Daytrading August 25 pre-market

Morning traders. Thanks Trees and after-market regulars.

Market wrap:

Equity futures indicate more pain today for Australian investors after an extraordinarily volatile night on Wall Street ended in heavy losses.

The September SPI200 futures contract tumbled 181 points or 3.6% to 4770 on massive volume as the S&P 500 entered a technical correction and the Dow suffered its biggest intraday swing in history.

The S&P 500 plunged 5.3% at the open, rebounded back towards break-even and then fell away in afternoon trade to a final loss of 78 points or 3.94%. The benchmark index ended the night 11% off its May peak following five days of losses. At its overnight low, the Dow was off 1,089 points before paring its fall to 588 points or 3.58%. The blue-chip index rallied to within 110 points of positive territory - the largest intraday swing ever recorded - before fading once again. The Nasdaq lost 9.8% of its value at the open before recovering to a final loss of 180 points or 3.82%.

"Fear has taken over. The market topped out last week," Adam Sarhan, CEO of Sarhan Capital in the US, told CNBC. "We saw important technical levels break last week. Huge shift in investor psychology."

A global retreat from risk accelerated overnight after China's benchmark share index, the Shanghai Composite, dived 8.49% yesterday, dashing hopes that government intervention could stem the unwinding of the nation's stock market bubble. Europe's benchmark index fell more than 5%, oil, copper and aluminium hit six-year lows and zinc and lead five-year lows.

“Investors in China have lost confidence in the central bank, and it’s a very alarming and difficult situation for the markets,” Bruce Bittles, chief investment strategist at Robert W Baird in the US, told Bloomberg. “It ultimately depends on whether the China situation results in a severe economic slowdown. It that happens, it’s going to ripple through the US.”

The Chicago Board Options Exchange Volatility Index, or VIX, spiked as much as 90% to a six-year high before halving its rally to around 45%. The index, known as Wall Street's 'fear gauge' doubled last week after China unsettled financial markets by devaluing the yuan.

Trading in more than 1,200 stocks and funds was temporarily halted overnight after falls of 5% triggered automatic five-minute trading pauses. The average number of halts during a standard session is less than ten.

European stocks suffered their heaviest falls since the GFC. The Stoxx Europe 600 declined 5.33%, ending the session roughly 17% below its April peak. Germany's DAX shed 4.7%, France's CAC 5.35% and Britain's FTSE 4.67%.

Australia's China-facing miners took heavy hits in US action, falling to levels last seen in 2009 as iron ore finally joined the global retrace. BHP slumped 7.21% and Rio Tinto 5.14%. Spot iron ore for import to China yesterday dropped $2.30 to US$53.30 a dry ton.

Any hope that gold stocks might offer a safe haven was dashed by an 8.29% dive in the NYSE Arca Gold Bugs index as gold for December delivery settled $6 or 0.5% lower at US$1,153.60 an ounce. Silver for September delivery tumbled 53.9 cents or 3.5% to US$14.762 an ounce.

All ten S&P 500 industry groups lost at least 3.2%. The energy sector neared a four-year low after West Texas Intermediate crude oil for delivery in October settled $2.21 or 5.5% in the red at US$38.24 a barrel. The settlement price was the lowest since February 2009.

A volatile night on the London Metal Exchange saw most base metals hit five- or six-year lows before paring their losses. London copper ended with a decline of 2%, aluminium 1.7%, lead 2.5%, nickel 6.7%, tin 5.7% and zinc 3.4%. US copper for September delivery was recently off 2.5% at US$2.25 a pound.

The dollar was this morning buying 71.57 US cents after falling as low as 70.49 overnight.

TRADING THEMES TODAY

WATCHING CHINA: No respite for investors overnight following one of the most remarkable US sessions any of us are likely to witness. These are extraordinary times. However, the partial rebound on Wall Street offers an early clue that world markets have come down far enough to encourage tentative buying. Certainly, I'm tempted to approach today with a view to acquiring one or two short-term holds, rather than the usual day-trader's scalps. The opening gap down looks likely to be massive. When the global rebound comes, it's going to be big. The question is, what would be the trigger? The answer likely lies where the rout began: China. Having intervened in the market several weeks ago, the government's credibility is now at stake if it sits on its hands. News in the next 48 hours? All speculation, of course, so treat these as the musings of a trader.

ECONOMIC NEWS: No significant domestic news scheduled today. Wall Street has some meaty economic data tonight in the form of consumer confidence figures, new home sales, the Richmond Manufacturing Index, flash services PMI and house price index.

Good luck to all.