Daily Morning Report

Wednesday, July 3–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were mixed overnight. U.S. stock indexes are pointed toward firmer openings when the New York day session begins. Look for trading activity in the U.S. to tail off quickly today, ahead of the U.S. Independence Day holiday on Thursday, when U.S. markets are closed. However, today is a very busy day for U.S. economic data releases.

European stock markets were buoyed by news the International Monetary Fund’s Christine Lagarde has been nominated to be the next president of the European Central Bank. Lagarde is considered a monetary policy dove, like current ECB president Mario Draghi.

Gold prices are sharply higher in early U.S. trading on some safe-haven demand and on ideas of an easier monetary policy coming from the U.S. Federal Reserve. President Trump on Tuesday said he will nominate a couple of likely dovish candidates to serve on the Federal Reserve Board.

The yield on the German 10-year government bond (bund) dropped to another record low Wednesday, at minus 0.394%.

The key “outside markets” today see Nymex crude oil prices modestly up and trading around $56.50 a barrel. Meantime, the U.S. dollar index is slightly higher in early U.S. trading.

Traders and investors are looking ahead to Friday morning’s June U.S. jobs report from the Labor Department. The key non-farm payrolls number of the report is expected to show a rise of 165,000.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the Challenger job-cuts report, the ADP national employment report, the weekly jobless claims report, the international trade report, the U.S. services PMI, the ISM non-manufacturing index, manufacturers’ shipments and orders, the global services PMI, and the weekly DOE liquid energy stocks report.

–Jim

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Tuesday, July 2–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were mixed to firmer overnight. U.S. stock indexes are pointed toward solidly lower openings when the New York day session begins. Look for trading activity in the U.S. to start to die down today, ahead of the U.S. Independence Day holiday on Thursday.

After having some time to reflect upon the weekend summit meeting on trade between U.S. President Trump and China President Xi, the marketplace is not quite so upbeat on the prospects of a final agreement any time soon. There is speculation now that a deal won’t get done ahead of the 2020 U.S. presidential election. Furthermore, there was some downbeat U.S. manufacturing data released Monday and the Trump administration is again threatening the European Union with trade tariffs.

In overnight news, the Reserve Bank of Australia cut its main interest rate for the second month in a row, and the central bank said more cuts may be needed.

The Euro zone reported its May producer price index dropped 0.1% from April and was up 1.6%, year-on-year. Those numbers were in line with expectations but underscore the low inflation gripping many of the world’s major economies. The yield on the German 10-year government bonds (bunds) hit a new record low today.

There was some civil unrest in the streets of Hong Kong on Monday, but that has fallen out of the TV news cycle, which suggests that situation has calmed down.

The key “outside markets” today see Nymex crude oil prices slightly lower and trading just below $59.00 a barrel. Meantime, the U.S. dollar index is modestly down in early U.S. trading.

U.S. economic data due for release Tuesday includes the weekly Johnson Redbook and Goldman Sachs retail sales report, the ISM New York report on business, the IBD/TIPP economic optimism index, and domestic auto industry sales.

–Jim

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Grain traders and most Americans are setting their sites on the upcoming July Fourth holiday weekend. The summer respite will find barbecuing, baseball, boating and other summertime pleasures the order of the day–capped off by evening fireworks displays.

But after the Fourth of July holiday period, grain traders will even more keenly focus on the critical timeframe that occurs after the holiday. Indeed, mid- to late-July typically finds the hottest weather of the year in the Corn Belt. This time period coincides with the
extreme-heat-sensitive pollination stage of corn crop development. August is the most critical growing month for U.S. soybeans. U.S. wheat harvest is also wrapping up in July.

Already this year the grain markets have experienced serious weather market rallies, mainly due to too much rainfall either delaying planting progress or drowning out already-planted fields. The U.S. hard red winter and soft red winter wheat crops are experiencing some harvesting delays and quality problems due to recent soggy weather in those regions.

Here is what Conrad Leslie, the longtime and highly respected crop forecaster and market commentator, told me a few years ago: “Following the July Fourth holiday period, those who are interested in soybean and corn prices and production estimates look to the skies for the next two months for weather developments. Historical statistics indicate crops can
either improve or decline….”

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Grain traders are still trying to digest the surprising USDA reports last Friday that showed a sharp drop in U.S. soybean acres and a rise in corn acres. That data pushed corn prices sharply lower and soybean prices moderately higher. Wheat was pulled lower by the big drop in corn prices. Significant chart damage was inflicted in corn futures, as the price uptrend on the daily chart was negated. Weather in the midwest U.S. now leans toward favoring the bears, as drier and warmer conditions over the weekend and in the coming days will benefit the crops. Historically, the first trading day for the grains after the U.S. Independence Day, which comes this Friday, is extra important. Grain price trends can be reversed or existing trends accelerate during the critical early-July timeframe. Stay tuned!–Jim

Monday, July 1–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were mostly higher overnight. U.S. stock indexes are pointed toward solidly higher openings when the New York day session begins. The U.S. indexes today are at or near record highs amid keener risk appetite among traders and investors worldwide.

The weekend Group of 20 meetings taking place in Japan featured a face-to-face meeting between U.S. President Trump and Chinese President Xi regarding their trade war. That meeting saw the U.S. back off on some of its threatened sanctions, while China said it would buy more U.S. agricultural products, and both sides agreed to restart trade negotiations. This was deemed a positive by the marketplace, but most agree much heavy lifting needs to be done to get a complete and final U.S.-China trade agreement.

Also, President Trump made a surprise visit to North Korea over the weekend and met with North Korean leader Kim Jong Un. The U.S. and North Korea said they would resume talks on North Korea’s nuclear program.

Gold dropped just over $20 to start the trading week and trading month, on the positive news on the geopolitical fronts. U.S. government bond yields also rose Monday but European bond yields dipped.

There was a mixed bag of economic data coming out Europe Monday. The Euro zone May unemployment rate dropped to 7.5%, which is the lowest in over 10 years. However, U.K. manufacturing growth was the slowest in six years. The Eurozone manufacturing purchasing managers index (PMI) came in at 47.8 in June, which was just a bit better than expectations, but any reading below 50.0 suggests contraction in the sector.

The key “outside markets” today see Nymex crude oil prices solidly higher, hitting a five-month high and trading around $60.00 a barrel. The OPEC oil cartel over the weekend reached a deal to keep its production curtailed. Meantime, the U.S. dollar index is higher in early U.S. trading.

U.S. economic data due for release Monday includes the U.S. manufacturing PMI, the ISM manufacturing report on business, the global manufacturing PMI and construction spending.

–Jim

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Friday, June 28–Jim Wyckoff’s Morning Markets Report

Asian stock markets were mostly weaker overnight, while European stock indexes were mostly firmer. U.S. stock indexes are pointed toward modestly higher openings when the New York day session begins.

Many markets are quieter and pausing amid the Group of 20 confab taking place in Japan that will feature a face-to-face meeting between U.S. President Trump and Chinese President Xi late Friday or this weekend. China has laid out several conditions for the U.S. to make a trade deal, but Trump may not accept them, including lifting sanctions on China telecommunications giant Huawei. The outcome of the U.S.-China summit meeting is still very uncertain and could have major implications for many markets come Monday morning.

In overnight news, the Euro zone June consumer price index came in at up 1.2%, year-on-year, which was in line with market expectations but still too low for the liking of the European Central Bank. This inflation report is one more element falling into the camp of the Euro zone monetary policy doves who want to see the ECB inject more stimulus into the economy.

The key “outside markets” today see Nymex crude oil prices near steady and trading around $59.50 a barrel. Meantime, the U.S. dollar index is modestly lower in early U.S. trading.

U.S. economic data due for release Friday includes personal income and outlays, the ISM Chicago business survey, and the University of Michigan consumer sentiment survey.

–Jim

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