Sentiment and price action bode ill for commodities ...

What the improved payrolls number does is haunt the QE lovers. That is: improvement in the employment situation causes investors to second-guess the duration of the Federal Reserve's open-ended quantitative easing. Improved economic fundamentals, particularly employment, are what the Federal Reserve is looking to in making any decisions to rein in the liquidity their providing to markets.

In the long-run, however, if the US economy truly is recovering, then it might begin to support global demand and, in turn, commodity prices. But that day is still a long way off.

The downdraft in the markets today is happening after a new surge to borrow several billion euros from the ECB's marginal lending facility suggests eurozone banks are worried about funding ... still. In other words, banking system insolvency lingers on in Europe. As to what this means for the markets, consider previous instances of heavy facility usage ...

 

Commodities Essential. 2 November 2012

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