daytrades july 26 pre-market

Morning traders.

Market wrap: Shares are likely to recoup some of yesterday's losses at today's open after a deadlock on the US debt ceiling generated only modest falls in US shares.

The September SPI futures contract ended the night session 22 points or 0.4% stronger at 4535 as traders speculated that yesterday's 1.5% slump on the Australian share market was overdone.

US shares fell more than 1% in initial trade as Republicans and Democrats worked on competing plans to raise the debt ceiling before next Tuesday's deadline. But the major indexes recovered around half of their initial losses before the close, the Dow ending 88 points or 0.7% lower and the S&P 500 and Nasdaq dropping 0.56%.

"There's nervousness about the US debt negotiations, but this isn't panic in the markets," the chief investment officer at Fort Washington Investment Advisors in the US told Bloomberg. "Both sides want to avoid a technical default and they'll most likely end up passing something. What's supportive is that we continue to have very solid earnings results for US corporations."

The Republicans and Democrats remained as far apart as ever on a solution to the political impasse over the debt ceiling. The Republicans are pushing a two-step plan to cut the federal deficit that includes US $1.2 trillion in spending cuts in the first phase and US $1.8 trillion in the second. Meanwhile, Democrats favour a plan to hand the President US $2.4 trillion in additional borrowing and US $2.7 trillion in spending cuts.

Adding to global concerns, ratings agency Moody's cut Greece's credit rating by three levels, warning that a default is almost certain. The agency said the latest European plan to assist Greece, announced last week, set a dangerous precedent for bond-holders.

A reduction in risk appetite was apparent in falls in oil and most base metals and a record close for gold. Crude for September delivery was recently down 78 cents or 0.8% at $99.10 a barrel but actually trading higher than at lunchtime yesterday AEST.

"We're seeing a response to the debt talks falling apart and a general risk-off [environment]," a senior commodities strategist at TD Securities in Canada told MarketWatch. "Uncertainty is sending shock waves through the market."

Gold continued to benefit from inflows of capital looking for a safe home as the US dollar declined. Gold for August delivery was recently ahead $13.10 or 0.8% at US $1,614.60 an ounce.

Industrial metals closed mixed but remained resilient to global political events, with most little changed. In London, copper added 0.1% and aluminium advanced 1%. Lead fell 0.5%, nickel 0.65%, tin 0.4% and zinc 1.1%. US copper was recently off 0.1%.

The major European markets were mixed, with bank stocks leading declines following the latest credit downgrade for Greece. Britain's FTSE lost 0.16%, Germany's DAX added 0.25% and France's CAC gave up 0.77%.

TRADING THEMES TODAY

PARTIAL REBOUND: It turned out the rest of the trading world is more worried about a US default than the US is. US traders appear convinced that their warring political factions will craft some sort of compromise ahead of next Tuesday's deadline, hence the limited reaction in US shares overnight. That's good news for our market, which should claw back a little of yesterday's losses this morning. Arguably more worrying is the fact that Moody's has stated the obvious overnight: the latest European "solution" for Greece involves a partial default and hardly offers bond-holders of other beleaguered nations much confidence. In the meantime, gold and silver are the obvious havens.

OBAMA ADDRESSES THE NATION: US President Barack Obama is due to deliver a televised speech on the debt ceiling negotiations in the US at 11 am AEST. The reaction - if any - from US futures may determine how our market fares this morning.

ECONOMIC NEWS: The monthly leading index of economic indicators is due at 10 am AEST. RBA Governor Glenn Stevens is due to address the Anika Foundation in Sydney at 1.05 pm. Tonight's highlights in the US include consumer confidence, new home sales, the Richmond manufacturing index and the year-on-year house price index.

Good luck to all.