China's Economy Showing Signs of Stabilizing, Euro-Zone Still Struggling

October 24, 2012 01:05 AM
 

What Traders are Talking About:

 

* Chinese easing on hold? China's manufacturing sector is showing signs of stabilizing despite data indicating the sector remained in contraction (PMI below 50) for a twelfth consecutive month. China's flash purchasing managers' index (PMI) rose to 49.1 in October from a final reading of 47.9 in September. In addition, new orders, output and export orders all increased. Meanwhile, conditions continue to deteriorate in the euro-zone, with the flash PMI dropping to 45.8 this month from a September reading of 46.1 and German business sentiment dropping to its lowest level in over 2 1/2 years.

The long and short of it: For commodities, the uptick in Chinese PMI is the focal point as this suggests monetary easing policies are working and no additional easing will likely be needed unless conditions start to worsen again.

* FOMC meeting concludes today. The Fed concludes its two-day Federal Open Market Committee (FOMC) meeting around 1:15 p.m. CT. There will be no change in monetary policy and virtually everyone expects the Fed will keep its foot on the gas pedal in regards to its bond-buying program despite signs that the U.S. economy is modestly strengthening.

The long and short of it: With no change in the Fed's stance expected, traders will closely dissect wording of the post-meeting comments to see if there is any change from the last meeting that might hint at further actions down the road.

* Ukraine confirms wheat export ban. Ukraine's Ag Minister Mykola Prysyazhnyuk confirmed there will be a "full ban" on wheat exports starting Nov. 15, as was reported last Friday. One export source told Reuters, "Everything is clear and we can claim force majeure." While Ukraine will not be a player in global wheat trade moving forward, exporters will continue to ship corn from the country. Prysyazhnyuk says the country has plenty of corn and there's "no ground" for a ban on corn exports.

The long and short of it: Impact from the confirmation of the wheat export ban is limited as the news was already "in" the market. But reduced export competition will eventually lead to more demand for U.S. wheat, although I believe that will take longer to develop than many are anticipating.

 

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