Good morning,
DXZ9 97.425 -0.298 GCZ9 1493.6 -0.4 ESZ9 2997.00 +5.50 CLX9 53.07 -0.29
Talk of improved chances for a Brexit deal, and increasing optimism on a trade deal with China has created a bit of a “risk on” appetite this morning. Equities are trading higher, gold is coming off, the dollar has come under pressure and commodities are higher. The contrarian is oil, which is trading down, as API projected a much larger stock build than what the market was expecting (+10.5m barrels vs +3m). There remains a lot of time between now and the end of the month, the actual Brexit deadline, so many things can still happen and headline risk is still out there.
The softer dollar has put a bid in the commodity space today, as it allows products priced in dollars to be more competitive in the export arena. Improved trade prospects also helps the demand scenario for commodities, along the likelihood of an upbeat economic outlook. The softer dollar is also helping to support the gold market, which would likely be lower with this “risk on” tone. Gold has found itself in a bit of a range trade of late as stalling out when it pops above $1500, but unable to test the recent lows around $1460.
Wheat futures are leading the “ags” complex higher today, gaining a bid in response to the firming of prices in France and Russia. In Egypt’s wheat purchase tender yesterday, of which they bought 405k mt from Russia, France and Ukraine, prices were higher than the previous tender and France is very competitive in this arena. There has been talk of weather causing some issues with the next Russian wheat crop, possible creating more opportunities for France and maybe even the US to gain some market share. Australia has had some weather related issues with its wheat crop as well. Corn and soybeans are higher, following wheat but also on the improving trade prospects. An announced sale of corn to Mexico came across the export wire yesterday. The US weather appears to allow for some decent progress to be made for harvest, which will be key as cooler temperatures return to the extended forecast.
Cotton futures had another strong move higher yesterday, as the recent rainy and cold weather systems, coupled with trade provided the bid to prices. It is up a little more today with the dollar weakness. Coffee futures were lower yesterday, as beneficial rains in South America improves the outlook for what was already expected to be a healthy crop. The potential for an over supplied market weighs on prices. Sugar prices were hit yesterday, following a fairly strong short covering rally over the past few weeks. All the covering has brought the overall positioning of the market a little more in balance, but it still is carrying a decent sized short.
The oil market, which has swung 30 cents to either side of $53 in the overnight trade, will be looking for confirmation of the API inventory build projection this morning with the production and stocks figures from last week from the DOE. The US is not the only non OPEC country to have ramped up production of late, keeping pressure on prices. Much to the chagrin of OPEC+, as current prices are not where they would like to see them at. It remains to be seen what response comes from OPEC in the future. For the meantime, any supply concerns caused by geo-political events in the Middle East are mitigated some by the increased production elsewhere around the globe. Brexit and a US/China trade deal should provide some support to oil prices, as these resolutions would be interpreted as good for the global economy, and hence oil demand.
As mentioned yesterday, stay tuned to any headline news regarding Brexit, a trade deal and what the next move is from the Federal Reserve at the next meeting at month’s end. These appear to be the next big events for the markets.
Technical Moving Averages:
Product 50 day 100 day 200 day
SX9 889.00 897.50 910.50
CZ9 377.75 408.50 401.75
WZ9 483.50 503.25 503.75
KWZ9 407.00 441.50 466.75
MWZ9 522.25 540.25 557.00
SMZ9 300.2 309.5 313.4
BOZ9 29.31 28.89 29.41
CLX9 55.18 55.69 57.39
GCZ9 1515.5 1457.6 1389.3
LHZ9 66.010 69.855 71.310
LCZ9 106.975 109.340 113.775
KCZ9 98.30 102.80 104.55
CCZ9 2343 2409 2374
CTZ9 60.27 62.61 68.17
SBH0 12.40 12.85 13.33
JOX9 100.90 103.85 112.10
HGZ9 259.65 263.90 273.90
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404