Daytrading March 2 pre-market

Morning traders. Thanks Trees and after-market regulars.

Market wrap:

Shares look set for a solid start as a rate cut in China and a rally in select commodities offset a soft end to a strong month on Wall Street.

The March SPI 200 futures contract edged up four points or less than 0.1% to 5918 after BHP and Rio Tinto shrugged off mild losses among US stocks as iron ore and oil rallied. However, the market may find impetus in news that the People’s Bank of China cut its benchmark lending and deposit rates by a quarter of a percentage point on Saturday to stimulate growth.  

The S&P 500 ended its best month in three and a half years with a decline of six points or 0.3% on Friday as economic data came in mixed and traders took profits. The fall reduced the benchmark index's gain for the month to 5.5%, its best since October 2011. The Dow lost 81 points or 0.45% on Friday and the Nasdaq 24 points or 0.49%.

US economic growth last quarter was revised downwards to a final annualised rate of 2.2% from an initial reading of 2.6%, according to the Commerce Department. Although the final reading was ahead of economists' expectations for growth of 2-2.1%, it represented a substantial loss of momentum compared to the previous quarter's blistering pace of 5%.

The Chicago Purchasing Managers' Index, a measure of regional business activity, dropped to 45.8, the lowest level since July 2009. Consumer sentiment fell to 95.4 this month from January's 11-year high of 98.1.  House sales bucked the downtrend, with pending sales rising to the highest in 18 months.

"The numbers weren't bad but weren't great," Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in the US, told Reuters. "We've been hearing one million jobs have been created in the last three months, so where are people spending this money?"

Eight of ten S&P 500 industry groups retreated, led by profit-taking in the month's biggest winner, tech stocks. The sector put on 7.9% during February as market behemoth Apple rallied 9.6%.

BHP rallied 1.27% and Rio Tinto 0.06% in US trade. Spot iron ore for import to China bounced 50 cents to US$63 a dry tonne on Friday, paring two days of declines since trade resumed after the Lunar New Year holiday.

The People’s Bank of China cut its one-year lending rate to 5.35% on Saturday and its one-year deposit rate to 2.5% in an effort to encourage spending as the housing market cools and economic growth slows. The move came a day before an official purchasing managers' index showed factory activity contracted for a second straight month in February, but by less than economists expected. The manufacturing PMI improved to 49.9 from a January reading of 49.8. Economists had anticipated a fall to 49.7. Read more here.

Oil broke a seven-month losing run with Brent crude recording its biggest rise in nearly six years, but a rise on Friday did little for US oil stocks. West Texas Intermediate crude oil for April delivery settled $1.59 or 3.3% ahead on Friday at US$49.76 a barrel for a 3.2% gain for the month. Brent crude continued to outperform, rising 18.1% over February. US oil stocks paced the broader market decline on Friday, losing 0.44%.

Gold stocks found buyers in the US as the downbeat economic data was interpreted as dulling the case for rate rises later this year. The NYSE Arca Gold Bugs index rallied 1.45%. Gold for April delivery settled $3 or 0.3% ahead at US1,213.10 an ounce as the US dollar declined.

Copper ended its best month in two years mixed in the UK and US but little changed for the session as an increase in inventories capped demand. In London, copper edged up 0.1% for a monthly gain of 7%. US copper for March delivery fell a fifth of a cent or 0.1% to US$2.71 a pound. London aluminium advanced 0.6%. Lead lost 1.8%, nickel 2.1%, tin 0.8% and zinc 0.3%.

Europe's benchmark share index marked a new seven-year high as German stocks set a new record. The Stoxx Europe 600 improved 0.39% as Germany's DAX put on 0.66%, France's CAC rose 0.82% and Britain's FTSE fell 0.04%.

The dollar was this morning buying 78.23 US cents.

TRADING THEMES TODAY

CHINESE CUT TO HELP MINING SENTIMENT: A round of end-0f-month profit-taking in the US on Friday is likely to be overshadowed by weekend news that China has joined the global rate-cutting cycle. The implications are positive for demand for Australian resources, principally iron ore, copper, gold and oil. Market sentiment may also be helped by the fact the official Chinese February factory gauge was not as weak as economists anticipated. HSBC releases a rival measure at 12.45pm EST today, which may also bring good news. Those of a bearish disposition will point out that the first day of a new month sometimes sees dumping by institutional traders of shares purchased at the end of the previous month to boost their monthly returns, however, this is generally more evident at quarter-ends and where the returns are less lavish than they were in February.

ECONOMIC NEWS: A busy day for domestic news includes AIG's Manufacturing Index at 9.30am EST, the MI Inflation Gauge at 10.30am and quarterly company operating profits and monthly house sales at 11.30am. However, that lot may be overshadowed by HSBC's Final February Manufacturing PMI for China at 12.45pm. Europe releases manufacturing, employment and inflation data tonight. US highlights include twin manufacturing gauges, personal spending and income, construction spending, manufacturing prices and the core price index.

Good luck to all.