Good morning,
DXH0 96.870 -0.090 GCG0 1556.1 +2.1 ESH0 3303.00 +9.25 CLG0 57.75 -0.06
Phase 1 of the trade deal is signed, and equities appear to be pleased, trading up to new highs overnight. Oil prices are hovering around unchanged, which is below $58, having traded at the lowest price since early December yesterday. Keep an eye on $57.21 in CLG0 (about 50 cents away from current price) as that is the 200 day moving average. This can be a pivotal spot for the oil market, as a breach with some momentum can trigger stop loss sell orders, along with algorithmic sell orders. Gold prices are a touch higher today, having traded in a fairly narrow range overnight. The potential geo-political risks appear to trump the continued dollar strength, which typically puts some pressure on gold prices. Copper prices are firm today, following the equity markets and just from the general belief of increased demand going forward.
Grain markets, including cotton, which should be benefactors of the trade deal, finds prices trading down yesterday afternoon and today. This price action is not that surprising, given that high expectations were built into the market leading up to the signing. Wheat, which had led the charge on the trade higher, is leading on the way down today as well. A couple of bearish inputs for wheat prices today include the Ukraine saying it would not follow Russia’s lead in implementing any export restrictions and the expectations of decent snowfall across the US Plains is thought to be sufficient to provide protective cover for the winter wheat crops. For soybeans, corn and cotton (and wheat), it is unclear how much additional buying will actually take place from China. This is particularly the case in the short run, as South American crops are coming to market, with decent sized harvests expected there.
The coffee market received some fresh news this morning, as CONAB projected Brazil’s coffee production for 2020 would be up over 25% from 2019 levels. It is projecting production of both Arabica and Robusta could come in between 57.2m bags to 62m bags, above the total of 49.3m bags produced last year. While this is a decent number, it is below market expectations of 65m bags, and whisper number of close to 70m bags. Coffee futures, which were a touch lower ahead of the release, had a minor uptick, but then returned back to the downward path. Sugar is taking a breather this morning, after trading at 2 year highs yesterday. Sugar prices have rallied 20% since mid Q4, as lower production from Thailand and India, along with Brazilian milers shifting its processing of cane towards ethanol and way from sugar. Hedge funds are no holding the largest spec long position in the past 14 months. Cocoa prices also continue to push higher, as strong demand, particularly out of Asia where cocoa grindings are thought to be up over 7%, and concerns about smaller available supplies keeps both the end users seeking forward coverage and the hedge funds with spec longs here as well bidding up the price. Hog futures also traded lower yesterday, after the fact with the trade signing. Similar to the grains, it remains unclear how much additional Chinese purchases will materialize.
Today in the US, the economic calendar includes December Retail sales, which is expected to be stronger than last month, along with initial jobless claims and import/export prices. The grain markets receive the latest look at export sales from last week.
Technical Moving Averages:
Product 50 day 100 day 200 day
SH0 928.25 927.75 921.50
CH0 383.75 387.00 405.25
WH0 535.25 517.00 514.75
KWH0 452.75 438.00 458.25
MWH0 532.75 536.25 550.25
SMH0 303.8 305.3 310.8
BOH0 32.68 31.42 30.32
CLG0 58.82 56.73 57.21
GCG0 1496.3 1507.0 1445.2
LHJ0 76.375 78.255 80.130
LCJ0 126.505 122.050 120.330
KCH0 121.10 111.55 109.00
CCH0 2555 2486 2448
CTH0 67.11 64.73 66.44
SBH0 13.19 12.76 13.04
JOH0 100.65 103.05 108.30
HGH0 274.35 268.20 271.35
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404