Daytrading May 11 pre-market

Morning traders. Thanks Trees and after-market regulars.

Market wrap:

Australian shares are poised to rebound from their worst week in two years after a 'Goldilocks' jobs report helped Wall Street record its biggest rally in three months on Friday.

The June SPI 200 futures contract bounced 43 points or 0.8% to 5645 as US investors welcomed news that employment improved last month but not by enough to push the Federal Reserve closer to raising its key rate.

The S&P 500 surged 28 points or 0.34% to wipe out its losses for the week and close within two points of an all-time high. The reversal sealed a weekly gain of 0.4% while the ASX 200 tumbled 3.1%, its worst return since June 2013. The Dow gained 267 points or 1.49% on Friday, its strongest advance in three months. The Nasdaq added 58 points or 1.18%.

Unemployment in the US fell to 5.4%, the lowest reading since March 2008,  after the economy created 223,000 jobs last month. Both readings were in line with expectations and a significant improvement from tepid growth of 85,000 in March.

“This is just-right jobs for stocks,” Darrell Cronk, president of Wells Fargo Investment Institute in the US, told Bloomberg. “We hit it right where we needed to be, not too much and not too little. You want an economy growing north of 200,000 jobs, but if you get closer to 300,000 you start to have conversations about inflationary pressures and the economy heating up too fast, so this number is perfect.”

Worries about inflation were soothed by news that average hourly earnings increased by 0.1%, less than expected. The March increase was revised down to 0.2% in another sign that wage growth remains contained despite the pick-up in hiring. Wholesale inventories increased by 0.1%, less than economists expected.

Also helping the mood in the US was a strong rally in Europe after the Conservative government won an unexpectedly convincing victory in the UK's general election. The FTSE jumped 2.32% as the scale of the win erased fears of a hung parliament and months of negotiations to form a coalition. The Stoxx Europe 600 put on 2.87%, Germany's DAX 2.65% and France's CAC 2.47%.

The raw materials sector was a stand-out in the US as all ten S&P 500 industry groups rallied. BHP gained 1.05% and Rio Tinto 1.07% in US trade. Spot iron ore for import to China improved 50 cents on Friday to US$60.50 a dry ton.

The energy sector rose 1.64% after crude oil sealed an eighth straight positive week after the number of drilling rigs deployed in the US declined for a 22nd week. West Texas Intermediate crude oil for June delivery settled 45 cents or 0.8% ahead at US$59.39 a barrel for a five-day rise of 0.4%.

Gold stocks gained 1.13% as US treasury yields declined, increasing the attractiveness of alternative assets. Gold for June delivery settled $6.70 or 0.6% higher at US$1,188.90 an ounce.

Most base metals lost ground as a rising US dollar dulled demand. In London, copper eased 0.2%, lead 1.8%, tin 0.5% and zinc 1%. Aluminium gained 0.3% and nickel 1.1% US copper for July delivery slipped 0.2% to US$2.91 a pound.

The dollar was this morning buying 79.34 US cents.

TRADING THEMES TODAY

BOUNCE: Investors look like getting some respite ahead of tomorrow's Federal Budget after Wall Street erased a week's worth of losses in one fell swoop on Friday. Europe also staged an impressive recovery, leaving the ASX significantly out of sync with other major markets. However, there were domestic factors at play last week, so it's unlikely we'll see a swift return to the old highs. The Reserve Bank hinted last week that rates may gone as low as they are going this cycle and the big banks did not deliver the sort of bumper profit increases that the market has come to expect. Tomorrow's budget is a wildcard and may keep a lid on gains today. IPL reports half-year results this morning.

ECONOMIC NEWS: April business confidence data are due at 11.30am EST. European finance ministers meet tonight, with Greece back on the agenda. The trading week gets off to a low-key start in the US, with the labour market conditions index the only scheduled data of any note.

Good luck to all.