Morning traders. Thanks Trees and after-market regulars. Market...

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    Morning traders. Thanks Trees and after-market regulars.

    Market wrap:

    The share market's four-session winning run is under threat after improved US economic data helped fuel a surge in the greenback and sharp declines in US equities and key commodities.

    The June SPI 200 futures contract retreated 30 points or 0.5% to 5748 as US stocks returned from the Memorial Day long weekend with their biggest fall in three weeks.

    All three major US equity indices fell more than 1% as traders concluded that a slew of economic data released overnight strengthened the case for the Federal Reserve to raise rates this year. The S&P 500 dived 22 points or 1.03%, the Dow 190 points or 1.04% and the Nasdaq 57 points or 1.11%.

    “The looming Fed change is always out there,” Richard Sichel, chief investment officer at Philadelphia Trust in the US, told Bloomberg. “You have a couple of items that could be considered good, things are looking better, the dollar is strong, basically it’s working against the market at the moment.”

    A strong US dollar is a headwind for US exporters and for dollar-denominated commodities. Overnight, the greenback hit an eight-year high against the yen and strengthened against a falling euro following a weekend of negative developments in Greece and Spain. The US dollar index, which ranks the greenback against a basket of major currencies, was lately up 0.93% at a four-week high. The Australian dollar was down almost a cent at 77.41 US cents.

    While the night's economic data was mixed, traders found enough positives to conclude that the case for a rate rise before the end of the year is building. Business investment picked up in April, with core orders for capital goods increasing by 1%. The rise was the second in a row following a run of five straight declines. Sales of new homes increased 6.8%, more than economists expected, while a separate report showed that house prices improved by 0.9% during March for an annual gain of 5%. Consumer confidence also came in ahead of expectations.   

    A measure of services activity declined for a third straight month during May but at 56.4 (previously 57.4) remained well above the 50-point level that indicates expansion. A measure of manufacturing activity in the deep south contracted at a faster rate this month due to reduced activity in the energy industry.

    Federal Reserve Chair Janet Yellen surprised some investors with an unequivocal statement on Friday that she expects to raise the Fed's key rate this year. Federal Reserve Bank of Cleveland President Loretta Mester added her support in an interview on Monday. Overnight, Fed vice-chairman Stanley Fischer said the market has been well briefed on the factors dictating the timing of the first rate rise and should not be surprised when it comes.

    Resource stocks copped the worst of the overnight selling as the strengthening greenback pulled most commodities lower. BHP fell 1.5% and Rio Tinto 1.35% in US trade, even after spot iron ore for import to China yesterday rallied $1 to US$62.10 a dry ton.

    Gold stocks tumbled 3.71% to a seven-week low as gold slipped to its weakest point in two weeks. Gold for June delivery settled $17.10 or 1.4% in the red at US$1,186.90 an ounce.

    “The consumer confidence and US home sales data were a real slap in the face if you are trading gold and hoping for the upside,” Naeem Aslam, chief market analyst at AvaTrade, told MarketWatch. “Make no mistake — it is the strength in the dollar, which is the main denominator and this is impacting the price for both gold and oil.”

    Energy was the worst of the ten major US industry groups, losing 1.58% after crude slid almost 3%. West Texas Intermediate crude oil for July delivery settled $1.69 or 2.8% lower at US$58.03 a barrel.

    Copper touched a three-week low in London. At the LME, copper lost 0.9%, aluminium 0.9%, lead 0.6%, nickel 0.3% and tin 2.1%. Zinc closed unchanged. US copper for July delivery was recently down 1.3% at US$2.78 a pound.

    European stocks retreated as markets in Germany and the UK played catch-up with developments in Greece and Spain after Monday holidays. The Stoxx Europe 600 slid 0.73%, Germany's DAX 1.61%, France's CAC 0.66% and Britain's FTSE 1.18%. Spain’s IBEX 35 fell 0.72%. Greece’s Athex Composite bounced 1.05%.

    TRADING THEMES TODAY

    PULLBACK: The XJO put in a 'higher high' on the charts yesterday - a promising sign that a month-long retrace may have run its course - but faces headwinds this morning after Wall Street reacted pretty as much as US equity futures had been suggesting since the weekend. Trading on the S&P 500 narrowed into a tight band last week, and breakouts in those sort of set-ups tend to be explosive. A retrace from record highs looked likeliest and events in Europe duly handed the bears an excuse to push the index lower. Back home, hopefully we'll see a little volatility in the mid-caps today, because volumes/volatility at the speculative end of the market seem to have tapered this week. I've had two very dull, slow days. Let's hope it's temporary.

    ECONOMIC NEWS: A leading index of economic indicators is due at 10.30am EST. RBA Deputy Governor Phil Lowe is due to address at Sydney summit at 10.45am. Quarterly construction figures are due at 11.3oam. The rush of data dries up, with no major releases scheduled in the US tonight.

    Good luck to all.
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