Daytrading Sep 18 pre-market

Morning traders. Thanks Trees and after-market regulars.

Market wrap:

Shares look set to open flat after falls in the big two miners and key commodities offset slim gains on Wall Street as the Federal Reserve renewed its pledge to leave rates on hold for a "considerable time".

The September SPI 200 futures contract, which expires today, eased three points or less than 0.1% to 5399 after BHP and Rio Tinto pared their Tuesday night rally in the US, which followed news of Chinese stimulus measures. Iron ore, oil and most metals retreated overnight as the US dollar rallied.

A volatile session on Wall Street saw US stocks spike following the release of a Fed policy statement, then pare gains as the market digested comments by Chair Janet Yellen at a press conference afterwards. The S&P 500 fell as low as 1,993 and swung as high as 2,011 in the aftermath of the Fed meeting before closing three points or 0.15% ahead at 2,001.57. The Dow put on 25 points or 0.15% and the Nasdaq nine points or 0.2%.

The Fed statement soothed fears that interest rates may rise sooner than expected next year by retaining its commitment keep short-term interest rates near zero for a “considerable time” after the central bank wraps up its stimulus program at next month's policy meeting. However, markets were concerned that two committee members voted against the bank's approach for the first time since Yellen became Chair. Stocks came off their highs after Yellen made it clear in her press conference that the commitment to low rates was dependent on economic data. Read more here.

“Yellen may be a hawk in dove’s clothing because she keeps reiterating that economic data can change the pace of rate hikes and the path to normalisation,” Karyn Cavanaugh, senior market strategist at Voya Investment Management in the US, told Bloomberg. “The economy is gaining steam, I think we could see some increase in rates by March or sooner.”

Yellen said the US jobs market was still in recovery and inflation running some way below the Fed's 2% target. The bank reduced its monthly bond-buying by US$10 billion for the seventh straight meeting to US$15 billion a month and is expected to end the stimulus program next month.

The US dollar hit multi-year highs against several rival currencies as forex traders bet that interest rate rises are on their way following the two dissenting votes. The dollar index, which measures the greenback against a basket of currencies, rallied 0.59% to a 14-month high. The Australian dollar was lately off around a cent and a half at 89.6 US cents.

Commodities sensitive to fluctuations in the greenback suffered as the rally continued. Gold for December delivery settled just 80 cents lower at US$1,236.70 an ounce ahead of the Fed policy statement but then slumped $14.10 or 1.1% to trade lately at US$1,224.50, near a nine-month low.

Copper, which had risen in London trade, sagged in the US. US copper for December delivery was recently down more than three cents or 1.1% at US$3.13 a pound. In London, copper edged up 0.4%, while nickel lost 0.1%, aluminium 1.3%, lead 0.4%, tin 0.1% and zinc 0.5%.

Oil retreated after the weekly US inventory report showed an unexpected rise in inventories. West Texas Intermediate crude oil or October delivery dropped 46 cents or 0.5% to settle at US$94.42 a barrel. The contract was lately trading at US$94.06.

The basic materials sector bucked the up-trend in the US, giving back some of their gains this week amid falling commodity prices. BHP fell 2.34% and Rio Tinto 1.73% in US trade. Spot iron ore for import to China yesterday declined for a second day, drifting 30 cents to US$84.20 a dry tonne.

European markets closed in positive territory before the Fed meeting, although risk appetite in the UK was capped by tonight's Scottish independence referendum. The Stoxx Europe 600 index added 0.45% as Germany's DAX put on 0.3%, France's CAC gained 0.5% and Britain's FTSE lost 0.17%.

TRADING THEMES TODAY

FED HEDGES ITS BETS: Suffering Australian investors hoping for a strong lead from Wall Street this morning will have to wait at least another day after the usual confused reaction to a Fed meeting. While market bulls were relieved that the central bank retained the "considerable time" pledge on low rates, bears were heartened that Yellen left the door open to change in her post-statement press conference, that two committee members dissented and that the Fed released a "dot plot" showing where each committee member thinks rates will be by 2017. This chart suggests that rates will rise fast once they start, with a majority in the committee expecting the Fed funds rate to hit 3.75% within three years. Read more here. The outlook for our market today was dampened by a slump in BHP and Rio amid some doubt about the temporary nature of the Chinese stimulus measures announced on Tuesday. The downturn in the broader market has well and truly penetrated the spec sector, which is suffering from low volumes. Trading volumes won't be a problem at the big end of the market today as September equity index derivatives expire.

ECONOMIC NEWS: The RBA Bulletin is due at 11.30am EST. A full menu tonight in the US includes a speech by Fed Chair Janet Yellen, building permits, housing starts, weekly jobless claims and the Philly Fed Manufacturing Index.

Good luck to all.