Good morning,
DXM0 100.215 +0.462 GCM0 1623.2 +31.8 ESM0 2431.50 -16.50 CLK0 21.99 +1.68
Equities are staging a corrective bounce today, following yesterday’s trade lower. All of the global economic manufacturing indices, while coming in better than feared, were all below the 50 threshold, suggesting a slowing or recessionary economy. Not really surprising, given what has occurred in the world. The market now awaits today’s Jobless Claims report in the US, where a number of +3.7m is expected, following last week’s +3.283m. While bad news is expected in most of the data that will be reported, numbers worse than expected have the potential to be market movers. Regarding claims, there is some thought in the market that today’s number could be in the 5 to 6m range, so a print like that may not be a big shocker. Similar story has taken place with the data in oil this week. Between the API report Tuesday evening and yesterday’s production and inventory data from the DOE, which showed much larger stock builds than what was expected, but oil prices didn’t really tank. The were 2 trips below $20 yesterday, only to bounce off the levels.
**Initial Jobless Claims rose by 6.648m last week, vs an expected rise of 3.7m. Stocks come off a bit on this, fixed income markets turn bid (but don’t explode higher) and gold firms.**
Oil prices are up over $2 this morning, as China announces it plans to build up its domestic oil reserves. This coupled with hope in the market that Presidents Trump and Putin might be able to hold some positive talks on oil price stability. Yesterday was the first day where the oil production quotas from the OPEC+ agreement were lifted, but Russia reported it did not increase its daily production totals. Oil producers, in addition to facing the 18 year low prices in oil are also facing exploding storage costs, as storage facilities are near capacity. An example is what used to be a $20k charge for storage has now moved up to between $200k to $300k for storage. This should act as a deterrent to any aggressive production increases.
Gold prices are firming back up today, moving back above the $1600 level. As the virus story grows worse in the US, while the rest of the world is also suffering, just continues to raise the awareness of how serious this is. It continues to be believed that this will carry deep negative economic undertones, and global governments will have to take drastic measures to attempt to rebuild economies when this finally passes. This keeps the safe haven status of gold alive and kicking.
Grain prices were hit hard yesterday. Soybeans and wheat led the move down, following the overall assault on most commodities. Soybeans were hit hard, driven down by a couple of factors including a strong quarterly stocks number on Tuesday, the Brazilian real trading at a new low, making Brazilian beans even cheaper in the export market, and a growing belief that the decimation of the ethanol market, with crude prices cascading lower, still leaves the possibility of seeing a switch to soybeans acres from the very large corn sowing acreage number reported on Tuesday. Wheat prices were hit as the panic buying of staples from the pandemic leaves consumers well supplied in the short run. In addition, favorable weather forecasts should benefit the winter wheat crops that have now come out of dormancy. Corn, which has already been hit hard from the ethanol market and the above expectations acreage projection from the USDA, was down, but not crushed yesterday. With corn prices trading near the lows, many traders are contemplating a move to test the $3 area. There has been a lot of option activity involving the $2.70 put, which also signals part of the market’s mindset.
Coffee prices fell yesterday, pushed down with most commodities, but also with the depreciation of the real. With the pandemic supply scramble subsiding, a renewed focus on longer term declining demand also came into focus. Coffee prices are recovering this morning, as a government lockdown in Vietnam could lead to some supply disruptions. Sugar prices were also hit, on demand concerns but also from the decline in oil. Lower oil prices encourages millers to produce sugar rather than ethanol with the cane. Lumber prices, not surprisingly, have been in a downfall on the dim global economic prospects. Live cattle and lean hogs also traded a limit down levels again yesterday.
There are certainly more stories out there for many of the markets, unfortunately, with our reduced staffing with the shelter in place rules, I need to cut this off here, as I am multi-tasking. Stay well and be safe!
Technical Moving Averages:
Product 50 day 100 day 200 day
SK0 887.00 913.75 924.25
CK0 372.25 381.00 398.25
WK0 544.50 543.25 528.50
KWK0 469.50 466.75 461.75
MWK0 534.00 538.50 547.50
SMK0 304.4 305.7 310.0
BOK0 29.15 31.09 30.60
CLK0 41.85 49.94 52.14
GCM0 1600.1 1555.3 1526.3
LHM0 76.675 82.285 85.584
LCM0 103.189 110.721 110.587
KCK0 110.45 116.95 112.35
CCK0 2622 2604 2514
CTK0 63.22 65.86 64.93
SBK0 13.28 13.32 13.06
JOK0 101.70 102.55 106.55
HGK0 248.10 262.10 263.75
HOK0 142.62 167.17 176.44
XBK0 132.19 158.39 166.36
NGK0 1.855 2.037 2.179
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404