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Commentary: China concerns drag on commodities and resource currencies
00:00, 25 February 2014
US indices have shrugged off some early weakness and are trading higher although the S&P still struggles to get through 1,850. Richmond Fed was soft but can be blamed on bad weather especially since that region isn't really ready to cope with it. Some traders may be looking ahead to Fed Chair Yellen’s testimony later this week. Since, however, the Senate speech was postponed from earlier this month due to a big storm that closed government offices, it’s hard to see how she would be able to say the data hasn’t been distorted by big storms. So those who may be thinking recent soft data could have an effect on tapering may find themselves sorely disappointed. While there hasn’t been a big broad trend today, there has been strong action in individual names. Blackberry is up again on reports the company's new CEO may be open to selling or spinning off its Messaging business which has become hot after Facebook's big charge into the space.Tesla Motors is rolling higher again gaining over 15%. With Bitcoin breaking down through $500 today and Mt. Gox apparently gone for good, we wonder if some speculative capital coming out of the virtual currency may be finding its way back into high octane plays in more traditional markets. Groupon has also been on the rebound today. Concerns over China that have weighed on indices and CNY earlier this week appear to be taking their toll on crude oil today as well as copper. Natural gas is under pressure again as seasonal speculation appears to be moving past heating season. Remember last week was warm so this week’s storage number could be softer. Gold and silver remain under accumulation, possibly attracting some haven interest with CHF and JPY also on the rise today. GBP received a boost from a better than expected CBI sales report. On the flip side, the resource dollars (AUD, NZD, CAD) have been backsliding along with commodity prices. It’s relatively quiet for Asia Pacific news today but things really ramp up the rest of the week heading toward Friday’s release of Japan’s key indicators and manufacturing PMI numbers for China and elsewhere on the weekend. Corporate News There have been no major aftermarket announcements at the time of writing. First Solar earnings are due after US markets close. Economic News Significant announcements released overnight include: US house price index 0.8% vs street 0.3% US consumer confidence 78.1 vs street 80.0 US Richmond Fed (6) vs previous 12 Germany GDP 1.3% vs street 1.4% Italy retail sales (2.6%) vs street 0.2% UK CBI distributive trade 37 vs street 15 Upcoming significant announcements include: 9:30 am GMT UK GDP street 2.8% vs previous 1.9% 10:00 am EST US new home sales street 400K 10:30 am EST US crude oil inventories previous 0.9 mmbbls