Thursday May 8, 02:07 AM
Australian shares outlook - Lower after Wall St retreats on oil price concerns
SYDNEY (Thomson Financial) - Australian shares are expected to open sharply lower on Thursday following a steep decline on Wall Street as concerns that record high oil prices and rising food costs will dampen the impact of moves to revive a sluggish U.S. economy.
Weaker metals prices overnight will ease demand for mining stocks but energy stocks are likely to advance, led by sector leader Woodside Petroleum (Berlin: WOPA.BE - news) which hit record highs on Wednesday.
'The selling momentum we saw yesterday will continue following aggressive selling in the U.S.,' said Stuart Smith, a private client advisor at Bell Potter Securities.
'Our futures have been in downtrend since yesterday morning and there will be no help from the LME (London Metals Exchange) today but the market remains a buy, especially on the dips.'
He said comments by Reserve Bank of Australia board members on Wednesday that the credit crisis was less intense than earlier in the year should help soothe investors' nerves.
The S&P/ASX 200 June futures contract ended its overnight session down 74 points at 5,582.
Share prices closed lower on Wednesday after a late-day sell-off in the financial sector outweighed gains in resource stocks on strong commodity prices.
The benchmark S&P/ASX 200 closed down 33.0 points or 0.6 percent at 5,668.4 and the broader All Ordinaries index dropped 20.1 points or 0.4 percent to 5,757.8.
In New York, share prices closed sharply lower as worries about oil and food prices combined with concerns that the Federal Reserve might be finished with its easing cycle to unnerve investors. Downside pressure was compounded by hedge fund short-selling.
The Dow Jones Industrial Average ended down 206.48 points or 1.6 percent at 12,814.35.
Economic data was mixed. U.S. consumer credit rose by $15.29 billion in March -- the biggest rise since November (Frankfurt: A0S9N7 - news) in a sign that tight consumer credit markets could be starting to ease.
But U.S. pending home sales fell 1 percent in March to a reading of 83, which was the lowest reading since the index began in 2001.
News Corp closed down 1.3 percent ahead of the global media giant reporting its earnings more than tripled in the latest quarter to $2.69 billion on a one-time gain of $1.7 billion from a stock swap deal with Liberty Media Corp.
Share prices in London closed firmer but off highs as Wall Street made weak progress after disappointing U.S. pending home sales data. Pub operators were a positive feature in London as the sector rallied after recent falls.
The FTSE 100 index closed up 45.8 points or 0.7 percent at 6,261.0.
BHP Billiton (LSE: BLT.L - news) eased 0.4 percent despite the oil price hitting fresh record highs above $123 a barrel as the group talked up the prospects of its petroleum division at a briefing in London, in a move designed to convince Rio Tinto (Frankfurt: 855018 - news) shareholders of the benefits of BHP's merger proposal.
Rio Tinto gained 0.1 percent.
Crude oil prices lifted to record levels for a third straight day on supply worries, despite an increase in crude oil inventories. The June Nymex crude oil quote rose $1.69 or 1.4 percent to $123.53 before hitting $123.89 in after hours trade.
Base metal prices fell on the London Metal Exchange on Wednesday in line with the stronger U.S. dollar. Zinc fell 1.3 percent, lead dropped 5.3 percent and copper lost 1.0 percent.
Gold prices were also weaker. The most-active June Comex gold contract fell $6.50 or 0.7 percent to $871.20 and ounce.
Ahead in Australia, April labour force data will be released. The market consensus forecast is for the unemployment rate to remain at a 33-year low of 4.1 percent, thanks to strong job demand in the booming resources sector.
($1 = A$1.06)
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