daytrades nov 29 pre-market

Morning traders.

Market wrap: A soft start to local trade is likely this morning after European debt woes and Korean tensions dragged U.S. equities and key commodities lower on Friday.

The December SPI futures contract closed 21 points or 0.5% weaker on Saturday morning at 4576 as metals prices deteriorated, weighing on Australian miners listed on overseas indexes.

The Dow opened nearly 120 points lower following Thursday's Thanksgiving holiday and recovered less than a quarter of that, closing with a loss of 95 points or 0.85% in a holiday-shortened session. The S&P 500 fell 0.75% and the Nasdaq lost 0.34%.

Promising early evidence of a pick-up in U.S. retail traffic at the start of the Christmas shopping season was largely overlooked as traders focussed on Ireland's debt troubles and sabre rattling by North Korea.

"On top of the tension in Korea, the European situation is one that's going to continue to affect the markets in a negative way," a senior vice-president at BB&T Wealth Management in the U.S. told Bloomberg. "Over here, retail traffic is very good and that's fueling some optimism. However, with so many unknowns, I'd see a choppy market."

Credit ratings agency S&P lowered ratings on Irish banks ahead of a weekend meeting of European leaders to arrange a bailout package for Ireland (see below). The cost of insuring Portuguese, Irish and Spanish government debt against default hit record levels.

Commodity prices eased as investors abandoned "risk assets" for the perceived security of the U.S. dollar. The dollar index, which tracks the greenback against a basket of currencies, rallied 0.6% to 80.38, its highest level since late September. The Australian dollar eased to 96.4 U.S. cents.

Industrial metals fell on speculation that further interest rate rises are coming in China, with negative implications for commodity demand. In London, copper fell 1.1%, aluminium 0.3%, lead 1.7%, nickel 1%, tin 0.5% and zinc 3.5%. The falls fuelled drops in Australian miners listed in the U.S., including BHP -2%, RIO -1.4% and AWC -3.2%.

"The Chinese look likely to raise rates again this year," an analyst at London-based investment bank Fairfax told Reuters. "The Chinese have slowed their buying (and) any slowing of Chinese activity pulls prices down."

Precious metals normally benefit from any "flight to safety" but on Friday were caught up in a general move away from commodities as the rising U.S. dollar undermined demand. Spot gold closed $10.90 weaker than Thursday's New York close at $1,364.20 an ounce. Silver was hit harder, tumbling 83 cents or 3% to $26.70 an ounce.

Oil moderated Wednesday's gains but fared better than most commodities in thin trade. Crude futures eased 10 cents or 0.1% to $83.87 a barrel.

The major European markets continued to suffer from the continent's debt crisis. Britain's FTSE fell 0.53%, Germany's DAX 0.45% and France's CAC 0.84%.

TRADING THEMES THIS WEEK

RETREAT FROM RISK: The key theme for the last three weeks has been a rotation from "risk assets" (shares, oil, metals, the euro and Australian dollar) to "safe assets" (bonds, the U.S. dollar, precious metals). Some risk assets may be close to finding a bottom, but there's no clear sign of a turn yet as the European debt crisis continues to rumble on. These are tough trading conditions for long-traders. My approach is to reduce my trading, restrict overnight holds to "sure things" and focus on oversold shares, rather than momentum plays.

EUROPEAN DEBT: European leaders agreed yesterday to deliver an 85-billion-euro aid package to Ireland. What matters now is the market's response to a German proposal that bondholders shoulder the burden of any future losses in the euro zone. That plan could see bond yields for the likes of Portugal and Spain rocket this week, increasing the probability of other bailouts. There's no end in sight to this problem.

U.S. SHOPPING SEASON: Last week's Thanksgiving public holiday marked the start of the Christmas shopping season in the U.S. Expectations are high that this season will be the best since the start of the GFC, following recent signs of improvement in the U.S. economy. Sales figures released today and later this week from the "Black Friday" weekend and "Cyber Monday" (today) will have a strong bearing on the share market direction in the U.S. and consequently here. Early reports appear promising. Read more here.

ECONOMIC NEWS: A busy week for local releases starts today with quarterly company operating profits at 11.30 am and continues with: monthly building approvals, current account, private sector credit (tomorrow); GDP, manufacturing index, year-on-year commodity prices (Wed); trade balance, monthly retail sales (Thu); and the services index (Fri). Holiday-weekend retail sales are tonight's main interest in the U.S. The other key releases this week are: consumer confidence (Tue); non-farming employment change, manufacturing PMI (Wed); unemployment claims, pending home sales (Thu); and unemployment rate, non-manufacturing PMI.

Good luck to all.