Livestock

Out to the woodshed with Livestock.Live cattle,feeder cattle and lean hogs all limit down.Too much supply for both.Continued talk of more supply than Processing ability is not good for higher prices but reall good for lower prices.Front month Live cattle will settle below $1.00   for first time in 6 years.Weekly Slaughters continue to increase as Packers margins are still positive,lets  make money while we can.Since  margins are still good why wouldn’t you continue to bring product to market.Some action might be due to month end Plays  but I wouldnt look too much into that.The bottom line is that there is more supply than demand  and in some cases more supply then can be processed into retail product.until market  finds balance,prices should trend lower.

All About DB

Rumor earlier this morning is that Deutsche Bank’s  fine will be lowered from   $14B   to   $5.6B  .DB has rallied smartly as a result DB   higher=Dax Higher=risk on!.Also helping the Risk on move is Chicago Pmi and Michigan Confidence  revision were both higher than consensus.

In the bond complex  Long end leading treasuries lower.In turn  steeping the yield curve for second day in a row.Inflation worries? or readjustment of Inflation expectations? 1,2,5 and 10 year  Inflation break-even are trading higher today continuing the trend higher.Reuters telling us “chunky algo sales” and  Block trade but of 10k 131.25 Puts in the 10 year complex adding to the bearish pressure.Plus stocks continuing to press higher will lead to lower bond prices.As I mentioned before I will default to Month end/Quarter End  for price gyrations.

Morning 9-30

cds

Here is a snapshot of  movement  in the Credit default Swaps overnight.All of Europe’s big banks are under stress.Stoxx bank index gapped open lower but has clawed back about half it losses as the sense of panic eases(currently lower by 2.5%).A couple of things that have cause the markets to exhale  .1) Swiss Government has said “*SWISS GOVT TO EASE TAX BURDEN FOR   TBTF CAPITAL. *SWISS GOVT TO FACILITATE ACCUMULATION OF CAPITAL BY TBTF BANKS(TBTF=To Big Too Fail) And secondly The USA could just lower the  $14 Billion fine they levied on DB.The Fine is what started the latest leg Lower in the stock.I believe the fine will be lowered to a  more “manageable level” DB CEO out saying “media speculation causing unjustified concerns”  “bank balance sheet Has never been more stable over past 2 decades”  Dax is currently -.9%  but has rallied roughly 1.3% off a session lows.Spain and Italy both down ~1.8%.We could see some “tape Bombs” today regarding DB but it appears that  the panic maybe over.Spoos only down 2 handles  as the too are recovering losses and sit 2 handles away from session highs.DB gapped open lower  by they too have clawed back over half their losses

Oil followed Stocks lower  and has now followed them  higher.Dont need to repeat story  but I believe a Bottom is in place until  more evidence of actual Production cuts appear.

Not too much in the way of Economic releases overnight.german retail sales beat Expectations,EuroZone Core CPI missed by .1 and a handful of second tier UK data had minor impact on the trade.All eyes on banks  and the fluctuations of DB.

Dollar higher,Euro (-65 pips) yen(-25)  and GBP steady .Gold,silver platinum up a touch  but in no real hurry to do anything.We do get personal spending and PCE Inflation at 7:30.Normally these have little impact on markets.Chicago PMI at 8:42 and U of Michigan Confidence also should not be of much Importance.Month end/Quarter end and banks will be driver of action today

Crop report at 11:00   Should be a mover

 

 

Deutsche bank

News headlines indicating that hedge fund clients are withdrawing funds and possibly moving assets out of Deutsche bank. Bloomberg saying at least 10 hedge funds could be looking  for a new Clearing firm as Questions about banks solvency swirl.

DB bonds also being sold as Credit default swaps move higher as does 1 year probability of default

Plenty of moving parts

We have seen a mid morning Sell off in the Dax  which caused  weakness in the spoos and thus “risk”.No one specific reason for selloff,chatter of  hefty sell programs in Dax.  I believe Dax ran into resistance(10570) and when it couldn’t break it sell off occurred.Month end/ quarter end could be blamed also ongoing Deutsche bank worries  as well.This snapshot of the Dax does not show  that prices did print below yesterdays lows,an outside day.

dax.

here we have Spoos on a 30 minute chart,it too ran into Good resistance at 2165 before it followed DAX lowered

spz

Oil was sideways for most of day  and that caught a bid as we approached the European Close. December  Brent traded above $50 and WTI Pressed above Yesterdays All session highs.Also helping the Brent complex is worries about a shortage of Diesel.If you recall from 2 weeks ago the Colonial Pipeline  was ruptured.The line 2 which carries Diesel,was then used to carry gasoline.So the USA is a touch short of diesel at the moment and thus less exports going to Europe.Also Refinery issues in Europe making Diesel a little more expensive. Gasoil  crack spread +40% also helping the bid.

A little bit confusing today is the trade in bonds.  Yesterday they ran inverse to Oil,today they seem to be positively correlated.I think the bonds are trading off the weakness in Stocks  and not so much the Run up in oil.

Deutsche Bank ADR  trading -5.5%

 

OPEC

What we know so far.

OPEC decided to CUT PRODUCTION  not freeze it at today’s informal meeting.If they do actually follow-up with Cuts it will be the first time in 8 years that OPEC has done this.In August OPEC production was ~33.3 MMbpd  Announcement today lowers production to 32.5 starting in November.Todays Decision is light on Details  as we don’t know  how much Each country will have to cut.Will Iran be excluded from a  cut?or will they Continue to ramp up production and then freeze it in Novemember?Plenty of Questions need to be answered  and time  needed to see if Cuts are actually Implemented.But regardless of the specifics   OPEC announced a production cut,much to everyone’s surprise.

Net changes on day

  • CL  +4.75%
  • Brent +5.5
  • Gasoline  5.3%

Run up in oil weighed on Bonds,Created a bid into Copper,Commodity currencies and SPX.Inflation metrics also moved to the upside.Higher oil could be a godd thing