Good morning,
DXU9 97.360 +0.038 GCZ9 1516.3 +7.8 ESU9 2902.25 -17.50 CLU9 54.15 -0.35
Equity markets were higher in the Asian and early European trade, only to sell off in the past couple of hours (6 AM CDT). The violence from the protests in Hong Kong remains, and has even escalated, hitting the late trade for Asian equities. The yuan fixing came in above 7. Another cause for the quick change in sentiment may be the economic release of new loans generated in China for the month in July dropped to 1.06T yuan, versus 1.28T yuan in June. This being another sign that China’s economy continues to struggle during the trade dispute. Also weighing on markets is the results of the primary election in Argentina, where President Macri suffered a strong defeat to his opposing candidate, Alberto Fernandez, from the left wing. This sent emerging market assets into a tailspin.
Gold prices, which were under pressure early in the evening, have also reversed course and are now trading higher. Gold did dip below $1500, but has found fundamental support and bounced back above. The safe haven play will remain intact for the gold trade.
Oil prices opened up below Friday’s settle, and have been leaking lower throughout the day. Lack of optimism for trade progress is weighing on prices. Saudi Aramco announced profits for the first half of the year fell by 12%, due to lower oil prices. Oil remains prone to some wild swings, from headline risk.
Grains are lower today, ahead of the much anticipated WASDE report from the USDA. Probably more important, is the release of the re-surveyed planting intentions of farmers. A sharp decline in the amount of corn acres from what was announced on June 28 is expected, while soybeans are expected to see a small increase in acres. The WASDE should give a fresh look at where the USDA sees production and stocks headed for this season. Given the difficult growing conditions this season, downticks to production and inventory figures are expected. Estimates for today’s data can be found on the “Current Data” attachment. Following the WASDE, this afternoon brings an updated look at crop progress, which has been lagging all season.
Cotton prices are lower again today, and have been hit hard over the past week on trade disappointment. Today’s WASDE report is expected to show a large supply of cotton coming from harvest, and absence of a major trading partner brings into question where the cotton will go. Funds continue to carry a spec short position in cotton. Funds also have a very large spec short position in sugar, as favorable growing conditions keep expectations for an abundant crop in place. Rains in Brazil keep big crop thoughts alive in that market as well. Also pressuring prices is the report of Brazil breaking its export record for shipments in July.
On the data front, the grain markets will dominate the action today. Over the course of the week, fresh looks at inflation in the July CPI on Tuesday and retail sales on Thursday could provide volatility to the trade. While it seems unlikely, any news on trade can always cause a reaction. Political tensions in Hong Kong and elsewhere can also create movement. The oil markets will get the weekly production and inventory data from the US, while continuing to wait for the next OPEC+ meeting in September. Emerging market assets, given the uncertainty mounting in Argentina can also influence prices.
Technical Moving Averages:
Product 50 day 100 day 200 day
SX9 904.75 899.75 921.50
CZ9 437.50 415.50 407.50
WU9 512.00 489.75 508.25
KWU9 452.25 445.25 484.50
MWU9 543.00 543.25 564.75
SMZ9 317.3 315.1 318.4
BOZ9 28.53 28.74 29.46
CLU9 55.93 59.07 57.62
GCZ9 1412.6 1360.5 1331.9
LHV9 74.155 80.675 74.715
LCV9 107.150 110.485 112.845
KCZ9 107.00 103.45 110.30
CCZ9 2463 2409 2360
CTZ9 64.41 68.87 72.05
SBV9 12.31 12.49 12.87
JOU9 103.75 107.40 119.30
HGU9 267.00 275.80 277.25
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404