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Top Plays on China's Food Inflation

Catherine Holahan of CNBC's "Fast Money"
Monday, 13 Dec 2010 | 11:04 AM ET

Soaring inflation in China was the story of the weekend and the Fast Money traders had plenty of ideas on how to play it Monday morning.

Drakon Capital’s Guy Adami was expecting a broad-based market rally on the lack of news about an interest rate hike in China, despite inflation soaring to a 28-month high of 5.1 percent in November.

Investors were betting Monday that China may continue to rely on raising bank reserve requirements to cool the economy and forgo a rate hike altogether. China's central bank has already raised bank reserve requirements six times this year. “The non-move in China has got things sort of bolstered here,” said Adami.

Stephen Weiss of Short Hills Capital seconded Adami’s view that the market would move higher as a rate hike out of China seemed less likely. “Runaway inflation is really on food and even if their rate increases, how is that going to cut back on the food inflation problem that they have?”

Virtus’ Joe Terranova was also watching food inflation in the wake of China’s inflation number. But what caught his eye was a U.S. play: orange juice. The commodity traded limit up Monday morning on concerns that cold weather in Florida would damage the orange harvest. “Orange juice is limit up… but that is obviously on Florida’s freezing temperatures,” Terranova said.

For the best market insight, catch 'Fast Money' each night at 5pm ET, and the ‘Halftime Report’ each afternoon at 12:30 ET on CNBC.

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