Daytrading August 27 pre-market

Morning traders. Thanks Trees and after-market regulars.

Market wrap:

Australian shares look set to open more than 1.5% higher after US stocks staged their biggest rally in four years as traders cheered strong economic data, a potential delay in rate increases and further Chinese stimulus measures.

The September SPI200 futures contract surged 83 points or 1.6% to 5208, indicating a possible third straight gain for the ASX today after Wall Street broke a run of six losses that pushed the major indices deep into correction territory.

The S&P 500 opened strongly and then faded towards lunch, as it did on Tuesday, but this time resumed its rise and accelerated to close near its intraday peak, 73 points or 3.9% ahead. The Dow put on 619 points or 3.95% and the Nasdaq 191 points or 4.24%.

“This type of short-term rally shouldn’t be much surprise given recent weakness,” Chad Morganlander, money manager at Stifel, Nicolaus in the US, told Bloomberg. “Eventually the reality that valuations have come off so much will come into play.”

The strong open followed another day of stimulus efforts in China, where the central bank injected 140 billion yuan (US$21.8 billion) into the financial market to help stabilise a share market freefall that has pushed the Shanghai Composite deep into a bear market. The announcement followed cuts to interest rates and bank capital requirements on Tuesday. The latest efforts have enjoyed minimal success to date, with the Shanghai Composite closing 1.27% lower yesterday and losing a quarter of its value in five sessions. Read more here.


Also helping US sentiment was the first indication from a board member of the Federal Reserve that recent market volatility may delay the first rate increase in the US in nine years. New York Fed Bank President William Dudley said overnight that the case for a rate rise next month was "less compelling" in the light of recent events. Read more here.

Fears that the US economy is losing steam just as it enters a rate-raising cycle were temporarily soothed by evidence that business investment picked up last month. Orders for US-made goods increased 2% last month and a category used by analysts as a proxy for business investment rose 2.2%, its second straight monthly improvement. Read more here.

European markets, which staged a strong relief rally on Tuesday night, closed lower overnight as US stocks faded mid-session. The Stoxx Europe 600 shed 1.75%, Germany's DAX 1.29%, France's CAC 1.4% and Britain's FTSE 1.69%.

"Today is the first day in which global equity markets are mixed, not collectively up big or down big," Katie Stockton, chief technical strategist at BTIG, told CNBC. "This could be an early indication of the correction releasing its hold... The extremes in our market internal measures support a relief rally in the days ahead, and we think the magnitude of that rally may hold information about whether the breakdowns that have occurred are real or shakeouts."

Australian miners BHP and Rio Tinto improved for a second day in US trade. BHP rallied 3.52% and Rio 1.2%. Spot iron ore for import to China yesterday dipped 20 cents to US$53.10 a dry ton.

The US energy ETF jumped 3.51% despite a decline in crude oil. West Texas Intermediate crude oil for October delivery settled 71 cents or 1.8% lower at US$38.60 a barrel.

The unwinding of the 'fear premium' in gold continued to pressure US precious metals miners. The NYSE Arca Gold Bugs index dropped another 5.35% and has now erased all of its gains since gold began to rally in late July. Gold for December delivery settled $13.70 or 1.2% weaker at US$1,124.60 an ounce.

Base metals erased most of Tuesday night's gains amid concerns that Chinese efforts to support demand may not be enough to avoid a hard landing in the economy. London copper declined 2.6%, aluminium 1.7%, lead 1.9%, nickel 1.4%, tin 2.1% and zinc 2.2%. US copper for September delivery was recently up % at US$2.42 a pound.

The dollar was this morning buying 71.24 US cents.

TRADING THEMES TODAY

RELIEF RALLY: The ASX has been anticipating a relief rally on Wall Street for the last two sessions and finally got its wish last night. While the first half of the night was a mirror image of Tuesday's failed rally, this time the bulls took control after lunch and delivered the sort of extreme bounce that is typical during sharp retraces. Last night may mark the bottom of the correction or it may prove a temporary stop on the way lower. We won't know for a few days/weeks. The spotlight in the US will tonight likely swing back to the state of the economy, with preliminary GDP figures on tap. The expectation is that growth accelerated last quarter, but bear in mind that a strong reading may not be welcomed by the market because it would boost the case for a rate rise next month. Alternatively, a weak result would heighten fears of a slowdown. Fingers crossed that Goldilocks is in the house. Australian traders will once again keep an eye on China during today's session - a rebound there is overdue and can only help global sentiment.

ECONOMIC NEWS: Quarterly private-capital expenditure is due at 11.30am EST. A night of meaty US data includes preliminary GDP data, weekly jobless claims and pending home sales.

Good luck to all.