Daytrading August 11 pre-market

Morning traders. Thanks Trees and after-market regulars.

Market wrap:

A rebound on the Australian share market looks set to accelerate after resource stocks spearheaded Wall Street's best night in three months.

The September SPI200 futures contract jumped 36 points or 0.7% to 5481 as BHP and Rio Tinto closed at their highest levels in at least three weeks, and weakness in the US dollar fuelled recoveries in oil and metals.

A combination of a strong rally in China, US merger activity and dovish discussion on US rates helped inspire the S&P 500's biggest rise since May 8, a gain of 27 points or 1.28%. The Dow ended its worst losing run in three years with a bounce of 242 points or 1.39%. The Nasdaq added 58 points or 1.16%.

“China started it off with a 5 percent rally, there was another test of the S&P 200-day moving average, plus merger activity with Berkshire and PCP kind of gave the market an excuse to rally,” Mark Kepner, equity trader at Themis Trading in the US, told Bloomberg.

The Shanghai Composite spiked 4.92% yesterday, soothing fears that government intervention would be unable to arrest a harrowing plunge over the last few months. The rally came after soft weekend economic figures fuelled speculation about further stimulus measures to cushion the economy from a recent slowdown. The rally was driven by state-owned listed companies following reports that the government will force state-owned enterprises to merge to improve the nation's economic performance. Read more here.

Also helping sentiment in the US was news that Warren Buffett's Berkshire Hathaway will buy aircraft equipment-maker Precision Castparts for roughly US$32 billion. News of the conglomerate's largest ever take-over helped dampen fears about stock-market valuations that appear mildly extended by historical standards.

Speculation that the Federal Reserve may not raise rates next month was heightened by Fed Vice Chairman Stanley Fischer, who said the central bank will not move until stubbornly-low inflation normalises. “The interesting situation in which we are is that employment has been rising pretty fast relative to previous performance and yet inflation is very low,” Fischer told Bloomberg TV. “And the concern about the situation is not to move before we see inflation as well as employment returning to more normal levels.” Read more here.

Fischer's comments helped push the greenback to a one-week low, which encouraged a recovery in dollar-denominated commodities. The US energy ETF rebounded 3.21% as West Texas Intermediate crude oil for September delivery settled $1.09 or 2.5% ahead at US$44.96 a barrel.

BHP and Rio Tinto benefitted from speculation that the Chinese government will enact further stimulus measures to boost demand following dire export data released over the weekend. BHP rallied 2.8% and Rio Tinto 4.55% in US trade. Trade in iron ore was suspended for a Chinese public holiday with the spot price last trading last week at US$56.30 a dry ton.

Copper recovered from six-year lows following unexpected news that imports of unwrought copper increased 3% last month, sparking a round of short-covering. In London, copper rallied 2.6%, aluminium 1.8%, lead 1.7%, nickel 3.2%, tin 3.1% and zinc 1%. US copper for September delivery was recently up 2.4% at US$2.39 a pound.

Gold miners enjoyed their best session in weeks as a whiff of a stay on rates pushed the NYSE Arca Gold Bugs index up 7.04%. Gold for December delivery rose for a third session, settling $10 or 0.9 % higher at US$1,104.10 an ounce.

European stocks reversed early losses as resource stocks turned around and optimism increased that Greece is close to securing a third bailout following weekend talks with lenders. The Stoxx Europe 600 advanced 0.69%, Germany's DAX 0.99%, France's CAC 0.79% and Britain's FTSE 0.26%.

The dollar was this morning buying 74.16 US cents.

TRADING THEMES TODAY

REBOUND GATHERS PACE: A bright 24 hours on world markets saw traders find the silver lining in a series of reports and events that could easily warrant a more negative interpretation. China went up because weekend trade figures were so dire that the market figures the government has to do something. Europe rose because Greece might get yet another hand-out. The US went up because economic growth may be too weak to raise rates. I'm generalising here, but you get the idea: the market was ready to rally after last week's sharp retreat and therefore in a forgiving mood. On another day, with a different spin, the same data/developments might very well have fuelled a sell-off. None of that matters for traders, who will thank the trade Gods for a favourable wind for today's session. Resource stocks were notably strong as some of the heat came out of the US dollar. Gold miners, in particular, were finally rewarded with a very strong rally in the US. Company earnings are due today from BKN, COH, CPU, DMP and TCL (source: Fairfax).

ECONOMIC NEWS: July business confidence data are due at 11.30am EST. Tonight's US highlights are preliminary unit labour costs and non-farm productivity, small business index and wholesale inventories.

Good luck to all.