Daytrading October 26 pre-market

Morning traders. Thanks Trees and weekend regulars.

Market wrap:

Australian shares are primed for a fresh two-month high after a Chinese rate cut and a hat-trick of strong tech earnings propelled Wall Street sharply higher.

The December SPI200 futures contract surged 55 points or 1% to 5378, positioning the benchmark share index for its first shot at the 5400 level since mid-August. The gains came in spite of a soft session for oil, iron ore and most metals.

The S&P 500 locked in a 2.1% gain for the week with a rise of 23 points or 1.1% on Friday as technology giants Amazon, Microsoft and Google parent company Alphabet beat analyst estimates. The tech-heavy Nasdaq soared 112 points or 2.27% to a nine-week high. The Dow, which has Microsoft as a component but neither Amazon nor Alphabet, trailled with a rise of 158 points or 0.9%.

“It’s great news to have these gorillas beat estimates," Vincent Delisle, portfolio strategist at Scotia Capital in the US, told Bloomberg. "Anytime you have Google, Microsoft and Amazon up it will balance out some of the weaker and more lacklustre numbers recently. The market wants to feel good and it’s a cherry on top with these trademark companies beating estimates.”

Microsoft jumped 10.08% to its highest level since the first tech boom peaked in 2000, Amazon gained 6.23% and Alphabet 5.61%. Both Amazon and Alphabet logged all-time closing highs. The technology sector as a whole rallied 3%, cementing its role as the lynchpin of a rebound from the August market low that has lifted the S&P 500 11%. The benchmark index has advanced for four straight weeks. Technology is one of the few sectors expected to deliver growth this quarterly earnings season. Apple is scheduled to report tomorrow.  

Optimism over easy monetary policy was sharpened by another rate cut from the People's Bank of China, the country's sixth in a year as the government tries to 'foam the runway' as the economy slows. The central bank lowered its key lending rate by 25 basis points to 4.35% and its one-year deposit rate by 25 basis points to 1.5%. Capital reserve requirements for banks were eased to encourage lending. Read more here. The news followed strong indications from European Central Bank President Mario Draghi on Thursday that Europe's central bank is committed to further stimulus measures before the end of the year.

"Chinese officials are stepping on the gas," Frederic Neumann, co-head of Asia Economics Research at HSBC Holdings in Hong Kong, told Bloomberg. "The joint move on interest rates and the reserve-requirement ratio shows that Beijing is determined to get the car out of the mud and get things moving again."

Europe's benchmark index surfed the Chinese rate cut to its strongest close since mid-August. The Stoxx Europe 600 rose 1.99%, Germany's DAX 2.88%, France's CAC 2.53% and Britain's FTSE 1.06%.

The general mood of optimism offset a downbeat session for commodity markets as the US dollar index rallied 0.66% to its highest point in ten weeks. BHP rose 1.05% and Rio Tinto 0.87% in US trade even as iron ore slid closer to the US$50 a ton level. Spot iron ore for import to China declined 50 cents on Friday to US$50.90 a dry ton.

The US energy ETF retreated 0.23% as US crude oil locked in a 6% loss for the week. West Texas Intermediate crude oil for December delivery settled 78 cents or 1.7% lower on Friday at US$44.60 a barrel after data from Baker Hughes showed little change in the number of rigs actively drilling in the US.

Gold stocks joined the rally, with the NYSE Arca Gold Bugs index rising 3.12%. Gold for December delivery settled $3.30 or 0.3% weaker at US$1,162.80 an ounce for a loss of 1.7% for the week.
  
The rising greenback helped knock copper off a one-week high following news of Chinese stimulus measures. London copper shed 1.1%, lead 0.4% and tin 0.7%. Aluminium improved 0.4%, nickel 0.8% and zinc 0.3%. US copper for December delivery declined 1.5% to US$2.35 a pound.

The dollar was this morning buying 72.09 US cents.

TRADING THEMES TODAY

REBOUND TO CONTINUE: A week of almost unrelenting good news ended with a Chinese rate cut on Friday and optimism that the US earnings season has enough pockets of strength to offset obvious weakness in many of the companies exposed to the global economic cycle. Unless I missed something over the weekend, we're in for a bright start to the week and potentially a run at 5400 in the first half hour of trade. We're not into overbought territory yet, but may well get there by the middle of the week if this vigorous rebound continues. There was so much going at the big end of the market on Friday that the specs were a little slow. The specs may take up the slack later this week once momentum slows elsewhere.

ECONOMIC NEWS: No significant domestic news scheduled today. New home sales is the only significant report scheduled tonight in the US.

Good luck to all.