Daytrading September 14 pre-market

Morning traders. Thanks Trees and after-market regulars.

Market wrap:

Australian shares look likely to follow Wall Street higher this morning, but weak Chinese economic data released over the weekend may limit any advance.

The September SPI200 futures contract rallied 25 points or 0.5% to 5093 on Saturday morning as US stocks ended their best week in two months with a late upswing.

The S&P 500, which had been down as much as 0.7% in the first hour of trade, closed nine points or 0.45% ahead on Friday to extend its weekly tally to 2.07%. The Nasdaq added 26 points or 0.54% for a weekly gain of 2.96%. Both indices had their strongest week since the one ending on July 17.  The Dow put on 103 points or 0.63% for a five-day rise of 2.05%, its best result since March.

The rally came as a panic over a Chinese slowdown continued to abate and as traders prepared for the possibility that the Federal Reserve may raise US rates this week for the first time in nine years. The Federal Open Market Committee gathers tomorrow night for a two-day meeting that the market assesses as having a 28% chance of producing a rate rise.

“It’s normal to have volatile markets ahead of such an important decision from the Fed,” Ralf Zimmermann, strategist at Bankhaus Lampe in Germany, told Bloomberg. “It’s been such a long time - there are a lot of traders who have never seen a rate hike in their career. Investors are pricing in a pretty low probability of a rate hike at the moment, so the risks are more to the downside. Markets will have to live with uncertainty until then.”

Weekend data revived concerns over a deceleration in the Chinese economy. August investment and factory figures both missed expectations. While year-on-year industrial production ticked up to 6.1% from a July reading of 6%, analysts had predicted a rebound to 6.3%. Spending on fixed asset investments declined to growth of 10.9%, also below expectations, from 11.2% in July. Retail sales surprised to the upside, coming in at 10.8%, versus a July level of 10.5% and expectations for growth of 10.6%.

"The pace of slowdown in fixed-asset investment is relatively fast - dragged by the property sector, while the factory sector remains sluggish," Zhou Hao, senior economist at Commerzbank in Singapore, told CNBC. "Overall, the economy is very weak and the central bank may have to continue cutting interest rates and banks' reserve requirement."

Last month's stock-market volatility took its toll on consumer sentiment in the US, which slumped to its lowest level in a year, according to data released on Friday. The University of Michigan index dropped to 85.7 from 91.9 in August, well below the consensus of 90.3. Read more here.

Momentum in tech and health stocks drove the US rally as eight out of ten industry groups improved. Apple and Dow component UnitedHealth strong for a second session. Energy and raw materials declined.

The US energy ETF declined 0.89% as crude oil wrapped up its first weekly decline in three weeks with another slide on Friday after Goldman Sachs downgraded its price outlook. West Texas Intermediate crude oil for October delivery settled $1.29 or 2.8% lower at US$44.63 a barrel after Goldman claimed a market oversupply could push crude as low as US$20 a barrel. The loss for the week was roughly 3%.

Australian heavyweights BHP and Rio Tinto bucked the downtrend in resource stocks. BHP lifted 0.38% and Rio Tinto 2.28% in US trade. Spot iron ore for import to China was flat on Friday at US$58.50 a dry ton due to a public holiday.

US gold stocks edged up 0.68% despite a third straight weekly fall in the precious metal. Gold for December delivery settled $6 or 0.5% in the red at US$1,103.30 an ounce for a weekly loss of 1.6%.

Copper backed down from a seven-week high during a mixed session on the London Metal Exchange amid uncertainty over the prospects for China and the US. London copper dipped 0.5%, lead 1.4%, nickel 1.7% and zinc 0.1%. Aluminium gained 0.2% and tin 1%. US copper for December delivery rose 0.2% to US$2.45 a pound.

Europe's benchmark index declined with the early weakness on Wall Street but rose enough earlier in the week for its best weekly tally in almost two months. The Stoxx Europe 600 gave up 1.01%, Germany's DAX 0.85%, France's CAC 1.04% and Britain's FTSE 0.62%. The Stoxx 600's weekly gain of 0.7% was its best return since mid-July.

The dollar was this morning buying 70.83 US cents.

TRADING THEMES TODAY

VOLATILITY TO CONTINUE: While the August low for the ASX has held to date, the market has struggled to make a convincing move higher. Unfortunately that leaves open the possibility that further weakness lies ahead. How this week plays out depends largely on Wednesday night's US rate decision. While the Federal Reserve policy meeting is one of those events with a binary outcome, the reaction to either result is by no means certain. Some argue that a rate hike would be a vote of confidence in the economy, others say the economy is not growing strongly enough to handle the hit. The reaction to weekend data out of China is also uncertain - lately 'bad' economic data has been seen as a plus because it adds to the pressure on the government for more stimulus. Interesting times.

ECONOMIC NEWS: No significant news scheduled here today or in the US tonight.

Good luck to all.