Sunder’s List

Doom, Gloom, Heartache, and Whiskey

(Photo credit: Wikipedia)

Market roundup: Stoxx 50 flat, Germany +0.1%, France -0.1%, Italy -1%, Spain +0.3%, U.K. -0.6%. Dow +0.57% to 12800. S&P +0.69%. Gold -0.63% to $1581.55.

Pray that the monsoon stays on track:

  • 55% of the US is in at least moderate short-term drought in June, the biggest since 1956. (CNN)
  • Russia and Kazakhstan have warned that bad weather will reduce the size of their grain crops this year. (FT)
  • Benchmark front-month Chicago wheat futures on Tuesday rose to a four-year high; Soyabean futures hit a record high last week; corn prices were also trading within a few cents of a record high of $8 a bushel.(FT)
  • India’s monsoon rains were above average in the past week for the first time in the current season and the deficit from June 1-July 11 narrows to 22% (Reuters)

China Watch:

  • Announcements by Chinese firms in the recent days have been dominated by profit warnings across sectors ranging from transportation to consumer goods, with few escaping the impact of slower domestic growth and faltering external demand. (CNBC)
  • Steel futures in Shanghai have tumbled to their lowest levels this year. Beijing’s efforts to cool the property market, combined with slower economic growth, have resulted in a sharp slowdown in steel demand and are also weighing on prices for iron ore. (FT)
  • China is sitting on a huge stockpile of commodities. And as Chinese companies find it harder to borrow long-term, they borrow more short term.  As the price of their commodity stockpiles declines, they add to their hoard to reduce average prices. As perceptions of financial fragility rise, the system switches even more to collateralized borrowing.  We don’t know what the cumulative impact of all this balance sheet inversion is, but we need to acknowledge that the range of expected outcomes has become more volatile. (MPettis)

The S&P 500 index is on the verge of hitting an “ultimate” death cross, where the market’s 50-month moving average falls below the 200-month average, according to a research note by Societe Generale. It is seen as a sign of a looming bear market, or a cue to sell. (CNBC)

From Mark Faber (Mr. Gloom & Doom): “Most markets peaked in May 2011.” He expects “further weakness in the second half of the year. Corporate profits will disappoint … stock markets are oversold. The U.S. government-bond market is overbought. The U.S. dollar is overbought, and gold is oversold near term.” Worse, he’s “very negative about the outlook longer term.” (MarketWatch)

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