Locally, forecasts for Wednesday's gross domestic product figures were trimmed on Tuesday after a fall in export volumes resulted in a larger than expected impact on economic growth. Australia's surplus on goods and services, in seasonally adjusted volume terms, slumped 85 per cent to $543 million in the three months to March, which will detract 0.7 percentage points from GDP, the Australian Bureau of Statistics said.

NAB economists said the impact of lower exports increased the risk of a contraction in GDP, along with weaker than expected government spending. A growth rate of 0.1 per cent in the March quarter would take annual growth to just 1.4 per cent.

Today's Agenda

Local data: First quarter GDP figures

Overseas data: OECD economic outlook, Chinese May foreign reserves

Market Highlights

SPI futures up 15 points, or 0.2 per cent

AUD up 0.33 to US75.08c.


On Wall St, Dow down 0.2 per cent, S & P500 down 0.3 per cent, Nasdaq down 0.3 per cent

In New York, BHP up 0.7 per cent, Rio up 1.2 per cent.

In Europe, Stoxx 50 down 0.8 per cent

Spot gold up 1 per cent to $1292.91.

Brent crude up 1.5 per cent to $50.21

Iron ore up 0.2 per cent to $US56.03

Dalian iron ore to down 1% to 427.5 yuan

Steam coal +1.4% to $76.95, Met. coal -5.0% to $143.00.


LME copper down 1.5 per cent to $US1,903.00

10-year bond yield: US 2.14%, Germany 0.25%, Australia 2.37%

From Today's Financial Review

Market darlings and top managers still earn a premium: Chanticleer. When a keen young equity analyst met fund manager Peter Lynch at the Boston headquarters of Fidelity more than a decade ago the legendary fundie imparted three pieces of sage advice that apply in spades in 2017.

Perpetual wants Soul Patts, Brickworks cross-shareholding broken up. Fund manager Perpetual wants the cross-shareholding that exists between Washington H. Soul Pattinson and Brickworks to be forcibly dismantled as part of its oppression action against both companies before the Federal Court.

Survey skewers BHP Billiton as activists eye board changes. Activist campaigns launched by two hedge funds against BHP Billiton have received a boost after a survey suggested that almost 50 per cent of the miner's shareholders believe "major changes" to the company's structure and operations are warranted.

United States

U.S. stocks edged lower on Tuesday as traders shied away from risk ahead of major political and economic headlines expected on Thursday.


Britain's general election as it maps its exit from the European Union, the European Central Bank's policy meeting and former FBI Director James Comey's testimony before a Senate panel could all affect investor sentiment.

Mr Comey was investigating whether Donald Trump's presidential campaign and Russia colluded to sway the 2016 U.S. election when he was fired by Trump in May. His testimony could dampen already flagging momentum for the U.S. President's agenda of rolling back regulations and overhauling the tax code.

British Prime Minister Theresa May looks on course to increase her parliamentary majority, an opinion poll showed on Tuesday, shortly after another survey suggested the race with the opposition Labour Party was neck and neck.

Investors will also watch out for the European Central Bank's meeting, where policymakers are expected to take a more benign view of the economy.

"We have a lot of stuff on Thursday. If you're looking for days where we can see some long-awaited volatility, I'd say that's probably going to be Thursday and Friday," said Anthony Conroy, president at Abel Noser in New York.

"You got to position yourself to whatever could happen Thursday so you take a little bit off the table."

The Dow Jones Industrial Average fell 24 points, or 0.11 percent, to 21,160.04, the S & P 500 lost 2.53 points, or 0.10 percent, to 2,433.57 and the Nasdaq Composite dropped 0.02 points to 6,295.67.

Safe-havens were bid up as as traders sold out of stocks. U.S. 10-year Treasury yields touched a session low of 2.129 percent, their lowest level since the days following the November U.S. Presidential election.


The largest weight on the S & P 500 was Walmart, down 1.7 percent at $78.93 after Amazon said it would offer its Prime subscription service at a discount to U.S. customers on government aid, taking aim at Walmart's key customer base. Amazon shares fell 0.1 percent.

Macy's dropped 6.9 percent to $22.21 after it warned its margins could shrink further.

Europe

European shares extended their fall on Tuesday, with healthcare stocks particularly weak, as a diplomatic spat in the Middle East weakened appetite for risky assets across the board.

The pan-European STOXX 600 benchmark dropped 0.7 percent, falling for a second session, while euro zone stocks and blue-chips followed suit.

The greatest downward pull came from healthcare stocks. Swiss heavyweight drugmaker Roche fell 5.5 percent, its biggest one-day drop in 30 months, after investors were disappointed by findings in its Aphinity study for a key breast cancer treatment. Analysts at Liberum said they believed the study, which showed lower disease-free survival rates than expected with Roche's treatment, could make clinical acceptance more difficult.

A rift in the Middle East between Qatar and neighbours Saudi Arabia, United Arab Emirates, Egypt, and Bahrain caused oil to fall further below $50 a barrel, but after initial losses energy stocks recovered to end up 0.15 percent.

In an early sign of Qatar's isolation affecting companies operating there, Norsk Hydro fell as much as 2.3 percent after it said exports from the Qatalum aluminium plant in Qatar, a joint venture with Qatar Petroleum, were blocked by the dispute. The company said it was seeking other routes. Its shares pared most of the losses to end down 0.1 percent.


Utilities were the best performers, up 0.6 percent, as investors fled to safety.

Sell-side enthusiasm on European equities seemed to moderate as Morgan Stanley said positive catalysts for the region were beginning to fade.

"Europe has had a very strong run, and tactically it makes sense to look for a more moderate period for a while," said Morgan Stanley equity strategist Matt Garman.

A stronger euro, which weighs on foreign-earning European companies, diminishes the case for European equities, he said.

"Rarely have the currency and positive equity market performance been correlated, and when they have, it has been politics related," Garman added, saying relief after the French elections had been felt across asset classes.

The euro has gained 5.6 percent against the dollar over the past two months, and Morgan Stanley strategists expect it to rise further.

Spain's troubled Banco Popular fell 6.2 percent to hit another record low after Barclays cut its price target on the stock.

The bank's shares have lost more than half their value over fears it could be wound down by regulators if it fails to find a buyer.


Asia

Asian shares fell, as equities retreated from recent record highs amid a dearth of news ahead of the U.K. general election and testimony from the former head of the FBI later in the week.

The MSCI Asia Pacific Index dropped 0.2 percent to 155.08 as of 4:42 p.m. in Hong Kong, led by health care and energy stocks. Hong Kong shares touched 26,000 for the first time since July 2015 before closing just short of the level. Eight out of 10 of the Hang Seng Index's top performers were developers, with New World Development climbing 7.4 percent.

Japanese shares extended declines for a second day as the dollar fell to a six-week low against the yen.

"Asian markets could find little to draw inspiration from," said Jingyi Pan, a Singapore-based analyst at IG Asia Pte Ltd, "The holding pattern for markets could certainly retain slightly longer towards the action-packed Thursday."

Currencies

"The Australian dollar hit a wall of confusion overnight," wrote NAB economist Tapas Strickland. "It initially fell 0.4% on the weak net exports and government spending figures yesterday, which also gave fuel to the notion of a weak GDP number today, but then fully reversed the moves on a more neutral than expected RBA Statement."

The dollar is currently up, having strengthened overnight to US75.05c. Strickland said the GDP figures were key to it sustaining those levels.


The US dollar fell while the yen rose as investors fled to safe haven assets.

The yen was up 1 per cent to 109.409/USD, its strongest level since April 21 on a closing basis. Meanwhile, the dollar index fell 0.3 percent and was trading at the lowest since October.

The euro strengthened 0.2 percent to $US1.1277 and the British pound was unchanged at $US1.2904

South Africa's rand weakened 0.9 percent after a report showed the economy contracted for a second successive quarter in the first three months of the year.

Commodities

Gold rose to the highest in seven months on Tuesday on a slump in the dollar to a seven-month low and safe-haven demand driven by a rift in the Middle East, an upcoming European Central Bank meeting and the British election. Investors were also drawn to gold, seen as a safe place to park assets, by uncertainty around the testimony to a Senate committee by former FBI Director James Comey. A weaker dollar makes gold cheaper for holders of other currencies, while lower yields reduce the opportunity cost of holding non-yielding bullion. Weak economic data from the United States has reduced expectations of rapid U.S. interest rate rises this year, but the Federal Reserve is expected to hike rates at its June policy meeting next week. Interest rate rises push bond yields higher and tend to strengthen the dollar. Spot gold was up 1.1 percent at $1,294.34 an ounce by 2:25 p.m. EDT (1825 GMT), having earlier touched its highest since Nov. 9 at $1,295.97. U.S. gold futures rose 1.2 percent to settle at $1,297.50.

"Gold surged to highs since Election Day as geopolitical concerns with the UK election and Comey testimony both due Thursday as well as fresh tensions on the Arabian peninsula triggered strong buying in spot as well as options," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York. European Central Bank policymakers will take a more benign view of the economy on Thursday and will even discuss dropping some of their pledges to ramp up stimulus if needed, sources told Reuters. A decision by major gold consumer India to levy a sales tax on gold at 3 percent rather than the expected 5 percent was supporting bullion prices by spurring demand for physical metal, analysts said. From a technical standpoint, gold may be poised for further gains, analysts said. "The long-term bearish trend line that had been in place since the year 2011 has broken down and this could pave the way for significant long-term gains," said Fawad Razaqzada, market analyst at Forex.com. "A decisive break above the last swing high at $1,295 is what the bulls want to see now."

Meanwhile, oil rose to trade near $48 a barrel as U.S. crude stockpiles are seen falling for a ninth week, ahead of the release of industry-funded data on inventories.


Futures rose 1.1 percent in New York after earlier declining as much as 1 percent. A Bloomberg survey found that U.S. crude inventories probably dropped last week, creating impetus for higher prices. Contango, the market structure where the near-term contract trades at a discount to those for expiration later, has tightened between the July and August West Texas Intermediate crude contracts, leading to bullish sentiment.

Australian sharemarket

Investors endured a torrid day of trading on the ASX on Tuesday, which had its second-worst session of the year amid almost indiscriminate selling.

The morning's trade started badly and then went mostly only one way: down. The top 200 index ended off 87 points of 1.5 per cent at 5668. That's its lowest in almost four months and pretty much where we started the year. The index also ended the day at its lowest point.

Only 19 of the top 200 stocks ended the session higher, and all sectors fell. Utilities lost a hefty 3.7 per cent as the mini-yield trade of recent months that has pushed some of these names to new records shows signs of fraying. A broker downgrade of Spark Infrastructure and APA Group didn't help, with the latter plunging 4.5 per cent.

There was no lack of news on the economic front, as economists busily penciled in new, lower predictions for tomorrow's GDP growth figure following a disappointing current account reading. Some economists now expect the economy to have shrunk over the first three months of the year.

The RBA was the other big news, even though it kept rates steady at 1.5 per cent and maintained its stubborn neutral stance.

The Aussie dollar dipped on the balance of payments data, but then recovered to end the day slightly up.


Among the winners on the ASX were gold miners, with the All Ords gold miners index climbing 0.8 per cent. Among individual names, Retail Food Group was the day's best as it bounced from a 11 per cent shellacking yesterday (see posts at 1:12 and 10:06 for more).

The big four banks all ended the session down around 1.5 per cent, as did Woolies and Wesfarmers. Macquarie lost 2.3 per cent and CSL 1.6 per cent. Miners all fell, as did energy names as oil continued to drop.

​Street Talk

Suitor set to stump up for Vocus Group: sources

VGI Partners readies investors for new fund IPO

Rural Funds Group poised to raise $80 million

with Reuters, Bloomberg, AAP

Comments? Questions? Let us know what you think of Before the Bell. You can reach Timothy Moore at timothy.moore@fairfaxmedia.com.au