Concerns Rise Euro-Zone Mess Is Spreading

November 17, 2011 12:07 AM

What Traders are Talking About:

* Attention squarely on Europe. Concerns within the euro-zone are escalating, with Italy, Spain and even France now seen at increased risk amid rising bond yields in those countries. Traders are waiting with bated breath results of Spanish and French bond auctions later today. Meanwhile, Germany continues to dig in its heels in regards to the European Central Bank's role in helping solve the debt crisis. Germany staunchly opposes having the ECB be the lender of last resort and an unlimited buyer of euro-zone debt. But that's the step many feel is needed to stop the recent sharp rise in euro-zone bond yields.

The long and short of it: Europe continues to draw the bulk of traders' attention, which means more risk aversion.

* A deeper look at China's purchases of U.S. soybeans. The U.S. soybeans China bought this week (500,000 to 600,000 MT) were priced at $606.70 to $622.40. That's roughly $30 to $40 per ton cheaper than current market prices in China and around $10 to $20 cheaper than China's state stockpiler, Sinograin, is reportedly paying for domestically produced soybeans. With the purchase price in China under current market prices, it's unlikely Chinese producers will be willing to sell to Sinograin. And with U.S. prices well below Chinese market prices, there's a good chance Sinograin could purchase more U.S. soybeans, especially if futures take out support at the October low.

The long and short of it: With futures at sub-$12 prices, U.S. soybeans are a relative bargain to Sinograin.


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