Commodity Corner: Morning Comments

Good morning,


DXZ9  98.70  +0.011                     GCZ9  1505.7  -2.2                ESZ9  2885.00  +4.50                   CLX9  52.49  -0.15


The markets are taking a bit of a break from the continued reactions to less than stellar news on the US economy, and incurring a bit of correction, ahead of tomorrow’s Non-Farm Payrolls report.  A manufacturing index report suggesting the economy could be turning towards recession, coupled with an employment report yesterday morning coming in lower than estimates, especially when the downward revision to the prior month was factored in, and the markets quickly caved on soft economy concerns.  Equities were drilled, oil was hit on the premise of slower economy equate to lower demand, copper also was hit hard.  Gold prices, which had been in a steep nosedive since month end on Monday, quickly found support and bounced back above the magical $1500 level.  As mentioned yesterday, when viewing the overall global landscape, there is a place to have gold in one’s portfolio.  This point was proven again yesterday.  Fixed income markets immediately moved back to pricing in a Fed intent upon lowering interest rates to ease monetary policy.  This put some pressure on the dollar.  Commodities also came under pressure, as softer economy, meaning reduced demand weighed on prices. 


For the most part, most markets will be in some type of consolidation mode today, ahead of tomorrow’s key employment report.  This will be the last look the Fed has before the next monetary policy meeting at the end of the month.  Keep in mind, October 31 is also the Brexit deadline, so there are numerous key events for the markets at this month’s end.  As the market’s wait, today brings a report on the economy, from the non-manufacturing side.  So far in Europe, these numbers have been coming in a touch softer than expected, but remaining above the key 50 level, which is viewed as the tipping point for an economy expanding or receding.   There are also reports on initial jobless claims, factory orders and durable goods.  For tomorrow, the consensus for September Non-Farm Payrolls is +148k, vs +130k last month.  The Unemployment Rate is expected to remain at 3.7%, and Average Hourly Earnings to be 0.3% vs 0.4% last, on a monthly basis.  August Trade Balance figures are also released tomorrow, which are of interest to gauge the continued impact of the China trade dispute on the movement of US goods.  


The grain markets sold off yesterday, along with other asset classes, in spite of bullish news received on Monday with the quarterly inventory figures.  Outside of a couple of rain events moving across the country now, the window for harvest looks decent, and colder temperatures do not appear to be a threat.  Weather is playing a role in the wheat market, as poor conditions are having some impacts around the globe.  Yesterday, Egypt only bought 60k mmt of wheat in its purchase tender, and the sale came out of France.  The Black Sea was represented in the bidding, but awarded nothing.  France was able to take advantage of a near record harvest to be more aggressive in it’s pricing to Egypt.  From a technical perspective in soybeans, the SX9 contract failed to take out the old high up around 9.20, with all of the announced sales made to China over the past week to 10 days or so.  On this rotation down, keep an eye on the 9.11 ¼ level, which is the 200 day moving average.  If the SX9 market can trade below this level with some authority, it could bring some additional selling in. 


The coffee market ended up lower yesterday, in a rangebound trade, as new information on weather for the growing regions is waited for.  With the decline in the dollar, the South American currencies firmed, and provided an opportunity for producers to make some sales.  Sugar also remains at the upper end of its recent large move, where short covering from a large spec short position has dominated the flows.  Prices are a touch lower today, but still within striking distance of the highs.  Cotton prices ended up higher yesterday, as optimism continues in front of the resumption of the trade talks with China.  The large flows of recent soybean purchases from China also keeps hope alive for the cotton market, and other products.    


The oil market not only had to contend with the concerns about a stagnating economy, but also was faced with the report of an inventory build in the US from last week.  While the production figure released from the DOE had a downtick, inventories rose for the week, signaling a reduction in demand.  So the additional supply in the US, coupled with Saudi Aramco back up to full capacity following the drone attacks a few weeks ago, drive prices lower.  OPEC+, clearly concerned about this price decline, is not scheduled to officially meet again until December, so it remains to be seen if there is any attempt to thwart this drop in prices. 


There are more Fed speakers on deck today, so the market will continue to monitor the comments, and gauge the impacts to monetary policy, for the US and possibly the rest of the world.  A change in tone of what the market is currently thinking can have a n impact on numerous asset classes.  The primary them for today’s trade should be setting up for tomorrow’s key employment data, along with watching headlines for Fed comments and impeachment news.  


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                      881.25                   890.00                   911.25

CZ9                      383.25                   409.25                   402.00

WZ9                     483.00                   502.00                   506.50

KWZ9                   413.50                   445.50                   473.75

MWZ9                 521.00                   541.50                   559.75

SMZ9                   300.0                     309.3                     314.2

BOZ9                   29.03                     28.68                     29.38

CLX9                    55.76                     56.52                     57.16

GCZ9                   1504.4                   1437.7                   1379.2

LHZ9                    66.410                   71.105                   70.980

LCZ9                    107.190                 109.360                 114.020

KCZ9                    99.60                     102.90                   105.45

CCZ9                    2330                       2399                       2369

CTZ9                    60.26                     63.06                     68.78

SBH0                    12.50                     12.91                     13.38

JOX9                    101.90                   104.60                   113.80

HGZ9                   261.05                   265.25                   274.45






Michael Clifford


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Ste 1065                                                              

Chicago, IL 60604                                              

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