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|Evening markets: ags show some form despite US holiday
By James Moore - Published 03/09/2012
Monday had the potential to provide a great deal of excitement following Fridays comments from Federal Reserve chairman Ben Bernanke, a weekend full of grain purchase news and another round of disappointing data from China overnight.
In addition, the move into September traditionally heralds the exit of summer holiday doldrums for financial market,
However, agricultural commodity futures, for which month beginnings anyway often bring money inflows, were tentative over getting ahead themselves with US markets closed.
Indeed, while markets were largely underpinned by the prospect of fresh stimulus measures from central banks globally, the absence of US players for the Labor Day holiday kept most risk assets from overexuberance, although light volumes encouraged some volatility.
Equities in Europe finished in positive territory with the German DAX index ending up 0.6%, the FTSE 100 up 0.8% and the French CAC 40 1.2%.
Meanwhile in the currency market the dollar was in a softer tone for much of the day amid renewed expectations of a further round of monetary easing by the Fed.
The dollar index settled down, but only by around 0.1%.
Brent sets tone
While US market were shut, a firm tone in Brent crude helped underpin soft commodity prices, October futures added \$1.27 to finish at \$115.84 a barrel.
Among agricultural commodities, London robusta coffee futures for November settlement finished up 0.8% at \$2,084 a tonne in part on supply concern following a recent report that the Vietnamese harvest, the world's biggest for robustas, will fall in 2012-13.
However, Sucden Financial flagged technical reasons too behind the gains.
'What was seen between 10.00-11.00 GMT…'
"For the first hour London did exactly what most thought and a small rally was seen pretty much in line with the slightly higher settlement in New York on Friday, and on relatively light volume," the broker said.
"But what was seen between 10.00-11.00 GMT was enough to keep phones and chats busy.
"Why was there a rally?" Speculators are "very short" on New York arabica coffee, with a net short of 16,866 futures and options, up 2,083 lots in the ending August 28, according to US regulatory data.
The extent of the short position "may see a rally" when New York markets return from holiday.
In contrast December cocoa closed in negative territory, correcting from a 10-month peak last week. Liffe December futures closed down 1.9%.
Liffe white sugar futures posted a similar day to cocoa amid expectations the sugar market was shifting towards a sizeable supply surplus. October futures settled down 0.5% at \$563.30 a tonne.
'Something of a surprise'
Europe's grain markets were a bit of a mixed bag too.
OK, there was some continued disappointment among bulls at Russia's pledge on Friday that the country would not need to limit grain exports.
"This comes as something of a surprise given that the latest figures from SovEcon put the 2012 harvest at around 3.5m tonnes lower than the 2010 harvest – which was the last time export bans were imposed," Commerzbank said.
And Russia scored heavily in the latest Egyptian wheat tender, coming nearly \$40 a tonne cheaper than US supplies, even before shipping is factored in, and with no French grain offered at all.
Romania and Ukraine were on the winners' sheet too.
Curbs on their way?
However, will Russia stick by its pledge?
At its current pace of grain shipments, "Russia will only have volumes to export until the end of October", Agritel said.
"Hence despite the decision taken this Friday, market operators should still continue to pay attention to the export situation in Russia, as export restrictions cannot be ruled out for the coming months."
Benchmark contract November milling wheat in Paris finished 0.1% higher at E264.50 a tonne. Volume was thin however with a total of 4,788 lots traded compared with over 22,000 on Friday
'Harvest has finally started'
London, however, underperformed, feeling the weight of harvest pressure – now that a dry spell is allowing combines to roll, even a month or more late in some places.
"The UK weather has turned dry and warmer for many and harvest has finally started in large parts of the north and west after the wettest summer in 100 years," UK grain merchant Frontier, part-owned by Cargill, said.
London wheat for November shed 0.2% to £204.50 a tonne in slim volumes.
Markets await direction
While general sentiment today has been of limited risk interest, markets are likely to find direction as the week progress given the return of US markets and key macro-economic events.
These include the European Central Bank and Bank of England monetary policy meetings on Thursday, at which the ECB is expected to lower rates by 25-basis points, and the US non-farm payrolls release Friday.
This will be of particular interest given the comments on Friday from Federal Reserve chairman Ben Bernanke towards stimulating US jobs growth.
Inflation data from China in the form of consumer price inflation (CPI) and producer price inflation (PPI) at the end of the week will also be under scrutiny as a further easing of inflationary pressure, to give the People's Bank room to carry out its own monetary easing.
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