Open: London Session | Forex, Metals, Oil, Agriculture October 19, 2020

Agriculture

It also covers the commodities market daily focusing on in-depth technical developments in GOLD, CRUDE OIL, SILVER, CORN & WHEAT. Cocoa futures recovered on Friday after touching the lowest prices in several weeks as the market digested data showing plunging demand for the chocolate ingredient during the coronavirus pandemic. It said farmers had collected 10.0 million tonnes of corn from 2.2 million hectares, or 40% of fields planted with this crop. Ongoing EU wheat sowings to rebound despite adverse weather.
However, investors bullish corn run is still alive.

Currencies

Dollar indexThe dollar index ended last week on a positive note after registering loss in the preceding two weeks. BL Research BureauLast week, the rupee (INR) ended 21 paise lower against the dollar (USD), it ended at 73.34 versus 73.13 – its previous week’s close. The local unit opened at 73.38 against the US dollar at the interbank forex market, then lost ground and touched 73.42, down 7 paise over its previous close. The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.09 per cent to 93.76.
This was primarily due to a steep drop in gross dollar volume and in processed transactions. Euro Stoxx 50 futures rose 0.3%.Currencies: The yen traded flat at 105.40 per dollar. Also, as indicated by the dollar index, the trend has not really shifted in favour of the greenback. “Rising COVID-19 cases has prompted investors to move towards the safe haven appeal of the US dollar,” Reliance Securities said in a research note.
The offshore yuan was little changed at 6.6925 per dollar. The Bloomberg Dollar Spot Index fell 0.1%.Bonds: The yield on 10-year Treasuries advanced more than one basis point to 0.76%.

Metals

The company reported fiscal Q1 2020 gold production of 170,000 ounces, down 11% year over year, with all-in sustaining costs hitting a new multi-year high of A$1,198/oz [$857/oz]. Without this divestment, the company would have had flat production year over year, and the slight escalation is also due to lower gold sales. As per our short term oriented gold forecast we believe that the gold price will turn bullish or bearish during election week. Meanwhile, Evolution is one of the only gold producers with margins above 50% at a $1,750/oz gold (GLD) price.
(Source: Company Presentation) Evolution Mining released its preliminary fiscal Q1 2020 results last week, and the headlines were quite disappointing for investors not familiar with the intermediate gold producer. : 1.2% (prior 0.3%) Home prices (y/y): 8.9% (prior 8.1%) The gold market is hot, the gold market sells off. Based on Evolution’s current production, more than 70% of its gold production comes from the #1 mining jurisdiction in the world: Australia.
Consequently, silver will follow the same path, and our short term oriented silver forecast is absolutely similar to the short term gold forecast. Based on the company’s exceptional margins and an industry-leading dividend yield of 2.80%, I continue to see Evolution as a top-10 gold producer in the sector. Repeat this short term cycle a few times, and you have a great recipe to turn gold investors absolutely nuts.

Oil

Longer term, oil demand destruction will likely remain, reducing oil flows and tanker demand. But tanker names began to plummet in early January, even before the pandemic began to impact oil demand and shipping. My thesis was: Spot tanker rates surged in 4Q19 and remain elevated 1Q20, and the share prices of shipping names followed in lock-step, as speculators chased the market higher. My thesis was: The spike in tanker rates due to demand for floating storage appears to have peaked.
VLCC tanker rates fell by more than 50 percent in the week ending May 1st v. the prior week, according to Clarksons.
Oil tanker names have suffered in 2020 and the longer-term outlook is dim. Tanker rates may have ended their run for this cycle, as the support from IMO 2020 may not be all that it was cracked up to be. I compared my returns to long positions of three popular tanker names in 2020: Ardmore Shipping Corporation (ASC), Diamond S Shipping Inc. (DSSI), and Scorpio Tankers (STNG). The sustained recovery in Libyan crude production also added to the supply overhang concern which left the market with very little positive news to support prices.
By the end of January, it became clear to me that the virus would affect oil demand.

United States

As far as people with money at stake are concerned, Biden has lost the bounce he received from President Trump s coronavirus diagnosis at the end of last month. So it is true that Clinton had a better lead at this point, but the polls correctly showed her losing support to Trump in a dramatic way. Everyone now knows that Trump can hold on to the presidency without winning the popular vote, and that the polls in the crucial battleground states are what matters.
“A momentous day for the international community, which— in defiance of malign US efforts—has protected UNSC Res. A momentous day for the international community, which— in defiance of malign US efforts—has protected UNSC Res. The Trump administration has tried to fight the expiration of the embargo tooth and nail while claiming authority to enact snap back sanctions. The 2016 precedent doesn t give as good a reason to ignore the polls and bet on Trump as it appears. Using 2016 as a model, Trump still needs to find a big surge of support from somewhere.
In all cases, Trump won: Yet there are two factors that suggest Biden s lead in these states is more meaningful than Clinton s was. Four years ago, President Trump s fortunes were close to their nadir after the Entertainment Hollywood tape.

China

The PBOC moved to make it easier to speculate against the Chinese yuan, seen as a signal that Chinese policy makers are against further yuan strength.

Europe

Brexit, and particularly the risk of just such an exit from the EU without a trade deal, has dominated moves in sterling for the best part of five years. There’s optimism on getting a U.S. stimulus deal before the election, the U.K. may rewrite its lawbreaking Brexit bill and earnings season gets underway. Friday brought Johnson s announcement that he was giving up on negotiations with the European Union over a new trade deal. Buxl spread drifting higher, bp We could of course blame the ECB/APP/PEPP and argue that the negative net issuance is squeezing German yields lower and sending swap spreads wider.
However, as some market participants think, the ECB could hammer the E/E down by new measures. With the EU taking legal action over the proposed bill, Johnson’s officials believe Britain’s House of Lords will cut the contentious clauses despite the Prime Minister’s refusal. The economists may have to revise their Q4 GDP estimates down due to new Covid restrictions and Brexit risks.
However, given the size differential and trade composition, the UK is at a distinct disadvantage, as French President Macron baldly stated.
Current yields seem too low/unstainable if the ECB does not cut the deposit rate, but it’s difficult to go against the market momentum. It’s interesting to see the fresh data this afternoon, and whether the ECB increased its purchases.

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