Open: New York Session | Forex, Metals, Oil, Agriculture October 27, 2020

Agriculture

Farmers in Russia, one of the world’s largest wheat exporters, have been sowing winter wheat in dry soil this year, increasing risks for the 2021 crop. The condition ratings were the USDA’s first for the newly seeded winter wheat crop, most of which will be harvested in mid-2021. Exhibit 1 illustrates global soybean ending stocks in the 2020-2021 crop year dropping in October 2020 to the lowest level in four years.” Earlier this month, the USDA’s monthly World Agricultural Supply and Demand Estimates (WASDE) report forecast a large, and somewhat unexpected, reduction in global soybean stocks.
Over two decades ago Jay got his start at the Kansas City Board of Trade in the Wheat Futures pit. Analysts in the poll had estimated that the USDA would rate 42% to 65% of the wheat as good to excellent. The Nebraska corn was harvested over the weekend, leaving the Ohio corn as the last field standing. At Burger King, comparable sales fell 7% and slumped 12.5% at Tim Hortons, as fewer people bought their morning cups of coffee at cafes amid the work-from-home orders.

Currencies

Moreover, the dollar index looks weak hinting at a decline in the dollar. The US dollar jumped to CAD1.3225 yesterday amid the risk-off push, which often weighs disproportionately on the Canadian dollar. BEFORE THE BELL Canada’s main stock index futures inched lower, even as gold prices and the dollar index were little changed. In line with the trends in international markets, gold prices rose in early trade this morning in the domestic futures market as the dollar softened.
The dollar remains below JPY105.00, many Asian emerging market currencies edged higher, the Chinese yuan is a little softer. The dollar index and gold prices were little changed. A two-day climb in the DXY US Dollar index fueled by haven demand also weighed on commodity prices. Falling crude oil prices echo prevailing ‘risk-off’ sentiment, which has also dragged the growth-linked Australian Dollar lower. Gene comments on stock, bond, dollar, oil & gold markets, with a particular emphasis on monetary policy, technology issues and S&P intraday action.
You can use this volatile time to make tremendous returns trading precious metals, which are the other side of the US dollar.

Metals

Teck Resources quarterly adjusted profit falls 66.6% Canadian miner Teck Resources Ltd reported a 66.6% fall in third-quarter adjusted profit on Tuesday, as production of steelmaking coal decreased. Note that gold prices are up about 30% so far this year in Indian markets. Since the metals peaked in early August, the net speculative positions in Gold and Silver have not decreased. Gold consumption in the July-September period, meanwhile, jumped 28.71% quarter-on-quarter fueled by stabilising domestic economy, the association said in a statement on its website.
After a spectacular four-month move, Gold and silver stocks still have not corrected enough in price and time. Source: MICHAEL A JACKSON FILMS / Shutterstock.com The Phoenix-based Freeport-McMoRan (NYSE: FCX), the world’s largest publicly traded copper company, released its third quarter results on October 22, 2020. However, gold production decreased to than the 3Q’19 due to the Grasberg mine transition almost completed now.
The average price for gold today is $1905 according to the Variable Changing Price Momentum Indicator (VC PMI). The Canadian miner reported a 66.6% fall in third-quarter adjusted profit, as production of steelmaking coal decreased. The miner reported a 66.6% fall in third-quarter adjusted profit, as production of steelmaking coal decreased.

Oil

At $40 WTI oil in the second half of 2020, this would lead to a projection of approximately $374 million in oil and gas revenue and $179 million EBITDAX. The results were boosted by higher oil prices and stronger natural gas trading results, though oil trading was “significantly lower” than the previous quarter, BP said. Source: Baker Hughes Oil traders may also watch this Wednesday’s EIA inventory reports, expecting a 1.5-million-barrel rise in US crude oil stockpiles.
If Whiting then averages around 80,000 BOEPD in 2021 with a $160 million capital expenditure budget, it would generate around $711 million in oil and gas revenue in 2021.
A 3.0x EV/EBITDAX multiple (using $200 million in net debt and $40 WTI oil, along with 80,000 BOEPD in production) would value the company at approximately $20 per share. At 488.1 million barrels, the current level of US crude oil inventories is still about 11% above the 5-year average for this time of year. The reported production cut due to the storm is 16% of the offshore oil production and 6% of gas production as per estimates by the US BSEE.
Secretary General Mohammed Barkindo speaking at an event said that economic and oil demand recovery have been anaemic and rising infections could delay the recovery. BP’s chief executive Bernard Looney said in a virtual forum on Monday that the second viral wave may have a larger-than-expected impact on global oil demand. Whiting would be able to continue paying down its debt at $40 oil, although it would see continued production declines then.

United States

It is also forthrightly about the Election, since the market is more comfortable, as it has been for months, with the prospect of a Trump re-election favored. A second Trump term, however, would be the big wild card, he said, because there’s no guarantee that a second term will be like the first. In March, the Fed announced that there were no limits to quantitative easing or to the stimulus, which then led to the stock market rallying to record levels.
A: (sigh) I said that it seems as if the Fed is targeting the stock market. Q: But you said that the Fed was targeting the stock market. The Fed Funds rate, like SOFR, is an overnight rate, unsecured by Treasuries but perhaps the least risky of the unsecured overnight rates. Mr. Trump’s tax cuts, for example, helped boost the stock market early in his presidency. The recent trading activity also highlights investors’ confidence in such polling, despite several political surprises in 2016, such as Mr. Trump’s victory and Brexit.
3M profit beats estimates on healthcare product boost 3M Co topped Wall Street estimates for quarterly profit, as the COVID-19 pandemic boosted demand for its healthcare equipment. US stock futures are trading higher today, indicating a positive opening for Wall Street indices.

China

The market regards the PBOC’s tolerance of higher market rates as a tightening signal of monetary conditions. To gauge the PBOC’s monetary stance for China’s real economy, we should focus more on credit growth and credit impulse rather than just looking at market rates. This divergence also happened in 2018-2019 when the PBOC injected liquidity and cut the reserve requirement ratio (RRR), sending short-term rates lower while MLF rates stayed unchanged. So far, the PBOC has been tolerating the divergence of market rates and benchmark rates.
Here, we assess the true indicators of the People’s Bank of China’s (PBOC) monetary stance, reasons for the market rate selloff, and whether China’s onshore bonds offer value. More surprisingly, the PBOC refrained from injecting more liquidity to contain the sharp increase in short-term rates and bond yields. Amid the confusing signals, what is the most accurate way to gauge the PBOC’s actual monetary policy stance?
We do not expect the PBOC to inject liquidity to contain the rate rise as economic activities continue to recover. The PBOC utilizes multiple tools to control monetary policy.
In addition, we believe caution around a potential asset price bubble and financial risk will restrain the PBOC from easing.

Europe

There is a risk of additional fourth-quarter provisions if the U.K. and European Union fail to reach a trade agreement by the end of the year, HSBC said. That ruling, which could hamstring U.S. companies, will also be relevant to the U.K. as a deadline for a trade deal with the EU nears. British Prime Minister Boris Johnson theatrically threatened to walk out of Brexit trade negotiations earlier this month, before agreeing to a resumption last week. UK-EU trade talks have intensified, which amounts to daily meetings, according to reports.
Covid-19 angst hits market sentiment, Boris Johnson faces a revolt over local lockdowns and Amy Coney Barrett is confirmed. Decisions regarding Turkey are on the EU s agenda for December, but the latest developments may give it a mention on the leaders call on Thursday. Hard to tell whether the ECB can really move the needle, as the policy ball is in the EU’s court, as fiscal stimulus is far more powerful. The ECB could try to counter this by a new long-term loan program (TLTRO) with a rate as low as minus 100 bp.
– Brexit negotiations have been extended at least through tomorrow after they were scheduled to wrap up at the weekend. We also publish the Brexit Bulletin, a daily briefing on the latest on the U.K. s departure from the EU.

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