The domestic market may tread water ahead of the Federal Reserve's policy review and heavyweight tech company earnings after weak US consumer confidence and disappointing earnings kept Wall Street on the back foot.
The US Conference Board consumer confidence index fell to 92.6 from a revised 98.3 in June. Economists polled by MarketWatch had expected a reading of 96.0. The expectations index – which measures the short-term outlook – fell to 91.5 from 106.1 in June.
"Consumers have grown less optimistic about the short-term outlook for the economy and labour market and remain subdued about their financial prospects," said Lynn Franco, Conference Board senior director of economic indicators.
"Such uncertainty about the short-term future does not bode well for the recovery, nor for consumer spending."
On the earnings front, 3M fell after demand for face masks didn't offset falls in other parts of the business and McDonald's also lost ground after a drop in global same-store sales because of Covid-19.
Wall Street was weaker, with the Dow Jones Industrial Average down 0.8 per cent at 8am in Wellington, the S&P 500 down 0.6 per cent and the Nasdaq down 1.3 per cent.
Big tech reports due
Key for direction will be results from major tech stocks Apple, Amazon, Facebook and Alphabet - the parent of Google - all due to report this week.
Meanwhile, the US Federal Reserve said it would extend several lending facilities through year end, a sign the pandemic's economic impact has been longer than expected.
"The three-month extension will facilitate planning by potential facility participants and provide certainty that the facilities will continue to be available to help the economy recover from the covid-19 pandemic," the bank said.
It is widely expected to reiterate its accommodative stance when the Federal Open Market Committee wraps up its two-day policy meeting early tomorrow New Zealand time.
"Global equities movements were mixed with the market looking to the US Federal Reserve for signals. While no policy changes are expected, it is difficult to see the Fed being anything other than very dovish," said ANZ Bank agriculture economist Susan Kilsby and strategist David Croy.
The Fed's extension, however, doesn't cover the expanded unemployment benefit, which is due to expire.
A new US$1 trillion aid package is being negotiated but markets are jittery because it looks like it will face a lengthy negotiation process before being passed, said Stuart Ive, treasury manager at OMF.
Democrats have been pushing for their own US$3.5 trillion package and immediately opposed the White House proposal.
"What is likely to follow is a lengthy negotiation period which doesn't bode well as a key lifeline to the US economy expires, the expanded unemployment benefit," said Ive.
With little data on the domestic front, investors may look to Australia for direction where Rio Tinto is due to report today and second-quarter inflation is due. JP Morgan is expecting a 1.7 per cent quarterly deflation, resulting in annual deflation of 0.2 per cent.
The NZ dollar was also treading water, trading at 66.56 US cents at 8am in Wellington versus 66.58 cents at 5pm yesterday.
"Daily volatility aside, the US dollar remains unloved and with a very dovish tone likely to emerge from tomorrow's FOMC meeting, it's difficult to see that changing," ANZ Bank said.
"A lack of success in containing the virus and fiscal disagreement isn't helping the US dollar; meanwhile New Zealand is open for business, albeit with deep scars."