daytrading dec 21 pre-market

Morning traders.

Market wrap:

A sharp rebound in shares is on the cards after improved global economic signals catapulted US and European equities higher overnight.

The March SPI 200 futures contract ended the night session 74 points or 1.8% stronger at 4113 as the big Australian miners jumped in overseas trade and oil and metals recouped some of their recent losses.

US stocks took their lead from a successful Spanish bond auction, an unexpected improvement in German business confidence and signs of life in the dormant US housing market, closing near their highs for their best session of the month. The S&P 500 put on 2.98% as the companies most exposed to the economic cycle rallied hardest. The Dow added 337 points or 2.87% and the Nasdaq gained 3.19%.

Builders in the US started more new houses last month than any time in the last year and a half, raising hopes that the housing market is finally starting to recover from the after-effects of the property bubble.

"It looks like our economy is doing pretty good despite the challenges of Europe," the chief investment strategist at Commonfund in the US told Bloomberg. "We're seeing better economic news and the housing report fits right in line with that. The data provides confirmation that the surprise may be that housing is a pretty good contributor to economic activity. It's another piece of news that's helping the stock market."

For once, the overnight news from Europe was mostly positive. German business confidence improved for a second month, defying expectations of a downturn as the euro-zone slides towards recession. Spain's borrowing costs fell and it sold more debt than expected amid reports that European banks were buying sovereign debt as part of a European Central Bank program. Italy's borrowing costs also fell in another hopeful sign that European bond markets are pulling back from the precipice. The news helped push Germany's DAX up 3.11%, France's CAC 2.73% and Britain's FTSE 1.02%.

A rotation back into risk assets pushed the US dollar lower and commodities higher. Miners benefitted from the improved mood, driving Rio Tinto up 5.8% in US trade, BHP 4.6% and Alumina 3.7%.

Oil surged more than 3% as German and US economic data helped the demand outlook and a warning from the US Defence Secretary about Iran's nuclear intentions heightened tensions in the Middle East. February crude was recently up $3.42 or 3.6% at US$97.47 a barrel.

Gold continued to move with risk assets, locking in its biggest rise in a bleak month to date as bargain-hunters tentatively entered the market. Gold for February delivery was lately ahead $19.90 or 1.25% at US$1,616.50 an ounce.

Industrial metals took their cue from strength in German business morale, which continues to defy deteriorating conditions across the continent. In London, copper put on 2.3%, aluminium 2.05%, lead 1.4%, nickel 2.6%, tin 1.7% and zinc 1.9%. US copper was recently up 2.2%.

"It's entirely to do with confidence," a Citi analyst told Reuters. "Anything that looks slightly positive generally causes a short covering rally."

TRADING THEMES TODAY

SANTA RALLY?: This manic depressive market has been prone to long periods of gloom followed by brief outbursts of optimism that offer up to a week of relief. You never know when the rallies will arrive, but last night's action suggests we're at the start of one. Of particular note last night was the decline in Spanish and Italian borrowing costs - if the European bond market starts to mend, that removes a major obstacle to a genuine rally in global equities next year. But that's getting ahead of ourselves. Barring bad news from the ratings agencies, we just might get a nice rally through the Christmas holiday period and into January. Phew.

ECONOMIC NEWS: The Melbourne Institute's leading index is due at 10.30 am AEST. Europe has consumer confidence figures out tonight. Highlights in the US include existing home sales, weekly crude oil inventories and the Treasury Currency Report.

Good luck to all.