Daytrading October 20 pre-market

Morning traders. Thanks Trees and after-market regulars.

Market wrap:

Declines in commodities and resource stocks point to a flat start to Australian trade despite slender gains for US share indices overnight.

The December SPI200 futures contract ended the night session unchanged at 5237 as news yesterday that the Chinese economy lost momentum weighed on oil and metals.

The energy and raw materials sectors were the biggest drags as the S&P 500 recovered early losses to close 0.03% or less than a point ahead during a night of corporate earning disappointments. The Dow gained 15 points or 0.08% and the Nasdaq 19 points or 0.38%.

“This earnings season is going to be tough," Joseph Saluzzi, co-founder and co-head of equity trading at Themis Trading in the US, told MarketWatch. "We have already been seeing a lot of misses and downbeat guidance. And when there are growth fears, investors begin to question if the market deserves [its] current price-to-earnings ratio of 16.”

Morgan Stanley shook investors after Q3 earnings and revenue both missed analysts' targets by a wide margin. Shares in the investment bank slid 4.8%. Read more here. Oil services company Halliburton (-1.19%) and toymaker Hasbro (-7.01%) also disappointed. Earnings reports are due this week from roughly a fifth of the S&P 500.

"I think it's earnings-driven," JJ Kinahan, chief strategist at TD Ameritrade, told CNBC. "Morgan Stanley earnings were disappointing. Halliburton was expected to be poor; somehow they managed to do worse than that."

Energy and materials both declined at least 0.7% following a slew of generally downbeat Chinese economic data yesterday. While third-quarter GDP eased less than expected to a six-year low of 6.9% from a Q2 reading of 7%, marketwatchers were surprised by slowdowns industrial production and fixed asset investment last month, according to Nour Al-Hammoury, chief market strategist at ADS Securities in the US. Industrial production eased to year-on-year growth of 5.7% from 6.1% in August and asset investment to 10.3% from 10.9%. The data helped push the US dollar index to a one-week high, which capped demand for dollar-denominated commodities.

The US energy ETF slid 1.96% as the Chinese data was compounded by reports that Iran expects to resume exports before the end of the year. West Texas Intermediate crude oil for November delivery settled $1.37 or 2.9% lower at US$45.89 a barrel. Iranian sources said the country could bring 500,000 barrels a day back online as soon as the nuclear deal with the west is implemented.

BHP dropped 2.3% and Rio Tinto 1.59% in US trade. Spot iron ore for import to China yesterday shed 10 cents to US$52.50 a dry ton.

The NYSE Arca Gold Bugs index retreated 4.1% as the rising greenback pulled the precious metal further from last week's three-month high. Gold for December delivery settled $10.30 weaker at US$1,172.80 an ounce.  

Base metals sold off on news that Chinese industrial production fell to a six-month low and fixed asset investment to the weakest level in 15 years. In London, copper shed 1.5%, aluminium 1.4%, lead 1.1%, nickel 2%, tin 0.5% and zinc 0.4%. US copper for December delivery was recently off 1.7% at US$2.36 a pound.

European stocks edged to a third straight advance despite downward pressure from resource stocks. The Stoxx Europe 600 gained 0.31%, Germany's DAX 0.59% and France's CAC 0.03%. Britain's mining-heavy FTSE lost 0.4%.

The dollar was this morning buying 72.48 US cents.

TRADING THEMES TODAY

CONSOLIDATION TO CONTINUE?: The ASX marked time yesterday and may offer more of the same today. The 5300 level has formed as overhead resistance for the XJO after the two-week rebound in resource stocks ran out of steam. The index may need to do a little work here before any serious attempt to break higher. While the headline Chinese GDP figure yesterday was fine, the devil was in the detail, which capped interest in energy and materials overnight. BHP and Rio shape as drags here today. US biotechs continued to heal. The slowdown in the broader market appeared to catch up with the specs yesterday, although the overall mood lately has been the brightest for some months.

ECONOMIC NEWS: The minutes from the September Reserve Bank policy meeting are due at 11.30am EST. September building permits and housing starts are both due in the US tonight, but marketwatchers may be more interested in speeches from three Federal Reserve officials, including Chair Janet Yellen.

Good luck to all.