Morning traders.Market wrap: Local futures are flagging a...

Morning traders.

Market wrap: Local futures are flagging a cautiously positive start to trade despite a wobbly night on Wall Street and sharp falls in gold and oil.

The March SPI futures contract ended the night session 12 points or 0.25% stronger at 4792 after the S&P 500 squeezed out a fifth straight gain.

U.S. stocks jagged in and out of positive territory as investors weighed another promising housing report and some strong earnings results against a credit downgrade for Japan, weak regional manufacturing data, a fall in durable goods orders and a jump in jobless claims. The Dow traded in a narrow band near break-even before closing 4 points or 0.04% ahead. The S&P 500 added 0.22% and the Nasdaq 0.58%.

An index of home sales rose by 2%, more than the 1% rise expected by analysts surveyed by Bloomberg News. However, the night's other economic reports were less hopeful - jobless claims jumped a whopping 51,000 to 454,000 last week, orders for long-lasting goods declined and manufacturing activity in the mid-west slowed sharply.

"We're in repair mode," the chief investment officer at PNC Wealth Management in the U.S. told Bloomberg. "As confidence improves, home sales will rise and that will be an important piece of the puzzle in this recovery. We still need to see progress in hiring. The U.S., Europe and Japan are not out of the deleveraging woods yet."

Also harming sentiment was news that ratings agency Standard & Poors has cut Japan's credit rating to AA-, the fourth-highest level, because of the government's failure to tackle debt.

Gold slumped to a four-month low after the president of the European Central Bank declared Europe, Britain and the U.S. were united against inflation. Analysts said the metal sold off on concerns over weaker demand as a hedge against inflation. The fall came despite a softer U.S. dollar. Gold for February delivery was recently down $22.20 or 1.6% at $1,311 an ounce.

Oil neared a two-month low as the night's disappointing U.S. economic data raised demand worries. Crude futures were recently down $1.81 or 2.1% at $85.51 a barrel.

The picture was brighter on the other side of the Atlantic, where industrial metals continued to rebound from last week's 'China slowdown sell-off'. Tin hit another record high and other metals rose despite the start of the seasonally-weak Chinese Lunar New Year holidays next week. In London, copper rallied 2.1%, aluminium 2%, lead 2.2%, nickel 0.75%, tin 2% and zinc 0.3%.

The major European markets closed mixed as financial stocks were hit by concerns over Japan's credit downgrade. Britain's FTSE eased 0.07%, while Germany's DAX rallied 0.4% and France's CAC 0.26%.

TRADING THEMES TODAY

MIXED MESSAGE: Hard to draw firm conclusions about the prospects for today from a very muddled night on world markets. Europe mixed, Wall Street narrowly ahead, BHP/RIO down in the US, gold down hard, oil down hard, base metals nicely up. Very unusual to see oil/precious metals and base metals as far apart as last night. Good to see Wall Street shrug off some pretty poor economic numbers, but one wonders how long it can last if the job situation doesn't take a solid turn for the better. In the meantime, the reaction in Japan to its credit downgrade may hold the key to how our market performs today.

TIN: Easy to see where the strength should be in our market today. Tin has marked five record highs in the last five sessions, last night hitting $29,300 a tonne. The La Nina weather pattern that has caused major floods here has had a similar impact on tin miners in Indonesia, the world's biggest exporter. Supplies are being squeezed and consumption remains solid. All good for our handful of tin miners.

ECONOMIC NEWS: Nothing significant scheduled in Australia. The World Economic Forum starts its annual meeting in Davos today. GDP is the key release in the U.S. tonight - economists are tipping a pick-up in the economy from growth of 2.6% the previous quarter to 3.5% in the December quarter. Also due tonight: the quarterly employment cost index, revised inflation expectations, revised consumer sentiment, advance GDP price index and a speech from Treasury Secretary Tim Geithner.

Good luck to all.