Open: New York Session | Forex, Metals, Oil, Agriculture October 12, 2020

A member of the National Guard plays a trumpet during a flag rai


MARKET NEWS Chicago soybean futures edged higher, trading near a more than two-year peak hit in the previous session as the U.S. government’s estimate for lower supplies supported prices. Chicago Board of Trade soybean futures soared to their highest prices since March 2018 on Friday, after the U.S. Department of Agriculture projected tighter domestic supplies. Bioceres’ HB4 wheat is resistant to drought and tolerates the herbicide glufosinate sodium, a combination the company says can help boost yields on dry years.
Soybean stocks were pegged at a five-year low, with rising exports eating into the stockpile, according to the U.S. Agriculture Department’s monthly World Agricultural Supply and Demand Estimates Report. The coronavirus tended to survive longer on nonporous or smooth surfaces, compared with porous complex surfaces, such as cotton.


The US dollar is firmer against most of the world’s currencies, with the yen, South Korean won, and Taiwanese dollar notable exceptions. High foreign exchange reserves can be an effective tool in keeping the exchange rate stable.Dollar indexThe dollar index closed in the red last week i.e. Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, gained 0.02 per cent to 93.07. The dollar index, which gauges the greenback’s strength against a basket of six currencies, gained 0.11 per cent to 93.15.
Analysts said the rupee came under pressure in view of strengthening US dollar against Asian currencies, though easing crude oil prices lent some support to the Indian unit. The domestic currency had settled 8 paise higher at 73.16 a dollar on Friday after the Reserve Bank kept key interest rates unchanged while retaining an accommodative stance. The rupee snapped its three-session winning run on Monday, slipping 12 paise to close at 73.28 against the US dollar amid weakening Asian peers against the greenback.
The rupee (INR), that ended flat last week at 73.13, has today opened marginally higher at 73.08 against the dollar (USD). U.S. Dollar index futures (USD measured against a basket of five major currencies) are trading up marginally to 93.097. If the foreign money continues to come in, it can help the rupee gain ground against the dollar.


Nordgold, a Russian gold company that has investments in Guinea and Burkina Faso, could also expand its extraction initiatives in Mali’s gold reserves. This is the same valuation as its Newfoundland neighbor Marathon Gold (OTCQX:MGDPF), which is at the Feasibility stage and is sitting on 4 million ounces of gold resources. (Source: Company Presentation) For those unfamiliar, New Found Gold is a newer company in the exploration space that’s begun an aggressive 100,000-meter drill program in Newfoundland, Canada.
The company has amassed a significant 151,000 square-kilometer land position in the province, with infrastructure that would make most gold juniors salivate. Given that New Found Gold is a pre-resource company, the valuation is getting difficult to justify here. (Source: Author’s Notes) As we can see above, the price paid per ounce for Tier-1 jurisdiction gold explorers during acquisitions is $90.74. It’s also getting lots of comparisons to Kirkland Lake Gold’s (KL) Fosterville Mine, arguably one of the most impressive discoveries of the past decade.
Meanwhile, the average enterprise value per once for revenue-generating gold producers when acquired is $199.55. Obviously, we can compare these companies to other juniors and conclude that there are large discrepancies between the valuations, but not all gold ounces are created equal. S&P 500 futures pointed to a higher open, oil dipped below $40 a barrel and gold dropped.


OPEC published the 2020 World Oil Outlook wherein the group has forecasted oil demand to grow consistently upto 2030s and see a plateauing of demand in the late 2030s. Further bearishness came on account of US oil rig data published by Baker Hughes showed a 4th consecutive week of increase in oil rigs. Oil prices dropped as force majeure at Libya’s largest oilfield was lifted, a Norwegian strike affecting production ended and U.S. producers began restoring output after Hurricane Delta.
Oil producers have started returning workers to offshore oil fields in the Gulf of Mexico after Hurricane Delta made landfall over the weekend.
During the week, US crude oil prices gained around 10%, although still haven’t broken free of the narrow price range they have been stuck in for months. Goldman reiterated its bullish 2021 view for both natural gas and oil, saying drivers for higher prices supersede the potential outcomes of the U.S. election. Oil demand is forecasted to go up to 107.2 million bpd in 2030 from 90.7 million bpd in 2020. The challenge for the company though is that current oil prices remain too low for it to restart drilling activity, and it is slowly working down its PDP reserves.
It needs higher oil prices to be able to do more than just keep paying down its debt while its borrowing base gets reduced though. Production declines will likely result in continued borrowing base reductions as the value of its PDP reserves diminishes (through lack of replenishment) in a low-$40s WTI oil environment.

United States

Along with stimulus negotiations and election polls, investors will be watching third-quarter corporate earnings, which kick off in the US this week. Risk markets have been very well in demand, with investors feeling better about the US election and progress towards the next round of stimulus out of the US. less U.S indexes saw significant volatility last week that ended in gains, thanks to talks around stimulus. The only downer was Tuesday, when Trump said he was ending congressional talks regarding a second round of stimulus payments until after the election.
The Nasdaq Composite gained almost 5%, while the S&P 500 closed the week 3.8% higher – its best week in three months. The Nasdaq Composite led the three major US stock indices last week, but it was small-cap stocks that drove it overall. While indices initially fell, they recovered well after Trump announced he went ahead anyway to approve a revised stimulus package. For now, markets are likely to continue to move based on the narrative from the US, especially so near to the presidential election.
One or two papers suggest this might be happening, although neither indicates that shy Trump voters could make up more than about two percentage points of the difference. A recent Wall Street Journal/NBC poll found 47% of Biden supporters plan to vote by mail whereas 86% of Trump supporters plan to vote in person.


Beijing has been encouraging portfolio capital inflows, and foreign asset managers hedging their purchases would be the obvious sellers of yuan in the forward market. Beijing has also tried to connect its work on restoring ecosystems to the larger issue of climate change. 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. State media reports that Beijing plans to push forward cooperation between Shenzhen and Hong Kong just across the border to a higher level.
Coal ban | China has suspended purchases of Australian coal as Beijing continues to tightly control imports of the fuel amid soured political relations with Canberra. Simply click on this link and like the tweet.Shenzhen spotlight | Xi Jinping is bolstering plans to make southern China a global hub. Just 16 months ago, Beijing-based GSX was valued at $2.5 billion after completing a $216 million initial public offering on the New York Stock Exchange.
Hong Kong leader Carrie Lam has postponed her annual policy address scheduled for Wednesday to factor in any measures from Beijing.
The Chinese (CYB) currency returned about half of its pre-weekend gains following the PBOC’s move and removed the reserve requirement for forwards. Xu Weikang, a 28-year-old software engineer in Beijing, is in the same boat.


This week also sees the latest European Council meeting, starting on October 15, where post-Brexit trade talks will dominate the agenda. Talks between the U.K. and EU over their post-Brexit relations continue in Brussels today, targeting a deal ahead of Thursday’s leaders summit. EU/UK trade talks will intensify this week ahead of PM Boris Johnson’s October 15 deadline. Five Things Follow Us Get the newsletter Stimulus stalemate continues, another big week for Brexit, and more virus restrictions.
Deal or no dealYou may have heard this one before, but this week is definitely a crunch one for Brexit negotiations. Brussels wants EU members to use a common criteria when deciding whether to open or close their borders. While relatively sanguine about the impact of Brexit on financial stability, the 13 council members were more concerned about the impact of COVID-19 and geopolitical tensions. The Czech Republic plans to further tighten social-distancing rules to stem the European Union’s worst coronavirus surge — without repeating the economic paralysis from this spring.
Boris Johnson is set to tighten rules in the U.K. as daily case numbers there have recently hit record highs. The EU has been working to make powerful tech companies less powerful, and the bloc is building a list of businesses that are in its crosshairs, FT reports.