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Morning markets: China reassurance puts bulls back in charge

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In the cycle of financial market headlines centring on either Greece, broader eurozone/ratings agencies or China, it was China's turn to take the spotlight.

That said, it was actually with a eurozone theme. The country's central bank governor, Zhou Xiaochuan, said on Wednesday that China will continue to invest in eurozone debt.

"Some people had cast doubt or suspicion over the currency, but for the People's Bank of China, we have always been confident in the euro and its future," Mr Zhou said.

The comments enabled markets to overlook the ongoing doubts about whether Greece will get its E130bn rescue package, and adopt a risk-on attitude.


rose, closing 2.3% higher in Tokyo, with smaller gains on other major Asian exchanges. The safe haven of the


dipped 0.5%as of 08:20 GMT.

And, in making dollar-denominated assets cheaper as exports, that too encouraged in many commodities, such as Brent


, which added 0.5% to come close to regaining $118 a barrel.

Saudi tender

So the default direction in agricultural commodities was up, a direction they followed.


was among the better performers in Chicago with a 0.6% rise to $6.39 a bushel for March delivery.

The headlines for the grain, marred on Tuesday by Australia's crop upgrade, were better this time, with Saudi Arabia joining the myriad of buyers, such as Algeria, Iran, Iraq and Tunisia, which have popped up over the last week .

Saudi unveiled a tender for 330,000 tonnes of 12.5%-protein wheat.

That helped the March lot overcome what Market 1's Mike Mawdsley termed a "not good" technical picture, having dropped below nine, 20, 50 and 100-day moving averages.

'Somewhat optimistic'

Fellow grain


managed progress too if, at 0.4% to $6.36 a bushel for March delivery, not overdoing itself.

The USDA initial estimates, on Monday, for the domestic crop this year continue to be a talking point, particularly the idea that year-end stocks for 2012-13 will double to more than 1.6bn bushels.

"A nearly 16-bushel-per-acre yield increase over last year, accounting for almost 1.4bn bushels of additional production, seems to be somewhat optimistic," Jon Michalscheck at Benson Quinn Commodities said.

That said, "one may also question as to whether feed demand can improve by more than 600m bushels this coming crop year, and will ethanol usage decline?"

'Even wetter'

South American weather remains a concern too, although not one significant enough to provoke extra upward movement.

Indeed, said the updated GFS model was "even wetter with regard to the cold front over central and eastern Argentina in February 17-19".

Then, on February 20-21, "the cold front begins to move north and bring significant rain into Uruguay portions of Rio Grande do Sul, northern Entre Rios, northern Santa Fe, Chaco and Formosa".


, which have more potential than corn for yield recovery, added 1 cent to $12.56 a bushel.

Battle for acres

The new crop November soybean lot lost a bit of ground on corn too, key given that the ratio between the two crops is seen as an influence on which one of the crops US farmers plant in the spring, and so helps determine production potential.

The contract eased 0.2% to $12.55 a bushel, while the new crop December corn lot shed a more modest 0.1% to $5.63 ¾ a bushel.

Still, that leaves the ratio between the two at 2.22, among the highest levels it has been for a while, incentivising more soybean sowings than looked the case a couple of months ago.

It is also worth noting that the November soybean lot is also now at a discount to the March contract, signalling investors are not so worried about supplies ahead.

December corn was already at a discount to March, with December wheat facing a shrinking premium over March,

Palm slips

Soft commodities recorded gentle gains too, New York raw


for March recovering 0.3% to 24.32 cents a pound despite Thailand, the second ranked exporter, opening a tender to sell 67,333 tonnes of the sweetener.


for March added 0.2% to 92.45 cents a pound, continuing a firm finish to the last session on ideas that mills remain buyers at lower levels.

But, in Kuala Lumpur,

palm oil

eased 0.3% to 3,194 ringgit a tonne, depressed by weakness in Chicago soybeans, and Tuesday's data showing a 160m-pound rise to 2.098bn ponds in US inventories of rival vegetable oil soyoil.

And, on Wednesday, cargo surveyors reported lower Malaysian exports of palm oil in the first two weeks of the month. Both Intertek Testing Services and Societe Generale de Surveillance put the decline at 14%, month on month.


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