daytrade diaries... december 1

Morning traders.

Market wrap: Local stocks are expected to hold yesterday's big advance at today's open after a rebound in U.S. financial shares overnight.

Wall Street slipped into negative territory early in the session as investors brooded over a lacklustre start to the holiday shopping season. But rallying banks carried the market to modest gains for the day as fears eased over the potential for a sovereign default in Dubai. The Dow closed 0.34% higher, the S&P 500 gained 0.38% and the Nasdaq 0.29%.

Around 195 million consumers shopped over the "Black Friday" weekend, up from 172 million last year, but average spending dropped to $343.31 a person from $372.57 a year ago.

U.S. analysts were cheered that the market shook off concerns over Dubai but concerned that the eight-month rally in equities has narrowed recently. The financial sector continues to benefit from central government support but the broader economy remains weak, as the soft start to the Christmas shopping season demonstrates.

"We're still bullish over the long run, but it is a little disconcerting to see the way breadth in the rally has fallen away lately," strategist Steve Charest, of Divine Capital Markets told MarketWatch.

The big advancers last night were banks +3.68%, REITs +4.06% and airlines +3.44%. Defensive and resource-sensitive sectors were mostly softer.

The major European markets were underwater for most of the session and fell away as US markets retreated. Britain’s FTSE and Germany’s DAX both lost 1.05% and France’s CAC 1.11%.

Commodity prices were helped by a sliding U.S. dollar as worries over a potential Dubai default eased. Oil also benefited from rising tensions in the Middle East as Iran stands firm on its nuclear program. Crude futures climbed 1.62% to $77.17 a barrel. Gold continued to recover from Friday's Dubi wobble. The spot price edged up 70 cents to $1,177.40, 13% higher for the month, one of its best this decade.

Base metals pushed higher as investors hedged against inflation. Copper added 1.66% in London and settled near its 14-month high. Aluminium gained 2.43%, lead 0.13%, nickel 1.68%, tin 0.77% and zinc 3.68%.

Futures traders expect our market to open modestly higher. The SPI futures index rallied 11 points to 4706.

TRADING THEMES TODAY

INTEREST RATES: The big question today is whether the Reserve Bank will raise interest rates for a third straight month. The odds yesterday favoured a 0.25% rise to a 3.75% cash rate. Rising interest rates are good for the Aussie dollar and broadly negative for the stock market (but there are plenty of exceptions). The announcement is due at 2.30 am and will be posted here: http://www.rba.gov.au/

ECONOMIC NEWS: Aside from the RBA's interest rate decision, local news today includes the Australian Industry Group's Manufacturing Index at 9.30 am and monthly building approvals at 11.30 am. Tonight's US data includes pending home sales, manufacturing business conditions, vehicle sales and construction spending.

Good luck to all.