Daytrading August 19 pre-market

Morning traders. Many thanks, Speckled and Oscar, for stepping up yesterday - sterling work.

Market wrap:

Australian stocks may trim yesterday's sharp decline at today's open after Wall Street closed modestly lower following heavy falls in Chinese equities and base metals.

The September SPI200 futures contract rebounded ten points or 0.2% to 5279 despite fresh six-year lows in copper and aluminium overnight as worries about Chinese growth persisted.

US stocks declined for the first time in three sessions as disappointing earnings from consumer bellwether stock Wal-Mart and a rout in Chinese shares overshadowed upbeat housing news. All ten S&P 500 industry sectors recorded mild declines as the benchmark index eased six points or 0.26%. The Dow gave up 34 points or 0.19% and the Nasdaq 32 points or 0.64%.

“We’re seeing China dominating headlines and concern the consumer is not all in right now,” Bill Schultz, chief investment officer at McQueen, Ball & Associates in the US, told Bloomberg. “Until this economic environment and earnings stabilise, we’re going to continue to see the back-and-forth in stocks.”

European and US investors were unnerved by another heavy loss on the Chinese stock exchange yesterday. The Shanghai Composite tumbled 6.15%, fuelling a late sell-off on the ASX. The decline came amid speculation that the government may further devalue the yuan to help exporters as economic growth slows.

"The volatility of those markets in China has been tremendous," Nick Raich, CEO at The Earnings Scout in the US, told CNBC.

Dow component Wal-Mart missed its quarterly earnings target and slashed full-year guidance. The company is used by some analysts as a useful measure of the American consumer's willingness to spend.

There was better news on the economy from the housing market, where new construction increased last month to the highest in eight years. Housing starts rose 0.2% to an annual rate of 1.21 million. However, optimism was tempered by news that permits for new construction dived 16.3%. Read more here.

Copper plumbed a new six-year low overnight, falling briefly below the psychologically-significant US$5,000 a tonne level as the rout in Chinese equities rattled buyers. London copper dipped to US$4,983 before closing 1.5% in the red at US$5,035. Aluminium fell 0.8%, lead 2.2%, nickel 2.5%, tin 2% and zinc 2.9%. US copper for September delivery was recently up % at US$2.42 a pound.

“Concerns that China’s stock market rout could destabilise its economy in transition and impact resource demand continues to drag on commodities… particularly copper which has broken down to its lowest level since 2009,”  Colin Cieszynski, chief market strategist at CMC Markets, told MarketWatch.

BHP shed 1.4% and Rio Tinto 1.28% in US trade. Spot iron ore for import to China yesterday held steady at US$56 a dry ton.

US gold stocks slid 1.58% as gold pared Monday's rise. Gold for December delivery settled $1.50 or 0.1% lower at US$1,116.90 an ounce.

A rebound in crude oil failed to encourage buying in oil companies. The US energy ETF slipped 0.37% even as West Texas Intermediate crude oil for September delivery settled 75 cents or 1.8% higher at US$42.62 a barrel.
  
Declines in resource stocks drove most European markets lower, but the continent's benchmark index scrambled a gain. The Stoxx Europe 600 rose 0.22% even as Germany's DAX slipped by the same percentage, France's CAC lost 0.27% and Britain's FTSE 0.37%.

The dollar was this morning buying 73.43 US cents.

TRADING THEMES TODAY

OVERSOLD REBOUND?: The XJO has given up 400 points in two weeks, triggering 'oversold' indicators and reaching obvious horizontal support and arguably a natural rebound level within the downward trading channel that has developed since April. If this level doesn't hold then we're looking at a trip to last year's October/December double bottom down around 5150. Yesterday's Chinese rout caused barely a ripple overseas, so the reaction here looks overdone. Barring another horror day on Chinese markets, it is likely the focus in the US will tonight swing back to the Fed and the prospects of a September rate rise. Sentiment on Wall Street has swung around so far that it appears that a failure to raise rates next month might be worse for stock market sentiment than a hike. Investors want the Fed to pat them on the back and tell them everything is going to be all right with the US economy.

ECONOMIC NEWS: The Melbourne Institute publishes a leading index of economic indicators at 10.30am EST. The possibility of a September rate hike will dominate trade tonight in the US with the release of consumer inflation data and the minutes from the July Federal Reserve policy meeting. Crude oil inventories are also due.

Good luck to all.