daytrading jan 2 pre-market

Morning traders. Happy new year.

Market wrap:

Stocks are poised to surge on the first trading day of the new year unless the US House of Representatives blocks a fiscal cliff fudge that fuelled a sharp rise in US futures following Monday's Wall Street rally.

The March SPI 200 futures contract last traded at 4616 at 2.30pm on Monday, but that figure takes no account of subsequent events in Washington and in China where manufacturing data over the last two days showed continued improvement.

Emini S&P 500 futures were this morning trading 2.7% ahead after the Senate passed a compromise budget deal that avoids automatic tax increases on the majority of Americans and delays spending cuts for two months. The bill was this morning still waiting for approval in the Republican-controlled House of Representatives.

The prospect of a deal helped Wall Street deliver its best final trading session of the year since 1974. On Monday the S&P 500 jumped 1.68% for an annual gain of 13%, its best return since 2009. The Dow rallied 166 points or 1.28% and the Nasdaq added 2.02%.

The Senate voted 89-8 at 2am Washington time on New Years Day to pass a bill that increases income tax on citizens earning more than US$400,000 and raises payroll tax but postpones a decision on automatic spending cuts for two months. President Barack Obama said: "While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country and the House should pass it without delay."

The Republican-controlled House of Representatives has the power to amend, block the bill or pass it as it stands. House Speaker John Boehner, who has given no public indication of his intentions, was due to consult members of his party this morning.

The VIX, Wall Street's "anxiety gauge", plunged 21% on Monday, its biggest intraday decline in more than a year. An index of stocks most exposed to the economic cycle jumped 2.2%.

Chinese manufacturing reports released over the last two days underlined the continuing improvement in economic activity in Australia's biggest trading partner. The official government purchasing managers' index was steady at 50.6 this month, slightly below expectations but still indicating a third month of expansion. The final version of HSBC's private survey was better, hitting a 19-month high of 51.5 following an upward revision.

Oil and most metals rallied on Monday as traders snapped up risk assets. West Texas crude for February delivery advanced 99 cents or 1.1% to US$91.79 a barrel.

Gold broke out of its recent trading range, accelerating gains as it cleared technical resistance. Gold for February delivery advanced $19.70 or 1.2% to US$1,675.60 an ounce.

Copper jumped in US trade on news of a possible budget deal, extending gains in the UK following HSBC's upbeat Chinese manufacturing report. US copper for March delivery spiked six cents or 1.7% to US$3.65 a pound. In London, copper put on 0.7%, aluminium 0.5% and zinc 1.2%. Tin was flat, lead lost 0.4% and nickel fell 0.6%.

TRADING THEMES TODAY

BRIGHT START LIKELY: The indications are that the market will start the year wearing rocket boots. But in trading there's always a "but". We remain hostage to events in Washington, where the Republican-controlled House of Representatives has yet to approve the fiscal cliff deal. The latest reports suggest that at best the bill is unlikely to go through as it stands. That prospect may take some of the wind out of today's rally. Predictably, the deal currently on the table manages to kick some of the toughest decisions further down the road, meaning we're going to be stuck with US budget debates for months to come. Stock exchanges in China and Japan are closed until Friday, which means our market is going to have to think for itself for a couple of sessions. Yikes.

ECONOMIC NEWS: The AIG manufacturing index is due at 9.30am EST and year-on-year commodity prices are scheduled for 4.30pm. Europe has manufacturing data due tonight. Tonight's US highlights are manufacturing PMIs, manufacturing prices and construction spending.

Good luck to all.