Daytrading November 3 pre-market

Morning traders. Thanks Trees and after-market regulars. Best of luck to all with eyes on the racetrack today.

Market wrap:

The share market looks set to pare six days of losses after Wall Street rallied strongly on merger activity and upbeat US and European manufacturing reports.

The December SPI200 futures contract bounced 60 points or 1.1% to 5190 as overseas traders found the positives in Chinese factory updates released over the last two days.

US stocks surged to ten-week highs as a flurry of deals encouraged value-hunters. The S&P 500 advanced 25 points or 1.19% to its highest close since mid-August, ending the session 1.3% off an all-time high. A rebound in biotechs helped the Nasdaq add 73 points or 1.45%. The Dow was hamstrung by a poorly-received earnings update from Visa, trailling the other two indices with a gain of 165 points or 0.94%.

“The global data today shows stable economic conditions, which is improving sentiment,” Mark Luschini, chief investment strategist at Janney Capital Management in the US, told Bloomberg. “M&A [mergers and acquisitions] activity is always a good litmus test for the sentiment of companies and usually speaks well to market conditions, and we’ve seen some big deals lately.”

Manufacturing activity in the US hit a six-month high last month, according to Markit. The final version of its purchasing managers' index rose to 54.1 from a September reading of 53.1 and a preliminary reading of 54. Read more here. The news helped offset concern about the Institute of Supply Management's rival measure, which eased to a two-year low but came in slightly ahead of expectations. The ISM gauge dipped to 50.1 from a September reading of 50.2. Read more here. Construction spending increased 0.6%, in line with expectations.

"Manufacturing data exceeded expectations," Ben Garber, economist at Moody's Analytics Capital Markets in the US, told CNBC. "We also had positive news on construction that points to areas of the domestic economy that are showing strength... I think we get a lot of mixed signals from the data but this data is a positive."

The positive mood for the session was set in Europe, where a positive read on euro-zone factory activity offset initial concerns about Chinese data. The October eurozone manufacturing PMI improved to 52.3 from a flash estimate of 52 and a September take of 52. Britain's gauge hit a 16-month peak. The Stoxx Europe 600 put on 0.34%, Germany's DAX 0.93%, France's CAC 0.38% and Britain's FTSE 0.01%.

While Asian markets sold off yesterday on news that Chinese factory activity contracted for an eighth straight month, European and US traders focussed on indications that the slowdown may be stabilising. The official manufacturing PMI held steady at 49.8 for a second month and Caixin's private measure came in ahead of expectations at 48.3, following a September reading of 47.2.

A string of deals announced overnight in the US included a US$2.7 billion move by TreeHouse Foods on ConAgra Foods' private brands business, a US$23.4 billion move on Visa Europe by Visa, a US$5.9 billion buy-out of Dyax by Shire and reports of progress on Pfizer's offer to Allergan. The iShares Nasdaq Biotechnology Index surged 3.85% overnight to a five-week high.

While the positive mood lifted most US resource stocks, Australian giants BHP and Rio Tinto declined. BHP shed 0.46% and Rio Tinto 1.01% in US trade. Spot iron ore for import to China yesterday dipped 40 cents to US$49.10 a dry ton.

The US energy ETF rallied 2.35% despite weakness in crude oil as Russia announced production hit a post-communist era high last month. West Texas Intermediate crude oil for December delivery settled 45 cents or 1% weaker at US$46.14 a barrel.

Gold stocks shrugged off a one-month low in the precious metal. The NYSE Arca Gold Bugs index edged up 1%. Gold for December delivery settled $5.50 or 0.5% lower at US$1,135.90 an ounce.

London-traded copper hit a one-month low on the Chinese manufacturing report before rebounding to a gain of 0.3%. Also in London, aluminium rallied 0.9%, lead 0.2% and nickel 0.6%. Tin fell 1.1% and zinc 1.5%. US copper for December delivery was recently down 0.2% at US$2.31 a pound.

The dollar was this morning buying 71.46 US cents.

TRADING THEMES TODAY

PLAYING CATCH-UP: Finally a lead so positive that Australia can't ignore it. While many will have a flutter on Flemington, there should be easier gains on offer on the ASX today, especially with the Rate Decision That (Doesn't Quite) Stop(s) A Nation at 2.30pm EST. We were sold a dummy yesterday by those gloomy US futures following the Chinese factory data. By the time Wall Street opened, analysts had decided that the important thing was that the slide had not accelerated. The result was a push back towards the S&P 500's August highs. The Fed rate hold/yuan depreciation panics are now ancient history. We should get a bright start here, with the possibility profit taking around lunchtime ahead of the RBA rate announcement. BHP and Rio Tinto may hold us back, but there should be enough strength elsewhere for a good session. Enjoy your day, wherever you place your bets.

ECONOMIC NEWS: The big event outside Flemington is the 2.30pm Reserve Bank cash rate decision and policy statement. A fairly light night ahead in the US includes factory orders, vehicle sales and economic optimism gauge.

Good luck to all.