wmeubank@ocp.kcmo.com
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(May 5, 1997) STOCK INDICES: The state of the current world economy should be described as growing, but at a controlled pace. It would seem that the Central Banks have achieved enough control to make them think they can direct the world economy through coordination.
While the Japanese and European economies are certainly the most suspect, one should assume growth in commodity demand continues at slightly better levels than last year! However, given the return to more even conditions in the stock market, commodities will see periodic liquidation moves sparked by the funds which could be seen last week in cocoa and the metals. We would consider last week a major pivot point for both financial and agricultural markets since both market segments saw significant bullish and bearish factors collide. In the grain markets the proximity of large planted acres ran head long into rumors/reality of additional Chinese grain purchases while the financial markets discovered that the U.S. economy was not growing too fast at the same time that many traders realized that some minor rate hikes were not the end of the world.
In looking at implied gasoline consumption, copper consumption, platinum imports into Japan, grain buying patterns and the structure of interest rates, the only thing that can damage commodity prices in the months ahead is the threat of "excessive supply." We are truly in a historical period in which most commodities are achieving prolific production and slow price gains!
As for the U.S. stock market, we take last week's action very serious as the fear of the Fed was basically the only stumbling block to a resumption of the bull market. Therefore, the pendulum for stocks is attempting a swing toward the bull camp again!
For daily market updates of the Hightower Report of Comprehensive Commodity Research, call 900-225-2200, extension 2 for Financial Market Forecast. The cost per minute is $1.33.
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