daytrading dec 13 pre-market

Morning traders.

Market wrap:

The share market faces a flat start following a late fade on Wall Street after Federal Reserve chairman Ben Bernanke warned he could not cushion the US economy if it goes over the fiscal cliff.

The December SPI 200 futures contract ended the night session three points or less than 0.1% stronger at 4599 as initial exuberance over a new bond-buying program and the prospect of record low lending rates in the US through to 2015 wore off.

US stocks surged after the Fed unveiled a plan to buy US$45 billion in treasuries each month in addition to US$40 billion each month of mortgage-backed bonds. Bernanke said the Fed will hold its key lending rate near zero so long as the jobless rate is above 6.5% and forecast-inflation is below 2.5%, with no change likely until 2015. But the gains withered after Bernanke warned that the Fed lacks the firepower to deal with the US$607 billion "fiscal cliff" package of tax increases and spending cuts due to come into force on January 1 unless politicians reach a compromise.

The S&P 500, which had been up as much as 11 points, closed less than a point or 0.01% ahead at 1,428. An 82-point rally on the Dow faded to a loss of two points or 0.02%. The Nasdaq lost 0.27%.

"We cannot offset the full impact of the fiscal cliff, it's just too big," Bernanke told reporters. He also clarified that the new bond-buying program merely replaces the expiring Operation Twist and does not amount to an increase in economic stimulus.

The Federal Reserve chairman's comments dominated the headlines as political manoeuvrings continued behind the scenes for a budget deal. President Obama cut his offer for tax increases to US$1.4 trillion from US$1.6 trillion but Republican House Speaker John Boehner said the new offer still would not have enough support to pass in Congress.

Earlier, Europe's benchmark index inched to an eighth straight day of gains. The Stoxx Europe 600 index added 0.05% as Germany's DAX advanced 0.33%, France's CAC 0.02% and Britain's FTSE 0.35%.

Dollar-denominated commodities rallied as the Fed's stimulus plans pushed the greenback lower. West Texas crude for January delivery was lately up 97 cents or 1.1% at US$86.75 a barrel after OPEC left its oil production limit at 30 million barrels a day.

Gold spiked with equities as the new Fed program was announced, but pared gains as the US dollar recovered. Gold for February delivery was recently ahead $3.30 or 0.2% at US$1,712.90 an ounce after running as high as US$1,725.

Most industrial metals rallied in London as traders anticipated fresh stimulus in the US. Copper put on 0.2%, aluminium 0.9%, lead 0.9%, tin 0.1% and zinc 0.6%. Nickel eased 0.4%. US copper for March delivery was recently up two cents or 0.6% at US$3.71 a pound.

TRADING THEMES TODAY

UNCERTAINTY ON WALL STREET: The Fed appeared to make a historic change overnight by tying its lending rate to a specific employment target. While that provides greater policy clarity, Wall Street didn't care for the rest of Bernanke's press conference, which made it clear that the Fed doesn't have a magic bullet for the fiscal cliff fiasco. That hardly seems a revelation, but in this news-bite driven environment there's a difference between thinking something and hearing the Fed chairman confirm it. Much of the outlook here today depends on how US futures perform once the dust has settled. I've been saying that our market may be getting short-term toppy and yesterday's XJO candlestick supports that.

ECONOMIC NEWS: Inflation expectations figures are due at 11am EST, followed by new vehicle sales at 11.30am. European leaders assemble tonight for a two-day summit. Highlights in the US include monthly retail sales and producer inflation, weekly jobless claims, business inventories and natural gas storage.

Good luck to all.