China Inflation Eases In September

October 14, 2011 01:11 AM

What Traders are Talking About:

* China inflation data eases, but food prices unchanged. China's consumer price index rose 6.1% over year-ago in September, which was down from a 6.2% increase in August. That signals China's aggressive stance on inflation is working. But food prices, which have been the leading driver of inflation in China were unchanged at 13.4% over year-ago in September. Still, soybean futures rallied on the milder Chinese headline inflation data, as traders believe China will eventually start easing monetary policy.

The long and short of it: The positive "spin" on the inflation data by soybean traders signals they are looking for reasons to be bullish. And that signals attitudes have shifted.

* Soy basis firms amid tight supplies, improving demand. Soybean and soybean meal basis have both firmed this week, signaling demand is outpacing supplies. Farmers have been slow to sell new-crop soybeans and there are reports of processors being caught short on supplies. But China has also been a buyer of U.S. beans this week and if Gulf basis continues to strengthen, there will likely be more talk/speculation of Chinese demand.

The long and short of it: Strengthening basis is giving soy traders a fundamental reason to be bullish, especially after USDA unexpectedly cut its soybean crop estimate and 2011-12 soybean carrovery projection earlier this week.

* G20 meeting to focus on euro-zone issues. Finance ministers from the Group of 20 (G20) industrialized nations meet today and Saturday in Paris, with a focal point on the euro-zone debt situation. France will reportedly propose the G20 adopt a set of principles to protect consumers of financial services aimed at restoring trust in the sector and preventing a repeat of the global financial crisis. German Chancellor Angela Merkel said, "There are two key issues for the G20 to discuss. The first is how can we prevent the spread of less regulated financial markets... and how do we deal with shadow banks and create a framework that prevents a troubled bank from hurting the whole sector." Meanwhile, finance ministry officials from both South Africa and Russia question whether the European Financial Stability Facility (EFSF) has enough funding if the financial crisis spreads.

The long and short of it: This meeting of finance ministers is a chance prior to a Nov. 3-4 meeting of G20 leaders to put pressure on the euro-zone to fix its financial situation before it has a more gripping impact around the world.


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