Good morning,
DXH0 97.720 -0.099 GCJ0 1584.0 +8.0 ESH0 3251.00 -21.50 CLH0 52.28 -1.05
The Federal Reserve leaves interest rates unchanged, while keeping the repo facility in place, and the market moves into “risk off” mode. In Chairman Powell’s press conference, he tried to keep a neutral tone, regarding policy going forward, but there may have been a few traces of dovishness in the comments. This morning, the Bank of England left monetary policy unchanged, when there had been high expectations for a cut in rates (although, the market’s odds on that had been diminishing over the past few days). Germany had some favorable employment news, which provided a moment of stop the bleeding for global equities, but the tourniquet loosened up rather quickly. The coronavirus death toll now over 180 people, and thousands possibly carrying, keeps the threat of spreading very real. Part of the equity decline can be attributed to not fully knowing what the impact on the global economy could be. Gold prices have responded with a $4 gap higher on the open last night, and are up over $9 now. Not surprising that the safe haven bid, providing support for gold, remains in the market.
The oil market has been the biggest mover late yesterday and overnight. Getting past any concerns about reduced supply from Libya and a further cut to OPEC+ production, the oil market returned to concerns about greatly reduced demand from a hit to the global economy caused by the virus. Further pressuring prices yesterday was the weekly inventory data in the US, showing a sharp increase to stocks. Continued strong US production, coupled with a potential hit to the demand side of the equation, pushed prices down. Futures gapped lower last night, and proceeded to trade down to just below $52, where the market may have found some temporary support. Oil prices are now trading at the lowest levels in the past 3 months. The oil market will continue to monitor the virus, and how it may impact the Chinese economy and the rest of the world.
Copper prices are lower again today, marking the 12th consecutive day of lower prices. All industrial metals have come under siege with the likely reduction in demand. Copper, seen as the primary industrial metal, gets the headlines and prices are feeling the blow here. As projected hits to China’s economy keep being discussed, copper prices should remain under pressure.
Grains and the soft commodities were lower yesterday, again on demand concerns. Additional pressure to grain prices is coming from South American crops now coming to harvest, and with the reduction in trade/shipping with China, producers now need to look elsewhere and possibly be more aggressive in moving inventory. Wheat prices were also hit on beneficial moisture hitting the Plains.
Coffee prices continue to spiral lower, with prices being down more than 20% this month. Futures open interest has been increasing on this break in prices, suggesting new short positions are entering the market. Prices of sugar, cocoa and coffee find themselves trading higher today, in part aided by the softening of the dollar, as producers are less incentivized to sell with their domestic currencies rising. Coffee is probably also bouncing today in part from short covering, with the fresh shorts piling into the market. Cocoa prices continue to converge higher to meet the cash price, which includes a $400 surcharge to the producer. Sugar, which has had a strong bull run of its own, can now resume the course higher, following a slight correction down yesterday.
Lean hogs were down sharply again yesterday, having been limit down on Monday, and having a light bounce on Tuesday. Clearly the impact of the virus on overall Chinese consumption is playing a role here. The early call for hogs appear to be slightly lower again today. Live cattle was also lower yesterday, also having been limit down Monday with a recovery on Tuesday. Prices were not down as much in cattle yesterday, and the early call appears to be slightly higher for cattle.
The first look at the US GDP for Q4 of 2019 was released today, coming in at 2.1% vs an expected 2.0%. The GDP Price Index was 1.4% vs an expected 1.8%. Core PCE was also below expectations, coming in at 1.3% vs 1.6%.
Tomorrow is month end, so there is a good possibility of profit taking, position squaring and window dressing that could impact numerous markets both today and tomorrow.
Technical Moving Averages:
Product 50 day 100 day 200 day
SH0 923.00 929.25 919.75
CH0 383.50 387.50 404.50
WH0 545.50 525.75 517.75
KWH0 462.25 444.75 458.25
MWH0 535.50 539.25 549.00
SMH0 302.1 305.1 309.7
BOH0 32.78 31.70 30.39
CLH0 58.44 56.63 56.67
GCJ0 1517.2 1514.0 1461.3
LHJ0 75.020 77.905 79.740
LCJ0 126.180 123.155 120.315
KCH0 120.90 112.35 109.15
CCH0 2593 2532 2464
CTH0 67.86 65.72 66.13
SBH0 13.52 12.96 13.06
JOH0 99.50 101.95 106.95
HGH0 274.95 269.40 270.25
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404