What Traders are Talking About:
* Disappointing jobs report. The U.S. economy added just 96,000 non-farm payrolls in August, which was well below the average guess of 125,000 jobs. In addition, there were combined revisions of -41,000 jobs for June and July. While the unemployment rate dropped to 8.1%, it was because the work force declined -- more workers are giving up trying to find jobs. This jobs report raises more questions than it provides answers as there are potential implications for the economy/monetary policy and the Nov. 6 presidential elections.
The long and short of it: Market reaction -- The U.S. dollar is sharply lower and the bond market is rallying as traders feel this increases odds the Fed will announce a third round of quantitative easing (QE3) next week. But price action in the stock market is more reserved after yesterday's strong gains.
* Get it while you can. Egypt purchased 475,000 MT of Russian, Romanian and Ukrainian wheat Thursday just five days after purchasing 355,000 MT from the same countries. Since mid-August, Russia has purchased 1.25 MMT of Black Sea origin wheat. It's apparent Egypt feels Russia, Ukraine and others will soon ban exports. It's also apparent exporters are looking to ship as much wheat as they can before export restrictions are put in place. With Black Sea wheat moving very quickly and exportable supplies expected to run out soon, there's more demand potential for U.S. wheat down the road. But contacts signal Russia may be tapping government reserves for exports as the country looks to take advantage of current prices and panic buying by importers.
The long and short of it: If Russia is tapping government reserves for exports, it could keep them in the export market longer than expected now. But it could also lead to issues down the road if Russia's wheat production doesn't rebound sharply in 2012-13. Think of it as robbing Peter to pay Paul.
* ECB unveils bond-buying plan -- sort of. European Central Bank (ECB) President Mario Draghi announced Thursday the central bank would launch an "outside monetary transaction" program in the secondary sovereign bond market aimed at lowering borrowing costs for struggling euro-zone countries. Importantly, the ECB will not set a limit on how much sovereign debt it can buy under its new initiative and will waive its senior creditor status, meaning it will be treated the same as private creditors in case of default. While the ECB is allowed to decide when to start, continue or suspend bond purchases, it will do so under strict conditionality -- although those conditions were not announced.
The long and short of it: Details of "when" and "how" the ECB plans to carry out its new bond-buying initiative were lacking, but it still gave investors more confidence to add risk, especially with expectations the Fed will announce its own stimulus package -- possibly as early as next week following the Sept. 12-13 FOMC meeting.
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