Daytrading September 4 pre-market

Morning traders. Thanks Trees and after-market regulars.

Market wrap:

Australian equity futures point to an early rebound despite a mixed close on Wall Street as an initial rally fizzled.

The September SPI200 futures contract lifted 20 points or 0.4% to 5025, indicating possible respite from a week-long sell-off that has driven the ASX 200 down 236 points from last Friday's close.

Overnight, US and European stocks rose strongly at first on bullish signals from the European Central Bank, before Wall Street succumbed to caution ahead of tonight's closely-watched August jobs report and a three-day weekend. The S&P 500 was up as much as 26 points in the morning, but ended the session just two points or 0.12% ahead. A 199-point rally on the Dow withered to a closing gain of 23 points or 0.14%, while the Nasdaq turned negative, losing 16 points or 0.35%.

“There’s going to be caution not only going into the jobs report but into the long weekend,” Tim Ghriskey, managing director and chief investment officer at Solaris Asset Management in the US, told Bloomberg.

Markets on both sides of the Atlantic moved sharply higher after the European Central Bank delivered a downbeat assessment of the economy, but pledged to extend stimulus measures if necessary. ECB President Mario Draghi said the growth outlook for Europe had deteriorated with the downturn in China, raising the threat of deflation and forcing ECB officials to downgrade GDP predictions through to 2017. The ECB announced revisions to the amount of government debt it can buy from individual member countries. Draghi declared the bank stood ready to continue its bond-buying beyond this month if needed. Read more here.

The prospect of further quantitative easing sent the euro lower and European equities and bonds higher. The Stoxx Europe 600 rallied 2.37%, Germany's DAX 2.68%, France's CAC 2.17% and Britain's FTSE 1.82%.

"Today's ECB press conference was significantly more downbeat in terms of the outlook for euro-zone growth and inflation," Alastair George, Chief Strategist at Edison Investment Research in the UK, told Reuters. "Today's comments have generated the now-traditional QE effect of putting downward pressure on the currency and upward pressure on bonds and equities."


The rally began to unwind in the US as traders turned back to domestic concerns: Monday's Labor Day market holiday and a jobs report tonight that could potentially tilt the Federal Reserve towards a rate rise in two weeks. The night's economic data did nothing to alter the picture of an economy enjoying slow but steady growth. Claims for jobless benefits ticked up by 12,000 to an eight-week high of 282,000 last week but remained at a historically low level. A measure of services activity eased to 59 last month from 60.3 in July but both levels indicate good growth. The trade deficit declined by 7.4% in July as imports decreased and exports improved for the first time in three months.

The closure of Chinese markets for the 70th anniversary of WWII gave China-facing companies breathing space. BHP edged up 0.23% and Rio Tinto 1.11% in US trade, both paring stronger earlier gains as sentiment on Wall Street deteriorated. Spot iron ore for import to China was steady yesterday at US$55.80 a dry ton.

Crude oil rose for the fifth time in six sessions before losing altitude as US equities faded and the greenback strengthened against a falling euro. West Texas Intermediate crude oil for October delivery settled 50 cents or 1.1% ahead at US$46.75 a barrel after trading as high as US$48.42.

The rising greenback helped push gold to a second day of losses and its lowest close in a week. Gold for December delivery settled $9.10 or 0.8% lower at US$1,124.50 an ounce.

The mood was more bullish on the London Metal Exchange, where the prospect of further ECB stimulus pushed copper to a three-week high. London copper put on 2.5%, aluminium 1.9%, lead 0.2% and nickel 2%. Tin eased 0.2% and zinc 0.4%. US copper for September delivery was recently up 2% at US$2.38 a pound.

The dollar was this morning buying 70.2 US cents.

TRADING THEMES TODAY

CAUTIOUS FRIDAY: The ASX has significantly under-performed Wall Street this week and has ample room for a partial recovery today if the instos are so inclined. However, any recovery may have to wait until Monday, with tonight's US jobs report casting a long shadow this week. US traders are terrified that a strong report will force the Fed's hand and guarantee a rate rise later this month - hence the rush to take profits from what looked like a promising rally last night. Back home, this week's economic data has been so dire that there is little wonder the dollar is plumbing six-year lows, dragging equities with it. We're within touching distance of last week's two-year low and may have test support as early as today.

ECONOMIC NEWS: No significant domestic news scheduled today. Chinese markets remain closed today for a public holiday. A big night ahead on Wall Street includes the August non-farm employment change report, unemployment rate and average hourly earnings.

Good luck to all.