daytrades may 11 pre-market

Morning traders.

Market wrap: A third night of gains on Wall Street and advances in oil and metals have set up Australian shares for their best open in several weeks.

The June SPI futures contract ended the night session 47 points or 1% stronger at 4766 as deal news and rising earnings boosted US stocks, and the prospect of a new IMF aid package soothed fears over Greece's debt crisis.

The S&P 500 rallied 0.81% as Microsoft's move on Skype encouraged investors to buy mid-cap take-over targets. The Dow put on 76 points or 0.6% and the Nasdaq 1.01%.

A range of lesser-known companies raised earnings forecasts overnight as the US quarterly reporting season moved into its final weeks. Four-fifths of companies in the S&P 500 have now reported, delivering an average operating earning just 6% below the peak set in 2007.

"Corporate earnings continue to surprise on the upside," a manager at American Century Investments in the US told Bloomberg. "There's been a lot of noise and uncertainty with oil and Greece in particular, but investors are being pragmatic and they're rewarding solid corporate fundamentals."

The US dollar retreated, encouraging investors to buy alternative investments such as commodities, following reports that the International Monetary Fund will offer Greece a new bailout package. The news boosted the euro, sending the US dollar index down 0.25% as the Australian dollar rally nearly half a cent to US $1.0844.

Oil pushed back above US $103 a barrel as flooding along the Mississippi threatens US refineries and yesterday's panic over increased trading margin requirements abated. Light sweet crude for June delivery was recently up $1.01 or 1% at $103.57 a barrel.

Precious metals continued to rebound from last week's steep falls as wrangling over the US debt ceiling encouraged safe-haven buying. Gold for June delivery rallied for a second day, recently ahead $12.40 or 0.8% at US $1,515.60 an ounce. July silver put on $1.35 or 3.6% to $38.47 an ounce.

Copper rallied for a third day and most industrial metals improved following yesterday's healthy Chinese trade report. However, gains were again capped by caution ahead of today's Chinese inflation report.

"That's what I think will be the bigger driver for the market," a senior base metals analyst with CPM Group in the US told Reuters. "If inflation creeps back up that could be alarming for the market. Even if it's unchanged, it would be bearish."

In London, copper added 0.3%, aluminium 1.6%, lead 1.9%, nickel 2% and zinc 0.45%. Tin was unchanged. US copper was recently up 0.8%. In US trade, BHP rallied 0.5%, Rio Tinto 0.8% and Alumina 3.2%.

Gains in banks on hopes for a new bailout deal for Greece helped the major European markets advanced. Britain's FTSE added 1.28%, Germany's DAX 1.23% and France's CAC 1.13%.

TRADING THEMES TODAY

CHINESE INFLATION: Today's monthly economic update from our largest trading partner will tell us whether recent central-bank attempts to cool China's frothy economy are having an impact. Expect a negative reaction from the share market if inflation remains as strong as last month's figure of 5.4%. Consensus forecasts for today's figure vary from 5.2 - 5.3%. Any stronger than that and markets will likely drop on the prospect of further monetary tightening in China that will increase the risk of a hard landing for the economy. The rest of the figures, due at noon AEST, include industrial production, retail sales and the producer price index.

BUDGET FOLLOW-THROUGH: There are always winners and losers from a Federal Budget, but I haven't had time to analyse which sectors gained/lost from last night's changes. The reaction from futures traders suggests there were no real nasty surprises, however, the market sometimes takes a while to assess the implications. I'll be interested to hear any thoughts before today's opening bell.

ECONOMIC NEWS: There is no local news scheduled today but plenty of interest in the monthly Chinese economic update, due at noon (see above). Tonight's US menu includes the trade balance, Federal Budget Balance and crude oil inventories.

Good luck to all.