Precious metals rebounding, as Italy stabilizes, at least for now. A more stable Italy = stronger Euro = weaker US Dollar = stronger Gold = slightly stronger Silver.Copper breaking some important support levels overnight. The general negative economic tone from yesterday carried over to the Asian markets overnight and then to industrial metals, as Palladium shows similar signs of weakness.
Oil and gasoline rebounding, after the recent washout. Last Friday’s CoT report showed speculators holding a record long position in RBOB and it’s not surprising to see a little correction at this point. Sure, a “global risk-off” adds to the negative tone, but it is not the fundamental drive. OPEC’s production cuts will be the movers, but we are still a few days away from any official statement on that.
Natural Gas reversed course yesterday, following five days of higher highs and capping a +10% since the May 7. Fundamentals remain unchanged, with the potential of hotter than expected weather putting pressure of on energy demand.
Crop Conditions report offered the first rating of the year for Corn and it was a good one… Over 79% of the crop was in Good/Excellent conditions, the highest rating since 1994 and the second highest on record, according to Allendale.
Soybeans were also looking good, with 77% already plant, more than the 72% that traders expected. Trade talk still influencing this market also, as the on-off-on again conversation with Asia is driving analysts bunkers.
Wheat conditions improved. Yep, you heard it right. 38% in G/E conditions vs 36% last week, a good omen as it nears full maturation.
How fun was Cotton yesterday and today? The limit-up move looked a bit overdone, as it occurred during a holiday weekend, when not all the traders are playing. Today we saw a gap and reversal. Yet, problems with weather in the US and China persist, so we might not be done with the rally just yet.
Coffee has retested the $1.20 area and appears poised for another move higher, given that the Brazilian on-crop appears to be fully priced in and it’s tough to find more bearish news. More likely to find weather premium coming to market.
Cocoa is following what’s become routine in May: bounce overnight and early morning reversed midday and close lower. The fundamentals remain unchanged, with the trend moving to more positive supply data than initially expected.
Sugar is restarting its rally in conjunction with the Brazilian Real’s renewed weakness. A strike by truckers in Brazil adds a little noise to the trade, but we remain of the opinion that, similarly to coffee, we had heard of massive global production for a while and now we are having a correction or the discounted news.
Cattle-on-Feed report was neutral and mostly in line with expectations. Hence, as the theme of the day, we are seeing a buying of the news, after selling the rumor that indeed we have a massive supply wave coming to market.
Similar situation in Hogs which is also supported by good seasonal demand.
Abbreviations: bbl = barrels; BRL = Brazilian Real; CoT = Commitment of Traders report; K = 1,000; MoM = Month-over-Month; Px = price; USD = US Dollar; YoY = Year-over-Year; YTD = Year-to-Date.