Daytrading July 28 pre-market

Morning traders. Thanks Trees and after-market regulars.

Market wrap:

The Chinese stock market's biggest plunge in eight years fuelled a global flight to safety overnight and pulled Australian equity futures lower.

The September SPI200 futures contract ended the night session 43 points or 0.8% weaker at 5494 after an 8.48% rout on the Shanghai Composite yesterday sharpened fears about global growth.

European markets plunged more than 2% as investors abandoned risk assets such as equities and commodities for traditional havens including US treasuries and gold. US stocks slumped at the open before paring falls. The S&P 500 ended the night with a loss of 12 points or 0.58%, the index's fifth fall in a row and its longest losing run since January. The Dow shed 128 points or 0.73% and the Nasdaq 49 points or 0.96%.

“The situation in China is causing concern, particularly for international companies that get a good portion of their sales from overseas,” Matt Maley, equity strategist at Miller Tabak in the US, told Bloomberg. “We’re already starting to see cracks in the earnings picture, so if global growth is going to slow, that will make the cracks bigger.”

China's benchmark stock index suffered its biggest one-day fall since February 2007 amid fears that government measures introduced three weeks to arrest a sharp decline in the market are unsustainable. The Shanghai Composite had rallied 16% since the government announced a range of supportive policies, including the suspension of  more than a thousand companies, state purchases of stocks and a ban on substantial shareholders selling their stakes.

“Investors are afraid the Chinese government will withdraw supporting measures from the market,” Sam Chi Yung, strategist at Delta Asia Securities in Hong Kong, told Bloomberg. “Once those disappear, the market cannot support itself.”

China's Securities Regulatory Commission declared late last night that the government will increase stock buying to support the market. Yesterday's rout was sparked by news that industrial profits in China declined 0.3% last month from a year earlier. The market was already on edged after a report on Friday showed factory activity fell to a 15-month low this month. An index of industrial companies suffered a record 9% fall during yesterday's rout.

European stocks closed at their lows as an upbeat reading on German business confidence was overshadowed by the Chinese meltdown. The Stoxx Europe 600 skidded 2.21%, Germany's DAX 2.56%, France's CAC 2.57% and Britain's FTSE 1.13%.

The number of US stocks falling to new lows was the highest in almost a year. Reuters reported that 435 companies listed on the New York Stock Exchange touched lows overnight, the most since last October.

"It's a concern," Marc Chaikin, CEO of Chaikin Analytics in the US, told CNBC. "I think this is a one time when the technicals really have to be your guide. The internals—breadth numbers—are not good."

The Thomson Reuters CRB commodities index slumped to a six-year low as oil and base metals declined. Gold and iron ore bucked the downtrend.

The US energy sector shed 1.44% as crude oil scored its eighth loss in nine sessions amid concerns about the outlook for Chinese demand. West Texas Intermediate crude oil for September delivery settled 75 cents or 1.6% lower at US$47.39 a barrel.

Copper, which depends heavily on Chinese demand, fell to a six-year low. London copper lost 1.4%, aluminium 0.2%, lead 1.5%, nickel 2.7% and zinc 1.1%. Tin gained 1.3%. US copper for September delivery was recently off 1.6% at US$2.34 a pound.

The big two Australian miners skirted the worst of the selling after ending last week at six-year lows. BHP edged up 0.06% in US trade and Rio Tinto slid 1.12%. Spot iron ore for import to China yesterday rallied 70 cents to US$51.40 a dry ton.

Gold attracted haven buying at five-year lows, but the rise did not stem the selling among US miners. The NYSE Arca Gold Bugs index gave up another 4.54% overnight. Gold for August delivery settled $10.90 or 1% higher at US$1,096.40 an ounce after briefly regaining the US$1,100 level.

The dollar was this morning buying 72.76 US cents.

TRADING THEMES TODAY

ALL EYES ON CHINA: The Chinese government's bold (naive?) experiment in intervention in the free market suffered a heavy setback yesterday with the Shanghai Composite's biggest collapse since the dark days of the GFC. The news initially sent investors screaming for the sidelines, but as is usually the case, the ripple effect dampened as the night wore on. While European markets closed at their lows, Wall Street pared its losses after hitting technical support. US stock indices have come back to the level where we might normally expect a bounce, provided the Chinese rout does not continue today. The commodities space looks pretty bleak right now, but BHP and Rio Tinto did not suffer the sort of damage you might have expected last night, considering the declines in base metals and oil and the grim news about their biggest customer.

ECONOMIC NEWS: No significant domestic news scheduled today. Tonight's US highlights are consumer confidence, the Richmond Manufacturing Index, flash services PMI and house price index.

Good luck to all.