Chinese Data Signals More Economic Stimulus Coming

August 9, 2012 01:07 AM
 

What Traders are Talking About:

* Chinese data signals more pro-growth measures likely. China consumer price index (CPI) eased to 1.8% over year-ago last month, which was down from a 2.2% rise in June and a 30-month low. Food prices increased 2.4%, while non-food prices were up 1.5%. Meanwhile, the producer price index (PPI) came in 2.9% under year-ago in June. Also, factory output slowed and retail sales were up less than expected.

The long and short of it: With inflation not a concern, investors are looking for the Chinese government to take more aggressive steps to ease monetary policy in hopes of boosting economic activity. That's supportive for global stock markets and commodities.

* Spotty rains continue. Scattered rains were seen across the Corn Belt yesterday and are continuing this morning. While the rains (and cooler temps) will help in areas that received them, the precip wasn't widespread. Forecasts signal the spotty rain coverage will continue for the next several days with forecast models continuing to indicate the best rainfall totals are likely across the northern and eastern Corn Belt. Limited rainfall is in the outlook for the central Belt.

The long and short of it: Rains so far have been too spotty to have broad impact and there's nothing in the outlook to signal the rain event will become more widespread.

* World food prices increase in July. World food prices broke a string of three months of declines last month as grains, sugars and to a lesser extent fats/oils increased. The United Nations' Food and Agriculture Organization (FAO) food price index rose 6% to an average of 213 in July. While still well below the peak of 238 in February 2011, there is heightened concern on the global food front as the U.S. and Black Sea region are battling drought. Still, FAO's chief economist says a repeat of the global food crisis in 2007-08 should be avoided unless there's government supply intervention.

The long and short of it: The major difference compared to 2007-08 on the global front at this point is rice supplies and prices. While corn and wheat prices rose sharply last month, international rice prices were nearly unchanged.

 

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