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Commodities Soar On US Jobs, Crops and Storage Data
00:00, 11 October 2012
Stocks and commodities have caught a tailwind today, boosted by better than expected jobs numbers out of the United States and Australia overnight. Today’s rebounds, while encouraging, have not been enough to offset much of yesterday’s bearishness, however, as uncertainty remains the key theme of the month heading into earnings season. So today’s bounce looks like more of a relief rally that could see a higher open in the US but could have difficulty maintaining momentum through the day in the absence. Europe European markets have been climbing through the day with even Spain’s IBEX moving into positive territory heading into the close. S&P’s downgrade of Spain, which likely will be followed by the usual downgrade of the banking sector at some point, has met with mixed reviews. While the downgrade indicates that Spain’s problems continue to worsen it also suggests that these problems may soon reach the point where the federal government is forced off the fence and into seeking a bailout. Meanwhile Italy’s treasury yields declined toward the 5.0% level today following a successful bond auction. Burberry (BRBY) is leading the FTSE higher today with the luxury retailer posting a 13.1% gain on the back of improved same store sales numbers and earnings guidance. US luxury retailer Coach (COH) has gained 2.9% in sympathy with Burberry. Banks have also been picking up with Barclays (BARC) up 4.3% and RBS (RBS) up 4.2%. US US indices have been climbing today after US jobless claims fell to their lowest level since February 2008 at 339K. This has helped to undo some of the damage done by yesterday’s selloff but technically traders would still need to see the Dow back above 13,500 and/or the S&P back above 1,450 to call off the current downdraft. Sprint Nextel (S) has rallied out of the gate this morning, surging 11.7% on press reports that Japan’s Softbank may be preparing to bid JPY 1.5 trillion (around USD 19.2B) for a 66% interest in the wireless telecom company. On the flip side, MetroPCS (PCS) has dropped 6.4% as speculation of a bidding war for the company dissipates. (T-Mobile has launched a takeover bid for PCS and rumours of a competitive offer from Sprint had been swirling) FX Currency markets have seen the rotation out of defensive plays into more cyclical markets resume. USD and JPY have been under the most pressure with precious metals rebounding against the greenback. Resource currencies like AUD, NOK, NZD and CAD have attracted the most attention with EUR and GBP posting moderate gains. AUD has benefitted from better than expected job creation last month (14.5K vs street 5.0K, 32K full time jobs added). Commodities Commodities have resumed advancing once again with copper leading the way, a sign that fears about the global economy are starting to ease. Natural gas has soared today, breaking out over $3.40/mmbtu on the back of a better than expected storage report (72BCF injection vs street 78BCF). Natural gas and heating oil both continue to benefit from the usual seasonal trading ahead of home heating season. Grains have caught fire again in a big way today, getting a big boost from the monthly crop report which saw forecast stocks for wheat and soybeans fall. Corn is up 4.6% with wheat and soybeans up in the 2.0-2.5% range.