Broad Investor Focus Back On Negative Macro-Economics

August 18, 2011 01:25 AM


What Traders are Talking About:

* Investors move to 'risk-off' stance. Overseas stock markets were under pressure, while U.S. stock futures traded well under fair value overnight and commodities were broadly lower amid a move toward risk aversion given uncertainty with the global economic recovery. The latest "hit" to investors' confidence comes from Morgan Stanley, which cut its global growth forecast for 2011 and 2012 and warned the U.S. and Europe are "dangerously close to a recession." The bank cut its global GDP growth forecast to 3.9% from 4.2% for 2011 and to 3.8% from 4.5% for 2012.

The long and short of it: Investors have a "risk-off" attitude today, which means a lot of the focus in the grain and soy markets will be on macro-economics. That's negative for grain and soy futures.

* Crop concerns should help ease selling pressure. While focus will be mostly on the macro-economic situation, corn and soybean crop concerns may limit selling interest. But it will be hard for grain and soy traders to look past the wave of heavy risk aversion today -- even with crop concerns and bullish long-term fundamentals.

The long and short of it: Crop concerns and bullish fundamentals may not be enough to trigger fresh buying today, but it should help limit pressure compared to other commodities and the stock market.

* Parts of Australia get some rain. Widespread rains fell on Victoria and New South Wales, which should boost wheat crop prospects in the region. Other areas of the country remain dry, but Australian wheat production is expected to be strong this year and crop quality is expected to be much better than last year's crop which produced way more feed wheat than normal.

The long and short of it: The Australian rains add fundamental pressure today, which will make wheat the leader to the downside in the grain and soy complex.


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