daytrading may 1 pre-market

Morning traders.

Market wrap:

The promise of a rate cut this afternoon cushioned Australian stock futures from overseas declines as Spain slid back into recession and US economic data disappointed.

The June SPI 200 futures contract ended the night session just three points or less than 0.1% weaker at 4394 despite a general retreat from risk assets overnight.

US stocks declined after two regional business gauges deteriorated and Spain's second recession in three years cast a pall over European equities. The S&P 500 reduced its loss to 0.39% in the last hour of trade. The Dow lost 15 points or 0.11% and the Nasdaq dropped 0.74%.

A measure of manufacturing in the Chicago region was weaker than the most pessimistic estimate in a Bloomberg survey off 55 economists. The ISM-Chicago business barometer fell to 56.2 - above the 50-point level that indicates expansion but the weakest reading in two-and-a-half years. Another report showed manufacturing in Texas contracted last month, heightening concerns about tonight's national reading.

"Last week we had a bad GDP print, so it's all about the macro[-economic data] this week, and we did not get off to a good start with the weak Chicago PMI number," the chief investment officer of Wedgewood Partners in the US told MarketWatch. "If we get a weaker [national manufacturing] number tomorrow, the bulls are going to be in a fetal position for the rest of the week."

European markets slumped as a double dose of bad news for Spain heightened questions about its ability to negotiate the continent's sovereign debt storm. Standard & Poor's downgraded 11 Spanish banks as first-quarter GDP data confirmed the country had slipped back into recession. Spain's IBEX 35 index tumbled 1.89% to extend its losses since the start of the year to more than 18%. Germany's DAX lost 0.59%, France's CAC 1.64% and Britain's FTSE 0.68%.

A rally in the US dollar pressured commodity prices but most recovered in recent trade. West Texas crude fell towards US$104 a barrel but futures for June delivery were lately off just seven cents or 0.1% at US$104.86 a barrel.

Gold also reversed sharp early losses to trade little changed. Gold for June delivery fell as low as US$1,645.10 an ounce but was lately up 20 cents or less than 0.1% at US$1,665.

"Gold is holding up fairly well considering the commodity sell-off on the stronger dollar and lower stocks," a portfolio manager with Optionsellers.com in the US told MarketWatch. "We are seeing some fresh money coming to the market."

Industrial metals were mixed, with copper losing ground in the UK but inching higher in the US. In London, copper dropped 0.15% and nickel lost 1.2%. Aluminium rallied 0.4%, lead 0.3%, tin 1.2% and zinc 0.9%. US copper for July delivery was recently up one cent or 0.3% at US$3.84 a pound.

TRADING THEMES TODAY

GLUED TO THE NEWS WIRES: We're in for an interesting session with two important pointers for domestic equities due during trading hours today: the official Chinese manufacturing report at 11am EST and then the Reserve Bank rate statement and cash rate at 2.30pm. Both news-events have the capacity to push the market strongly in either direction. Economists expect the official Chinese manufacturing report to continue the recent trend of mild improvement, with the ForexFactory consensus for a reading of 53.6, up from 53.1 last month. With Shanghai closed for equity trade today for the May Day holiday, our market will have to work out the significance of the figures for itself. Then comes the Reserve Bank. There is a strong expectation that the central bank will cut the overnight cash rate by 25 basis points to 4%. Anything less will likely spark a sell-off in equities. However, a 0.25% cut has been so thoroughly anticipated that a sell-off is possible anyway. Stay nimble.

ECONOMIC NEWS: An exceptionally busy day for domestic news includes the manufacturing index at 9.30am EST, quarterly house-price index at 11.30am, cash rate and Reserve Bank statement at 2.30pm and commodity prices at 4.30pm. China's official manufacturing report is due at 11am. Shanghai is closed again today for the May Day holiday, as are most European markets tonight. The main interest in the US tonight is the national manufacturing report. Also due: construction spending, manufacturing prices and vehicle sales.

Good luck to all.