Daytrading August 21 pre-market

Morning traders. Thanks Trees and after-market regulars.

Market wrap:

Australian shares are targeting a new six-year high after Wall Street overcame a brief interest rate panic before closing near record levels.

The September SPI 200 futures contract rallied 19 points or almost 0.4% to 5625 as BHP and Rio Tinto pared Tuesday's losses in US trade and oil and base metals advanced strongly.  

The S&P 500 briefly turned negative after the minutes from last month's Federal Reserve policy meeting implied interest rates could rise early next year if economic data continues to improve. However, the index quickly overcame the wobble, closing five points or 0.27% higher and just two points below a record close. The Dow gained 59 points or 0.35% and the Nasdaq finished two points or 0.03% in the red.

“The Fed said if data points move toward their objectives faster than expected they’ll raise rates sooner than expected,” Todd Salamone, senior vice president of research at Schaeffer’s Investment Research in the US, told Bloomberg. “That’s still a big ‘if’.”

The minutes showed considerable divisions within the Fed over the strength of improvement in US labour markets, with a minority arguing that rising inflation and jobs growth mean the central bank should prepare the market for interest rate rises. However, the consensus view was that more progress was required before the Fed considered tightening. Read more here. Fed Chair Janet Yellen is due to address the annual Jackson Hole symposium tomorrow night, ensuring the Fed will continue to cast a long shadow over equity markets.

Risk appetite was subdued, with the Russell 2000 index of small caps losing 0.43% and the Nasdaq Biotechnology index 0.28%. The VIX continued to retreat, falling 3.5% towards levels seen before this month's brief stock market retrace.

The market opened in the red as European stocks retreated following a surprise hint that the Bank of England may raise interest rates sooner than most analysts expect. The minutes from the last BoE policy meeting showed two members voted for an immediate rate hike to combat rising inflation. The Stoxx Europe 600 index slipped 0.06% as Germany's DAX lost 0.21%, France's CAC 0.32% and Britain's FTSE 0.36%.

Australia's largest miners staged a partial recovery in US trade from sharp declines on Tuesday night following BHP's disappointing earnings update. BHP rebounded 1.43% and Rio Tinto 0.97%. Spot iron ore for import to China yesterday eased 70 cents to US$92.30 a dry tonne.

Oil rallied on news that US inventories declined last week. The US Energy Information Administration said inventories declined by 4.5 million barrels. West Texas Intermediate crude oil for delivery in September advanced $1.59 or 1.7% to settle at US$96.07 a barrel and was lately trading at US$96.40.

Base metals saw strong gains as this week's US housing data encouraged optimism that increased activity there will offset concerns about the outlook for Chinese demand. Aluminium hit its highest level in a year and a half. In London, copper put on 2.1%, nickel 2.2%, aluminium 1.8%, lead 1.5%, tin 0.1% and zinc 2.4%. US copper for September delivery was recently up eight cents or 2.7% at US$3.17 a pound.

Gold extended this month's losses as the dovish tone of the Fed minutes offered few reasons to buy havens. Gold for December delivery settled at US$1,295.20 an ounce ahead of the release of the minutes and was lately down $4.30 or 0.3% at US$1,292.40.
A rally in the US dollar pushed the Australian unit back below 93 US cents, lately buying 92.92 US cents.

TRADING THEMES TODAY

WATCHING EARNINGS AND CHINA: The outlook for the day is promising, with the market gaining enough momentum from this earnings season to have a crack at a new six-year high today. Wall Street had a brief panic attack about rate rises overnight, but soon convinced itself that nothing really changed within the Fed last month and the punch bowl will stay on the table a little longer. Today's heavy diet of domestic profit reports includes: AIO, AMP, ASX, CAB, CFX, FMG, IIN, IRE, MGR, MOC, ORG, SUL, SYD, TPI, TTS, TWE (sources: Fairfax, BRR). The other potential market-mover today is the 11.45am EST release of this month's preliminary Chinese factory update, which is expected to show a mild moderation in growth to 51.5 from last month's final reading of 51.7, according to Forex Factory.

ECONOMIC NEWS: The Conference Board releases a leading index at 10am EST. HSBC's flash manufacturing PMI comes out at 11.45am. Europe has manufacturing and services data due tonight. US highlights include the flash manufacturing PMI, weekly benefits claims, existing home sales, Philly Fed Manufacturing Index and a leading index.

Good luck to all.