Daytrading July 11 pre-market

Morning traders. Thanks Trees.

Market wrap:

A soft open awaits following a flight to safety on world markets as a missed debt payment by one of Portugal's biggest lenders revived fears over the strength of Europe's banks.

The September SPI 200 futures contract slid 18 points or more than 0.3% to 5402 but closed well off its lows as US stocks pared sharp initial falls.

The S&P 500 trimmed an early decline of 1% to a closing loss of eight points or 0.4% as traders digested news that the parent company of Portugal's largest bank, Banco Espirito Santo, failed to make a short-term debt repayment earlier this week. The news roiled European equity and bond markets. The Dow plunged as much as 180 points before closing 71 points or 0.42% lower. The Nasdaq fell 23 points or 0.52%.

“People will shoot first and ask questions later when news like this hits,” Lawrence Creatura, fund manager at Federated Investors in the US, told Bloomberg. “The concern of an event like this is always determining whether it’s occurring in isolation or whether it’s the first domino. It’s a classic flight to safety across the equity, commodities and bond markets.”

The turmoil, fuelled by a family-owned Portuguese multi-industry conglomerate called Espírito Santo International, raised contagion fears about Europe's fragile banking system. Shares of the company's listed subsidiaries tumbled up to 17% before trading was suspended. Other Portuguese banks also suffered heavy losses, driving Portugal's benchmark share index, the PSI 20 down 4.18%. Loss on other European markets included Germany's DAX losing 1.52%, France's CAC 1.35% and Britain's FTSE 0.69%.

“The event has hit European financials like a torpedo and has revived investors’ darkest nightmares about Europe,” Peter Garnry, head of equity strategy at Saxo Bank, told MarketWatch.

Contagion fears appeared to ease as the US session neared its end, with many analysts marking the early fall down to profit-taking with equity valuations at their highest since 2011. The S&P 500 has fallen for three of the last four sessions since reaching record levels last week.

Utilities was the only US sector to rise last night as traders fled 'risk assets' like small caps (-1.02%) and financials for US government bonds and the greenback. The Australian dollar dropped back under 94 US cents, recently buying 93.96 US cents.
Australia's largest miners were caught up in the sell-off on Wall Street. BHP fell 1.04% and Rio Tinto 1.73% in US trade. Spot iron ore for import to China yesterday rose another 30 cents to US$96.90 a dry tonne.
Gold benefitted from the flight to havens, but US gold miners sold off all the same. The New York Stock Exchange Arca Gold Bugs Index lost 1.8%. Gold for August delivery rallied $14.90 or 1.1% to settle at US$1,339.20 an ounce, its highest close since March. The contract was lately at US$1,336.10.

A late rebound saw oil broke a nine-session losing run. West Texas Intermediate crude oil for August delivery gained 64 cents or 0.6% to settle at US$102.93 a barrel and was lately trading at US$102.90.

Copper resisted a broadly negative trend in base metals after US jobless claims fell to their lowest level since the GFC. US copper for September delivery was recently up 0.7% or two cents at US$3.27 a pound. In London, copper rallied 0.5%. Nickel lost 1.4%, aluminium 0.7%, lead 0.3%, tin 1.2% and zinc 0.5%.

TRADING THEMES TODAY

RETURN OF CONTAGION FEARS: Short-sellers praying for a trigger for a genuine 10% market retrace may hope they just found it, but there is no reason to think a missed debt payment from a Portuguese bank heralds the collapse of the capitalist system. The likelihood is that the US earnings season will next week command most of our attention and we can go back to neither knowing nor caring about Espírito Santo International. Meantime it looks like a dour week on the ASX will end with a fourth loss from five sessions. The market has been range trading for most of the year and can't seem to find a reason to break out of this band in either direction.

ECONOMIC NEWS: May home loan data is due at 11.30am EST. Corporate earnings are tonight's highlight in the US as the Q2 earnings season starts to pick up.

Good luck to all.