- Today has seen “meltdown: in Asian stock markets, which has spread with contagion around the globe. The Dow opened 1,000 points lower although the “black box” trades seem to have had enough by midday and something of a recovery followed with the Dow (only!) 250 lower at midday. Some support may well translate into Asian markets tomorrow but we are not holding our breath. Commodities followed with prices sharply lower in early trade but recoveries were also clear with Chicago markets almost back to Friday’s closing levels with under an hour to go.
- The drop in global equity markets is based upon fears over slowing market growth in emerging markets. However, unlike in 2008, there is not a systemic risk to US or other developed nation’s banking systems based upon depreciating assets (house prices) but in the absence of global economic growth there is a real risk to future commodity demand (and growth). This is the underlying concern that markets are considering, and will likely plague any market rallies, particularly in the short term.
- The US$ has fallen in value against the €uro (or has the €uro gained?) and this added some support to Chicago grains, wheat in particular, with corn following behind. With all that we have seen in the last week or so, and particularly today, it feels extremely difficult for major rallies to succeed particularly with the US harvest staring at us in a few short weeks.
- The EU crop monitoring unit, MARS, has increased EU soft wheat yield marginally to 5.81 mt/ha compared with last month, this is above the five year average (by 2.5%) but still below last year. Corn yields were forecast lower at 6.4 mt/ha down from 6.71 mt/ha last month and below both last year’s figure and the five year average.
- US crop conditions, which will be reported later tonight, are expected to see an unchanged to slightly better figure based upon last week’s favourable weather conditions. We will update on this tomorrow.