Daytrading November 25 pre-market

Morning traders. Thanks Trees and after-market regulars.

Market wrap:

A rebound in commodities and a V-shaped rally in US stocks point to a positive start to Australian trade despite heightened global tensions after Turkey downed a Russian jet.

The December SPI200 futures contract rallied 24 points or almost 0.5% to 5254 as oil and metals bounced and Wall Street overcame early jitters.

US stocks followed European markets lower before recovering as resource stocks responded to improved commodity prices. The S&P 500 ended the session 0.12% or less than three points ahead after earlier falling as much as 17 points or 0.6%. The Dow put on 20 points or 0.11% and the Nasdaq less than a point or 0.1%.

“The market is clearly reacting to geopolitical tensions today,” Jeff Mortimer, director of investment strategy for BNY Mellon Wealth Management in the US, told Bloomberg. “Those things weigh on market sentiment a bit and there was a negative tone. Moves may be more exaggerated on lower volume this week” as Americans prepare for Thursday's Thanksgiving holiday.

Airlines and travel-related companies led the initial retreat amid fears that Turkey's actions represented a dangerous new phase in the meeting of the great powers over Syrian air space. The Dow Jones Transportation Average lost 0.63%.

Turkey said it shot down a Russian fighter plane over Turkish air space after the pilot ignored repeated warnings to leave. Russian President Vladimir Putin said there would be "serious consequences" for Russia's relations with Ankara, but did not mention military retaliation.

Russia's benchmark index, the Micex, tumbled 3.1% and Turkey's Borsa Istanbul 100 4.39% amid concerns about an escalation. The Stoxx Europe 600 lost 1.24%, Germany's DAX 1.43%, France's CAC 1.41% and Britain's FTSE 0.45%.

Energy stocks led the US recovery as a pullback in the greenback boosted commodity prices, fuelling a round of short covering. The US energy ETF rallied 2.17% as oil reacted to the heightened tensions. West Texas Intermediate crude oil for January delivery settled $1.12 or 2.68% ahead at US$42.87 a barrel.

Nickel had its biggest gain in three years and copper and zinc snapped back from Monday night's multi-year lows. London copper bounced 2.6%, aluminium less than 0.1%, lead 2%, nickel 5.7%, tin 0.5% and zinc 2.2%. US copper for December delivery was recently up 1.9% at US$2.06 a pound.

"The Chinese selling has been absolutely massive over the last few weeks, so I guess we're getting some short-covering," analyst David Wilson at Citibank told Reuters.


BHP and Rio Tinto rallied in US trade despite a slump in iron ore to its lowest level in at least six years. BHP put on 1.23% and Rio Tinto 0.35%. Spot iron ore for import to China yesterday fell 80 cents or 1.8% to US$43.40 a dry ton. Ore delivered to Qingdao dropped 1.9% to US$43.89 a dry ton, below the July low. Read more here.

Gold stocks jumped higher as precious metals attracted haven buying. The NYSE Arca Gold Bugs index rose 4.32%. Gold for December delivery settled $6.90 or 0.6% ahead at US$1073.80 an ounce.
  
The night's economic data was mixed. Third-quarter GDP was revised upwards to 2.1% from an initial reading of 1.5%, broadly in line with expectations. However, corporate profits fell and exports and consumer spending were revised lower. A separate report showed consumer confidence deteriorated sharply from 99.1 last month to 90.4 this month, the lowest level since last September.

The dollar was this morning buying 72.5 US cents.

TRADING THEMES TODAY

RUSSIA, THANKSGIVING: The outlook for this session is murky, with several cross-currents confusing the trading picture. Wall Street will be winding down tonight for tomorrow's public holiday and a thinly-traded half-session on Friday. A lot of traders will have abandoned their desks already. Turkey's surprisingly aggressive move against Russia seems unlikely to trigger a major conflict, but Vladimir Putin's personal prestige likely requires a gesture in the days ahead. Several commodities were oversold and bounced hard overnight, but there seems little conviction at this stage that it represents a change in trend. Iron ore, the one that matters most to the Australian economy, took out the July low and kept falling. So we may see a bounce in select resource stocks - goldies especially. Ore miners might have to wait.

ECONOMIC NEWS: Third-quarter construction figures are due at 11.30am EST. An exceptionally busy night in the US ahead of tomorrow's public holiday includes durable goods/core durable goods, weekly unemployment claims, personal spending and income, new home sales, revised consumer sentiment and inflation expectations, core price index, house price index, flash services PMI and crude oil inventories.

Good luck to all.