Daytrading Sep 5 pre-market

Morning traders. Thanks Trees and after-market regulars.

Market wrap:
Shares are likely to open flat after Wall Street's enthusiasm for a surprise European rate cut faded as a surging US dollar depressed commodity prices.

The September SPI 200 futures contract closed unchanged at 5633 as oil and precious metals retreated and BHP and Rio Tinto were hurt by a new five-year low in iron ore.

US stocks initially followed European markets higher after the European Central Bank ramped up stimulus measures, but gains evaporated as stocks exposed to declining commodity prices turned negative. The S&P 500 fell for a third day, turning a 10-point rally into a closing loss of three points or 0.14% and finishing below 2,000 at 1,997.66. The Dow gave up eight points or 0.05% and the Nasdaq 11 points or 0.23%.

“The market is kind of tired,” Walter Todd, chief investment officer at Greenwood Capital Associates in the US, told Bloomberg. "We saw such a quick bounce off the 1,900 level in early August straight up to a new high. In the very near-term, you’ve got a variety of headwinds and exhaustion around the move higher.”
European stocks surged after the European Central Bank cut three major interest rates by 0.1% and announced a plan to buy euro-backed assets. The Stoxx Europe 600 index jumped 1.14% as Germany's DAX gained 1.01%, France's CAC 1.65%, Italy's FTSE MIB 2.82% and Britain's FTSE 0.06%.

The unexpected scale of the ECB stimulus plan caused ructions in currency markets, driving the euro down more than 1% against the US dollar, lifting the US dollar index up 1.2% and depressing-dollar denominated commodities. The Australian dollar held its ground, lately buying 93.49 US cents.

Also supporting the greenback was another round of solid US economic data. A gauge of services activity hit a nine-year high. Jobs growth in the private sector remained on track, with ADP's payrolls gauge assessing growth at 204,000 last month, down from from 212,000 in July and just below expectations. First-time claims for jobless benefits ticked up 4,000 to 302,000 but remained close to an eight-year low.

Iron ore extended its decline to a new five-year low. Spot iron ore for import to China yesterday dropped $1.40 to US$84.30 a dry tonne. BHP lost 0.57% and Rio Tinto 1.4% in US trade.

Energy producers in the US lost ground for a second day as oil was undercut by the rising greenback and a mildly bearish weekly US inventory report. West Texas Intermediate crude oil  for delivery in October fell 77 cents or 0.8% to settle at US$94.77 a barrel and was lately at US$94.53.

Precious metals declined as the greenback's gains made dollar-denominated commodities more expensive for holders of other currencies. Gold for December delivery was recently down $8.60 or 0.7% at US$1,261.70. December silver was 11 cents or 0.6% weaker at US$19.08.


Nickel hit a seven-week high during a strong session for base metals as buyers bet that stimulus measures will improve demand from the euro-zone. In London, copper advanced 0.4%, nickel 1.7%, aluminium 1.3%, lead 0.8%, tin 0.7% and zinc 1.4%. US copper for December delivery was recently up two cents or 0.7% at US$3.17 a pound.

TRADING THEMES TODAY

DOWNBEAT CONCLUSION TO THE WEEK: A lacklustre week looks like ending near its low after a Wall Street rally ran out of steam last night. Energy and resource stocks took most of the hit in the US. However, overnight movements in commodity markets were notably mixed, with base metals improving even as oil, precious metals and iron ore extended recent losses. Iron ore is nearing the level where some producers become uneconomic, so be careful if 'bargain' hunting. The Gold Bugs index in the US had a rough night, sagging 3.55%. Biotechs and small caps also underperformed the broader market.  

ECONOMIC NEWS: The AIG Construction Index is due at 9.30am EST. Europe releases revised GDP data tonight. The monthly non-farm employment change and unemployment rate are tonight;s US highlights. Also due: average hourly earnings.

Good luck to all.