daytrades feb 7 pre-market

Morning traders.

Market wrap: Stocks will likely open in the red after a 29-month high in oil dragged US shares lower on Friday and undermined the price of industrial metals.

The March SPI futures contract closed 28 points or 0.58% weaker at 4836 on Saturday morning as oil reached US$105 a barrel and American wages missed expectations.

Wall Street fell heavily a day after its best session in three months but moderated losses before the closing bell. The Dow trimmed a 180-point fall into a loss of 88 points or 0.72%. The S&P 500 closed 0.74% weaker and the Nasdaq fell 0.5%.

The monthly jobs report was mixed, with a gain of 192,000 jobs in February narrowly missing expectations, the unemployment rate falling to 8.9% and average hourly earnings flat. Factory orders jumped 3.1% in January, the biggest improvement in five years.

"I'm concerned about hourly earnings being flat," the head of asset allocation for ING Investment Management in the US told Bloomberg. "With rising gas prices this means that consumers' real income is not increasing, which will put downward pressure on consumption. I don't think this is a good number for the equity market."

Oil continued its swift ascent, with crude for April delivery rallying $2.51 or 2.5% on Friday to $104.91 a barrel, up 7% for the week.

"Traders are watching Libya, and for now trading is based on the turmoil there," the president of energy-consulting firm Perry Management told MarketWatch. "Traders are bidding the price up on what might happen in the future."

Precious metals benefitted from a renewal of risk aversion, reversing most of Thursday's brief downturn. Gold for April delivery improved $12.20 or 0.9% to $1,428.60 an ounce. May silver advanced to a new 31-year high, up $1 or 2.9% at $35.33 an ounce.

The move into oil and precious metals sucked funds away from industrial metals. In London, copper eased 0.71%, aluminium 0.73%, lead 0.02%, nickel 0.38%, tin 0.24% and zinc 0.97%.

The major European markets weakened as US markets turned south. Britain's FTSE fell 0.24%, Germany's DAX 0.65% and France's CAC 1%.

TRADING THEMES THIS WEEK

FOLLOW THE OIL: Now and then a simple dynamic develops on world markets that helps guide trading decisions. For example, last year for several months an inverse relationship developed between the US dollar and US shares - if the former rose, the latter generally fell and vice versa. That nice, clean relationship endured for several months before other factors edged it aside. In the last few weeks the greenback has been replaced by oil as the key factor driving equity market direction because rising energy costs have the capacity to derail the global economic recovery - if they run high enough. Current investor nerves are not so much caused by oil at US$100 a barrel but the possibility that we could see US$150+ a barrel if the unrest in North Africa and the Middle East infects the region's major producers, in particular Saudi Arabia. This is a very light week for US economic reports (see below), which unfortunately means fewer distractions from the price of oil. Protests scheduled this week in Saudi Arabia in the face of a government ban may provide a flashpoint.

CHINA: Chinese Premier Wen Jiabao on the weekend named fighting inflation as his government's top priority. That can only mean one thing: more interest rate rises ahead, with negative implications for demand for Australian resources and a knock-on effect on local share prices. This week continues the government's annual congress and brings the monthly update, with trade balance figures due on Thursday and inflation, retail sales and industrial production among the numbers released on Friday. Read more here.

ECONOMIC NEWS: A solid local schedule this week includes: the monthly construction index at 9.30 am and monthly job ads at 11.30 am today; business confidence (Tue); consumer sentiment (Wed); and employment change and the unemployment rate (Thu). Chinese trade balance figures are due on Thursday and the bulk of the Chinese monthly update, including inflation and industrial production, is due on Friday. A thin week for US news has little of interest until Thursday's trade deficit report and a busy Friday night, with retail sales, inventories and consumer sentiment.

Good luck to all.