What Traders are Talking About:
* China factory activity continues to slow. China's flash HSBC purchasing managers index (PMI) for March dropped to 48.1 from 49.6 in February -- the fifth consecutive month China's factory activity has contracted (sub-50 reading). New orders (largest component of the index) dropped to 46.2, while manufacturing output (second largest component) fell to a two-month low. The data not only raises concerns about export demand, but also domestic demand. With China's factory activity contracting -- and the pace of decline quickening -- there are renewed concerns about a hard landing for its economy. The weak data and concerns about the health of the Chinese economy point to more near-term monetary policy easing through lower bank reserve requirements and/or lower interest rates.
The long and short of it: China's slowing economy is likely to limit imports of some commodities, especially industrial metals. But a further easing of monetary policy may encourage purchases of ag commodities, which are in high demand.
* Euro-zone PMI also declines. The euro-zone composite PMI for March fell to 48.7 from 49.3 in February. Most concerning is a sharp drop in factory activity in region's two largest economies -- Germany and France. The manufacturing PMI fell to 47.7 in March from 49.0 in February. Factory output levels dropped to 48.8 from 50.3 last month. And the jobs index fell to its lowest level in two years, at 49.0 in March from 49.1 February. Despite the European Central Bank's aggressive efforts to keep the euro-zone economy "greased," demand for goods is slowing.
The long and short of it: The unexpected drop in the composite PMI seemingly squashes any hopes the euro-zone might avoid falling into recession this year.
* Funds aggressively sell corn. Funds have sold 36,000 contracts (180 million bu.) of corn so far this week in an aggressive liquidation move. While old-crop corn stocks are tight, there are expectations for a big jump in corn acreage, which is putting fundamental pressure on the market. Additionally, negative global economic concerns are worrying investors.
The long and short of it: Despite the aggressive selling so far this week, funds still hold a relatively large net long position, which could lead to more near-term liquidation pressure unless there's a compelling "reason" to buy.
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