Good morning,

 

DXH0  97.275  +0.213              GCG0  1556.6  +6.1                              ESH0  3325.00  +8.50                CLG0  58.75  +0.23

 

Apologies for the delay this morning.  Here is a brief spin.

 

The equity surge to new highs continues, as the market moves into the MLK holiday weekend, following through on the momentum from the signing of Phase 1 of the trade deal with China, along with friendly economic data released in the US.  Overnight, China reported 4Q GDP was +6.1%, which was slightly lower than what was expected, but coming in above 6% was still viewed as a positive.  Probably the biggest piece of news overnight came from US Treasury Secretary Mnuchin, stating the US will begin to issue 20 year debt to help fund the rising deficit.  Needless to say, the very long end of the US yield curve took a quick header on the open last night.  While the yield curve steepened quickly, it has recovered a bit from the widest levels of last evening, it is still steeper this morning. 

 

The trade deal and the decent Chinese economic data are aiding numerous commodity markets this morning.  Oil has held in the mid $57’s and is rotating back up, having stalled just in front of $59 in the overnight trade.  The reported decline in crude stocks mid-week, coupled with the surging economic sentiment is pushing oil prices higher. 

 

Gold is higher as well, also on the notion of improved economy and continued geo-political concerns.  Interesting that gold is so firm, given the dollar strength.  Often the stronger currency tends to weigh on gold prices.  Not the case at the moment.  

 

Grain markets are mixed today.  With soybeans continuing to sag following the trade deal.  It remains very uncertain as to how much additional buying of beans will come from China.  This is partially due to the huge depletion of the hog population in China from last season’s ASF epidemic.  Corn futures are higher, as in addition to hopes of some more corn purchases made to China.  It was also announced that China would be looking to purchase more ethanol.  Wheat prices are mixed, as the current winter storm sweeping across the country is thought to provide some needed moisture for the winter wheat crop, along with snow cover to protect from the cold front that is behind this system.  Cotton futures are also trading higher from the improved trade sentiment. 

 

Cocoa futures are set to post the largest weekly gain in 4 months, amidst signals of rising demand out of Asia.  This pushes prices to 3 year highs, as the market still deals with concerns of a looming supply deficit.  In addition to weather related production issues in Ghana and the Ivory Coast, the cost of cocoa supplies has been raised by the implementation of a quality of living subsidy for cocoa producers. 

 

Sugar prices continue to trade at multi year highs as well.  In addition to Brazilian millers producing more ethanol and less sugar, Thailand is reporting that the worst drought in 40 years is going to cut output by as much as 30% this year. 

 

Coffee prices remained on the down slope yesterday, this time driven by the weakening Brazilian real.  The softer real allows the producers to capture more of a profit in the domestic currency, as sales are made in dollar terms.  Recent weak economic data and declining optimism on the overall strength of the economy are putting pressure on the currency.  The Columbian peso was also down yesterday.  The other day, CONAB announced strong coffee crop projections, well ahead of 2019 levels, but actually a bit lower than what the market thought it may see.  Coffee continues its sharp reversal down, off the highs made in Q4 of 2019.

 

Again, apologies for today’s comment.  It’s just been one of those mornings.  For those who may have Monday off, enjoy the holiday weekend!          

 

Technical Moving Averages:

Product               50 day                100 day               200 day

SH0                      927.75                   928.00                   921.50

CH0                      383.25                   386.75                   405.25

WH0                    536.25                   518.00                   515.00

KWH0                  453.75                   438.75                   458.25

MWH0                533.00                   536.50                   550.00

SMH0                  303.7                     305.3                     310.6

BOH0                   32.69                     31.46                     30.33

CLG0                    58.86                     56.78                     57.19

GCG0                   1496.9                   1507.0                   1446.3

LHJ0                     76.275                   78.270                   80.110

LCJ0                     126.520                 122.195                 120.345

KCH0                   121.20                   111.65                   109.05

CCH0                   2559                       2491                       2450

CTH0                    67.21                     64.84                     66.41

SBH0                    13.22                     12.78                     13.04

JOH0                    100.55                   102.95                   108.10

HGH0                   274.70                   268.50                   271.30

 

Thanks,

Mike

 

 

Michael Clifford

 

141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC                                              

312-604-6404