30/07/10 - 09:00
Ben Potter, Research Analyst
Overnight Market Report - 9.00am
US stocks fell for a third day as investors were left disappointed after poor earnings from technology and consumer-related companies. Whilst there was quite choppy trade the S&P 500 lost 0.4% to 1101 and the Dow Jones Industrial average closed down 30 points or 0.3%.
The S&P 500 did however make an attempt to rally on the open, trading to a high of 1115. Pre- market, the latest read on weekly jobless claims showed a fall of 11,000 claimants. However, the strength in US equities on open was subsequently sold into pushing the index to test 1100 as weak earnings reports from technology companies such as Akamai and Nvidia were disseminated. Just how quickly the recent gains can be erased in such a short space of time has some quite worried.
Whilst the bulk of US companies have beaten expectations, recent downbeat assessments from the Federal Reserve have left global traders scratching their heads as to what to do next. Comments overnight from Federal Reserve Bank of St. Louis, James Bullard, that the Central Bank should resume purchases of treasuries if the economy slows, created further downside to the markets.
There seems to be growing feeling though in the global investment community that the US economy is stuck between a rock and a hard place, whilst job growth is anaemic and confidence is waning, the recent run of stronger than expected data out of Europe has seen the Greenback fall out of favour with currency traders. Strong job and sentiment numbers in Germany overnight propelled the single currency up to 1.31 and there is a realisation that global funds managers are looking to deploy funds into stocks which are not leveraged to the US$.
As for the Australian market today, an open around 4500 is expected. Whether traders choose to defend that level will no doubt depend on how Asian markets fair; further strength in the Shanghai composite could see the ASX 200 maintain the 4500 mark.
Materials should fair ok today given some overnight strength in base metals, however BHP’s ADR is pointing to an open around $40.20, down about 0.6%. Look out for ERA’S results today; the stock has underperformed the market this year so a strong result could attract buying interest.
It’s hard to see where strength will come from as the lead in for banks, energy and industrials is weak. However tonight’s GDP print in the US, whilst backward looking, is seen as a catalyst for creating some volatility, so traders may tread cautiously today in anticipation of that.
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