Germany Approves Increased Authority For EFSF

September 29, 2011 01:29 AM

What Traders are Talking About:

* German parliament approves more authority for EFSF. Germany's parliament approved new authority for the euro-zone rescue fund by an overwhelming vote of 523-85 (3 abstained) early this morning. Market reaction was positive, as would be expected. But there are still plenty of hurdles. Other euro-zone countries must still vote on the plan to increase powers for the European Financial Stability Facility (EFSF). And even if fully approved, there's no guarantee the plan will work. Plus, Greece is still very much at risk of defaulting on sovereign debt. In fact, there's a meeting today between Greece and leaders from the European Union and International Monetary Fund to see if Greece is on path to receive its second installment of bailout funds, which were approved conditionally.

The long and short of it: As I said earlier this week, pessimism in the euro-zone is easing mildly, but investor attitudes are still far from optimistic.

* Downside breakout for beans? November soybean futures closed below the March low of $12.38 for the first time yesterday, signaling a potential downside breakout from the extended choppy range. This opens sharp downside price risk as the next level of strong support on the daily chart isn't until the Nov. 2010 low at $11.02 1/4. But while the technical picture looks very bearish, it's too early to call "the end" for bulls. After all, November soybean futures posted what looked to be an upside breakout from the extended choppy range just one month ago. And that turned into a bull trap.

The long and short of it: Bears have strong technical momentum, but I have to wonder if this doesn't turn into a repeat of what happened to bulls on the upside breakout in late August.

* H&P Report bearish compared to pre-report expectations. USDA's quarterly snout count showed the U.S. hog herd expanded by around 1% compared to year-ago as of Sept. 1. Mild expansion of the herd was expected, which should limit the negative market impact. But it's amazing to see hog numbers expand in the face of record corn prices and the extreme heat this summer. Looking forward, producers plan to farrow slightly fewer hogs this fall and winter, but not likely enough to offset a continued rise in efficiency in the farrowing house.

The long and short of it: Lean hog futures were lower in overnight electronic trade in reaction to the report data, with the bulk of the price pressure coming in far-deferred contracts.


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