Good morning,
DXH0 97.530 +0.317 GCJ0 1582.5 -5.4 ESH0 3244.50 +20.50 CLH0 51.57 +0.01
As expected, Chinese markets return from the extended new year holiday to lower prices, European and US markets are actually trading higher, following sharp sell-offs during Friday’s session. While it will take some time too realize the full extent of the impact from the coronavirus on China, markets that were open last week, and priced in virus expectations, are in a bit of recovery mode.
Oil prices dipped to new lows in the Asian trade, as it was reported that Chinese demand will decline by approximately 20% (3m barrels) due to the virus. However, prices recovered back towards unchanged, as the oil market find itself in a technically very oversold state, and many OPEC members are discussing ideas to bring some support to oil prices. On Friday, Russia agreed to an emergency meeting for OPEC+ in February, where it is likely that further reductions to the production quotas agreed upon in December will be discussed.
Gold prices, following last week’s strong safe haven rally, took another leg higher in the Asian trade last night, failing just shy of the $1600 level. In similar fashion, prices rotated lower in Europe and now moving to the US, as much of the market reaction in China had been anticipated. Gold could continue to rotate lower some, but underlying support should come from the unknown of just how big of an impact the virus will have in China and then for the rest of the global economy.
Commodity prices are lower for the most part today, extending the declines posted to end last month. January saw most prices reach the lowest levels in numerous months, and sectors posted double digit percentage losses for the month. Once again, coffee has the biggest move lower today. The dollar firming back up, following several lower sessions last week, allows for coffee producers to resume aggressively selling product, to take advantage of the depreciating domestic currency. Friday’s COT report from the CFTC again showed continued liquidation of spec long positions. A current season crop which is being estimated to be larger than what had been thought previously, is leading to the continued move down. The COT report showed continued increases in the spec long positioning in sugar and cocoa, as supply deficit concerns continues to bring in spec buyers, pushing prices up.
Grain prices are slightly lower today, also on uncertainty over how much demand there will be out of China for US “ags” products. Cotton prices are a touch higher today, but this is corrective as cotton faced major selling pressure on the China demand story last week. Also weighing on “ag” prices are expectations for a decent sized crop to come out of South America this season, and uncertainty over how much demand will be found in Asia. This is putting a drag on global pricing.
It is a busy week on the US economic calendar, with manufacturing index reports coming throughout the week and the employment report due on Friday. While the market will be more focused on economic developments derived from the impact of the coronavirus, this data can always create some price volatility.
Technical Moving Averages:
Product 50 day 100 day 200 day
SH0 920.75 929.00 919.00
CH0 383.50 387.75 404.25
WH0 547.50 527.50 518.50
KWH0 464.00 446.00 458.00
MWH0 536.00 539.75 548.75
SMH0 301.4 305.0 309.4
BOH0 32.75 31.73 30.39
CLH0 58.24 56.55 56.56
GCJ0 1521.4 1515.2 1464.0
LHJ0 74.465 77.665 79.495
LCJ0 125.925 123.330 120.250
KCH0 120.60 112.40 109.15
CCH0 2598 2542 2468
CTH0 67.94 65.89 66.04
SBH0 13.60 13.01 13.07
JOH0 99.25 101.75 106.70
HGH0 274.45 269.15 269.80
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404