery lost roughly two cents or 0.7% at US$3.24 a pound. In London, copper lost 0.8%, aluminium 1.2%, lead 2%, nickel 1.9%, tin 0.8% and zinc 1.6%.
European markets ended their worst week since June with further falls. Germany's DAX gave up 1.12%, France's CAC 1.31% and Britain's FTSE 1.08%.
TRADING THEMES THIS WEEK
US HOLIDAY: Wall Street is closed tonight for the Labor Day public holiday. That elevates the importance of Asian and European action today as diviners of global market sentiment, but also reduces the likelihood that we will see a major move on the ASX until Wednesday. Trading volumes will start to pick up in the US this week as institutional desks get back to full-strength following the end of the traditional northern holiday season.
CHINA'S ECONOMIC REBOUND GATHERS PACE: More good news emerged from Australia's biggest trading partner over the weekend, with the official manufacturing measure hitting its highest level in 16 months. Further confirmation of the acceleration in activity should come today at 11.45am EST with the release of the final version of HSBC's rival manufacturing PMI. The initial reading of 50.1 is expected to show a modest improvement to 50.2, according to Forex Factory. The services PMI is due tomorrow.
FEDERAL ELECTION: Saturday's Federal Election may cap risk appetite this week, so long as there remains any uncertainty about the outcome. Overseas money likes to know who is in charge. However, a likely victory for the Coalition, generally seen as more business-friendly, may prove a long-term positive for the share market.
DATA ON TAP: The first week of each month is heavy with domestic economic data and this week includes a rates decision, GDP figures and trade data. While tomorrow's rates meeting is widely-expected to be a non-event ahead of Saturday's election, Wednesday's quarterly GDP reading and Thursday's monthly trade report have the capacity to move the market. The earnings season is now mostly out of the way.
SYRIA: Onto the backburner this week after President Obama said he will wait for congressional approval for any attack on Syria. That is by no measure guaranteed and will come no sooner than next week.
ECONOMIC NEWS: This week's heavy domestic menu includes: the AIG Manufacturing Index (9.30am EST today), MI Inflation Gauge (10.30am), monthly building approvals and company operating profits (both 11.30am) and year-on-year commodity prices (4.30pm); monthly retail sales, current account, rate decision and statement (tomorrow); AIG Services Index, quarterly GDP (Wed); trade balance (Thu); and AIG Construction Index (Fri). US highlights include: manufacturing index, construction spending (tomorrow); trade deficit, car sales (Wed); ADP employment report, services index, factory orders (Thu); and non-farm payrolls, unemployment rate (Fri).
