Daytrading Sep 22 pre-market

Morning traders. Thanks Trees and weekend regulars.

Market wrap:


Shares face a negative start after BHP and Rio Tinto fell to multi-month lows in the US as iron ore slumped and US stocks closed mixed.

The December SPI 200 futures contract dropped 18 points or 0.3% to 5408 after an index of commodities and spot iron ore plumbed five-year lows.

Wall Street backed down from record levels despite the successful launch of its biggest ever float, Chinese e-commerce giant Alibaba, which ended its first day with a 38% premium to its IPO price. The S&P 500 eased around one point or 0.07% after earlier pushing into record territory. The Dow held on for a gain of 14 points or 0.08% and the Nasdaq lost 13 points or 0.29%.

While traders cheered Alibaba's successful debut on the New York Stock Exchange, the company's shares are not components of any of the major indexes. The weakness in the Nasdaq and S&P 500 reflected declines in Oracle after co-founder Larry Ellison stepped down, and in Yahoo!, which reduced its stake in Alibaba.

"Alibaba was awesome. The Alibaba deal was done correctly, which is, you leave something on the table for investors to enjoy," Phil Orlando, chief equity market strategist at Federated Investors in the US, told Reuters. "So the market got to focus on Alibaba, which was a positive."


Basic materials was the hardest hit of the S&P 500's 10 industry groups as the Bloomberg Commodity Index, which measures 22 raw materials, fell 0.83% to its weakest point since July 2009 as a rampant US dollar pressured oil and metals. The US Dollar Index advanced 0.6% to seal a 10th straight winning week, its longest run since 1967.

BHP dropped 1.26% to its lowest level in US trade since February after iron ore broke to fresh five-year lows. Rio Tinto fell 2.73% to a level last seen in June. Spot iron ore for import to China retreated 1.6% or $1.30 on Friday to US$81.70 a dry tonne.

Gold hit an eight-month low as the prospect of rate rises and further gains in the US dollar cruelled demand for alternative stores of wealth. Gold for December delivery declined $10.30 or 0.8% to settle at US$1,216.60 an ounce for a weekly loss of 1.2%. The metal has fallen for three straight weeks.

"If the dollar stays strong and the data from the US continues to be positive, the metals are in for a tough time,” David Govett of Marex Spectron in the US told MarketWatch.

The rising dollar and supply concerns saw oil pare a winning week. West Texas Intermediate crude oil for October delivery dropped 66 cents or 0.7% on Friday to settle at US$92.41 a barrel but gained 0.2% for the week.

Base metals closed mixed but little changed as traders balanced Chinese growth concerns against the prospect of a a pick-up in US demand. In London, copper eased 0.1%, nickel 0.7% and aluminium 0.3%. Lead gained 0.2%, tin 0.1% and zinc 0.5%. US copper for December delivery eased 0.2% or less than a cent to US$3.09 a pound.

Rumours of a pending French credit downgrade took the wind out of a relief rally in Europe after Scotland voted to stay within the United Kingdom. The French government later dismissed the rumours and ordered an investigation into the source. The Stoxx Europe 600 index held on to a gain of 0.21% as Germany's DAX ended near flat at +0.01%, France's CAC lost 0.08% and Britain's FTSE gained 0.27%.
The dollar was this morning buying 89.34 US cents.

TRADING THEMES THIS WEEK

SURGING GREENBACK: There are major shifts taking place in financial markets as Wall Street prepares for the end of quantitative easing next month and the start of a new rate rise cycle some time next year. The US dollar index has rallied 6% since the start of July. This has broadly negative implications for commodities such as oil and metals and therefore the Australian resources sector because commodities tend to have an inverse relationship with the greenback since strength in the US dollar increases the relative cost of dollar-denominated commodities for holders of other currencies. Market heavyweights BHP and Rio Tinto are out of favour in the US. The Australian dollar has been in steady decline, producing both winners and losers among Australian listed companies according to where they derive most of their earnings and source product and materials. Yield stocks such as the big banks have also come under pressure as international money rotates into assets seen as having better prospects.

CHINESE FACTORY UPDATE: Last week's intervention by Chinese authorities into money markets likely came too late to avoid another downbeat manufacturing report from Australia's largest trading partner tomorrow. Economists expect HSBC's Flash Manufacturing PMI to fall to a reading of 50 from a final reading of 50.2, last month, indicating that growth has stalled. However, traders may give the report a free pass this month, electing to delay any trading decisions until they see what impact China's latest stimulus effort has on activity in the months ahead.

ECONOMIC NEWS: With the Fed meeting and the Scottish independence vote out the way, Wall Street should get back to focussing on the fundamentals this week. US highlights include: existing home sales (tonight); new home sales (Wed);  durable goods/core durable goods, weekly jobless claims (Thu); and final GDP (Fri). Domestic data is scarce this week. Highlights: RBA Financial Stability Review, leading index (Wed); and a speech by RBA Governor Glenn Stevens (Thu).

Good luck to all.