Daytrading May 5 pre-market

Morning traders. Thanks Trees and after-market regulars.

Market wrap:

The Australian share market has positive leads after US stocks rallied towards record levels and iron ore and Shanghai copper jumped on expectations of further monetary easing in China.

The June SPI 200 futures contract ended the night session 30 points or 0.5% ahead at 5836, suggesting solid early gains before this afternoon's Reserve Bank cash rate decision.

The S&P 500 used Friday's momentum to push briefly above its all-time closing high before paring its final gain to six points or 0.27%. Friday's 1.08% rally was the index's strongest in a month. The Dow added 46 points or 0.25% overnight and the Nasdaq 12 points or 0.23%.

The advance came as the last busy week of the first-quarter corporate earnings season got underway with analysts pleasantly surprised that companies are beating lowered profit and revenue expectations. This season now looks like producing an average decline in profits of 0.4%, compared to the 4.3% drop that analysts anticipated in the middle of last month in the face of headwinds from a rising US dollar and falling commodity prces. Seventy-three per cent of S&P 500 companies have topped profit expectations and 49% have been ahead on sales, according to Bloomberg.

"The worst seems to be over... and the market seems to be taking mediocre news in stride," Maris Ogg, president at Tower Bridge Advisors in the US, told CNBC. "My guess would be maybe the impact of the dollar and lower energy prices is not as bad as people thought."

Orders for goods produced in US factories jumped 2.1% in March, the largest improvement since last July. The medium-term trend has been negative as a rising dollar undermined overseas demand.

Wall Street also had positive leads from Europe, where mainland markets played catch-up after a public holiday on Friday and news that manufacturing activity in the euro-zone was stronger than expected last month. The Stoxx Europe 600 put on 0.55%. Germany's DAX added 1.44% and France's CAC 0.7%. Britain's FTSE was closed for a holiday.

Financials was the best of the US sectors. Materials turned lower after leading on Friday. BHP gained 0.46% in US trade, while Rio Tinto slid 0.2%.

Spot iron ore for import to China bounced $1.60 to US$57.80 a dry ton after weak Chinese factory data yesterday raised expectations that the central bank will introduce further measures to stimulate the economy. Shanghai copper surged 3.7% and Shanghai nickel 3.4%. The London Metal Exchange was closed overnight for a bank holiday. London copper last week had its best week since December 2011, rising 6%. US copper for May delivery was recently down 0.55% at US$2.92 a pound.

"I think the market will probably take [weak Chinese factory data] positively in that it will be a further reason to increase liquidity and also raises the spectre of further RRR [bank reserve ratio requirements] cuts or other supportive measures," ANZ analyst Daniel Hynes told Reuters.

Gold stocks closed little changed as the previous metal bounced from a six-week low after an official of the Federal Reserve called for a stay on rates until next year. The NYSE Arca Gold Bugs index edged up 0.06%. Gold for June delivery settled $12.30 or 1.1% higher at US$1,186.80 an ounce.

“Recent US economic data has been worse than expected and suggests a moderating growth rate,” Mark O’Byrne, director at GoldCore in Ireland, told MarketWatch. “This has led to increased doubt as to when the Fed will finally lift interest rates from zero, which is supporting gold.”

Oil eased below US$59 a barrel as energy traders took a bearish view of yesterday's Chinese manufacturing report. West Texas Intermediate crude oil for June delivery settled at US$58.93 a barrel, 22 cents, or 0.4% lower.
   
The dollar was this morning buying 78.4 US cents.

TRADING THEMES TODAY

RBA TO DETERMINE OUTCOME: Wall Street played nice overnight, setting up a positive open here this morning. However, the close will be dictated by the Reserve Bank. Twenty-three out of 27 economists surveyed by Bloomberg expect the Reserve Bank to cut the cash rate by 25 basis points to a record low of 2% at 2.30pm EST. So a cut is highly likely but by no means a lock following unexpectedly strong jobs, job ads and building data over the last few weeks. There is potential for a sharp move in either direction. The banks copped a heavy knock yesterday after a tepid profit update from Westpac - interesting to see how much ground, if any, they make up today. Trading opportunities appeared fewer than usual yesterday - hope that's not the start of a trend.

ECONOMIC NEWS: The AIG Services Index is due at 9.30am EST and trade balance data at 11.30am, but the big event today is the 2.30pm cash rate decision and policy statement from the Reserve Bank. Trade figures are also a highlight tonight in the US, along with rival services gauges and the monthly IBD/TIPP consumer confidence report.

Good luck to all.