Bit a positive tone in physical commodities. This after Goldman releasing a “buy commodity” forecast. This seems to conflict with their global economic view. Apparently, developing country demand will help carry commodity prices though the softness in the global economy. US planting weather is wet short term followed by a hot & dry pattern forming which is keeping volatility high.
Tag Archives: Economy
Weakness Across Many Markets; Renewed Slowing Threats; Grain Volatility
Generally weak tone to start the new trading week with renewed global economic slowing fears. Weakest China factory orders in 10 months released last night. US Dollar hits multi-month highs. Grains saw significant rains over the weekend and forecast for more rains this week.
Weak Economic News Flow; Grain Planting Uncertain
Slight, big picture, liquidation tone remains in place from last week. Ideas of slowing US economy had equities under pressure. Grains have seen an ongoing debate on planting progress, but cold and rain persist over areas that are not planted yet. Energies are under pressure as well, but one needs to watch for any import interruptions due to flooding on the Mississippi river.
Big Picture, Broad Based Selling Overwhelms Internal Market Fundamentals
Broad based liquidation continues. Fears that China’s economy is slowing was fostered by Industrial Production numbers released yesterday. US Dollar has managed another upside push overnight which has put pressure on metals, energies and grains. Today’s Initial Claims expected to be down 50K.
Saudi’s Concerned Crude Too High; Crop Forecast Warmer & Dryer
After an 8 day $5.21 run in Silver, it’s not surprising to see some “back-and-fill” action. The FOMC meeting today and tomorrow ending with the first ever press conference with expected positive comments on the US economy. Expect significant volatility in the grain markets as weather models change causing additional planting concerns.
Video: Equities Positive; Grains Await USDA
Entering the Wednesday trade on a generally positive note. There are some comments out of Japan regarding their economy and future power sources which seems to be distracting the markets from the nuclear issues. Grain markets will remain volatile ahead, and likely after, tomorrow’s USDA report, which is shaping up to be one of the most important in modern time.
Video: Early Update – 2011.03.29
Kind of a bearish tone in physical commodities. Not a broad-based liquidation fear, but residual fears of economic slowing. US Fed’s Bullard comments in Prague overnight lent support to those concerns. Grains are generally weak leading up to USDA reports. However, our opinion is corn needs to see a large acreage number to continue to the downtrend.
Are Things Turning Around?
In retrospect, the months of March and April appear to have been a turning point. While the bears will discount the six straight weeks of equity market gains, the “green shoots of recovery” dialogue and the slowing of the rate of deterioration in the numbers, we think that the biggest indicator of the potential for recovery is the market’s ability to initially stand up to the threat presented by the influenza A outbreak. While the influenza A situation was still up for grabs as of this writing, we got the sense that the market would prefer to embrace the positives instead of the negatives, and that more than anything suggests the world is working its way past its problems. In addition to the influenza A pressure on April 27th and 28th, the markets were also presented with renewed capitalization threats at two major US financial firms, and even that failed to rekindle a full blown anxiety event. However, even if the influenza A threat is easily discounted, that event has probably added to the burdens facing the economy, especially since the US 1st Quarter GDP reading came in down a surprising 6.1% last week!
On the positive side, both consumer and investment sentiment have seemingly improved, and there continue to be signs that the housing sector is getting into a position to recover. In looking at a chart of the unsold supply of homes, it is clear that the US market is starting to correct its oversupplied condition, and that could be a very critical development. Former Fed Chairman Greenspan has consistently maintained that the supply of unsold homes could be the single most important indicator on the economy, because the housing/sub-prime crisis is considered to be the primary cause of the crisis. However, one probably has to expect further bad news from the US employment situation, as the “green shoots of recovery” really didn’t serve to lift sentiment until the later stages of March. With the influenza A threat complicating things, one might expect to see discouraging US Non-Farm Payroll readings through at least the first week of June. In the meantime, a sideways to higher trade in equities would seem to favor the bull camp after the rather impressive run up in the March and early April time frame.
While copper prices showed a definitive pattern of weakness in the second half of April (after peaking out at the highest levels since last October), a clear pattern of declining LME copper stocks would seem to suggest that global industrial activity is holding together. On the other hand, US crude oil and gasoline stocks have not shown any indication of tightening yet, so there really isn’t any physical evidence of an improvement in the “real” economy.
All things considered, it would appear that an improvement in sentiment or attitude is necessary before a real repair of the economy can be expected. Therefore, we would suggest that traders continue to use the action in the stock market as their primary guide. In the event that equities avoid significant downside action or manage to extend the March/April rally, it could provide markets like cattle, corn, copper and the platinum group metals with some upside potential.
