Daytrading July 14 pre-market

Morning traders. Thanks Trees.

Market wrap:

Shares are set to open modestly higher after Wall Street pared its worst week since April with shallow gains on Friday.

The September SPI 200 futures contract rallied 12 points or 0.2% to 5466 as BHP advanced in US trade and European stocks recovered from heavy falls earlier in the week following news that a major Portuguese industrial conglomerate failed to meet a debt repayment.

The S&P 500 reversed initial losses to put on three points or 0.17% on Friday, reducing its loss for the week to 0.9%. The index peaked on July 3 amid the lowest volatility in seven years. The Dow gained 29 points or 0.17% on Friday and the Nasdaq added 19 points or 0.43%.

“This Portugal news, while in and of itself isn’t going to bring down the European economy, is a reminder that things aren’t fixed yet,” Jordan Irving, co-founder of Irving Magee Investment Management in the US, told Bloomberg. “Things may be more tenuous than investors believe, and some bets are off the table.”   
Friday's gains were capped by an indifferent response to earnings from Wells Fargo, the first of the banking heavyweights to report second-quarter profits. Shares in the bank fell 0.62% on signs that profitability deteriorated and costs fell less than expected.

Also limiting gains were signs of disagreement within the Federal Reserve, where officials voiced opposing views on interest rates. Fed hawk Charles Plosser, President of the Philadelphia Fed, called on the bank to raise rates in response to an improving economic outlook, while Dennis Lockhart, President of the Atlanta Fed, said rates should stay at record lows for at least another year.

European stocks rallied for the first time in six sessions as shock over signs of stress at Portugal's Espirito Santo conglomerate began to wear off. The Stoxx Europe 600 index bounced 0.16% as Germany's DAX edged up 0.07%, France's CAC 0.37% and Britain's FTSE 0.26%. The benchmark index plunged 1.1% on Thursday as banking stocks were hit by a wave of selling.


BHP gained 1.3% in US trade and Rio Tinto closed flat as spot iron ore for import to China held steady at US$96.60 a dry tonne on Friday.

Oil ended a fourth losing week at its lowest level in two months. West Texas intermediate crude for August delivery fell $2.10 or 2% to settle at US$100.83, its 10th loss in 11 sessions. The contract lost 3.1% last week as a risk premium associated with violence in Iraq and Libya dissipated, ending the week at US$100.49.

London copper eased from four-and-a-half-month highs amid evidence of rising stockpiles in Shanghai and London. In London, copper dipped 0.1% while lead rose 0.8%, zinc 1.4%, aluminium 0.8%, nickel 0.7% and tin 0.7%. US copper for September delivery edged up 0.2% to US$3.27 a pound.

Gold ended a sixth straight winning week little changed for the session. Gold for August delivery declined $1.80 or 0.1% to settle at US$1,337.40 an ounce but bounced before the end of trade to US$1,340.

The dollar eased a tenth of a cent this morning to 93.8 US cents, from 93.87 cents on Friday.

TRADING THEMES THIS WEEK

US EARNINGS TO TEST VALUATIONS: The optimism built into record US equity index levels faces a test with the first big week of Q2 corporate reports. Banks and tech stocks will likely provide most of the headlines. Among the week's big hitters reporting are: Citigroup (tonight); JP Morgan-Chase, Goldman Sachs, Intel, Johnson & Johnson (tomorrow night); Bank of America (Wed); Google, IBM, Morgan Stanley (Thu); and GE (Fri). The week may see a pick-up in volatility as the market reacts to the latest slew of corporate reports. The first few days of a new season are often 'jerky' until the market gets some sense of the pattern of this season's reports.

PORTUGUESE WOES: The market suffered one of its periodic 'black swan' shocks last week when the parent company of one of the Portugal's largest lenders failed to meet a scheduled payment. How the market behaves from here depends on whether the problems at Espirito Santo prove to be an isolated incident or the canary in the goldmine. The market will soon forget one event, but signs of stress elsewhere in the European banking system would set alarm bells ringing.

CHINA PULSE: Wednesday brings a slew of Chinese economic data, including GDP, industrial production, retail sales and fixed asset investment. The quarterly GDP reading is the big one and is expected to hold steady at growth of 7.4%. New loans and money supply data are also due this week, exact date uncertain.

ECONOMIC NEWS: A solid week ahead of domestic data includes: new motor vehicle sales, minutes from the last Reserve Bank meeting (tomorrow); leading index (Wed); and business confidence and a rival leading index (Thu). This week's US highlights include: retail sales, Empire State Index (tomorrow); industrial production, producer price index (Wed); housing starts, unemployment claims, Philly Fed (Thu); and consumer sentiment (Fri).

Good luck to all.