Good morning,
DXM9 97.04 +0.382 GCM9 1275.1 -1.7 ESM9 2908.00 +7.50 CLM9 64.09 +0.22
The market comes to the end of a shortened week, due to the Good Friday observance tomorrow, which has all markets closed. The main story from yesterday afternoon/last evening is that a trade deal between the US and China is expected to be signed by late May or early June. The markets have been waiting for this for the better part of 9 months now, and it is setting up to be a text book example of “Buy the rumor; Sell the news”. Global equities are a touch lower this morning, as stocks rotated down off the session highs in yesterday afternoon’s trade.
Oil is hovering around unchanged levels this morning, having moved lower after rallying in front of the weekly inventory data released yesterday. The market was bracing to see another increase in oil inventories, only to have the report show a decline to oil stocks. The market reversed course, but found some support in the afternoon trade. In the early trade yesterday, Russian Energy Minister Novak was quoted saying the OPEC+ group shouldn’t target a range for oil prices. This morning, Russia reported it has the most primary refining capacity offline since October of 2017. Saudi Arabia reported that oil production fell to 10.14M b/d in Feb vs 10.24M. Gasoline futures traded higher yesterday, as inventories were reported lower again this week. If WTI can remain below $64 today, it would mark the first weekly loss since early March. ** Just announced (7 AM CDT), Libya is planning to cut output in early May, due to maintenance. Oil futures popped about 30 cents on this headline.
The grain markets continued to trade poorly yesterday. This time, soybeans led the move down. Beans traded the lowest prices since November. Some of the drivers were a report saying Chinese farmers plan to increase soybean acreage by 16%, South American harvests continue to be upgraded, helped by the beneficial rains and a reduction in feed demand, due to the Swine Fever epidemic. Funds, already carrying a decent sized short position, added yesterday on the break, as futures open interest increased over 17k. More bad news for oilseeds came from the canola market, where China’s imports are expected to drop further. This puts even more pressure on the Canadian canola farmer, already hurting from the dispute between China and Canada. The market continues to think there could be an acreage swap to spring wheat from canola. Corn also traded down yesterday, as the good South American weather also bodes well for the corn crops there. In spite of all the rain and flooding, there appears to be a dry window developing next week, where the market thinks good planting progress can be made. Funds appeared to take advantage of the decline in prices and did some short covering, booking profits with the market near the lows. Open interest declined by over 13k yesterday, yet the funds still carry a record sized short position. Wheat had a very anemic bounce yesterday, recovering from the large sell off observed on Tuesday, driven by concerns about large global supplies. Increases in crop sizes in Russia and Germany, along with another very good reading in Monday’s crop conditions report for winter wheat all supplied the fuel for the break. In yesterday’s trade, funds added to shorts in Kansas City wheat. Open interest increased by 8k. In addition to the good crop reading, the rains are viewed as beneficial for winter wheat. **Today’s export sales, just posted, were good for corn and wheat, a little disappointing in soybeans.
Some key levels for some grain markets:
CK9: 360.50 (10 day MA); 371.25 (50 day MA)
SK9: 893.5 (10 day MA); 906.00 (50 day MA); 907.25 (200 day MA)
WK9: 457.00 (10 day MA); 469.50 (50 day MA)
Copper had a big day higher yesterday, trading at a 9 month high. Optimism from the recent Chinese data, and a report that subsidies are being drafted to boost sales of cars and electronics in China provided the bid. Demand remains strong for copper, while supplies are tight. Copper is lower today, in part profit taking from the recent rally and partially from some softer than expected economic news out of Europe this morning. Gold is moving back and forth across unchanged levels today.
The coffee market continues to be decimated, trading at a 13 year low yesterday. Abundant supplies and good growing conditions keeps the market concerned about the glut of coffee on the market. The other softs markets were mixed yesterday, with cotton and coffee higher, while sugar was lower. Some projections from the USDA yesterday afternoon: Thailand 2019-20 sugar output should decline by 2%, Dominican Republic 2019-20 sugar output will decline 5.4% and Australia’s 2019-20 cotton output will decline 4.3%.
On the economic front, today’s March Retail Sales report came in stronger than expected, initial jobless claims were lower than expected, both positives for the economy. Equities and the dollar did catch a bid on this.
As already mentioned, markets will be closed tomorrow, in observance of Good Friday, and will resume trading Sunday evening. On days ahead of holidays, it’s always a good idea to check and make sure there are no special closing times for whatever markets you may be involved in.
Have a good day,
Mike