Investors Nervously Await ECB Meeting, EU Summit

December 7, 2011 12:12 AM

What Traders are Talking About:

* Markets nervously await ECB meeting, EU summit. Investor attitudes continue to ebb and flow as they await key decisions by euro-zone monetary policy makers and leaders later this week. Just when it looked like European leaders would make progress on solutions to the debt crisis, a German official said his country is increasingly pessimistic about a deal at Friday's summit as some countries don't understand the severity of the situation. Meanwhile, expectations the European Central Bank will cut interest rates on Thursday for the second time in two months have virtually been cemented as third quarter euro-zone GDP confirmed weakening economic growth.

The long and short of it: We've been down this road many times in the recent past. Any expectations euro-zone leaders will come up with a viable solution at Friday's summit are built more on hope than reality.

* Pre-report positioning begins. Corn, soybean and wheat futures ended higher Tuesday after a late rally that featured short-covering and bargain buying. The short-covering comes as traders are starting to even positions ahead of Friday's Supply & Demand Report from USDA. Given the sharp pressure on grain/soy markets since USDA's last report, it's not surprising to see some corrective buying. The bargain hunting is a little more surprising, especially with funds being the lead buyers late. While prices are at levels that should start to attract some bottom pickers, there's no fundamental reason for traders to feel lows are in place yet.

The long and short of it: The upside is limited to mild corrective buying at this time as there are still too many macro-economic headwinds and fundamental concerns to trigger strong buying interest.

* Russia to export at least 25 MMT of grain. Russia will export "no less than 25 MMT" of grain in 2011-12, according to the country's deputy ag minister. That's a change from previous statements that Russia would cap grain exports at 24 MMT to 25 MMT. But the head of the Russian Grain Union says shipping more than 25 MMT of grain would require the use of ports from neighboring countries, which isn't currently economically viable.

The long and short of it: No matter what the "official" export figure is, Russia will continue to actively sell grain onto the world market.


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