Good morning,
DXZ9 98.90 +0.123 GCZ9 1492.3 +3.3 ESZ9 2925.25 -12.50 CLX9 54.04 +0.42
Soft manufacturing data, both in the US and around the globe brought a quick end to the “risk on” euphoria that the 3rd quarter closed with. “Risk off” quickly became the theme, as the September ISM manufacturing index had a bad miss, posting a number below 50, which many interpret as recessionary territory. Fixed incomes markets immediately responded with a trade higher, as the data invigorated the Fed aggressive easing campaign. The dollar was hit hard and gold, which had been bloodied in a large liquidation sell off, quickly recovered some of the losses. The oil market, which was already coming off as concerns about global supply abated, took another big leg down on less demand with a failing global economy. Oil did have some support in the afternoon, as the API crude inventory data for last week showed a decent sized decline in stocks, where an increase was expected. More production and inventory data comes today from the DOE. Commodities firmed for the most part, on the softening dollar. Grain prices managed to keep the positive momentum from the prior day’s bullish reports on inventories and wheat production. Weather is also playing an impact on the grain markets. Dryness in South America and Australia is impacting the crops there. Cooler, wetter temperatures across the Midwest are delaying harvest for corn and soybeans, but providing some beneficial moisture for the winter wheat sowing. Cold, rain and snow are also wreaking havoc in the northern Plains and Canada, impacting the wheat crops there. Soybeans have had a solid bid the past few sessions, not only on Monday’s bullish data, but on continued announced bean purchases from China. The Chinese government waived tariffs on some private companies to buy US beans, and since then, there have Chinese purchases announced every day. The overall wheat market should have some support from Egypt coming with another purchase tender today. The business will most likely be won by the Black Sea and perhaps France. The US remains on the outside in this arena. Large short covering has taken place in the corn market over the past few sessions, and the large spec short position has declined by approximately 50k or so. Short covering is also prevalent in other soft commodities, namely sugar and coffee. The sugar market is seeing profit taking from a record short position, as concerns mount about a supply deficit next year. Coffee is also seeing short covering, aided by the overall weakness in the domestic currencies not incentivizing the local farmers to sell. The cotton market has been in a back and forth grind higher, as the market reflects optimism ahead of the continued trade talks.
So, he we are at “hump day” of a very busy week for the market. Today brings a view on the employment outlook with the ASDP index. There are three Fed speakers, and given yesterday’s bad manufacturing data, their comments will be much more closely scrutinized. As mentioned, more information on domestic oil production and inventories is given. There is the special counsel on Capital Hill, probing deeper into the Ukrainian impeachment show. Boris Johnson continues with the Brexit push in the UK. Hong Kong remains very unstable, with the continued protests through the Chinese holiday. The rest of the week for the US will bring data on the non-manufacturing sector, more Fed speakers, and non-farm payrolls on Friday. There certainly should be a lot of volatility surrounding the markets, and the theme may not be “risk on” or “risk off” but rather keeping things close to the vest until some more clarity sets in.
Technical Moving Averages:
Product 50 day 100 day 200 day
SX9 881.00 889.25 911.50
CZ9 384.00 409.25 402.00
WZ9 483.25 501.50 507.00
KWZ9 414.25 445.75 474.50
MWZ9 521.25 541.50 560.25
SMZ9 300.2 309.2 314.3
BOZ9 29.01 28.66 29.38
CLX9 55.84 56.61 57.17
GCZ9 1502.9 1435.7 1378.0
LHZ9 66.620 71.230 70.950
LCZ9 107.260 109.385 114.050
KCZ9 99.75 102.85 105.50
CCZ9 2331 2398 2368
CTZ9 60.30 63.14 68.86
SBH0 12.51 12.91 13.38
JOX9 102.05 104.60 114.00
HGZ9 261.35 265.50 274.55
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404