Economy may not be as bad as feared with the payroll report being better than expected. While not an indication that things are great, things may not be as recessionary as feared. If you removed the over all fear of global economic mayhem, physical commodities should start trading on their own fundamentals.
Tag Archives: Economy
Equity Indexes are Weaker; US Dollar Higher; Metals Back to Flight to Quality
Slides in many equity indexes are showing a return to slowing economic conditions. Slowing numbers out of EU add to that sentiment. Precious metals may be returning to a “flight-to-quality” role with the inverse relationship with equities returning. Grain markets have some critical numbers this morning with focus on tightening supplies and concerns about ongoing demand.
Commodity Outlook – 2011.08.19
Below is an excerpt from The Hightower Report’s most recent Newsletter. To receive access to this story, with trade strategies, and our daily coverage of 16 markets, visit futures-research.com for your free 2 week trial!
While Warren Buffett thinks the US economy is stronger than the Federal Reserve does and rail car loadings in the US have remained fairly strong, Washington continues to undermine rather than help the economy. Just as the GOP-controlled House showed no desire to forgo their current 5 week vacation, the President, when asked if he would call Congress back early, indicated that was last thing he wanted to see. Clearly any politician worth their salt makes sure their message includes concern for the economy and the need to create jobs, but apparently the people with jobs (primarily those in Washington) don’t seem to have a real sense of urgency.
In our opinion, a recent serious decline in a private consumer sentiment reading highlights the ongoing negative drag spilling out of Washington, and that in turn could increase the difficulty in turning the US economy around quickly. With the early start of the 2012 Presidential campaign by the major political parties last week, it is safe to assume that the Super Committee (when they get around to convening) will continue to face an extremely partisan environment. With US leadership unable to settle the ultra critical debt/spending debate, one might also expect any effort to put together tax reform or a stimulus package to be a very, long-drawn out affair. In the mean time, some members of the Fed have become so negative toward the economy that one of them recently suggested that the Fed will probably won’t have to raise interest rates until sometime in 2013. In other words, it could be years before any tightening is undertaken!
Equities and certain physical commodities showed the capacity to rebound last week, but the coming three weeks might see the stock market sending a definitive message to US leaders that something real has to be done to reduce the US debt load; otherwise investors could begin to flee US equities and the US Dollar.
While markets like cattle, pork, corn, gold, silver and platinum should be able to stand up to noted weakness in US equities, a sharp slide in the US Dollar could provide an added lift for commodities with positive or strong fundamentals. Given a combination of even more slowing evidence from the US economy and a resumption of political rancor in Washington, the dollar could easily make new lows for the year. Some analysts think that “business as usual in Washington” will prompt threats from US credit rating agencies and perhaps even some heat from China, Europe and or the IMF.
In the event that the global community is forced to exert pressure on the US to act, it could result in the dollar falling back toward the 2008 lows! In other words, one should not be surprised to see the Dollar react as if something worse than sub-prime is threatening the United States!
Markets Starting the Day off Positive. Not From Fundamental Changes
Market is seeing some recovery this morning, but not from any fundamental changes. Technical indicators are over done.
China Sees Softening Inflation; Projections of Large Sugar Surplus
China reported softer industrial production, but also reported softer inflation numbers. Market is taking that as a sign that China is not going lead their economy into a “hard landing.” While encouraging the global economy just isn’t showing signs of a widespread recovery. Brent and West Texas Intermediate spread continues to widen. Predictions of a world sugar surplus of 8-10 million tonne have started to surface, and if true, will be a drag on sugar prices. While US plantings are getting done, but some analysts feel that the damage has already been done to the crop and supplies will continue to tighten.
Weaker To Start; Brent – WTI Spread hits $20; World Economy Faster Than US
Negative to start the week. Suggestions over the weekend that US may need another “Stimulus Package” to avoid a Japan-style stagflation decade. The Brent Cude – WTI Crude spread hit $20 again, which is an indication that US crude oil is cheaper than the rest of the world. This is also an indicator of weaker US demand for Crude. Weather continues to be a concern for US crops.
Economic Slowing Fears Persist; US Jobs Data the Main Focus
Path of least resistance seems to be downward today for most physical commodities. Non-Farm payroll estimates have been revised lower over the past couple days. Significant declines in Registered COMEX Silver warehouse stocks.
Concerns About Global Economic Slowing; OPEC Talking About Increasing Production
Concerns about global economic slowing continue. US stock market seems to be factoring in a disappointing jobs number this Friday. OPEC is talking about increasing production by one million barrels per day at an upcoming meeting. US crops face uncertain weather over the coming weeks.
Some Positive Comments on Commodities; US Planting Weather Still in Flux
Bit a positive tone in physical commodities. This after Goldman releasing a “buy commodity” forecast. This seems to conflict with their global economic view. Apparently, developing country demand will help carry commodity prices though the softness in the global economy. US planting weather is wet short term followed by a hot & dry pattern forming which is keeping volatility high.
Commodity Outlook – 2011.10.24
by Dave Hightower on October 22, 2011
Below is an excerpt from The Hightower Report’s most recent Newsletter. To receive access to this story, with trade strategies, and our daily coverage of 16 markets, visit futures-research.com for your free 2 week trial!
The most positive thing that can be said about the global economy is that some sectors have managed to hold up against the deterioration that was seen for most of the last 4 months. Clearly the Euro zone debt crisis has been and continues to be the primary cloud hanging over consumer and investor sentiment. One only needs to look back to the negative reactions in consumer confidence to the Fukushima incident and the August US debt debate to understand that the current debt event has the potential to be a very important junction. While the US debt situation remains unsolved, the markets can be expected to trade primarily off the ebb and flow of the Euro zone crisis. In other words, internal fundamental factors are likely to take a back seat to headlines and big picture macroeconomic influences.
Since the outcome of the October 23rd EU meeting (after this writing) looks to be the dominating influence for a large portion of this week’s trade, one might expect a rather significant expansion of volatility. At stake is the latest loan of 8 billion Euros, which is only a small portion of the 350 billion Euros that Greece owes the World Bank, the EU and a long list of European banks. While the trade as of this writing was assuming something in the range of 2 trillion Euros for the EFSF, a more troublesome concern is that ratings agencies have already begun another round of sovereign debt downgrades, with Spain, France and Italy under increased scrutiny.
While recent history suggests that another “plan” won’t fully end the Euro zone debt crisis, it is possible that a euphoria window might be presented and that many markets might see an extension of the relief rallies that have already been engineered from the September and October lows. Those that are skeptical of a final and sustainable Euro zone fix (with good reason) might consider buying near to expiration, near to the money call options and buying longer dated, further out of the money put options, particularly in those physical commodity markets that are heavily tied to the recession/no recession theme.
From a big picture perspective, the recent slide in many commodity prices should eventually be seen as a big value play, but even if the Euro zone situation is put to rest, the markets still need to see the US come to terms with its unfulfilled promise to reduce its budget by just over 2 trillion dollars. In looking at a chart of the speculator net long position in non-financial commodities, one can see that nearly two-thirds of the peak position has already been eliminated. Another sharp slide in prices could mean that commodities will have once factor in a return to recession or worse.