The G20 meeting over the weekend confirmed another round of economic stimulus for the ailing economy. The news was compounded by the passing of the U.S. healthcare bill. The news sent the dollar reeling and investors piling into risk assets. Stocks rallied over 2% on the day in what is one of the most impressive rallies of the last few months. The upside action was uninterrupted all day as buyers piled into equities. Although the final tally isn’t official, today was almost certainly a 90% up day which should excite technical analysts. Volume, however, was extraordinarily light – a trend that we have seen throughout much of the recent rally.
U.S. Economy
The U.S. Treasury is scheduled to sell a record high $81 billion of debt this week, starting with $40 billion of three-year T-notes today that went for a median yield of 1.37%. The bid to cover ratio was 3.33, the best demand since 1990. The December U.S. T-bonds were up 2/32nds at 118.16/32nds.
Policy makers from this weekend’s G-20 meeting in Scotland tried to assure investors that central banks are not yet ready to withdraw stimulus from the world’s economy. The December U.S. dollar index fell .805 to 75.135, near the contract low. December gold closed up $5.70 at a new contract high of $1,101.40.
Grains and Cotton
According to Bloomberg news, China’s corn crop will be down 13% this year to 144.4 million tons, due to drought. December corn jumped up 19 cents to $3.86.
January soybeans closed up 17 cents at $9.72 ahead of tomorrow’s monthly USDA estimates.
Tropical Storm Ida is expected to bring more rain to the already-wet southeastern U.S. December cotton closed up 1.07 cents at 67.61.
Livestock
The USDA confirmed that a commercial herd of pigs in Indiana tested positive for the H1N1 virus. The virus has already been seen in hogs of other countries – including Canada, the U.K., and Australia. December hogs ended up .10 at 55.80.
Coffee
Hurricane Ida caused flooding and mudslides in the coffee regions of El Salvador, but the extent of any damage is not yet known. December coffee was up 1.15 cents at $1.4005.
Energies
Ida has been downgraded to a tropical storm with winds of 70 m.p.h. as it works through the Gulf of Mexico and is expected to land somewhere between eastern Louisiana and Florida’s panhandle either late tonight or early Tuesday morning. Also, Mexico has shut down oil facilities in the West due to storms and flooding. December crude oil closed up $2.00 at $79.43. December natural gas ended up 7.5 cents at $4.6700.
Metals
Moody’s raised its country rating for both China and Hong Kong from “stable” to “positive.” December copper finished up 1.50 cents at $2.9675 with ongoing support from strong demand in China.
India’s Prime Minister said that he expects real GDP to be up 7% in 2010 and that will allow the country to begin reducing its stimulus measures.
Currencies
Canada’s Mortgage and Housing Corporation said that housing starts were at an annual rate of 157,300 in October, up 5.4% from the previous month and slightly better than expected. The December Canadian dollar gained 2 cents to 94.85, the highest close in two weeks.
Source: Daily Futures
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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