Stocks: Markets Remain Resilient Despite Poor Data
Despite the mixed macro-economic data that in the longer term should undermine the good Q2 corporate earnings results, and generally very poor US economic data, stocks and other risk assets have moved higher in the past weeks. Even after the dreadful monthly US jobs report Friday, stocks and other risk assets recovered most of their early losses. Significantly, the S&P 500 managed to close above the significant resistance of its 200 day simple moving average around 1116, leaving stocks and other risk assets with a near term bullish bias. How much longer can markets rise with so little justification, and so many looming risks of further deterioration in the US, Europe, and UK? True, the leading EU economies and the UK have shown some improvement, but the picture in most of Europe is awful.
Commodities: Wheat and Coffee Come Focus Markets On Agricultural Commodities
In recent years, oil and gold generated big price moves were the focus of commodity markets. Then last week Russia announced a ban on wheat exports in the wake of drought-driven poor harvests, exacerbated by wild fires. Much of the key exporters in the Black Sea area may do likewise. Meanwhile another major wheat exporter, Canada, has also suffered for the opposite reason, too much rain during the harvest.
The mainstream financial media missed the story, but a glance at the daily wheat chart shows that commodity traders were already aware of the situation, with futures prices nearly doubling over the past month.
Coffee too has been on a major tear, unnoticed by many. After rising about 30% from December 2009 to June 2010, it spiked almost another 25% since the start of June and also continues higher.
The same goes for Sugar, though more for seasonal reasons, which has risen nearly 30% since early May
Oil meanwhile has continued its usual tracking of stocks, moving higher and has spent over a week above key $80 resistance. Next major resistance is $82.50.
Gold has been moving higher for the past few weeks despite the new calm about the Euro. Prime reasons for the rally include
Fears of new stimulus in the US could further weaken the USD
New easing of Chinese gold trading regulations that should stimulate further Chinese demand
Forex
USD: Continues weakness on months of poor data and receding hopes for rate increases, traders content to let it run down while EUR runs up, though little has changed in their relative fundamentals.
EUR: Continues to gain on USD weakness, also helped by fading awareness of ongoing troubles due to successful bond auctions and markets ignore leniency of EU bank stress tests.
JPY: Continues to show strength as safe haven despite rising stocks, perhaps because Japanese 10 year government bonds yielding 1.1%, after adjusting for actual deflation of about 2.9%, are actually yielding about 4%, and mostly tax free for the mostly Japanese buyers
AUD: continuing higher despite rate pause
NZD: may be topping after bad jobs data dampens rate increase hopes
CAD: rally may be slowing with poor jobs report, reflecting CAD’s ultimate tie to the US, destination of about 75% of exports
