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Flat start expected following declines on Wall Street

Tuesday 30 July 2013

Flat start expected following declines on Wall Street

By Tracey Warren (Stockbroking Sales Executive, CMC Markets Stockbroking)

Markets continue their wait-and-see mode ahead of a wave of economic data due later in the week.

Australian stocks are set for a flat start following declines on Wall Street in light volumes overnight. Weaker US housing data weighed on stocks which started the week on a down note as investors nervously await more data and the US Federal Reserve Policy meeting later in the week.

US earnings season is past half way for the S&P 500 with weak revenues being a concern. Despite decent earnings growth, stocks beating on earnings are below the average 4.3% of the past year and the 7% of the past four years. Wall Street is still mostly at all-time highs as markets sit tight and await clues on when the US Central bank will begin to slow its bond-buying program at their two day policy meeting this week. With the unemployment rate the key focus on paring economic stimulus, the US monthly jobs report due at the end of the week is also keeping investors on edge.

European stock markets were on track to snap a two-day- losing streak as a takeover deal saw shares of Elan Corp rally and Danone on the rise after a well-received earnings report. Shares of UK ad giant WPP also posted gains as a major merger in the advertising sector was interpreted to benefit. A fall in bank stocks offset gains with shares finishing largely unchanged.

The US dollar tumbled to a one month low below 98 yen overnight extending its losing streak against the currency to its third session. The US dollar faces event risk with the US GDP report, the FOMC policy meeting and the US employment report due. A stronger yen added to investor jitters with the Nikkei dropping 3.3% to a four week low.

Commodity markets struggled overnight as supply disruptions kept oil at three week lows and nervousness ahead of Chinese manufacturing data due Thursday affected copper prices. Gold rebounded from the previous session’s lows as investors look to a heavy schedule of central bank meetings and economic data this week.

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