Wednesday, July 29, 2009

Commodities sell off amid 'perfect storm'

A perfect storm made up of bad economic data, a sell-off in Shanghai and hearings on curbing speculation in energy trading sent most commodities sharply lower and also pressured stocks on Wall Street Wednesday.

The Reuters/Jefferies CRB Index /quotes/comstock/11j!i1:cr\y (CRB 243.55, -6.66, -2.66%) , a benchmark that gauges the prices of major commodities, fell 2.7% to 243.55 points.

Overnight, stocks in Shanghai tumbled 5% on some disappointing Chinese corporate profits and fears of possible central-bank moves to tighten lending. See full story.

"The big sell-off there put us in a bearish mood," said Phil Flynn, senior energy-market analyst at Alaron Trading. "We've been living on China time in the oil market and were still celebrating their economic rebound." (more)

Stocks: Detached from Reality

The stock market has abandoned rationality. Sure, it usually rallies ahead of evidence of measurable progress in the economy, but the rally from March to May had already priced in a strong ‘V-shaped’ recovery, which will, obviously, not happen. At best, we’re in for years of stagnation and lower living standards as society inflates away, pays down or writes off bad debts.

The recent rally, starting on July 13, has raised the bar for corporate earnings over the next few quarters even higher, setting market participants up for another round of disappointment.

In the financial, REIT and consumer discretionary sectors, the market completely detached from reality. Part of this can be explained by the growth of program trading based on backward-looking statistical inputs, part by the triumph of technical analysis over critical analysis, and part by the herd behavior of fund managers. (more)

What’s Really Happening in Housing

Here’s a headline we can’t resist: “Home Prices Rose in May,” trumpets The New York Times this morning. We understand… they’ve got papers to sell and a hell of a mortgage. But in reality, the U.S. housing market is only decaying at a slower pace. Today’s S&P/Case-Shiller home price index reading is par for the course for the last quarter… home prices and sales are still falling, just no longer accelerating into the abyss.

The collapse in world trade has stopped, but there is no sign of a recovery

WORLD trade has been one of the worst casualties of the global economic slowdown and the source of some particularly startling figures. Towards the end of last year trade all but collapsed. According to the World Bank, the value of exports from a sample of 65 countries accounting for 97% of world trade rose by 20.2% in September, compared with a year earlier. But by November exports were worth 17.3% less than a year earlier, before slumping by a whopping 32.6% in the year to January. In March the managers of South Korea’s Busan port, long one of the world’s busiest, said that it had run out of space to store nearly 32,000 empty containers. The Baltic Dry Index, which measures demand for the ships that transport bulk goods such as iron ore or coal, fell from 11,793 at the end of May last year to a pitiful 663 in early December. (more)

Insiders are selling

Corporate insiders have recently been selling their companies' shares at a greater pace than at any time since the top of the bull market in the fall of 2007.

Does that mean you should immediately start lightening your equity exposure?

It depends on whom you ask.

But, first, the data.

Corporate insiders are a company's officers, directors and largest shareholders. They are required to report to the SEC whenever they buy or sell shares of their companies, and various research firms collect and analyze those transactions. (more)

U.S. Economy: Home Prices Rise, Confidence Declines

A gauge of U.S. house prices posted its first monthly gain in three years, providing some solace to consumers shaken by rising joblessness.

The S&P/Case-Shiller home-price index rose 0.5 percent in May from the prior month, the first gain since July 2006 and biggest since May of that year, the group said today in New York. A Conference Board report showed consumer confidence this month fell more than forecast.


Platinum to Rise 16% as Car-Sales ‘Whammy’ Ends

The price of platinum, used mainly in jewelry and auto pollution-control devices, may rise 16 percent to $1,400 an ounce as demand for new cars gains in the U.S. and China, according to Citigroup Inc.

The CHART OF THE DAY shows platinum lagged behind the recovery in auto sales in China, where car demand surged after purchase incentives were part of the government’s $586 billion economic stimulus program. Vehicle sales on the mainland rose 48 percent in June from a year earlier. The chart also shows U.S. vehicle demand, which increased sequentially three of the past five months, according to data compiled by Bloomberg. (more)

Copper Peaking as Inventories Signal China’s Demand Slowing

Copper’s 80 percent rally this year may soon end on signs that China has stockpiled more than it can use in new homes, cars and appliances.

Inventories monitored by the London Metal Exchange posted their first back-to-back weekly gains since February, increasing 8.6 percent from an eight-month low. Sumitomo Metal Mining Co., Japan’s second-largest smelter, said Chinese imports are slowing after record purchases boosted domestic supplies, and U.S. copper-scrap exporters report shipments to Asia are dropping.