Daytrading July 18 pre-market

Morning traders. Firstly and most importantly, I extend my sympathies to the Australian families missing kin and friends on the Malaysian Airlines crash. To more trivial matters (and everything seems trivial in comparison), apologies for the interrupted transmission over the last two days. Flu knocked me for six. Thanks for the kind wishes and to Mitta, Trees and Nasa for stepping up. Apologies if I've missed anyone.

Market wrap:

Shares are pointing sharply lower after US stocks suffered their heaviest loss in three months amid fear of escalating conflicts in Ukraine and the Middle East.

The September SPI 200 futures contract slumped 30 points or almost 0.6% to 5453 during a global rotation out of risk assets following reports that a passenger plane had been shot down near the Ukraine-Russia border and that Israel had launched a ground offensive into Gaza.

The S&P 500 moved more than 1% for the first time in 63 sessions, breaking its longest run of low-volatility trading since 1995. The benchmark index fell 24 points or 1.19%, with all 10 industry groups closing lower. The Dow gave up 161 points or 0.94% and the Nasdaq 63 points or 1.42%.

“People are selling out of fear,” Todd Lowenstein, fund manager at Highmark Capital Management in the US, told Bloomberg. “The market is really acute to geopolitical risk. Given where valuations are and the move lately amid all the M&A activity, when you have some geopolitical shocks, people will look for a reason to sell.”
A Malaysian Airlines passenger jet containing 295 people travelling from Amsterdam to Kuala Lumpur crashed in east Ukraine. The Ukrainian president blamed the crash on pro-Russian separatists who have allegedly shot down two Ukrainian military planes in recent days, describing it as "an act of terrorism". Read more here.

“Today’s sell-off makes sense given that there’s been a concern among investors in the last few months that the US could become more closely intertwined in the conflict between Ukraine and Russia,” Kristina Hooper, US investment strategist at Allianz Global Investors, told MarketWatch.

The selling on Wall Street accelerated late in the session following reports that Israel's army has launched a ground operation against militants in the Gaza Strip. A Palestinian news agency described bombardment of Gaza by planes, artillery and ships. Other sources reported Israeli commandos had been sighted on a beach in Gaza.

The heightened geopolitical risks fuelled a classic rotation into traditional havens including gold, silver and US treasuries from 'risk assets'. Energy and industrial stocks were hit hardest in the US, falling at least 1.5%. The Russell 2000 index of small caps sagged 1.56%. The VIX, Wall Street's "fear gauge" surged to its highest level since April.

The night's economic data was mixed. Housing starts unexpectedly fell to a nine-month low last month. First-time claims for jobless benefits declined last week as the labour market continued to improve. Factory activity in the greater Philadelphia region improved this month.

BHP fell 2.03% and Rio Tinto 1.76% in US trade after spot iron ore for import to China yesterday slipped 50 cents to US$97.50 a dry tonne.

Gold saw its biggest rally in a month as traders sought havens from the stock market rout. Gold for August delivery advanced $17.10 or 1.3% to settle at US$1,316.90 an ounce was lately at US$1,318.90. September silver  put on 36 cents or 1.7% at US$21.13 an ounce.

Oil surged amid speculation about further sanctions against Russia, a major energy supplier, and the danger that the conflict in Gaza might expand into oil-producing neighbours. West Texas Intermediate crude oil for delivery in August rallied$1.99 or 2% to settle at US$103.19 a barrel and was lately at US$103.76.

Most base metals eased amid concern about demand from the Chinese property sector following reports yesterday that a Chinese builder may miss a debt repayment next week. Read more here. In London, copper lost 0.2%, nickel 0.5%, lead 0.7% and zinc 0.04%. Aluminium rose 0.9% and tin 0.1%. US copper for September delivery was recently up 0.1% at US$3.22 a pound.

The dollar last traded at 93.54 US cents.

European stocks extended losses following news of the plane crash in Ukraine. The Stoxx Europe 600 index gave up 0.94% as Germany's DAX dropped 1.07%, France's CAC 1.21% and Britain's FTSE 0.69%.

TRADING THEMES TODAY

RUSH TO HAVENS: Geopolitical tensions took a nasty turn for the worse overnight, triggering a typical "risk off" reaction on world markets. The result is likely to be a sharp reversal on the ASX today, with defensives outperforming cyclical sectors. Gold stocks fared well in the US - the HUI rose 2.47% - but energy stocks saw little benefit from the surge in energy prices. Whether this is a knee-jerk reaction or the start of something more serious will depend on how events play out in Ukraine/Russia and the Middle East over the next few days. However, the obvious move for many will be to lock in profits ahead of the weekend for fear that the picture looks worse on Monday.   

ECONOMIC NEWS: No significant domestic news scheduled today. Tonight's US highlights are preliminary consumer sentiment and inflation expectations and a leading index.

Good luck to all.