Attention on Macro-Economics Amid Very Fluid Euro-Zone Situation

September 14, 2011 09:19 AM

What Traders are Talking About:

* Investors closely watching all developments in euro-zone. Odds Greece will default on its sovereign debt obligations are rising and investor confidence is sinking by the day. Greek Prime Minister George Papandreou will hold a conference call at 11:00 a.m. CT with German Chancellor Angela Merkel and French President Nicolas Sarkozy to discuss debt crisis. The embattled Greek leader will reportedly ask Merkel and Sarkozy to push their banks to increase their participation in a Greek debt swap plan. Meanwhile, Moody's downgraded credit ratings for French banks Societe Generale SA and Credit Agricole SA, citing funding and liquidity problems. Moody's says the Credit Agricole downgrade is due to Greek exposure, but the rating cut for Societe Generale is not. The European Central Bank said it will lend $575 million to the two banks amid concern they are finding it harder to borrow dollars. Meanwhile, the head of the European Commission said it would soon present options for the introduction of euro-zone bonds despite Germany's opposition to the idea. Also, Italy's parliament is expected to approve a revised austerity plan today as the country scrambles to stave off further financial pressures.

The long and short of it: The euro-zone situation is very fluid and traders are now reacting to every bit of news (and some speculation) that is coming out of the region. Uncertainty is very high.

* Freezing temps, frost across Upper Midwest. Temps dipped below freezing in northern North Dakota overnight as a cold air mass moved south out of Canada. Other areas of the Upper Midwest experienced a frost, but didn't fall below freezing. The cold temps are expected to dip even further south tonight as there are freeze warnings and frost advisories for much of the Upper Midwest. The key on crop damage will be how low temps got for how long. A "killing" freeze is typically classified as sub-28-degree temps for more than 3 hours.

The long and short of it: Some crop damage will occur because of the frost/freeze event, but price action this week signals traders have other concerns on their minds.

* Fundamentals still matter. It may not seem like it right now, but market fundamentals will eventually become a focal point in grain and soy futures again. For now, however, macro-economic concerns are dictating price action. For fundamental focus to resurface, there likely needs to be a rush of value buying -- by end-users and/or funds.

The long and short of it: Macro-economic concerns are trumping bullish fundamentals for now. But price pressure on grain and soy futures will eventually trigger value buying again.


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