daytrades feb 9 pre-market

Morning traders.

Market wrap: A seventh night of gains for the Dow has set up our market for a positive open, but an interest rate rise in China may cap advances.

The March SPI futures contract ended the night session 14 points or 0.3% stronger at 4883 as futures traders weighed solid rises for US and European equities, gold and Australian miners listed in the US against a fall in oil and a mixed night for industrial metals after China raised its benchmark interest rate by 25 basis points.

US stocks wobbled at the opening bell following the Chinese news, then rallied on signs of a pick-up in retail sales and a better monthly report from McDonald's. The Dow added 70 points or 0.58% to 12,232 to extend its longest winning streak in nearly seven months. The S&P 500 put on 0.42% and the Nasdaq 0.47%.

The People's Bank of China announced late yesterday that it will raise its benchmark interest rate for the third time in four months. Yesterday's 0.25% increase in the lending rate to 6.06% follows rises in October and six weeks ago as the central authorities try to cool speculation in the property market that has raised fears of a developing bubble.

"The market was weak early on because of China raising rates - we're obviously worried about the implications for global economic growth," the director of equity strategy at Morgan Keegan in the US told MarketWatch. However, "investors have this burning desire to buy the dips right now, so they keep piling in on any sign of weakness."

Sentiment improved after the International Council of Shopping Centers in the US announced a 2.2% improvement in weekly retail sales, breaking a run of four declines, and McDonald's January sales beat expectations.

Commodities and the Australian dollar came under early pressure as China's rate move raised questions over demand for raw materials. The dollar was pushing near US $1.02 before the news and pulled back to trade recently at US $1.015.

Crude oil extended its week-long retreat, sliding 43 cents or 0.5% to $87.05 a barrel, but gold hit a three-week high as the US dollar softened. Gold for April delivery was recently ahead $15.40 or 1.1% at $1,363 an ounce. Silver touched its highest level since early January, rising 94 cents or 3.2% to $30.28 an ounce.

Industrial metals were mixed, with copper closing weaker in London but rebounding in US trade to close 0.6% stronger. In London, copper fell 0.15%, lead 0.7% and zinc 0.4%. Aluminium rallied 0.4%, nickel 0.2% and tin 0.3%.

The major European markets rallied late in the session as US stocks turned higher. Britain's FTSE added 0.47%, Germany's DAX 0.54% and France's CAC 0.43%.

TRADING THEMES TODAY

ALL EYES ON CHINA: A very interesting night's trade. It appears Chinese interest rate rises are suddenly "old news", so far as Wall Street is concerned - the market knows they're coming and does not appear overly concerned. The question for our market is how will Shanghai respond when it re-opens today after a week off for the Lunar New Year holiday? In theory the Shanghai Composite Index has catching up to do after a week of steady rises on most major international markets. However, the interest rate rise is a wildcard and China marches to its own idiosyncratic beat anyway. Our market and dollar tend to get traded by international investors as proxies for China, so the smooth ride of the last week may come to an end if there's any sign of weakness.

GOLD BACK IN FAVOUR: Gold got a leg up to a three-week high overnight as the Chinese rate hike was interpreted as evidence that inflation is back on the agenda. Analysts quoted on MarketWatch suggest the return of Chinese traders today after the week-long Lunar New Year holiday may provide additional support in the days ahead.

ECONOMIC NEWS: Monthly consumer sentiment figures are due at 10.30 am. The main event during another relatively quiet session tonight in the US is testimony from Federal Reserve Chairman Ben Bernanke on the economic outlook before the House Budget Committee. Also due: weekly crude oil inventories.

Good luck to all.