daytrading feb 7 pre-market

Morning traders.

Market wrap:

Futures traders expect a rate cut this afternoon to boost Australian equities despite a soft night on Wall Street and falls across key commodities.

The March SPI 200 futures contract ended the night session 15 points or nearly 0.4% stronger at 4271 after yesterday's disappointing Christmas retail sales made it a near-certainty that the Reserve Bank will cut the cash rate this afternoon by 0.25 points to 4%.

US and European stocks, oil and metals all lost ground as the spotlight fell once more on Greece's stalled debt talks. The Dow retreated from Friday's near-three-year closing high but pared initial falls to end the session 17 points or 0.13% weaker. The S&P 500 lost 0.04% and the Nasdaq 0.13%.

Greece's fragile coalition government was struggling to reach a consensus after European leaders warned Greece will not receive a second bailout package until the government approves new austerity measures. Unions and employers are objecting to demands for cuts to the minimum wage and holiday loadings. A weekend of negotiations among political chiefs in Greece failed to produce a final agreement. Talks are set to resume tonight.

"It's an ongoing Greek tragedy," the chief market strategist for Russell Investments in the US told Bloomberg. "We're in the hands of the best efforts of European politicians. That's a source of risk that's difficult to forecast."

European markets fell back after four days of gains, trimming losses after a member of the Federal Reserve said the US housing market had found a bottom and he expected the unemployment rate to fall under 8% this year. Britain's FTSE fell 0.15%, Germany's DAX 0.03% and France's CAC 0.66%.

Oil and metals eased alongside equities in a general retreat from risk assets. US crude for March delivery dropped 69 cents or 0.7% to US$97.16 a barrel.

Gold maintained its correlation with risk assets as a rising US dollar dampened demand for alternative stores of wealth. Gold for April delivery slid $17 or 1% to US$1,723.30 an ounce.

Most industrial metals fell back as traders reported sluggish demand as China's factories re-opened following the Lunar New Year break. In London, copper lost 0.6%, aluminium 1.3%, lead 1.65% and zinc 1%. Nickel rallied 1.4% and tin 0.4%. US copper was recently down 0.9%.

TRADING THEMES TODAY

BUCKING THE OVERSEAS LEADS: It's not often you see our market ignore a soft set of overseas leads, but the prospect of a rate cut this afternoon has done it. Traders like rate cuts because they help company profits and encourage investors to chase better returns from the stock market than they can find in banks (and more money coming into the market tends to inflate stock values). Questions for day traders and index traders today are how much has this afternoon's likely cut been factored in and how much of the early gains will our market hold after 2.30pm? (Assuming the central bank delivers.) The local earnings season gets underway with reports today from NAB, Transurban, Cochlear and Macquarie Group. In the US, biotechs, telecoms and oilers appeared to be the pick of the sectors overnight.

RATE CUT LOOMING: Futures traders took one look at yesterday's lousy December retail sales report and increased the odds on a cut to the cash rate this afternoon from around 73% to 100%. The Reserve Bank will reveal at 2.30pm EST today whether those odds are right. A reduction of 0.25 points would leave the cash rate at 4%. The Reserve Bank posts the news here at 2.30 pm sharp.

ECONOMIC NEWS: The monthly construction index is due at 9.30am EST, followed by the day's main event, the Reserve Bank cash rate announcement and statement at 2.30pm. Greek debt talks resume tonight and Germany releases industrial production data. The main focus of another quiet session on Wall Street is testimony by Federal Reserve Chairman Ben Bernanke on the economic outlook and federal budget before the Senate Budget Committee. Economic optimism and consumer credit figures are also scheduled.

Good luck to all