daytrading nov 1 pre-market

Morning traders. Happy race day.

Market wrap: A sharp pullback in overseas equities and commodity prices has Australian shares pointed lower ahead of this afternoon's Reserve Bank rate decision.

The December SPI futures contract ended the night session 39 points or nearly 1% weaker at 4245 as futures traders bet that the ASX yesterday pre-empted some of the overnight weakness.

Renewed signs of stress in European bond markets and a sharp rally in the US dollar fuelled declines in European and US stocks, oil and metals. Resource and financial stocks led the way south as the S&P 500 fell 2.47%. The Dow dropped 276 points or 2.26% and the Nasdaq lost 1.93%.

"We've been on a buying stampede," the chief investment strategist at Raymond James in the US told Bloomberg. "The market was due for a pullback. Europe did get a rescue that buys them more time, but they are not anywhere near a resolution to their crisis. We're not out of the woods yet."

The bond market continued to send warning signals about European sovereign debt, driving Spanish and Italian yields to worrying levels as China's official news agency warned that the Asian giant won't be Europe's "saviour". The five-year yield in Italy hit its highest level since the birth of the euro, near 6%. Spain's 10-year yield hit a 12-week high.

The major European markets declined as new economic data showing zero economic growth in Spain and weak German retail sales compounded worries about the lack of detail in last week's debt plan. Britain's FTSE fell 2.77%, Germany's DAX 3.23% and France's CAC 3.26%.

Also unsettling US investors was the collapse of MF Global Holdings and an unexpected decline in a regional business index. MF Global, whose Australian branch is the fourth largest CFD provider here, filed for bankruptcy last night after suffering heavy losses on bad investments in European bonds. The Chicago business index fell from 60.4 in September to 58.4 last month, raising a few eyebrows ahead of the release of the national gauge tonight.

A Japanese intervention in currency markets to weaken the yen sent the US dollar soaring, with collateral damage for commodity markets. The US dollar index, which measures the greenback against a basket of currencies, was lately up 1.85%. Declines in commodity prices helped send BHP down 6.1% in US trade, Rio Tinto 7.1% and Alumina 7.4%.

Copper led industrial metals lower as traders took profits following last week's 30-year record run. In London, copper fell 2.05%, aluminium 1.1%, lead 0.5%, nickel 0.5%, tin 0.2% and zinc 0.4%. US copper was recently off 2.7%.

Precious metals lost ground as the rising dollar sucked money out of alternative assets and MF Global's bankruptcy raised fears of a substantial liquidation of commodity positions. Gold for December delivery was recently down $29.30 or 1.7% at US$1,717.90 an ounce. December silver lost $1 or 2.9% at US$34.28 an ounce.

Oil fell 2% in early trade but pared losses as the session advanced. Crude for December delivery was recently down 64 cents or 0.7% at US$92.68 a barrel.

TRADING THEMES TODAY

PULLBACK CONTINUES AT THE OPEN: No surprise to see some profit-taking in Europe and the US on the last day of one of the best trading months in decades. World markets have run hard lately and a few days of weakness/consolidation is to be expected. For traders, this appears to be a good opportunity to get set for another up-leg. Our market will open weak but how it finishes will depend a great deal on two Chinese manufacturing reports at lunchtime and then this afternoon's Reserve Bank cash rate decision (see below).

INTEREST RATES: A majority of economists are betting that this afternoon will bring a cut in the cash rate from 4.75% to 4.5%, following last week's tepid inflation figures. More cautious heads say the Reserve Bank will more likely sit on its hands for another month. Retailers and other stocks exposed to consumer spending have run hard recently in anticipation of interest rate cuts. The new rate and central bank statement will be posted here at 2.30 pm AEST.

CHINESE MANUFACTURING: The official Chinese manufacturing index is due at noon AEST, followed by the final HSBC gauge at 1.30 pm. The release of the preliminary HSBC gauge revealed a sharp turnaround in manufacturing that helped inspire a solid rally on the ASX last week.

ECONOMIC NEWS: A very busy day for market-moving news brings the manufacturing index at 9.30 am AEST, house price index at 11.30 am, Chinese manufacturing reports at noon and 1.30 pm, the Reserve Bank's cash rate decision and statement at 2.30 pm and commodity prices at 4.30pm. Tonight's schedule includes a slab of British data and in the US, the manufacturing PMI, construction spending, manufacturing prices and vehicle sales.

Good luck to all.