Good morning,
DXU9 97.045 -0.108 GCQ9 1345.7 -5.0 ESM9 2921.50 -0.25 CLQ9 54.05 -0.06
Optimism regarding trade negotiations progress with China, coming from positive comments both from President Trump and President Xi gave many markets a shot in the arm yesterday. The 2 sides agreed to carry on the trade conversation at the G-20 next week. It was thought to be a day of waiting, ahead of today’s Federal Reserve monetary policy decision, coming this afternoon. Instead, many markets that benefit from an improved economy or trade situation, moved higher. US equities led the charge, as did oil. Gold, which had been near the recent highs earlier in the session, rotated down, but copper found a renewed bid. Cotton and soybeans were supported by the news.
Equities are chopping around this morning, hanging near unchanged, waiting for the decision. Oil is also hanging around unchanged levels today, which is towards the upper end of the recent trading range. Gold continues it’s rotation down overnight, and grains also work lower.
The oil market received a fresh crude stocks report yesterday afternoon. While the report showed a decline in stocks, it wasn’t down as much as the market expected, helping to keep oil prices at the upper end of the range. Also helping prices is talk that OPEC+ may have agreed upon dates for its next meeting. July 1 and 2 are being tossed around as the dates, where production quotas will be a major topic of the conversations. More production and inventory data come later this morning for oil.
Wheat again leads the grain markets lower today, as there is a period, following the current rain system, which shows an extended stretch of warmer and drier weather. This should be beneficial for harvest of winter wheat, although it is believed that a fair amount of crop damage may have occurred from the recent storms, especially in central Kansas and norther Oklahoma. There is rain in the forecast for Canada and the northern Plains, where drought like conditions have created much stress to the wheat crops there. This rain should help to alleviate the stress. Egypt is conducting a purchase tender today, where the Black Sea is expected to win the business. Corn and soybeans are lower today, having been supported yesterday afternoon on the Trump and Xi comments, and prospects for trade progress. The response with lower prices from these markets would suggest they have seen this movie before, bid on the hype and then disappointment when nothing follows. Will the movie have a different ending next week?
Looking at other commodity markets, lumber continues its surge higher, locking limit bid again yesterday for part df the session, as the housing data released yesterday was better than expected. Lumber is trading at a 3 month high. Prices did retreat later in the session, but still had a positive close for the day. The cotton market had a strong bid, as trade agreement prospects provided a boost. The cotton market has been facing concerns of a very large crop and, without China as a trading partner, a much lighter demand picture. Cotton was also supported on concerns that a plague of locusts in Pakistan could hurt crops. Coffee fell yesterday, as a report on green coffee stocks from the GCA was much stronger than expected. The report, for the month of May, showed an increase of 264k bags, where the market was expecting an increase of less than 150k.
Copper prices had a strong performance yesterday, trading up sharply also on the trade prospects. Copper has tended to track equities, so as stocks shot higher, copper did as well. It finds itself a touch lower this morning, again with equities. Gold, which had a see saw day yesterday, but ultimately ended down, is leaking lower today, ahead of the Fed. Gold still remains within striking distance of the highs for the move, and any signs of trouble in markets can always quickly bring a bid back to gold.
It’s an empty calendar today, aside from the oil data, with the exception of the Federal Reserve’s decision at 1 PM CDT and the press conference which follows at 1:30 PM. Expect another choppy trade ahead of this. No change in policy is expected today, but the market does expect a cut in short term interest rates to come at the July 31 meeting. The market will be looking for clues as to how far from the neutral the Fed may have moved its bias over the past few weeks. Any developments which are not what the market is thinking will have a direct effect on the dollar and many other markets. Stay tuned….
Technical Moving Averages:
Product 50 day 100 day 200 day
SN9 864.25 895.5 907.0
CN9 389.25 387.0 389.5
WN9 472.0 479.5 509.5
KWN9 432.0 451.75 496.0
MWN9 536.5 550.5 573.0
CLQ9 60.16 59.23 59.85
GCQ9 1302.9 1312.2 1284.3
LHQ9 92.300 88.545 84.910
LCQ9 109.990 112.905 113.070
KCU9 96.86 100.95 109.05
CCU9 2395 2337 2310
CTZ9 70.91 72.58 74.47
SBV9 12.60 12.90 12.97
JOU9 106.20 115.10 128.35
HGN9 277.45 282.60 278.90
Have a good day,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404