Daytrading November 20 pre-market

Morning traders. Thanks Lioness and after-market regulars.

Market wrap:

Modest falls on Wall Street and declines in key commodities point to a flat start to Australian trade after three days of strong gains.

The December SPI200 futures contract edged up five points or 0.1% to 5261 as rises in BHP and Rio Tinto in overseas trade cushioned the index from a lacklustre night session. The ASX 200 yesterday surged more than 100 points to extend its gains over the last three sessions to 240 points or 4.8%.

US stocks marked time overnight, a day after their best session in four weeks. The S&P 500 edged down two points or 0.11% at the end of a tight, range-bound session. The Dow shed four points or 0.02% and the Nasdaq 0.03% or less than two points.

“The market probably needs to move sideways here for a while,” David Spika, global investment strategist for GuideStone Capital Management in the US, told Bloomberg. “The way we rebounded from the correction was very rapid and very quick. There are more reasons to go down than up.”

Health care was the biggest weight on the market, falling 1.5% after UnitedHealth warned it was struggling to make money at new 'Obamacare' public health insurance exchanges. The Dow component-company slumped 5.7% after downgrading its profit outlook. The announcement pulled other health insurers lower. Read more here.

Energy was another drag after crude oil dipped below US$40 a barrel for a second day. The US energy ETF declined 1.34%. West Texas Intermediate crude oil for December delivery settled 21 cents or 0.52% lower at US$40.54 after dropping as low as US$39.89. US crude has struggled to gain traction as US inventories continue to increase.

The night's economic data was broadly positive. A measure of manufacturing activity in the greater Philadelphia region rose for the first time in three months. The number of people applying for unemployment benefits last week declined by 5,000 to 271,000, in line with expectations and close to the lowest level in forty years.

Australian iron ore giants BHP and Rio Tinto rallied in US action despite negative signals from commodity markets and the Baltic Dry Shipping Index. BHP put on 1.82% and Rio Tinto 0.92%. The Baltic Dry Index, which measures the cost of moving commodities and is used by traders as a demand gauge, hit a record low yesterday.

“The main issue is the lack of demand for iron ore from China,” Eirik Haavaldsen,  shipping analyst at Pareto Securities in Norway, told Bloomberg. “This market is looking like a disaster and the rates are a reflection of that. It is looking scary for the market and it doesn’t look like there is going to be any life in the market in the near term.”

Several Asian iron ore contracts hit record lows yesterday, according to Fairfax. Spot iron ore for import to China fell 70 cents to US$45.10 a dry ton. Metal Bulletin's benchmark, spot ore at Qingdao, fell 2% to a four-month low of US$45.44 a ton.

Industrial metals rang up multi-year lows on the London Metal Exchange for a second session, before several rebounded: copper, zinc and aluminium - six-year lows; nickel - seven-year low; and lead - five-and-a-half-year low.
London copper closed 0.4% ahead, tin 0.3% and zinc 1%. Nickel lost 1.7%, aluminium 0.3% and lead 0.3%. US copper for December delivery was recently off 0.2% at US$2.07 a pound.

A decline in the US dollar brought relief for precious metals and miners. The NYSE Arca Gold Bugs index rallied 3.36% as the US dollar index fell 0.56% and gold for December delivery settled $9.20 or 0.9% higher at US$1,077.90 an ounce, its best gain in three weeks.

European markets rallied but closed well below session highs as Wall Street struggled for traction. The Stoxx Europe 600 improved 0.43%, Germany's DAX 1.14%, France's CAC 0.17% and Britain's FTSE 0.81%.

The dollar was this morning buying 71.93 US cents.

TRADING THEMES TODAY

CONSOLIDATION: An extremely strong week looks likely to end with a whimper after US stocks took a breather overnight. The headline numbers were dull, but as always there was plenty happening under the bonnet. BHP and Rio fared well considering the dire headlines about iron ore and the Baltic Dry Index. Industrial metals were also pretty ghastly, but may see some reprieve tonight if the US dollar continues to come off. Goldies caught a bid, but the trend is uninviting unless you're a true believer. Back home in the independent republic of Specmania, there were heavy hits yesterday to some recent favourites and a flurry of capital raisings. Tread carefully.   

ECONOMIC NEWS: No significant domestic news scheduled today. China releases a leading index at 1pm EST. ECB President Mario Draghi is due to deliver a speech in Germany tonight. There are no significant reports scheduled for release in the US tonight.

Good luck to all.