Good morning,

 

DXU9  97.445  -0.407             GCZ9  1472.0  +15.0                         ESU9  2892.00  -40.50            CLU9  55.00  -0.66

 

Global unrest and heightened trade tensions welcome traders to the new week.  It is quite common for the Monday following a Non-Farm Payrolls day to be a relatively quiet session.  The overnight markets, led by all of the events of the weekend, don’t see things in the same light this time.  Two mass shooting tragedies in the US over the weekend, the continued protests and riots in Hong Kong and China announcing its retaliatory steps towards President Trump’s declaration of additional US tariffs towards China effective September 1 have put markets into a flat spin nosedive.  Gold and US fixed income markets are soaring on the flight to safety.  Equities, the dollar, oil and the other commodities are all getting blasted.

 

Overnight, the Chinese currency traded below the 7 renminbi/dollar bottom that has been in place since 2008.  The increased trade tensions are the reason for the drop.  This drop in the currency aids Chinese exporters, at the expense of the US.  Over the past decade, when the renminbi would approach the 7 level, the Chinese government would step in to support.  This time, it was allowed to drop below.  While an apparent tactical move from China, the PBOC has come out and said it will not use FX levels in the ongoing trade dispute.      

 

China announced it is telling state owned enterprises to suspend purchases of US agricultural products.  Private Chinese soybean crush producers have also stopped buying, do to the uncertainty surrounding soybeans as the US and China trade rhetoric appears to be heating up again.  Grain prices, which were already under pressure towards the end of last week on the stronger dollar post Fed meeting, then from President Trump’s bringing more tariffs, have moved even lower in the overnight trade.  Most grain products are down 6 to 8 cents, near the lows.  The weather has been decent, but a bit deficient of water, which is needed as the crops are late in their development due to the late planting.  This afternoon brings an updated look at crop conditions and progress from the USDA.  While things may have improved, they are still expected to be well behind where they should be at the beginning of August.

 

The gold market is trading at its highest level in 6 years today, as the escalated trade war and other global unrest situations drive prices up.  Gold clearly benefits from the risk off sentiment in the market.  The meltdown of the dollar here as investors flocking to gold.  At this point, a target of $1500 seems well within reach.  Copper prices are plunging, following equities, as the ramping up of the trade war brings gloom to global economy prospects.  It certainly feels like a prolonged battle remains, which isn’t healthy. 

 

Other commodities are also imploding today.  Cotton is really feeling the brunt of the trade battle.  Prices traded at a 3 year low on Friday, and have moved down almost 2 more cents today.  Cotton is rapidly approaching the contract low of 57.26.  Coffee and cocoa prices are also trading lower.  Hof futures, which had several dances with limit down last week, should expect more of the same upon re-opening today.  Even as African swine fever has depleted the Chinese hog herd, China is sourcing replacements away from the US, due to trade.   So the US hog producer, which ramped up production efforts in the face of ASF and hoping a trade resolution was in the works, now find themselves long and wrong.

 

The oil market, which tends to be towards the forefront of trading conversations of late, is definitely on the backburner today.  Of course, oil prices are also subject to heightened trade disputes.  Price began turning lower on Thursday afternoon, following President Trump’s declaration, and are softer again today.  Oil will probably observe a pretty volatile trading range, with just below 60 being resistance and just above 50 support, ahead of next month’s OPEC+ meeting. 

 

It’s a fairly light US economic calendar today, with only Non-Manufacturing ISM being released.  However, trade headlines (and Twitter blasts) will dominate the trade today.             

 

Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                       905.25                   902.75                   922.75

CZ9                      439.00                   414.50                   407.00

WU9                    512.75                   488.75                   510.00

KWU9                  456.50                   447.25                   488.25

MWU9                546.50                   545.25                   567.25

SMZ9                   318.9                     315.9                     318.8

BOZ9                   28.46                     28.83                     29.50

CLU9                    56.44                     59.41                     58.00

GCZ9                    1392.6                   1351.9                   1326.1

LHV9                    75.700                   81.230                   74.680

LCV9                    107.230                 111.025                 113.035

KCU9                   103.55                   100.05                   107.50

CCU9                   2453                       2390                       2345

CTZ9                    65.44                     69.81                     72.59

SBV9                    12.35                     12.57                     12.93

JOU9                    104.15                   108.80                   120.35

HGU9                  268.10                   277.55                   277.90

 

Have a good day,

 

Mike

 

 

Michael Clifford

 

141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC                                              

312-604-6404