daytrades may 20 pre-market

Morning traders.

Market wrap: Futures traders expect Australian stocks to open modestly higher this morning despite heavy overnight falls in Europe and further weakness on Wall Street and in key commodities.

The local June SPI futures contract has just closed 7 points ahead at 4396.

Wall Street followed European markets sharply lower in early trade but pared its losses before the session ended as a recovery in financial stocks countered losses in companies exposed to the charging U.S. dollar. The S&P 500 was down 1.8% at its intraday low and finished 0.51% weaker but above the May 7 closing low that provides technical support. The Dow also dipped below the May 7 support level but recovered to close 67 points or 0.63% lower. The Nasdaq lost 0.82%.

Earlier, European markets fell for the third session in four as Germany's move to ban short-sellers underlined policy differences in the European Union. Britain's FTSE tumbled 2.7%, Germany's DAX 2.7% and France's CAC 2.9%.

"Europe has serious structural problems and there's no quick way out for them," the president of a U.S. financial advisory service told Reuters. "We're not sure how big this problem is, so we're going to play it safe, selling stocks, selling crude oil, selling copper... until they get their hands around the problem."

Also weighing on sentiment in the U.S. were record mortgage foreclosures and a recent rise in the London Interbank Offered Rate (LIBOR), the rate at which banks lend to each other overnight. The LIBOR is considered an important measure of banks' confidence in each others' ability to pay and rising rates were a harbinger of the global financial crisis.

Government efforts to stem property seizures suffered a blow as a report showed a record share of U.S. mortgages were in foreclosure in the first quarter as home-buyers fell behind on payments. Homes in foreclosure rose to 4.63% from 4.58% in the fourth quarter. Shares in government-supported mortgage-finance companies Fannie Mae and Freddie Mac each fell more than 3% in response.

Wall Street continued to track the euro, partially recovering when the European currency reversed losses against the U.S. dollar. The dollar index, which measures the greenback against a basket of major currencies, was recently down 1.2% for the session.

Oil rallied off an eight-month low as the slide in the U.S. dollar made it more attractive for overseas buyers. Light crude for June delivery was recently up $1.89 or 2.7% to $71.30 a barrel.

However, oil was the exception to the general trend in commodity prices, with industrial metals resuming their decline as investors abandoned so-called "risk assets". In late trade in London, copper was down 2.2%, aluminium 2.3%, lead 4.4%, nickel 3.6%, tin 2% and zinc 3.3%.

"Based on sentiment, technical indicators and the cost curves, more downside is in the cards over the short run for base metals," a Canadian Commodity Strategist told clients in a research note quoted on Reuters.

The general sell-off in commodities dragged precious metals including gold, silver and platinum to significant losses. The spot gold price was recently $30.50 or nearly 3% lower than Tuesday's New York close at $1,192.50 an ounce.

TRADING THEMES TODAY

STRUGGLING FOR POSITIVES: Futures traders think we took our "German short ban" medicine yesterday but it's hard to find many positives in the overnight action: Europe down, Wall Street down, base metals down, gold down. Oil bounced off a support level but U.S. oilers finished mostly lower, suggesting traders are yet to be convinced that a bottom is in. However, an on-going bounce in the euro may be the key to today's action - the U.S. dollar is under pressure for the first time in a few weeks and that just may bring some relief for commodity prices and miners tonight.

ECONOMIC NEWS: Local monthly consumer inflation expectations are due at 11.30 am. In the U.S. tonight: unemployment claims, regional manufacturing, the Conference Board's leading index of economic indicators and natural gas storage.

Good luck to all.