Good morning,
DXZ9 97.435 -0.034 GCZ9 1495.2 +4.5 ESZ9 3036.00 +0.25 CLX9 55.20 -0.34
The Federal Reserve decision comes this afternoon, where the market is expecting a reduction to short term interest rates of 25 basis points. Probably as interesting will be the press conference after the announcement, as there has been a lot of speculation lately that the Fed may decide to pause the easing cycle, and see how what has already been done transpires throughout the economy. Numerous markets are likely to observe a responsive trade, following this event. Equities remain perched near the highs, as the expected stimulus from the rate cut, coupled with the positive rhetoric that keeps coming from the trade talks keeps popping up stocks. Oil futures are a touch lower today, shrugging off the report last evening from API saying crude inventories fell by 1.7m barrels last week. The market is expecting data from the DOE today to show a build of 2.5m barrels to crude inventory. Gold futures have had a quiet overnight trade, with prices near the highs at the moment, and just a shade below $1500. Gold should have some price volatility today, as the various markets interpret the Fed’s decision and comments. Being the safe haven asset, flows could come into gold or get moved out, depending on the circumstances.
Grain prices are basically steady in corn and soybeans, as the harvest keeps trying to come to a close. Recent colder temperatures and some snow systems sweeping across the Corn Belt and Palins are certainly creating an obstacle for completion. The risk of damage to the remaining crops grows as the calendar turns to November. Pressure on prices could be coming from South America, where producers may be looking to move old crops ahead of new legislation that could be put in place by the government. This fact was heightened with the weekend election in Argentina, where the socialist party came out ass the winner. The wheat market was softer yesterday, and is leaking lower again today. The rain and snowy conditions provide beneficial moisture for the newly planted winter wheat crops. In addition, yesterday’s purchase tender from Egypt saw winning bids coming from the Black Sea and Europe, with the US nowhere to be found. The market continues to be optimistic that, poor weather conditions in other parts of the world, which are having an impact on wheat production there (and hence lower available supplies) will translate into more export business for the US.
Cotton futures are up today, and poised to have the largest monthly rally in almost a year and a half. Optimism for an official trade deal with China, leading to a large increase in Chinese purchases is the largest driver of the rally. The recent weakness in the dollar, with the expected cut to US rates, is also helping commodity prices, including cotton. Coffee futures are recovering today, after getting hit yesterday, in a bout of spec profit taking. Prices made a higher high in the early trade yesterday, but were unable to hold those levels succumbed to the spec longs closing out positions. With first notice day for futures contracts very close by, more pressure could come in to prices in the short term.
Tomorrow is month end, which could lead to a profit taking/position squaring, or window dressing, type of trade today and tomorrow. Following today’s Fed result, the market will also be focusing on the latest picture on the US employment situation, with this Friday’s nonfarm payrolls and unemployment rate report. For nonfarm payrolls, and increase of 85k is expected, compared to adding 136k last month. The unemployment rate is expected to uptick to 3.6% from 3.5%. As a precursor to the payrolls report, the ADP employment index just came out, showing an increase of 125k, compared to being up 135k last month and market expectations of +110k. This may ramp up forecast for Friday’s number a touch, but probably not much.
Technical Moving Averages:
Product 50 day 100 day 200 day
SX9 898.00 900.00 909.50
CZ9 377.25 403.75 401.00
WZ9 490.00 503.00 502.50
KWZ9 408.50 435.00 460.75
MWZ9 525.25 536.50 554.25
SMZ9 301.2 307.6 312.4
BOZ9 29.55 29.12 29.47
CLZ9 55.17 55.55 57.36
GCZ9 1511.4 1472.7 1397.2
LHZ9 66.455 68.765 71.455
LCZ9 108.420 109.785 113.650
KCZ9 98.10 101.85 103.75
CCZ9 2387 2412 2375
CTZ9 61.27 62.39 67.77
SBH0 12.34 12.75 13.27
JOF0 102.90 105.45 113.30
HGZ9 260.60 263.85 273.90
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404