Australian equities are set to break two straight days of stellar gains to end the end on a sour note after comments from the US central bank sparked renewed worries about a global contagion from China's slowing economy.
While the Federal US Reserve decision to keep interest rates at a record low of 0.25% was expected, markets were surprised by the dovish statement highlighting the central bankers concern about volatile markets.
The chance of another interest rate cut in Australia has probably increased in light of last night's development. The Reserve Bank of Australia may be independent but if the Fed is that worried about the spillover, our central bankers will definitely be paying attention.
This caused US stocks to see-saw throughout the day before the Dow Jones Industrial Average finished 0.4% in the red.
This is enough to give traders here an excuse to take profit following the 2.6% gains over the previous two days with the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) tipped to open 0.7% lower.
Energy stocks like Woodside Petroleum Limited (ASX: WPL) and Santos Ltd (ASX: STO) are likely to give ground as the West Texas Intermediate oil price slipped 0.5% to $US46.90 a barrel and comments from Goldman Sachs that the glut of crude will keep prices low for the next 15 years will weigh on sentiment.
Investors will also be mulling the takeover saga for Oil Search Limited (ASX: OSH) following a report in the Australian Financial Review that bidder Woodside Petroleum is considering raising debt to help fund the acquisition.
However, iron ore managed to inch up 0.3% to $US57.37 a tonne while copper managed to hold relatively steady at $US2.4520 a pound.
But this may not be enough to keep Rio Tinto Limited (ASX: RIO) in investors' good books as its US-traded stock slipped 1.2% in overnight trade and UBS is predicting that the price for the steelmaking commodity will average $US50 a tonne in the December quarter.
In earnings news, retailing group Premier Investments Limited (ASX: PMV) will be in the spotlight as it is expected to announce its full-year results, while investors will be scrutinising Sydney Airport Holdings Ltd's (ASX: SYD) latest passenger traffic numbers to see if its premium is justified after the stock surged 32% over the past year.
Meanwhile, engineering consultants Cardno Limited (ASX: CCD) has cancelled a shareholder briefing that was to be held next Thursday after it told shareholders to reject Crescent Capital's proportional takeover bid as it accused the bidder of trying to gain control of Cardno without having to buy all its shares.
The rejection would come as little surprise as it was foreshadowed in my previous article.
Finally, today is the last day you can buy diversified investment holding company Seven Group Holdings Ltd (ASX: SVW) for its 20 cents a share fully franked dividend as the stock trades ex-div on Monday.
