daytrading aug 26 pre-market

Morning traders.

Market wrap: A rise in US jobless claims and a sharp sell-off in Germany ended Wall Street's three-day winning run and point to a negative open for Australian shares.

The September SPI futures contract closed the night session 49 points or 1.2% weaker at 4165 as stocks in the US and Europe weakened in nervy action ahead of a much-anticipated speech tonight by US Federal Reserve chairman Ben Bernanke at the Jackson Hole Symposium.

The S&P 500 rallied more than 1% in early trade but finished 1.56% lower as weekly jobless claims increased and traders hedging positions in Europe sparked a dramatic 4% plunge on Germany's DAX index. The Dow lost 171 points or 1.51% and the Nasdaq 1.95%.

Sentiment in the US was boosted ahead of the opening bell by news that Warren Buffett's Berkshire Hathaway had invested US$5 billion in Bank of America, the only blue chip stock to advance last night. The market started to sour when the weekly unemployment benefits report showed an increase in claims by 5,000 to 417,000, thwarting expectations of a decline.

The fall accelerated when traders looking to hedge positions ahead of an extension to short-selling bans in France, Italy and Spain drove Germany's benchmark equity index down 4% in 30 minutes. Some market commentators attributed the falls to rumours that Germany was about to ban short-selling or that its credit rating was under threat. The index partly recovered to end the session 1.71% weaker. Britain's FTSE lost 1.44% and France's CAC 0.65%.

"We're not out of the woods, and the market is reflecting that," the head of asset allocation for ING Investment Management in the US told Bloomberg. "The European situation is still a mess. Sometimes these markets get hit because they are the most liquid. If you want to dump risk quickly in Europe, shorting Germany is probably the best way to do it."

Gold was boosted by the rumours about a threat to Germany's credit rating (later denied by all three rating agencies). A volatile session saw gold for December delivery fall as low as $1,705.40 an ounce before recently trading $17.10 or 1% higher for the day at US$1,774.70 an ounce. September silver also rebounded, rising $1.98 or 4% to US$41.14 an ounce.

Oil suffered violent gyrations as Hurricane Irene hovered off the east coast of the US, but was lately trading little changed. Crude for October delivery eased 15 cents or 0.2% to US$85.02 a barrel after swinging through a range of $3.60 within a couple of hours.

Industrial metals took their lead from yesterday's strong session on Asian equity markets, where Shanghai had its biggest rise in 10 months, adding 2.9% following upbeat earnings news. Copper hit a three-week high. In London, copper rallied 1.95%, aluminium 0.4%, lead 2.2%, nickel 0.8%, tin 1.3% and zinc 2.5%. US copper was recently up 2.1%.

TRADING THEMES TODAY

PARING BETS: The prospects for a positive session today appear dim, with turmoil on European markets, falls in the US and a speech from Helicopter Ben ahead tonight that may make or break the recent recovery on world markets. There's an outside chance that Reserve Bank Governor Glenn Stevens will say something about interest rates in front of a House of Representatives committee this morning that will fuel a rally, but otherwise it looks like a day to reduce exposure. Gold was volatile overnight and that will likely continue in the lead-up to and aftermath of Bernanke's speech. There were positive signs for base metals overnight but it's hard to foresee a major rebound if equities remain in a funk and US economic data continues to disappoint.

ECONOMIC NEWS: Reserve Bank Governor Glenn Stevens is due to testify before the House of Representatives Standing Committee on Economics from 9.30 am AEST. A huge night ahead in the US includes Ben Bernanke's speech at the Jackson Hole Symposium, preliminary quarterly GDP, the preliminary GDP price index, revised consumer sentiment and revised inflation expectations

Good luck to all.