Good morning,
DXM9 96.995 -0.002 GCQ9 1341.7 -1.0 ESM9 2854.50 +8.75 CLN9 53.35 +0.76
The markets come to the end of a very volatile week, where global monetary policy and tariffs have dictated the price action for many markets. Numerous central banks this week have expressed concerns about global economic growth and have stated they carry a dovish view towards monetary policy. Tariffs, and the struggling negotiations on trade agreements have had a tug of war effect on markets. Most recently, the discussion with Mexico, and whether or not the declared tariffs will go into effect on Monday have increased price volatility.
Today is a big economic data day in the US. May Non Farm Payrolls are released, with expectations of +175k vs +263k last month. The Unemployment Rate is expected to remain at 3.6%. Average hourly earnings should remain +3.2% y/y. There has been much debate this week on where the Fed stands, regarding monetary policy. As they claim to be data dependent, perhaps today’s numbers may shed some light on monetary policy decisions for the June meeting and beyond.
Oil has had another volatile week, trading to a new low yesterday, following stronger than expected production and inventory data released mid-week. Many feel a short term low may have been put in yesterday, as the oil market is extremely oversold. Oil did bounce when it was reported that the tariffs on Mexico may be delayed, bringing optimism about a trade deal getting done. Later, after the day’s negotiations had ended without a deal, it was announced the tariffs would still kick in on Monday. Even with this, oil still managed to hold its bid. Also supporting oil prices is the announcement that the US would continue with sanctions on Venezuela production. Also, numerous OPEC officials have ben on the tape, discussing concerns about the instability in oil prices. With the OPEC+ meeting coming later this month, one can assume creating price stability will be a major topic of discussion. Saudi Arabia’s energy minister was on the tape saying he is sure OPEC will extend the production cuts. Not sure that Russia agrees with that, but this is helping support oil prices as well today.
Gold, which has been the primary recipient of asset re-allocations, with al of the uncertainty in other markets, soared to new highs over the past few sessions, falling just short of $1350 in CLQ9. Gold is receiving a safe haven bid as global economic growth concerns have equity markets on edge. As more central banks proclaim a dovish bias to monetary policy, which carries a negative impact on domestic currencies, gold is the benefactor. Today’s US data should have a big impact on numerous asset classes, including equities and currencies, so gold most likely has a responsive trade to the ebbs and flows of the other.
The grain markets are lower today, again somewhat catching its breathe following some very volatile price action with markets continuing to challenge the highs, due to the recent weather and impact to planting. There is also some position squaring taking place ahead of Tuesday’s WASDE report form the USDA. This report is going to be very interesting. There is so much uncertainty out there, regarding how much corn is going to get planted, and how many acres of soybeans there may, the estimates for this data are all over the map. There are huge discrepancies in the amount of acres to be planted, the expected yields and ending stocks. Of course production numbers are all over the place as well, naturally, with the varying acreage and yield numbers. One service yesterday, released its yield estimates for this season, calling corn yields 169.3 bpa, soybeans 47.4 bpa, spring wheat 47.2 bpa and winter wheat 52.1 bpa. With all of the uncertainty for this number, position squaring is likely to be in order ahead of Tuesday. Some of the pressure on prices today comes from the planting window opening up over the next few days, with very few rains in the forecast.
Other commodity prices were higher for the most part yesterday, as the dollar came under pressure. Commodities have been observing a back and forth trade of late, as all of the weather systems have had a direct impact on the growing seasons, while all of the trade talks carry implications on expected demand. While weather appears to have a relatively calm window in the short term, there are still storms forecast for the distant horizon and the trade deliberations don’t appear to have an end in sight, so I would expect more of the same.
This afternoon, the CFTC will release its latest COT reports, which will give the markets a fresh look at fund positioning. With all of the unknowns in the markets, funds have been attempting to get themselves a little closer to the comfort of home. Today’s reports will show where they stand.
Good luck on today’s data! I will be out of the office on Monday and Tuesday. This report will resume on Wednesday. Have a good weekend!
Technical Moving Averages:
Product 50 day 100 day 200 day
SN9 868.5 899.5 907.5
CN9 379.25 383.5 387.5
WN9 463.25 479.75 511.0
KWN9 428.75 456.75 500.75
MWN9 534.25 552.0 575.25
CLN9 61.49 59.16 60.29
GCQ9 1297.0 1309.4 1279.9
LHN9 93.720 87.705 84.870
LCQ9 111.805 113.575 113.260
KCN9 94.30 99.35 107.05
CCN9 2362 2315 2293
CTN9 73.58 74.51 77.48
SBN9 12.30 12.62 12.64
JON9 106.20 114.25 128.70
HGN9 281.60 282.75 279.35
Have a good day.
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404