Concern Of QE Phase-Out, Weak Chinese Data Weighs On Global Markets

May 23, 2013 01:04 AM

What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn futures are 1 to 2 cents lower, soybeans are mixed amid mild bull spreading and wheat futures are slightly higher with Chicago contracts leading gains. There's a lot of outside "noise" in the market today and weekly export sales will be released at 7:30 a.m. CT, so the price tone could change by the open this morning. Cattle and hog futures are expected to favor a weaker tone on the open this morning.


* QE easing talk spooks markets. U.S. stock indices closed poorly Wednesday and global stock markets were under pressure overnight following comments by Fed Chairman Ben Bernanke and minutes from the last Federal Open Market Committee (FOMC) meeting. While Bernanke gave no clear indication of when the Fed may phase out its massive asset purchase program, the FOMC minutes showed "a number" of Fed members are in favor of cutting back on the aggressive quantitative easing as soon as the June meeting. At this point, it’s not a matter of if the Fed will start to phase out its aggressive quantitative easing, but when.

The long and short of it: With the stock market appearing a little "frothy" and investors’ security blanket now appearing like it will be taken away sooner rather than later, some of the wild speculative buying seen in the stock market lately is likely to fade.

* More economic concerns out of China. China's HSBC flash purchasing managers' index (PMI) dropped to a 7-month low of 49.6 in May from 50.4 in April, signaling contraction in China's vast manufacturing sector. The new-orders sub-index slipped to an 8-month low of 49.5 as domestic and export orders weakened. The weaker factory data raises additional concerns with economic growth in the country because China's manufacturing sector is critical to overall economic health.

The long and short of it: The weak Chinese PMI data adds to global concerns this morning in what's shaping up as a strong risk-off day in the broad investment world.

* Record pork stocks in storage. USDA's Cold Storage Report showed pork stocks at the end of April were record-large for the month at 698.8 million lbs., which easily topped expectations of 658.5 million pounds. Frozen pork stocks rose 8% from last month and are 6% higher than year-ago. Total beef stocks came in tighter than expected at 510 million lbs, which was lower than the avearge guess of 517.7 million lbs. and down slightly from month- and year-ago. Total poultry stocks rose 11% from last month and are up 8% from year-ago levels at 1.130 billion pounds. Combined total red meat and poultry stocks of 2.366 billion lbs. are up 7.4% from month-ago and 5.4% higher than year-ago.

The long and short of it: The bearish pork stocks figure definitely raises questions on the demand side -- or with USDA's market hog numbers. How the market reacts to this negative data will tell me a lot about the hog market, especially following Wednesday's bullish price performance.


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