Morning traders.
Market wrap: Australian stocks are set to open in the red after Chinese moves to curb its rampant economy sparked a global equity and commodity price slump.
Futures traders expect our market to open 27 points lower this morning, wiping out any gains for this year. The March SPI futures contract closed at 4810 after heavy selling in Europe and the U.S.
The Dow Jones Industrial Average was down more than 200 points in early trade but pared losses to close 122 points or 1.14% lower. The S&P 500 lost 1.06% and the Nasdaq 1.26%.
The sell-off was ignited by a report that the China Banking Regulatory Commission has asked several banks to stop issuing loans. The prospect of slower growth in China started a flight to the "safety" of the U.S. dollar and a plunge in commodity prices. The dollar index, which tracks the greenback against a trade-weighted basket of six major rivals, was recently up 1.1%.
"We all know China's appetite for commodities," an American energy analyst told MarketWatch. "If they're going to slow their economy down, that would be a big factor for demand."
Also harming sentiment in the U.S. was glum housing news. Housing starts fell 4% from the previous month, more than the 0.2% fall economists expected.
U.S. earnings news was mixed. IBM beat analysts' profit expectations but fell 2.8% as disappointed investors looking for higher growth rates sold out. Bank of America edged 1% higher on signs of an improvement in its loan book.
The Bank of America result helped the U.S. financial sector hold positive territory, but most other sectors finished underwater. Gold/silver miners fell 3.8%, telecoms 1.9%, oilers 1.7%, tech stocks 1.5% and REITs 1.3%.
Crude oil futures were recently down 2.1% at $77.36 a barrel and close to a five-week low, with selling compounded by fears that data due tonight will show U.S. stockpiles are rising.
Gold surrendered most its gains for this year. The spot price slumped $27.30 or 2.5% to trade recently at $1,110.30 an ounce. Platinum fell 1.4%.
Industrial metals joined the rout, with lead hitting a six-week low. In London, copper fell 2.3%, aluminium 1.1%, lead 5.5%, nickel 2.3%, tin 2.5% and zinc 2.5%.
European markets crunched lower after heavy selling in mining stocks, including RIO, down 4.3% in London, and Xstrata, down 6.2%. Britains FTSE fell 1.7%, Germanys DAX 2.1% and Frances CAC 2%.
TRADING THEMES TODAY
CHINA: Further Chinese moves to rein in growth have spooked global markets and will weigh on our resources sector today. The Shanghai Composite dropped 2.9% yesterday and dragged most regional markets into the red. All eyes will be on the monthly release of Chinese economic data at 1 pm today EST (see "Economic News" below for details). It's probably too early for recent tightening measures to show in the numbers but any sign of a slowdown is likely to accelerate losses this afternoon. Equally, healthy growth will steady nerves.
BOUNCE TRADES: This week's weakness has pulled a number of stocks back towards support zones and several should open at support this morning. These provide excellent entry opportunities - provided the support holds. It will pay to be particularly wary of resource stocks this morning if mammoths like Rio and Xstrata are tumbling 4-6% overseas. This is purely an intraday scalping strategy for me today - if this is a genuine correction it will have further to run.
ECONOMIC NEWS: Monthly new motor vehicle sales are due at 11.30 am, but the main event is the monthly release of Chinese data at 1 pm, including GDP, industrial production, CPI, PPI and retail sales. In the U.S. tonight: unemployment claims, regional manufacturing, leading indicators and crude oil and natural gas inventories.
Good luck to all.
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