Dec E-mini S&Ps this morning are up +0.77% and European stocks are up +1.14%, both at 1-1/2 week highs, on optimism the trade conflict between the U.S. and China will soon be resolved. President Trump reportedly asked key cabinet secretaries to draw up a draft to signal a ceasefire in the trade conflict with China and that President Trump wants to reach an agreement on trade with Chinese President Xi Jinping when both leaders meet at the G-20 summit in Argentina later this month. Stocks gains were limited as Apple fell nearly 6% in pre-market trading after it forecast weaker-than-expected Q1 revenue growth. The rally in equities undercut demand for government debt as the 10-year German bund yield rose to a 1-week high of 0.438% and the 10-year T-note yield climbed to 1-1/2 week high of 3.170%. Asian stocks settled higher: Japan +2.56%, Hong Kong +4.21%, China +2.70%, Taiwan +0.63%, Australia +0.14%, Singapore +1.81%, South Korea +3.65%, India +1.68%. Asian markets rallied sharply on the prospects for a resolution to the U.S.-China trade conflict as China's Shanghai Composite climbed to a 3-week high and Japan's Nikkei Stock Index rose to a 1-1/2 week high. The yuan also rallied and climbed to a 5-week high against the dollar.
The dollar index is down -0.25% at a 1-week low. EUR/USD is up +0.40% at a 1-week high. USD/JPY is up +0.11.
Dec 10-year T-note prices are down -6 ticks at a 1-week low.
The Eurozone Oct Markit manufacturing PMI was revised downward to 52.0 from the previously reported 52.1, the slowest pace of expansion in 2-years.
The German Sep import price index rose +0.4% m/m and +4.4% y/y, slightly weaker than expectations of +0.4% m/m and +4.5% y/y.
The UK Oct Markit/CIPS construction PMI unexpectedly rose +1.1 to 53.2, stronger than expectations of -0.1 to 52.0.
Key news today includes: (1) Oct non-farm payrolls (expected +200,000, Sep +134,000) and Oct unemployment rate (expected unch at 3.7%, Sep -0.2 to 3.7%), (2) Oct avg hourly earnings (expected +0.2% m/m and +3.1% y/y, Sep +0.3% m/m and +2.8% y/y), (3) Sep trade balance (expected -$53.6 billion, Aug -$53.2 billion), (4) Sep factory orders (expected +0.5% m/m, Aug +2.3% and +0.1% ex transportation).
Dec S&P 500 E-minis this morning are up +21.00 points (+0.77%) at a 1-1/2 wek high. Thursday's closes: S&P 500 +1.06%, Dow Jones +1.06%, Nasdaq 100 +1.47%. The S&P 500 on Thursday rallied to a 1-week high and closed higher on reduced trade concerns after President Trump tweeted that progress has been made in trade negotiations with China. Stocks were also boosted by signs of strength in the U.S. labor market after weekly continuing unemployment claims unexpectedly fell -7,000 to a 45-1/4 year low of 1.631 million, stronger than expectations of +4,000 to 1.640 million. Stocks were undercut by the -2.1 point decline in the Oct ISM manufacturing PMI to 57.7, weaker than expectations of -0.8 to 59.0 and the slowest pace of expansion in 6 months.
Livestock prices on Thursday settled mixed: Dec live cattle +0.175 (+0.15%), Dec hogs -0.250 (-0.43%). Dec cattle on Thursday closed higher on signs of strength in domestic beef demand concerns after wholesale beef prices climbed to a 4-1/4 month high. Dec cattle fell to a 1-week low Tuesday on concern high slaughter rates will boost beef supplies. USDA slaughter data shows 26.848 mln head of cattle processed this year through Oct 27 up +2.5% y/y. Dec cattle on Oct 1 rose to a contract high after the new U.S.-Mexico-Canada trade deal was announced, which eased trade concerns and may lead to increased foreign demand for U.S. beef. Foreign demand for U.S. beef remains strong as U.S. Jan-Aug beef exports are up +14.2% y/y at 2.096 bln lbs and the USDA projects U.S. 2018/19 beef exports will climb +2.6% y/y to a record 3.245 bln lbs. The USDA reported U.S. Sep commercial beef production fell -11.2% m/m and -3.0% y/y to 2.158 bln lbs. Future beef output may also increase as the USDA projects U.S. 2018/19 beef production will climb +3.6% y/y to a record 27.973 bln lbs.
The Oct 19 USDA Cattle on Feed report was supportive as it showed cattle on feed as of Oct 1 rose +5.4% y/y to a record for an Oct of 11.4 million head (data from 1996), although that was below expectations of +6.3 y/y. Cattle placements in feedlots during Sep unexpectedly fell -4.6% y/y to 2.051 million head, below expectations of a +0.3% y/y increase. Cattle marketed for slaughter in Sep fell -3.6% y/y to 1.719 mln head, below expectations of -3.1% y/y. Last Monday's USDA Cold Storage report was negative as it showed U.S. beef supplies in cold storage in Sep rose +1.4% m/m and +2.5% y/y to 508.560 mln lbs.
Dec hog prices on Thursday closed lower on domestic pork demand concerns after wholesale pork prices fell to a 1-1/2 month low. Also, pork packer profit margins dipped to a 3-week low, which may curb hog demand from packers. Dec hogs on Wednesday posted a 3-week nearest-futures high on signs of smaller pork output after the USDA reported U.S. Sep pork production fell -13.1% m/m and -7.0% y/y to 2.013 bln pounds. Another positive is the spread of the African swine fever outbreak throughout China, which may force China to buy U.S. pork as it culls its pig herds. On the negative side, increased hog weights may boost future U.S. pork output after last Friday's USDA slaughter data showed the average hog carcass weight rose to 212.39 lbs, a 5-1/4 month high. Dec hogs rallied to a 4-1/4 month high Oct 1 on reduced trade concerns that may boost foreign demand for U.S. pork after the new U.S.-Mexico-Canada trade deal was announced. Nearest-futures (V18) hog prices slumped to 1-3/4 year nearest-futures low on Aug 30 due to retaliatory tariffs from China, Canada and Mexico, which account for 60% of all U.S. pork exports. The outlook for abundant supplies has weighed on hog prices as the USDA projects U.S. 2018/19 pork production will climb +5.2% y/y to a record 27.824 bln lbs. High slaughter rates are also negative for hog prices as USDA slaughter data showed 100.899 mln hogs processed this year through Oct 27, up +2.2% y/y. Last Monday's Cold Storage report was mixed as it showed overall pork supplies in Sep rose +1.3% m/m, but fell -4.8% y/y to 588.917 mln lbs. Foreign demand for U.S. pork was solid through Aug with U.S. Jan-Aug pork exports up +6.3% y/y at 3.896 bln lbs and the USDA projects that U.S. 2018/19 pork exports will climb +3.5% y/y to a record 6.2 bln lbs.
The Sep 27 USDA Q3 Hogs & Pigs report was mixed as it showed that the U.S. pig herd as of Sep 1 rose +3.0% y/y to 75.486 mln, below expectations of +3.3%. Sows retained for breeding as of Sep 1 rose +3.5% y/y to 6.33 mln, more than expectations of +2.9%, and hogs marketed for slaughter rose +2.9 y/y to 69.156 million, below expectations of +3.3% y/y. In addition, piglets per litter in Q3 rose +0.7% y/y to 10.72, slightly below expectations of +1.0% y/y, but still a record high for a Q3.
Softs this morning are higher: Mar sugar +0.07 (+0.53%), Dec coffee +0.75 (+0.64%), Dec cocoa +2 (+0.09%), and Dec cotton +0.71 (+0.90%). Softs on Thursday settled mostly higher: Mar sugar unch, Dec coffee +5.10 (+4.53%), Dec cocoa +30 (+1.34%), Dec cotton +2.17 (+2.82%). Mar sugar on Thursday closed little changed. Dec sugar on Wednesday slid to a 2-week low on negative carry-over from Tuesday after the USDA's FAS forecast 2018/19 sugar production in India, the world's second-largest sugar producer, may climb +5.2% y/y to a record 35.87 MMT. Mar sugar had posted a 9-1/2 month nearest-futures high last Wednesday on concern about smaller global production after Unica predicted that Brazil's Center South 2018/19 sugar production may fell -28% y/y to 26 MMT. Unica reported Brazil's Center-South 2018/19 sugar output through Sep was down -24.8% y/y at 22.273 MMT, with the amount of sugar converted to ethanol at 24.386 mln liters, up +25.1% y/y. Another positive was the rally in the Brazilian real to a 4-3/4 month high against the dollar on Oct 17, which reduces incentive for Brail' sugar producers to boost exports. Mar sugar on Sep 27 fell to a contract low and nearest-futures (V18) sank to a 10-year low on concern about bigger global supplies after India's government approved 55.38 billion rupees ($762 million) in subsidies to its sugar farmers, which may boost India's sugar exports by 5 MMT in the year starting Oct 1. Sugar prices had sold-off into late-Sep on signs of abundant global sugar supplies. ISO forecasts global 2018/19 sugar production will rise +0.6% y/y to a record 185.2 MMT and projects a global 2018/19 sugar surplus of 6.75 MMT, down from surplus of +8.6 MMT in 2017/18. The USDA's Foreign Agricultural Service (FAS) projects a record 2017/18 global sugar surplus of 10.73 MMT and record global 2017/18 sugar production of 184.95 MMT. The Thailand Office of Cane and Sugar Board reported Thailand 2017/18 sugar production rose to a record 14.47 MMT. Conab forecasts Brazil 2018/19 sugar production will fall -9.6% y/y to 34.25 MMT, a 3-year low.
Dec coffee on Thursday closed high as a decline in the dollar index to a 1-week low spurred fund short covering in coffee. Dec coffee on Wednesday fell to a 2-week low on signs of robust supplies. The International Coffee Organization (ICO) reported Thursday that global 2017/18 coffee exports rose +2% y/y to 121.9 mln bags. Also, ICE-monitored coffee inventories continue to climb and rose to a 4-year high of 2.448 mln bags on Tuesday. Dec coffee on Oct 19 rallied to an 8-3/4 month high nearest-futures high after the Brazilian real climbed to a 4-3/4 month high against the dollar, which reduces incentive for Brazil's coffee producers to boost exports. Coffee prices had sold-off over the past four months as Dec coffee fell to a contract low Sep 18 and nearest-futures (U18) posted a 12-3/4 year low on the outlook for ample supplies. The ICO reported global coffee exports from Oct-Aug were 112.5 mln bags, up +1.6% y/y. Conab raised its Brazil 2018 coffee production estimate to a record 59.9 mln bags from a prior estimate of 58 mln bags, up +33% y/y, as crops are in the higher-yielding half of their biennial cycle. The USDA on Jun 15 projected global 2018/19 coffee production will climb +7.1% y/y to a record 171.166 mln bags and global 2018/19 coffee ending stocks will increase by +11.6% to a 3-year high of 32.812 mln bags. Also, Vietnam coffee exports this year from Jan-Sep are up +19.6% y/y at 1.456 MMT. On the positive side, the USDA projects that global 2018/19 coffee consumption will climb +2.9% to a record 163.219 mln bags. Also, U.S. Sep green coffee inventories fell -10.5% y/y to 6.438 mln bags. In addition, ICO recently raised its global 2017/18 coffee deficit estimate to -3.5 mln bags from a previous estimate of -2.7 mln bags.
Dec cocoa prices on Thursday rallied to a 6-week high on signs of tighter supplies as ICE-monitored cocoa inventories have fallen steadily over the past six months down to a 9-1/4 month low on Wednesday of 3,840,290 bags. Also, concerns remain that cocoa exporters in the Ivory Coast are finding it harder to purchase beans as Ivory Coast banks tighten their lending standards after Ivory Coast cocoa processor Saf-Cacao defaulted on loans and was forced into liquidation. Signs of stronger global demand are also supportive for cocoa prices after the National Confectioners Association reported North American Q3 cocoa grindings unexpectedly rose +2.5% y/y to 128,494 MT, stronger than expectations for a -1% y/y decline. The European Cocoa Association reported that European Q3 cocoa grindings rose +2.7% y/y to 363,122 MT, the highest in 7 years. Conversely, Asia Q3 cocoa grindings rose +3.7% y/y to 196,418 MT, weaker than expectations of +5.1%. Also, current supplies have risen after the Ivory Coast reported farmers sent 250,704 MT of cocoa to ports from Oct 1-28, up +56.7% from the same time last year. The Ghana Cocoa Board said the 2017/18 cocoa crop in Ghana, the world's second largest, was 899,209 MT, down -7.2% y/y. Cocoa purchases from the Ghana Cocoa Board totaled 77,042 MT for the first 3 weeks of the 2018/19 harvest through Oct 25. Dec cocoa on Oct 1 sank to an 8-month nearest-futures low on harvest pressures from the Ivory Coast and Ghana main crops. Nearest-futures (U18) cocoa prices rallied to a 2-year high in May on signs of stronger global demand along with concern excessive dry conditions in West Africa would reduce Ivory Coast and Ghana cocoa yields. ICCO projects that 2017/18 global cocoa production will fall -2.0% y/y to 4.645 MMT and that the global cocoa surplus will fall to +31,000 MT from 2016/17's 6-year high surplus of 296,000 MT.
Dec cotton on Thursday moved higher on optimism that the U.S.- China trade rift can be resolved after President Trump said trade talks with Chinese President Xi Jinping are "moving along nicely." Cotton prices had been under pressure after Monday's USDA Crop Progress report showed the pace of the U.S. cotton harvest picked up and is now just above the 5-year average. Dec cotton last Thursday fell an 8-1/4 month nearest-futures low on fund selling fueled by speculation the recent slump in global stock prices will undercut economic growth and cotton demand. Also, Cotlook cut its global 2018/19 cotton deficit estimate to -664,000 MT from a previous estimate of -739,000 MT. Supplies are expected to tighten as the USDA projects global 2018/19 cotton ending stocks will fall to a 7-year low of 74.45 mln bales. Another bullish factor is concern about lower cotton production in India, the world's biggest cotton producer, after researcher Kotak Commodity Services said 2018/19 cotton production in India, may fall 4% y/y to 35 mln bales after India' monsoon rains were 9% below normal this year. India's 2017/18 cotton production rose to a 3-year high of 36.5 mln bales, according to data from the Cotton Association of India. The USDA projects U.S. 2018/19 cotton ending stocks will climb to an 11-year high of 5 mln bales. China Jan-Sep cotton imports were up +23.2% y/y at 1.1 MMT, although trade tensions between U.S. and China may limit China's demand for U.S. cotton going forward. The USDA projects that global 2018/19 cotton use will climb to a record high of 127.76 mln bales. Monday’s USDA Crop Progress report showed that 44% of the U.S. cotton crop was harvested as of Oct 28, +1 point ahead of the 5-year average.
Dec WTI crude oil prices this morning are down -2 cents (-0.03%) and Dec gasoline is +0.90 (+0.52%). Thursday's closes: Dec crude oil -1.62 (-2.48%), Dec gasoline -2.49 (-1.99%). Dec crude oil and gasoline on Thursday closed lower with Dec crude at a 6-1/2 month low and Dec gasoline at a 7-1/2 month low. Crude oil prices were undercut by the rise in OPEC Oct crude production by +430,000 bpd to a 2-year high of 33.33 million bpd and by the rise in Russian oil production from Oct 1 through Oct 30 to a record 11.41 million bpd. Crude oil prices were also undercut by negative carry-over from Wednesday's EIA data showing that U.S. crude production the week ended Oct 26 rose to a record 11.2 million bpd.
Metals prices this morning are mixed with Dec gold -1.3 (-0.10%), Dec silver +0.023 (+0.16%), and Dec copper +0.050 (+1.82%). Thursday's closes: Dec gold +23.6 (+1.94%), Dec silver +0.495 (+3.47%), Dec copper +0.0625 (+2.35%). Metals on Thursday closed higher on the slide in the dollar index to a 1-week low and the larger-than-expected decline in in the U.S. Oct ISM manufacturing PMI to a 6-month low, which was dovish for Fed policy. Copper was supported by tight copper supplies after LME copper inventories fell by -950 MT to a 10-1/4 year low of 136,675 MT.
Dec 10-year T-notes this morning are down -6 ticks at a 1-week low. Thursday's closes: TYZ8 +4.50, FVZ8 +3.25. Dec 10-year T-notes on Thursday closed higher on the weaker-than-expected U.S. Sep ISM manufacturing index that fell to a 6-month low, which was dovish for Fed policy. T-note prices were also supported by the slump in crude oil prices to a 6-1/2 month low, which undercuts inflation expectations.
The dollar index this morning is down -0.244 (-0.25%) at a 1-week low, EUR/USD is up +0.0046 (+0.40%) at a 10week high, and USD/JPY is up +0.12 (+0.11%). Thursday's closes: Dollar Index -0.850 (-0.88%), EUR/USD +0.0096 (+0.85%), USD/JPY -0.22 (-0.19%). The dollar index on Thursday fell to 1-week low and closed lower on the weaker-than-expected U.S. Sep ISM manufacturing index, which was dovish for Fed policy. There was also strength in GBP/USD which rallied to a 1-week high on reduced Brexit concerns after UK's lead negotiator Raab said "a great deal of progress" has been made in recent weeks and predicted that a deal on Brexit will be made by November 21.
Grain prices this morning are higher with Dec corn +2,50 (+0.68%), Nov soybeans +16.75 (+1.90%), and Dec wheat +1.00 (+0.20%). Grain prices on Thursday closed higher with Jan soybeans at a 2-week high: Dec corn +3.50 (+0.96%), Jan soybeans +30.25 (+3.55%), Dec wheat +7.50 (+1.50%). Bullish factors included (1) a drop in the dollar index to a 1-week low, (2) optimism that the U.S.- China trade rift can be resolved after President Trump said trade talks with Chinese President Xi Jinping are "moving along nicely," and (3) heavy rains in the Great Plains that may force farmers to plant less winter wheat. A negative for wheat is increased Russian wheat exports that have reduced demand for U.S. wheat supplies after Russia's Ag Ministry reported Russian wheat exports from Jul 1-Oct 18 were 15.2 MMT, up +34% y/y.
Monday's USDA Crop Progress report showed that 63% of the U.S. corn crop was harvested as of Oct 28, +2 points ahead of the 5-year average. The Crop Progress report also showed 72% of the U.S. soybean crop harvested as of Oct 28, -9 points behind the 5-year average. Meanwhile, 78% of the U.S winter wheat crop was planted as of Oct 28, -7 points behind the 5-year average.