Daytrading Nov 20 pre-market

Morning traders. Thanks Shants and after-market regulars.

Market wrap:

Stocks are likely to open at a four-week low after fears of low inflation helped sink US shares, and iron ore plumbed a new five-year low.

The December SPI 200 futures contract fell 10 points or 0.2% to 5365 as market heavyweights BHP and Rio Tinto tested their October lows in US trade after iron ore fell almost 3%.

US stocks retreated from record levels as the minutes from last month's Federal Reserve meeting showed members fretting about weak inflation and global growth. A choppy session saw the S&P 500 fall as much as 12 points before the release of the minutes, hit break-even after the Fed renewed its pledge to keep rates at record lows for "a considerable time" and then fade to a final loss of three points or 0.14%. The Dow was virtually flat at -2 points or -0.01% and the Nasdaq lost 26 points or 0.56%.

“The Fed is admitting they have no idea where inflation is going long term,” Michael Block, chief equity strategist at Rhino Trading Partners in the US, told Bloomberg. “While I admire their candour, this doesn’t make me want to own stocks this afternoon.”

The minutes from the October Fed meeting showed growing debate within the central bank over the commitment to hold rates at current levels for "a considerable time", language interpreted by a majority of analysts as pointing to a first rate rise in September next year. The minutes noted that "a couple" of members dissented on the issue, arguing that the central bank needs to clarify its rates outlook. Read more here. The bank wound up its stimulus program at last month's meeting.

The minutes also showed concern within the bank about public expectations for inflation: “Many participants observed the committee should remain attentive to evidence of a possible downward shift in longer-term inflation expectations. Some of them noted that if such an outcome occurred, it would be even more worrisome if growth faltered.”

Economic data released earlier in the session showed housing starts fell by 2.8% last month, missing expectations, but permits to build increased by more than forecast.

Small caps continued to under-perform the broader market. The Russell 2000 lost 1.08%. Gold stocks were also notably weak, with the NYSE Arca Gold Bugs index slumping 6.03% as the Fed held to its course and polling showed a referendum requiring Switzerland's central bank to hold a fifth of its reserves in gold was unlikely to get over the line. Gold for December delivery dropped $3.20 to settle at US$1,193.90 an ounce and had lately extended its decline to US$1,181.50.

Rio Tinto hit its lowest level in more than a year in US trade after spot iron ore for import to China yesterday dived $2.10 or almost 3% to US$70 a dry tonne, a new five-year low. Rio lost 2.31% and BHP 2.94%. Ore prices have fallen more than 7% this week and 47% so far this year as excess supplies hit the market. Read more here.

A surprise increase in US inventories helped push oil lower for a third straight session. West Texas Intermediate crude for delivery in December settled three cents or less than 0.1% lower at US$74.58 a barrel and had lately extended its loss to 19 cents. Crude supplies in the US increased by 2.6 million barrels last week, compared to analyst expectations of a decline of 660,000 barrels.

Most base metals rebounded as Japan's postponed sales tax hike and snap election raised hopes of increased economic activity. In London, copper gained 0.8%, aluminium 0.5%, lead 0.4%, nickel 3.2% and zinc 0.4%. Tin dipped 0.1%. US copper for December delivery was recently up three cents or 1% at US$3.03 a pound.

Pressure on European-listed mining shares capped gains in Europe. The Stoxx Europe 600 lost 0.04% as a 0.18% decline on Britain's FTSE overshadowed gains of 0.17% on Germany's DAX and 0.08% on France's CAC.

The dollar was this morning buying 86.15 US cents, down about half a cent following the release of the Fed minutes.

TRADING THEMES TODAY

CHINA TO SET TONE: Any hope of a break in this dreary two-week run of ASX falls rides on today's monthly Chinese manufacturing update at 12.45pm EST. Expectations are modest - economists expect HSBC's PMI to ease to 50.2 from a reading of 50.4 last month. Anything better will soothe concerns that the Chinese economy is fast losing steam. Anything worse will likely impact not only the ASX, but iron ore and other commodity prices. The prospect of that report will likely dampen any enthusiasm for the first few hours of trade that survived a rocky session on Wall Street. The Fed pretty much stuck to the script, although gold traders seem to have had different expectations. Once again the miners look like being a major drag on the market today - at least until 12.45.  

ECONOMIC NEWS: No significant domestic news scheduled today. Japan releases trade and manufacturing data this morning, but the day's big event is the HSBC manufacturing PMI at 12.45pm EST. Europe releases manufacturing and services figures tonight. A data-heavy session ahead in the US includes the consumer price index/core CPI, Philly Fed Manufacturing Index, weekly benefit claims, existing home sales, leading index, flash manufacturing PMI and a speech by a Fed member.

Good luck to all.