The Morning Vibe
05/09/11 -- America is shut for Labour Day today, so fresh impetus is likely to be thin on the ground. NYMEX crude oil is however trading, and having lost USD2.58/barrel on Friday it's a further USD1.58/barrel weaker this morning. That's a 4.6% fall in two sessions to currently trade at below USD85/barrel.
The reason for that is perhaps the clearest evidence yet that America is heading for recession, if in fact it isn't already in one. Friday's US jobs numbers showed zero jobs created in August, and revised downwards the previous figures for both June and July. That makes the number of jobs created in the last three months just 105,000.
One report I read over the weekend suggests that the US need 125,000 new jobs each and every month just to keep up with the pace of rising population. In other words for the real unemployment rate not to rise America needed to have created 375,000 jobs across the June/August period.
The rules and regulations relating to exactly how the unemployment rate is calculated are complicated to say the least. However it is suggested that the true US unemployment rate is maybe closer to 20% when including only those that really do want work, around double the official rate of 9.1%.
Across the pond we have Italy's coalition government struggling to get the austerity measures it plans to introduced passed in parliament. The ECB meanwhile is buying Italian bonds in the face of fierce criticism in an attempt to atop Italy's borrowing costs spiralling out of control.
Meanwhile the German public are rapidly tiring of being asked to put their hands in their pockets to bailout their weaker irresponsible neighbours. A survey published last week suggests that two thirds of German nationals think that there should be no more handouts.
German Chancellor Angela Merkel's Christian Democrats took a pasting in a vote in the north-eastern state of Mecklenburg-Western Pomerania over the weekend as voters expressed their dissatisfaction with her handling of the eurozone debt crisis.
The German Federal Constitutional Court is expected to rule on Wednesday on lawsuits claiming that contributing to bailout funds for eurozone members in distress is actually unlawful.
Greece meanwhile is attempting to roll-over EUR135 billion of outstanding bonds by Friday. It effectively seems to be saying "you'd better buy these bonds, even though you don't want them and they're almost worthless or you know what the consequences will be don't you?"
Talks between Greece and its eurozone/IMF creditors over the country's failure to adhere to its austerity schedule broke down on Friday. This interesting report in the Wall Street Journal sets the scene: Greece Has Its Fill of Austerity
Elsewhere the Beeb are reporting on foreign banks shifting large amounts of cash to the US across the summer and that separate data from the ECB suggests that European banks have been heavily involved.
It's not looking overly pretty is it? The six trillion dollar question that I can't quite get my head round is this: what does all this mean for grain prices?
On the one hand you could argue that a worldwide slump into a second double dip recession would see money pour out of commodities in general, including crude oil and grains. That is after all what happened in 2008/09.
On the other, you could say that QE1/2 & 3 if/when we get it at home and in the US will surely cause further inflation in everything. Most likely with fuel and food being up there with the leaders just behind gold.
So which is it to be? If you forced me to put money on it my answer would be both! A sudden and extreme knee-jerk downwards move potentially followed by an equally severe correction. Having already had two such similar moves already this year we should be getting used to it by now.
