Good morning,
DXU9 95.730 +0.002 GCQ9 1409.1 -6.3 ESU9 2924.00 +6.00 CLQ9 58.96 -0.42
The markets are relatively calm today, waiting for the much anticipated G-20 meeting to kick off in Osaka. It feels like there is much hope in significant trade progress being made from the planned meeting between Presidents Trump and Xi. This hope usually leads to a disappointing end. Maybe this time is different? Goldman Sachs and JP Morgan don’t necessarily think so, as they are now calling for the yield on the US Treasury 10 year note to yield 1.75% by year’s end (yielding approximately 2% right now), citing the trade negotiations will continue to take a long time and the dovish stance of global central banks, due to concerns about soft economic growth. Aside from monetary policies, it is widely expected that FX levels and relationships will be a hot topic.
The huge rally in oil and the sharp reversal in gold were the primary stories in yesterday’s trade. Oil, which was already trading higher following Tuesday afternoon’s report from API of softer crude stocks, was shot out of a cannon when the DOE and EIA released its weekly reports. A decline in both production and inventories was seen. Gasoline stocks were also lower. It was reported that the US exported 9.377m b/d of crude and oil products on a gross basis, which is the biggest outflow since 2001. WTI crude (CLQ9) blew through all of the key resistance points and fell just short of trading $60. The late rotation down saw the price settle below the key 200 day Moving Average (59.59). Nonetheless, on the run up, there were probably some buy stops elected and new longs initiated as this level was taken out. OPEC+ meets next week. Production quotas will be a major topic and there is talk that Saudi Arabia will be looking for deeper production cuts at the meeting.
Gold prices continued the decline which also began on Tuesday, following speeches from Fed Chairman Powell and St. Louis Fed President Bullard, suggesting the Fed’s mindset wasn’t nearly as dovish as what the market interpreted following last week’s Fed meeting. A rate cut is still expected at the July meeting, but it doesn’t look like the Fed will be as aggressive with the easing, going forward, as the market priced in. So, the dollar, which had been getting smoked, recovered a bit. This took the wind out of gold’s sails. Gold also came off as some of the safe haven status attributed to gold was viewed as unwarranted. The party probably isn’t over for gold, with the G-20 meeting the next few days, and the OPEC+ meeting next week. Not to mention next week brings a lot of economic data from the US, even with the holiday disrupted week, so markets may be a bit thinner and the trade could be more volatile, which usually has people thinking about gold.
The grain markets have 1 more day of waiting before tomorrow’s planting intentions and quarterly stocks report. Estimates are all over the map for the planting report, and many view it as old news, since the data was collected while farmers were still in the process of trying to figure out what to do, given the weather this spring. Position balancing, in front of this and ahead of first notice day for July contracts has kept the market relatively contained. Futures open interest showed big declines from yesterday’s trade, but a majority of this is seen in the July contracts, suggesting cleaning up before FND. Wheat prices were the firmest on the board yesterday, receiving support from the Canadian planting report showing less wheat acres being planted. Also helping is the hot and dry weather conditions that were in the Black Sea, and remain in Europe, impacting the crops, and causing concerns about the wheat and corn crops. This can be seen in the early returns from the Russian spring wheat harvest, which is reporting lower yields. These risks hopefully bode well for US prospects in the export arena. Wheat is also getting some support from the feed community, as rations are recalibrated.
Coffee futures have been trading better, initially driven by the real, but now by concerns about frost in Brazil. A report late yesterday suggested there was no legitimate threat for frost, and prices backed off some, but they have resumed the upward trajectory today. Cotton futures continued to trade well yesterday, as the strong rain storms across the southwest and the excessive heat and dry conditions in the south bring risks to the cotton crops. Feeder cattle was limit bid yesterday, and live cattle put in a strong performance as well. It was reported that China was halting imports of Canadian meat, due to improper veterinary certifications. This quickly brought a bid to the US meat markets. The sugar market is recovering from a 3 week low, as yesterday’s production report was lower than expected. Producers have been favoring using cane to make ethanol as opposed to the sweetener. Part of the recent decline in prices is being attributed to a potentially large amount of deliveries being made on the July contract.
Technical Moving Averages:
Product 50 day 100 day 200 day
SX9 887.75 914.75 924.25
CZ9 415.00 405.25 402.25
WU9 486.50 487.25 517.50
KWU9 446.25 459.25 505.00
MWU9 546.00 555.75 578.00
SMZ9 315.3 317.5 318.9
BOZ9 28.38 29.55 29.75
CLQ9 59.36 59.36 59.59
GCQ9 1314.0 1316.5 1289.6
LHQ9 89.605 88.505 84.890
LCQ9 108.300 112.315 112.840
KCU9 97.55 100.35 108.80
CCU9 2402 2349 2314
CTZ9 69.63 72.09 74.12
SBV9 12.53 12.86 12.99
JOU9 104.80 113.90 126.70
HGU9 275.10 282.75 279.50
Have a good day,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404