Morning traders. Thanks Trees.Market wrap: Shares are likely to...

Morning traders. Thanks Trees.

Market wrap:

Shares are likely to open lower as heavy falls on commodity markets and negative news from China overshadow a mixed close on Wall Street on Friday.

The March SPI 200 futures contract dropped 16 points or 0.3% to 5456 on Saturday morning as BHP and Rio Tinto slumped after a bond default in China fuelled heavy falls in iron ore and base metals. Further pressure may come from an unexpectedly sharp contraction in Chinese exports announced over the weekend.

The S&P 500 inched to a new record close on Friday after solid monthly jobs figures soothed concerns over the recent run of soft economic data. The index advanced one point or 0.05% to 1,878 as the financials sector rallied 0.5% to a new five-year high. The Dow added 31 points or 0.19% and the Nasdaq lost 16 points or 0.37%.

The US economy generated 175,000 jobs last month, better than the 140,000 new positions anticipated by economists as tough winter weather dampened expectations. However, the jobless rate ticked up to 6.7% from 6.6%, the first increase in 14 months, as more people looked for work. The number of hours people worked fell to a three-year low.

"The headline number on the jobs report was good, though the details were still mixed," John Canally, investment strategist at LPL Financial in the US, told MarketWatch. "More importantly, the underlying trend in the labour market is fairly good - not booming, but certainly not falling off the table."

Materials stocks were the worst of the S&P's 10 industry groups, declining 0.5% after news of a bond default in China fuelled heavy falls in metals. Chaori Solar Energy failed to make an interest payment on a bond last week, undermining the belief that Chinese corporate debt came with a state guarantee. BHP lost 2.04% in US trade and Rio Tinto 3.54% after spot iron ore for import to China slumped $2.70 or 2.3% to US$114.20 a dry tonne, an eight-month low.

"Capitulation is a very mild word to describe what happened to copper today," an analyst quoted on The Australian said of trade on the London Metal Exchange, where copper fell to a seven-month low on heavy volume. Copper lost 3.7%, aluminium 1.7%, nickel 1.5% and zinc 2.5%. US copper for March delivery dived 4.15% or around 13 cents to US$3.08 a pound.

Chinese exports plunged 18.1% last month from a year earlier, according to customs data released on Saturday. The reading was much worse than a 5% increase predicted by economists. Imports increased 10.1% from a year earlier, ahead of the median forecast of a 7.1% increase. Read more here. Inflationary pressures eased last month, with consumer inflation dropping to 2% last month from 2.5% in January.

Oil rallied as US jobs data raised confidence in the economy. West Texas Intermediate crude for April delivery ended the session $1.13 or 1.1% ahead at $102.69 after earlier settling at $102.58 a barrel.

US employment news had the opposite effect on gold, with some traders abandoning traditional hedges in favour of contracts more exposed to economic growth. Gold for April delivery fell $13.60 or 1% to US$1,338.20 an ounce.

Fears of an escalation in the Ukrainian crisis pushed European stocks lower as traders reduced positions ahead of the weekend. The Stoxx Europe 600 index declined 1.25% as Germany's DAX lost 2.01%, France's CAC 1.16% and Britain's FTSE 1.11%.

TRADING THEMES THIS WEEK

CLOUDS GATHER: If the market is looking for an excuse for a retrace, candidates began to pile up last week and over the weekend: debt default in China, a commodities rout, weak Chinese exports, the Ukrainian crisis, the possible return of international terrorism. Collectively they add up to a pretty negative backdrop for the start to the trading week. If Wall Street and the ASX can overcome that lot, the bulls are in total control. Cautious may be best approach until the clouds clear a bit.

METALS PLUNGE: The widely-held assumption that Chinese debt was underpinned by an implicit state guarantee was disproved at the end of last week by the default of a minor solar power company. The news sent shudders through commodity markets as traders fretted that the default could be a watershed event, some even calling it a 'Bear Stearns moment'. The implications for mining stocks and resource prices will take some time to work through. Read more here and here.

LIGHT WEEK ON WALL STREET: A thin stream of US economic data this week may oblige Wall Street to look beyond domestic matters this week. After last week's steady flow of 'big ticket' releases, this week brings little of consequence until Thursday night's retail report and even that is likely to get a free pass due to the weather. Jobless claims the same night and consumer sentiment and the producer price index on Friday are the other potential market-movers.

ECONOMIC NEWS: A solid week of domestic news includes: business confidence (tomorrow); consumer sentiment, home loans (Wed); and employment change, unemployment rate and inflation expectations (Thu).

Good luck to all.