daytrades feb 22 pre-market

Morning traders.

Market wrap: A weak start to trade is likely after spreading unrest in the Middle Rest sparked sharp falls in European stocks and US futures.

With US markets closed overnight for the Presidents Day public holiday, the local March SPI futures contract last traded at midnight 3 points or 0.06% higher at 4898. However, key European markets have closed weaker since then, with losses for BHP and Rio Tinto in UK trade. Oil surged more than 6% and precious metals rallied as investors rotated from "risk assets" into so-called "safe havens".

US futures are flagging a negative return to trade tonight after more clashes in Libya, which has the largest proven oil reserves in Africa. S&P futures were recently down 12.5 points or 0.93%.

European stocks slumped as a surging oil price increased inflationary concerns, with negative implications for global economic growth. Italy's FTSE MIB index was hit hardest, falling 3.6% due to the country's close connections with Libya. Britain's FTSE dropped 1.12%, Germany's DAX 1.41% and France's CAC 1.44%.
Rio Tinto fell another 1.9% in UK trade and BHP retreated 0.5%.

"The political unrest in the Middle East appears to be getting worse and spreading to other countries," a fund manager at Daiwa Asset Management in London told Bloomberg. "It could push up the oil price. It would obviously have a negative impact for inflation, and could cause economic growth to be weaker than expected."

Oil prices rocketed overnight on supply fears as pro-democracy supporters seized control of Libya's second largest city. Libya is a member of OPEC and a major oil producer. Oil for March delivery, the current contract due to expire today, was recently up $5.22 or 6.1% at $91.42 a barrel. Oil for April delivery added $5.69 or 6.3% to $95.40 a barrel.

Precious metals rallied as investors sought hedges against oil-fuelled inflation. Gold improved for a sixth straight day, breaking $1,400 for the first time since early January. Gold for April delivery was recently up $18 or 1.3% at $1,407 an ounce. March silver charged to a new 31-year high, up $1.42 or 4.4% at $33.72 an ounce.

Industrial metals were mixed, with copper losing ground but nickel setting a 34-month high and aluminium a 29-month high. In London, copper fell 0.25% and aluminium rallied 0.3%, lead 0.2%, nickel 0.9%, tin 0.15% and zinc 1.65%.

TRADING THEMES TODAY

CORRECTION GATHERS PACE? A very interesting session ahead, with overseas markets finally paying heed to the Middle East situation overnight. Share index indicators have been shouting "overbought" for some weeks, so it's no surprise to see a pullback. That said, I'll be surprised if our market falls too far today with US trade due to resume tonight. Wall Street is notoriously insular and there are no guarantees that it will respond as US futures currently suggest. After all, every recent dip has been a buying opportunity. Oil and precious metals are the obvious winners from overnight events and local producers should see some benefit this morning.

OIL: Bang. It took a few days for oil traders to grasp the full implications of turmoil in Africa's largest oil reserves but the market certainly responded overnight. Brent crude topped $106 a barrel and oilers with exposure to Libya were sold off in Europe. With the crisis in the Middle East now affecting significant oil producers, the outlook for local oilers is improving fast.

ECONOMIC NEWS: There is nothing significant scheduled to be released here today. The US re-opens tonight with consumer confidence and regional manufacturing the main items of interest.

Good luck to all.