daytrades may 31 pre-market

Morning traders.

Market wrap: Australian stocks are likely to open around 1% lower today after a soft end to last week on overseas equity and commodity markets.

The June SPI futures contract closed 42 points weaker at 4424 after tepid domestic economic news and a credit downgrade for Spain saw U.S. investors pare their bets ahead of a long weekend. A rally in the U.S. dollar weighed on dollar-denominated commodities.

The Dow Jones Industrial Average ended its worst month since February 2009 down 122 points or 1.19% for the day and 7.9% for the month. The S&P 500 dropped 1.24% on Friday and the Nasdaq lost 0.91%. Both fell more than 8% in May.

Trading volume was light in the U.S. on Friday ahead of Memorial Day, which may have exaggerated the response to news that Fitch Ratings had downgraded Spain's debt to AA+ from AAA, while re-affirming that the country's outlook was stable. Economists said the downgrade came as no surprise as recent government austerity measures pointed to slowing growth.

"It's looking to us like Europe's problems won't necessarily spread, but they are something the rest of the world is going to feel," the chief investment officer at U.S. private bank told MarketWatch.

Wall Street was also troubled by another round of weak economic reports that raised concerns that the domestic recovery is flagging. Consumer spending was flat after six straight monthly gains and business activity expanded less than expected in May, according to a closely-watched survey of Chicago-area purchasing managers. Consumer sentiment edged higher.

The U.S. Dollar Index, which tracks the greenback against a basket of six others, rallied 0.6% as investors once again dumped "risk assets" in favour of safe havens. The euro weakened after Spain's credit downgrade.

Oil advanced in early trade for a third session but succumbed to the darkening mood. Crude futures ended 58 cents or 0.78% lower at $74.09 a barrel.

Industrial metals fell back as traders locked in profits after several days of gains and the strengthening dollar sidelined foreign buyers. In London, copper dropped 1.6%, aluminium 1.8%, lead 0.7%, nickel 3.4%, tin 1.1% and zinc 1.1%.

The spot gold price edged higher for a fifth straight day as Spanish debt worries reversed an intraday decline. The spot price closed $2.30 ahead of Thursday's New York close at $1,214.30 an ounce.

The major European markets closed mixed before news of the Spanish downgrade was released. Britain's FTSE fell 0.13%, France's CAC was down 0.29% but Germany's DAX rallied 0.15%.

However, there was rising hope that the worst is behind for European equities. Equity strategists at Exane BNP Paribas issued a note to clients: "The Stoxx [Europe] 600 index has fallen 12% since mid-April, dragged down by fears of a Greek default and contagion of other euro zone member states. We believe that most of the damage has been done: this week's market rebound should be the start of a sustained rise."

TRADING THEMES THIS WEEK

FIGHTING THE DOWNTREND: This will be an important week for world equity markets as the traditionally soft month of May ends and June commences. The current trend is clearly negative but there were hints of a budding reversal last week. The next few days will confirm whether last week was anything more than a minor counter-trend rally.

PUBLIC HOLIDAYS: Markets are closed tonight in the U.S. for the Memorial Day holiday and the U.K. for the Spring Bank Holiday. That means Friday's uninspiring lead will loom over the next two Australian trading days unless better news emerges from Europe or elsewhere to boost spirits.

INTEREST RATES: The odds on a further hike in the cash rate when the Reserve Bank meets tomorrow are slim but it's another factor that will encourage caution in the early part of this week. The RBA announcement is due at 2.30 pm tomorrow.

ECONOMIC NEWS: A busy start to a busy week for local economic news. Today brings: the monthly inflation gauge at 10.30 am, monthly new home sales and the current account, monthly private sector credit, business inventories and company operating profits at 11.30 am. Other highlights this week include: the cash rate tomorrow; GDP on Wednesday; and trade balance on Thursday. The U.S. is closed tonight. The key release this week is Friday's monthly unemployment report but tomorrow night's factory activity report should show whether European problems are starting to affect demand.

Good luck to all.