Financial Markets Digest ECB Decision, Awaiting FOMC Minutes and Jobs Data

October 4, 2012 01:34 AM

What Traders are Talking About:

* ECB leaves interest rates unchanged, Draghi comments awaited. As expected, the European Central Bank left its benchmark interest rate unchanged at 0.75%. Traders are now focused on ECB President Mario Draghi's comments at 7:30 a.m. CT. It's hoped Draghi will shed some light on the bond-buying program the ECB announced last month and possibly comment on the Spanish situation. In addition to the ECB, traders are also highly focused on the minutes from the Sept. 12-13 FOMC meeting, which will be released this afternoon and the U.S. employment report that is out Friday morning.

The long and short of it: Financial markets are in wait-and-see mode as a barrage of key economic data hits the market today and tomorrow. Unless there are bullish surprises, however, traders are unlikely to take a strong "risk-on" stance.

* Short-covering, bargain buying surface in soybeans. After a $2.85 plunge in Nov. soybean futures in exactly one month, the contract rebounded yesterday and continued higher overnight amid short-covering and bargain buying. Ardent bulls argue the downside was overdone and short-term lows are in place as seasonals point futures higher. But while that may turn out to be the case, there have been no clear signs from the demand side of the market that prices have fallen "far enough." Many traders are waiting on signs of fresh (and aggressive) Chinese buying before they actively pump money into the long side of the market again.

The long and short of it: November soybean futures retraced 50% of the rally from the June low to the all-time high before bouncing yesterday, marking yesterday's low as key near-term support. Whether or not that level holds is the key to whether a short-term low is in place.

* FAO lowers global cereal grains forecast. The United Nations Food and Agriculture Organization (FAO) lowered it 2012 global cereal grains forecast by 9 MMT from last month to 2.286 billion MT, due primarily to crop losses in central and southeast Europe due to prolonged drought. Losses in the U.S. from drought were factored in last month. With the reduced output, FAO cut its 2012-13 global ending stocks forecast for cereal grains by 4 MMT tons to 499 MMT. Meanwhile, FAO's food price index rose 3 points to 216 in September due primarily to increases in meat and dairy prices.

The long and short of it: The FAO forecasts are mildly supportive, but the factors they highlighted are already "known," limiting the market impact.


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