It would appear that US scheduled economic data has returned to a choppy standing, but recent Asian data has clearly surprised on the upside. Chinese retail sales figures nearly returned to double digit percentage gains over year-ago levels, and those optimistic results were matched by strong data from Japan. Unfortunately for many physical commodities, the dollar has seemingly regained some favor, and “buy the rumor” action into the upcoming FOMC meeting might see that action extended.
Soybeans
Global Markets Retain Positive Risk Tone Amid Trade, USDA News
After an eventful trading week last week, global markets are holding onto a positive risk tone. President Trump formally announced steel and aluminum tariffs, but there were exceptions for Canada and Mexico that softened its impact on risk appetites. There has been pushback from Capitol Hill, the business sector and major central banks that could keep trade tensions subdued.
Despite Rising Rates and Strong Dollar, “Goldilocks” Economic Data May be Needed to Avoid Lower Market Action
While the fear of a series of 2018 rate hikes has provided commodities with a double negative from a rising rates/strengthening dollar perspective, we think the path to higher rates won’t be as direct as what was priced into the market in late February. First of all, we think the excess stock market volatility from the beginning of February will serve to soften the February scheduled release data (the first of which will be the employment report on March 9th), and that could temporarily pull back the anticipated number of rate hikes.
Equities Markets’ Resilience has Softened Negative Vibes in Commodity Markets
While the equity markets have not completely left the confidence-shaking volatility from early February behind, their ability to maintain a good portion of their gains from the recovery bounce has calmed investors and softened the negative vibes in the commodity markets.
Economic Data Suggests Low at Hand for Commodities
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Commodities Face Supply-Side Pressure, Year of “Exploding” US Exports Ahead
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Reflation Bias Extends into November, Strong Equities Positive for Growth
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Global Growth to Lead to Reflation & Recovering Commodities
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Pressure on USD, Strength in Equities to Start New Quarter
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Markets Exhausted, Significant Lows in Grains
Global markets have not regained a “risk on” tone, but they are showing signs of looking beyond the turbulent events of the past few weeks.