Chinese Economic Data, German Sentiment Cause Investors To Pull Back The Reins On Risk

October 18, 2011 01:26 AM

What Traders are Talking About:

* China GDP slowest in more than 2 years. China's third quarter GDP tipped the scales at a robust 9.1%. But that was lower than expected and down from 9.5% in the second quarter and 9.7% in the first quarter of this year. It was also the slowest growth pace since the second quarter of 2009. Also, Chinese output data for September slowed. That combination signals China's monetary tightening is taking a grip and raises concerns about Chinese commodity demand, especially for industrial metals and energies. U.S. soybean futures dropped sharply overnight after soybean futures at the Dalian Commodity Exchange posted hefty losses on the disappointing Chinese economic data.

The long and short of it: Chinese economic growth is slowing faster than expected, which is yet another negative macro-economic factor for traders to deal with.

* Germany throws water on bulls' fire. German investor sentiment fell to its lowest level in nearly three years in October. The ZEW monthly survey showed economic sentiment dropping to -48.3 from -43.3 in September, which was below expectations. This was the eighth consecutive decline and the lowest level since November 2008. Meanwhile Germany's finance minister warned this weekend's European Union summit would not provide a "definitive solution" to the region's sovereign debt crisis.

The long and short of it: News and data out of Germany this week is causing investors to actively trim risk exposure they added last week when it appeared the worst of the euro-zone problems were in the past.

* Japan considering shifts to beef rules. Cattle futures rallied in the face of cash market uncertainty and negative outside markets yesterday. The reason: News surfaced Japan is mulling changes to its beef rules. Japan is reportedly considering raising the allowable age for imported beef from the U.S. (and Canada) to 30 months or younger from the current standard of 20 months or younger. The changes, if implemented, would likely come sometime in 2012.

The long and short of it: Japan is "the" key market for U.S. beef. (Re)Opening more doors to that market would be price-bullish.


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