Good morning,
DXM9 97.155 -0.009 GCM9 1285.7 +0.5 ESM9 2852.75 -20.00 CLM9 61.80 +0.10
It has been a pretty crazy night in equities, as the markets await news from the trade negotiations and US implements tariffs on $200B worth of goods with China (China has vowed to retaliate). June e-mini’s traded 20 points either side of unchanged overnight (presently back on the lows), which I assume was the market trying to interpret / get a jump on any reactions to trade headlines. As talks resume today, and with tariffs beginning today, it is worth noting that anything that has already in the process of being delivered is exempt from the tariffs, so there may be an additional 5 to 7 day window before the tariffs actually kick in.
There are many things out there to influence the markets today, but they will all take a back seat to the trade negotiations. Tensions in the Middle East, North Korea’s missile firings, the WASDE report from the USDA, CPI data in the US, and updated fund positioning with the CFTC’s Commitment of Traders reports this afternoon all are out there for the markets to consume. While important information will be delivered with all of this, it just isn’t the primary focus at the moment. This being said, it is rather difficult to come up with much to say for this comment today, as Deal / No Deal will drive prices in the short run.
Via Twitter, President Trump just declared that the money raised from the additional tariffs placed upon China will be used to purchase US agricultural products, to be used for humanitarian needs. Trump declares these purchases would top any demand that would come from China. Grain prices basically had no reaction to these headlines. It almost feels like all of the markets, especially after the apparent whip saw last evening, have become numb to these blasts, and now just want to see the results.
Here is a quick look at some of the markets:
Oil, having traded down yesterday on trade is back up again today, having traded in a $1 range overnight.
Gold, had a good bid yesterday, not surprising given the early rout in equities, only to give some of the gains up as stocks bounced. Same story this morning, resting in positive territory as equities are starting to leak lower again.
Grains were pushed to new lows again yesterday, on trade, but also as today’s WASDE is expected to show strong production and inventory numbers, both domestically and globally. This will be the first look at the 2019-20 balance sheets from the USDA. (Estimates for this data are on an attachment here). Funds added to existing short positions, with estimates for corn sales being around 25k and almost 10k for soybeans. Soybean prices traded to the lowest level since December of 2008. Also putting pressure on prices is the planting window opening up over the next week. When the fields get dried out, it is expected the farmers will move quickly. There is more rain projected towards the end of the 2 week outlook, so the rain story is not over yet. Temperatures will also be on the cool side, which may have an impact to yields as the crops are planted in less than optimal soil temperatures. Wheat has been receiving beneficial rain, but there is some concern there as well. Temperatures are approaching in portions of HRW country, as winter wheat is beginning to head. This could have an impact on yields.
Both lean hogs and live cattle were lower early yesterday. China not buying US meat, on account of the trade debate being attributed for the weakness, although, I think the market has been trading on this theme most of the week. Both of these markets did manage to firm up into the close. Probably as any short term, short positions get covered up ahead of a potential trade announcement. Also helping bolster prices late was a report saying Asian Swine Fever will cut China’s pig meat output by 10% in 2019.
Other soft commodities, which for the most part have been trading down most of the week, managed to close higher yesterday. The exception was cotton, which traded to a 17 month low, as it is expected today’s WASDE will show the biggest expected production in 14 years, and demand will take a big hit if China is removed from the picture. Orange juice was lower as well. Same story, healthy crops and decreasing appetite for sugary drinks. The other markets being higher is most likely purely position squaring ahead of any announcement.
Copper prices were lower yesterday, as the diminishing trade agreement prospects were viewed as a negative for global economic growth. Copper is trading lower again this morning, as equities soften up here.
As mentioned, the US weather provides a planting window for next week, but temperatures will be normal to below normal. Close to freezing temperatures in the Plains could are expected, which could raise some issues for the wheat. Weather in Europe and the Black Sea has been beneficial for wheat development, putting pressure on prices in those markets.
Technical Moving Averages:
Product 50 day 100 day 200 day
SN9 896.0 916.25 915.5
CN9 372.5 382.75 387.75
WN9 456.25 489.375 521.625
KWN9 432.75 473.375 516.75
MWN9 541.125 558.625 585.25
CLM9 61.36 57.15 60.74
GCM9 1296.1 1302.1 1268.0
LHM9 89.580 84.070 81.925
LCM9 119.175 118.235 116.195
KCN9 95.79 101.69 109.22
CCN9 2295 2316 2278
CTN9 76.68 76.10 79.25
SBN9 12.60 12.75 12.64
JON9 114.29 119.38 134.60
HGN9 289.90 282.45 280.40
Have a good day,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1201A
Chicago, IL 60604
Trean Group, LLC
312-604-6404
312-896-2012 (fax)