daytrade diaries... december 16

Morning traders.

Market wrap: Australian stocks face a soft start after Wall Street sagged under a welter of mixed economic signals.

Futures traders expect our market to open firmly in the red after the US dollar hit a two-month high on inflation concerns. The SPI futures index closed 22 points lower at 4642.

Wall Street was underwater all session and faded into the close as investors digested a confusing stew of data. The Dow lost 0.47%, the S&P 500 was off 0.56% and the Nasdaq 0.46%.

Banks were sold off on evidence of rising credit card loan write-offs, weak manufacturing figures pointed to the fragility of the economic recovery while rising wholesale prices hinted at inflationary pressures and sparked a rally in the US dollar.

The producer-price index's bigger-than-expected 1.8% November rise in wholesale prices raised fears that the Fed will have to raise interest rates sooner than anticipated. The US dollar index, which measures the greenback against a basket of major currencies, rose 0.77% in response.

Most US sectors finished lower, with the worst hit including banks (-2.88%), airlines (-2.35%) and precious metals miners (-1.85%). Natural gas companies and oil services companies advanced.

European markets were mixed. Further falls in financial stocks helped strip 0.56% off Britains FTSE, but Germanys DAX edged 0.16% higher and Frances CAC added 0.1%.

Oil snapped its nine-day losing streak after OPEC upped its forecast for global demand. Crude oil futures were recently trading at $70.75 a barrel, a rise of 1.78%. Oil traders said there was evidence of short covering ahead of tonight's weekly US inventory data.

Gold was driven lower by a rising US dollar but recovered much of its early losses and was recently trading little changed. The spot gold price was $1,123.70 an ounce, down less than $3.

Base metals were mixed but little changed overnight. In London the rising US dollar trimmed 0.14% off copper, 1.11% off aluminium and 0.26% off zinc but lead rose 0.49%, nickel 0.3%, tin 0.26%.

TRADING THEMES TODAY

UNCERTAINTY: It's hard to pick a coherent theme in last night's US trade. The rising greenback should be ominous for resources but oil ignored it, base metals barely flinched and gold shrugged it off after a minor wobble. Collectively those are probably bullish signs. Our market has looked keen to rally all week, so we may well enjoy a fourth day in the green. I'll most likely stick to scalping today - my default setting when the overnight action doesn't offer a clear lead.

ECONOMIC NEWS: Another busy day for local news starts with the 10.30 am release of the Melbourne Institute's monthly Leading Index of economic indicators and continues with GDP at 11.30 and a speech by RBA Deputy Governor Ric Battellino at 12.15. Tonight in the US: Federal interest rates statement, consumer price index, building permits, current account, housing starts and oil inventories.

Good luck to all.