daytrading june 21 pre-market

Morning traders. Hold on to those tin hats.

Market wrap:

Wall Street's worst night in a year and a half and a "bloodbath" on commodity markets have Australian shares staring at a second day of severe losses.

The September SPI 200 futures contract, now the most active, skidded 81 points or 1.7% to 4629 as the timetable for ending central bank stimulus in the US and a growing lending crisis in China jolted world markets.

The S&P 500 plunged 41 points or 2.51% to its largest decline since November 2011. The Dow's loss of 354 points or 2.34% was the heaviest since President Obama secured a second term last year and its eighth straight triple-digit move. The Nasdaq fell 2.27%. Mainland European markets all closed more than 3% in the red.

A horror night on commodity markets saw gold and silver crash to two-and-a-half-year lows, oil suffer its biggest fall in seven months and several industrial metals hit multi-month/year lows.

The selling followed confirmation on Wednesday night that the US Federal Reserve expects to start to "taper" its bond buying program in September and wind up QE3 by the middle of next year. Earlier this month, only about a quarter of economists polled by Bloomberg expected tapering to start so soon.

"I kind of think of the US economy as this person who was lost at sea with a life vest provided by Ben Bernanke," a portfolio manager at Eaton Vance in the US told Reuters. "And now all of a sudden Bernanke is talking about poking a hole in the life vest, perhaps before the stranded person is able to swim to shore, and we are seeing essentially every market in the world react negatively to this."

Yield stocks again bore the brunt of the selling as investors rotated from equities into government bonds and the US dollar. Consumer staples was the worst of the S&P 500's 10 industry groups, with materials a close second. BHP dived 4.54% in US trad and Rio Tinto lost 3.99%.

Mostly of the economic data released overnight was positive, but traders appeared to equate positive data with an increased likelihood of an end to stimulus. Sales of existing homes hit their strongest in three-and-a-half years and factory activity in the greater Philadelphia region was the best in more than two years. Weekly jobless claims deteriorated by 18,000 to a seasonally adjusted 354,000.

Also pressuring markets was an emerging cash crisis in China, where a shadow banking system has developed because the central bank is trying to cool the property market. Rating agency Fitch warned yesterday that liquidity problems are threatening the economy as lending rates reach record levels. Read more here. Weak manufacturing figures released yesterday suggested the crisis was starting to impact business activity and helped push the Australian dollar to a recent level of 92.01 US cents.

Europe's benchmark share index gave up its gains for the year as European markets played catch-up with the Fed news. The Stoxx Europe 600 index dropped 2.97% as Germany's DAX lost 3.28%, France's CAC 3.66% and Britain's FTSE 2.97%.

Gold and silver recorded their lowest closes since September 2010 during what one analyst described as a "bloodbath". Gold for August delivery was lately down $89.70 or 6.5% at US$1,280.40 an ounce. July silver cratered $2.01 or 9.3% to US$19.62 an ounce.

Oil suffered its largest decline since November. West Texas Intermediate crude for July delivery was recently off $3.30 or 3.4% at US$94.94 a barrel.

Heavy selling in industrial metals saw several metals at recent lows: copper - the lowest in 20 months; nickel - four years; aluminium - three and a half years; and tin - nine and a half months. US copper for July delivery was recently down 2.9% or nine cents at US$3.05 a pound. In London, copper lost 2.7%, aluminium 1.8%, lead 2.3%, nickel 3.5%, tin 3% and zinc 1.7%.

Iron ore was a rare bright spot, inching higher for a sixth day. Spot iron ore for import to China gained 60 US cents at US$120.60 per dry metric tonne.

TRADING THEMES TODAY

BATTEN THE HATCHES: Not a lot to add about the night's events - the headline numbers tell the story. If you held anything overnight in the hope of a bounce (I have my hand up), well you're probably screwed. Survival and cash preservation is the name of the game right now. The dislocations on commodity markets are going to drive some resource stocks to places no one has anticipated because many projects will simply cease to be economic if these falls continue. This is an important time to check the fundamental economics of any resource stock in which you are invested. From a trading perspective, it wouldn't surprise to see a little short-covering in select shares if the opening levels are absurd, but you'll need a strong constitution to risk buying in these conditions. The QE taper story has a long way to run.

ECONOMIC NEWS: No significant domestic news scheduled today. European finance ministers meet tonight. The US has a rare night ahead without any economic news to digest.

Good luck to all.