Weather, Outside Markets Price-Negative -- For Now

April 16, 2012 01:13 AM

What Traders are Talking About:

* Rain makes grain. A major storm system produced inch-plus rains across much of the western Corn Belt over the weekend, with the heaviest rains and damaging storms seen in Nebraska and western Iowa. Similar rainfall totals were seen in areas of the eastern Belt, with central Illinois receiving the heaviest rainfall east of the Mississippi River. Lighter rainfall totals were seen in the Ohio River valley. Forecasts call for more rain chances across the region Wednesday through Friday. There are chances for freezing conditions, especially in northern areas tonight and again over the upcoming weekend.

The long and short of it: While the rains will slow planting efforts, they are seen as crop-friendly/price-negative as they will help recharge soil moisture.

* Macro head winds blowing harder. Investors are pulling back the reins on risk as they continue to digest the disappointing Chinese first quarter GDP data released last Friday. But there are also increased concerns in Europe, with Spain the focal point there. Spanish banks borrowed a record 316.3 billion euros ($411.7 billion) from the European Central Bank in March, nearly double the level in February. That data helped fuel a spike in the Spanish 10-year yield to more than 6% overnight. Focus will now be heightened on a Spanish bond auction on Thursday.

The long and short of it: The combination of concerns with the Chinese and Spanish economies is causing traders to take a risk-off approach to start the week, including in the grain and soy markets.

* China widens daily trading band for its currency. In an apparent move by the Chinese government to signal it has confidence in its economy, the People's Bank of China announced Saturday it will allow the yuan to trade in a wider daily price band against the U.S. dollar. Effective today, the yuan can now move 1% above or below the daily reference exchange rate, an increase from a 0.5% maximum daily move previously. This is the first time China has altered the daily trading band of the yuan since May 2007, when it went from 0.3% to 0.5%. The U.S., which has long pushed for China to let market factors determine the exchange rate for the yuan, applauded the expanded daily trading band, but says further progress is needed.

The long and short of it: Bulls argue this is a positive development for global trade, including commodities. But bears counter that it's a relatively token attempt by the Chinese government to instill confidence in its cooling economy.


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