Daytrading March 17 pre-market

Morning traders. Thanks Trees and after-market regulars.

Market wrap:

Australian stocks are set to gap higher after weak economic data dampened fears that rate rises are imminent in the US.

The March SPI 200 futures contract bounced 46 points or 0.8% to 5842 as the US dollar retreated ahead of tomorrow night's Federal Reserve policy announcement, easing pressure on stock and commodity prices.

The S&P 500 pared three weeks of losses with a rally of 28 points or 1.35%. The Dow put on 228 points or 1.28% and the Nasdaq 58 points or 1.2%.

“You’ve seen weaker reports and a drop in bond yields,” Donald Selkin, chief market strategist at National Securities in the US, told Bloomberg. “People are thinking it’s not a given that the Fed is going to move toward raising rates any time soon.”

The US dollar index, which measures the greenback against a basket of major peers, was last down 0.54% after data showed factory production, manufacturing in the New York region and confidence among house builders declined.  Factory activity fell for a third straight month during February for the first time since the height of the GFC and output rose 0.1%, a third of the increase that economists expected. The Empire State manufacturing index fell to 6.9 this month from 7.8 in February. The home builders index, which measures confidence, deteriorated for a third month to its weakest level since July.

Merger activity helped the market mood. Life Time Fitness was snapped up by private equity and Salix Pharmaceuticals agreed to an improved offer from Valeant Pharmaceuticals. Other factors contributing to the sharp rebound included short covering ahead of tomorrow's Fed rate call and institutional portfolio realignment ahead of Friday's 'quadruple witching' session, when four different types of options and futures expire.

“Markets have been oversold and beat up and part of the reason for a sharp bounce is some investors are covering short positions ahead of the Fed decision on Wednesday while light volumes amplify this action,” JJ Kinahan, chief derivatives strategist at TD Ameritrade in the US, told MarketWatch.

Wall Street had strong leads from Asia and Europe. The Shanghai Composite jumped 2.26% yesterday after Chinese Premier Li Keqiang committed to supporting economic growth, saying the government retained “comparatively many” policy tools at its disposal. A new record for German shares and a recovery in resource stocks propelled Europe's benchmark index higher. The Stoxx Europe 600 rallied 0.9% to its highest level since June 2007 as Germany's DAX advanced 2.24%, France's CAC 1.01% and Britain's FTSE 0.94%.

Australian heavyweights BHP and Rio Tinto joined the rally in the US, rising 1.5% and 1.46%, respectively. Spot iron ore for import to China yesterday held steady at US$58.10 a dry tonne.

Oil stocks rebounded 1.35% in the US, even as US crude settled at a six-year low. West Texas Intermediate crude oil for April delivery settled 96 cents, or 2.1% lower at US$43.88 a barrel after earlier falling as low as US$42.79.

Gold stocks trailled the broader market as traders favoured riskier assets. The NYSE Arca Gold Bugs index edged  up 0.06%. Gold for April delivery secured a third night of gains with a modest rise of 80 cents or 0.1% to settle at US$1,153.20 an ounce.

News of a rise in inventories held copper down. London copper dropped 0.3%, aluminium 0.1%, lead 1.5%, nickel 1.4% and zinc 0.3%. Tin improved 1.3%. US copper for March delivery was recently down 0.3% at US$2.67 a pound.

The dollar was this morning buying 76.45 US cents.

TRADING THEMES TODAY

REBOUND AHEAD OF RBA: Wall Street rallied overnight against the recent short-term trend as short sellers reduced their exposure ahead of tomorrow night's 'big ticket' event, the Fed's rate call. Aside from the February jobs report, recent US economic data has been mostly underwhelming, leaving the Fed room to delay raising rates. In other words, the recent 'rate hike' panic may be overdone. Central banks are also the focus here today, with the minutes from the last Reserve Bank meeting due at 11.30am EST and the Bank of Japan expected to release a statement later in the day, exact time uncertain.  

ECONOMIC NEWS: The minutes from the February RBA policy meeting are due at 11.30am EST. Tonight's US highlights include building permits and housing starts.

Good luck to all.