Risk-On To Start The New Year

January 1, 2013 11:38 PM

What Traders are Talking About:

* Fiscal cliff avoided. U.S. lawmakers reached a deal at the 11th hour to keep the U.S. economy from going over the so-called fiscal cliff. While the deal did little more than kick the can down the road (nearly $4 trillion will be added to debt over 10 years), investors responded positively with global markets posting strong gains overnight. Apparently all investors needed to broadly add risk to start the new year was the lifting of the burden of going over the fiscal cliff. And if that's the case, it signals investor attitudes are bullish.

The long and short of it: With the fiscal cliff avoided, investors have a strong risk-on attitude to start the new year.

* Grains get a later start. There was no overnight trade in U.S. grain markets coming out of New Year's Day. Grains will resume trading at 9:30 a.m. CT. Based on the response in global stock and commodity markets, U.S. grain futures are likely to see a boost of fresh buying interest this morning. In addition to the relief of the fiscal cliff being avoided, funds are expected to pump fresh money into the long side of markets after liquidating long positions to close out last year.

The long and short of it: For grain futures to signal short-term lows are in place, followthrough buying after the initial wave of buying will be needed. Bulls have work to do.

* More signs China's economy is strengthening. China's official purchasing managers' index (PMI) came in at 50.6 for December, matching the reading from November, which was a seven-month high. China's manufacturing sector has now posted three consecutive months of expansion (PMI readings above 50). China's final HSBC (survey of small, private-sector manufacturing firms) PMI came in at 51.5 for December, a full point above the November reading and the highest mark since May 2011.

The long and short of it: China's manufacturing sector is yet another signal pro-growth measures taken by the Chinese government are having a positive impact. China says it will maintain "prudent" monetary policy, which focuses on economic growth this year.


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