daytrades april 19 pre-market

Morning traders. Keep your tin hats nearby.

Market wrap: Shares are set to open near a three-week low after a downgrade in the credit outlook for the US sparked heavy overnight falls in US and European stocks and key commodities.

The June SPI futures contract ended the night session 46 points or 0.95% weaker at 4821 as Standard & Poor's cut its long-term outlook on the US from "stable" to "negative" and the odds increased on a Greek default. The US dollar jumped, oil and base metals were sold off and gold and silver hit new records.

The Dow suffered its biggest plunge in a month, falling nearly 250 points before a day-long recovery trimmed the losses to 140 points or 1.14%. The S&P 500 fell 1.1% and the Nasdaq 1.06%.

Standards and Poor's said there was a one-in-three chance it will cut the US's AAA credit rating in the next two years "because the US has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us." Any reduction in credit rating would make it more expensive for the US to borrow money.

"It's truly a shot across the bow and a message to Washington, which has been clowning around on this and playing politics when they should toss ideology aside and focus on achievement," the head of government bond strategy at CRT Capital Group in the US told Bloomberg. "It's a big deal. They've put us on notice."

Across the Atlantic, S&P's US move piled further woes on European markets already sagging under renewed debt concerns. There were significant falls following reports that Greece will ask the EU and IMF to restructure its debt and after a Euro-sceptic party opposed to bailouts made a strong showing in Finnish elections on the weekend. Britain's FTSE fell 2.1%, Germany's DAX 2.11% and France's CAC 2.35%. Share indexes fell 2.8% in Greece, 2.4% in Portugal and 2.9% in Italy.

Precious metals rallied and oil and base metals fell as investors rotated from "risk assets" to safe havens. Gold hit a new record and silver is fourth straight 31-year high. Gold for June delivery was recently up $10.60 or 0.7% at $1,496.60 an ounce. May silver added 84 cents or 2% at $43.41 an ounce.

Oil skidded more than 2% as investors factored in the prospect of lower demand if US government spending is reduced and as Nigerian elections passed without major incident. Light, sweet crude for May delivery was recently down $2.11 or 1.9% at $107.55 a barrel.

Copper fell for a sixth night to a one-month low and other industrial metals retreated as the US and European debt issues added to demand concerns following China's weekend increase in bank reserve requirements. In London, copper lost %1.4, aluminium 0.9%, lead 2.8%, nickel 2.1%, tin 1.4% and zinc 2.3%. US copper was recently off 0.9%.

TRADING THEMES TODAY

BATTEN THE HATCHES: Bravo to S&P for finally confronting the elephant in the room: the US's ballooning debt problem. The short-term consequences are likely to be ugly for those of us who make a living from the share market but at least the problem is finally on the table. Expect the other two major ratings agencies to follow soon. Picking the direction of the share market beyond a few days is a mug's game in my opinion but it's hard to foresee significant gains in the days ahead as the potential implications of a US credit downgrade filter through the market. The road ahead looks rockier this morning.

RISK AVERSION: We can expect to see rotation today from cyclical stocks into defensives and from industrial metal miners into precious metal miners. Silver and gold are the obvious beneficiaries from overnight events but a sinking tide lowers all ships, so the benefits in most cases are likely to be relative. Momentum trades will be scarcer but swing traders should find plenty of candidates falling back to support levels. If you're sitting on profits (or losses, for that matter) this might be a good day to assess your exposure.

ECONOMIC NEWS: The minutes from the last Reserve Bank rate meeting are due at 11.30 am, followed by Chinese manufacturing numbers at 12.30. Housing tops tonight's schedule in the US, which includes building permits and housing starts.

Good luck to all.