David Fuller and Eoin Treacy's Comment of the Day
Category - General

    U.S. Stocks Extend Rebound From Trade-Driven Rout: Markets Wrap

    This article by Randall Jensen and Sarah Ponczek for Bloomberg may be of interest to subscribers. Here is a section:

    “Investors are looking for opportunities to get into this market, and so far in 2019 there really haven’t been any ‘buy the dip’ opportunities other than last week,” Ryan Nauman, market strategist at Informa Financial Intelligence, said by phone. “And you’re also seeing President Trump confirmed a meeting with President Xi during next month’s G-20 summit, which provides some optimism that despite the increase in tariffs, negotiations are still ongoing.”

    Even as investors pick through Monday’s carnage for deals, the trade tussle between Washington and Beijing is keeping markets on edge as traders try to gauge its impact on the global economy. On Monday, all three major U.S. benchmarks dropped more than 2% -- only the second time this year that’s happened -- after China targeted some of the biggest U.S. exporters in response to American tariffs. Trump eased concerns talks would break down when he said he and Chinese President Xi Jinping would meet at the G-20 conference in late June.

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    Late Planting and Projections of 2019 U.S. Corn and Soybean Acreage

    This article by Scott Irwin and Todd Hubbs for Farmdocdaily may be of interest to subscribers. Here is a section:

    The impact of late planting on projections of the U.S. corn and soybean planted acreage is an important question right now due to the very wet and/or cold conditions so far this spring through much of the Corn Belt.  We estimate the relationship of late corn planting to corn and soybean planted acreage and prevented plantings in this article.  If late corn planting is 10 percent or more above average, we find that the chance of corn planted acreage decreasing is 83 percent and the average decrease is 1.4 million acres.  The level of prevented plantings for corn is about 1.2 million acres larger than average when late planting is near 10 percent or more above average.  This indicates that there is a reasonably high chance that planted acreage of corn will decline 2-3 million acres from expectations based on the March 30 USDA Prospective Plantings report.  Likewise, we find that when late corn planting is 10 percent or more above average that the chance of soybean planted acreage increasing is 83 percent and the average increase is 0.9 million acres.  However, the level of prevented plantings for soybeans also increases, offsetting much of the acreage switch.  This indicates there is a reasonably high chance that planted acreage of soybeans will not change much compared to expectations based on the March 30 USDA Prospective Plantings report.  It should be noted that changes to corn and soybean planted acreage could be even larger if planting conditions do not improve substantially in the next two weeks.  Finally, corn and soybean acreage changes could also be impacted by policy changes made in response to reaching or not reaching a trade deal with China.

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    Oil Rises as Drones Strike Saudi Pipeline and Trade Fears Recede

    This article by Alex Nussbaum and Grant Smith for Bloomberg may be of interest to subscribers. Here is a section:

    Oil climbed as drones struck Saudi Arabia’s main cross-country crude pipeline, while President Donald Trump said a trade deal with China is still within reach.

    Futures gained 1.2% in New York, amid assaults on the world’s chief crude exporter. State-owned Saudi Aramco halted operations in the area after the strike on two pumping stations, which was claimed by Iran-backed rebels from neighboring Yemen. The attack followed damage to four oil tankers anchored off the United Arab Emirates on Sunday.

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    A Fed Cut This Year Is Now Being Priced In as a Near Certainty

    This article by Alexandra Harris for Bloomberg may be of interest to subscribers. Here is a section:

    The rate on the January fed funds futures contract implies that the central bank’s benchmark will fall to 2.075% by the end of 2019. This is more than 25 basis points below where the effective fed funds rate stood Friday, showing traders are fully pricing in a quarter-point reduction. The implied rate on the contract ended last week at 2.15%.

    This is happening as China threatens retaliatory tariffs on some American imports, an escalation in the trade war with U.S. President Donald Trump. The clash is fueling concern about economic growth, prompting a key part of the U.S. yield curve to invert again -- a sign to many that the risk of a recession has increased.

    While “China/U.S. trade ripple effects certainly affect the Fed’s outlook, I think this is more of a macro move,” said Todd Colvin, senior vice president at futures and options broker Ambrosino Brothers in Chicago. “It’s not about whether or not the Fed sees policy shifts, that is, as much as it’s looking at
    global growth woes, or increased market volatility.”

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    China Hikes Tariffs on U.S. Products as Trade-War Divide Deepens

    This article by Shawn Donnan and Miao Han for Bloomberg may be of interest to subscribers. Here is a section:

    China announced plans to raise duties on some American imports starting June 1, defying a call from President Donald Trump to resist escalating a trade war that is sending stocks tumbling and clouding the outlook for the global economy.

    Less than two hours after Trump tweeted a warning that “China should not retaliate -- will only get worse!” the Ministry of Finance in Beijing unveiled the measures on its website. The new rate of 25% will apply to 2,493 U.S. products, with other goods subject to duties ranging from 5% to 20%, it
    said.

    The next salvo was poised to come later Monday, when the Trump administration is expected to provide details of its plans to impose a 25% additional tariff on all remaining imports from China -- some $300 billion in trade.

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    Funds Flock to Dollar on Bets Markets Underpricing Trade Divide

    This article by Ruth Carson for Bloomberg may be of interest to subscribers. Here is a section:

    Uncertainty over how the dispute would be resolved in the one-month deadline set by Washington will reinvigorate a hunt for haven assets in a world already hampered by slowing growth.

    An easy bet will be to short the expected losers: risk-sensitive currencies from Asia to South America, they say. “To be honest, I thought the dollar would be rising at a much faster pace than this -- markets were pricing in a Goldilocks environment and they were clearly wrong,” said Stephen Miller, an adviser at asset manager GSFM and a former head of fixed income at BlackRock Inc.’s Australian business.

    “Right now I’d be long U.S. dollar versus EM currencies, the likes of Argentina and Turkey.” There’s a 60% chance that China and U.S. won’t reach a deal in the coming weeks, according to analysts at Australia and New Zealand Banking Group Ltd., after last week’s talks laid bare divisions including the removal of existing tariffs and a breakdown in trust. While both nations plan to continue negotiations, traders are waiting for Beijing’s retaliation measures after Washington slapped more duties.

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    China Armed With Powerful Market Weapons in Duel With Trump

    This article by Katherine Greifeld for Bloomberg may be of interest to subscribers. Here is a section:

    Chinese policy makers could devalue the yuan to offset the impact of U.S. duties on China’s economy. The offshore yuan weakened 5.5% against the dollar in 2018, drawing Trump’s ire and fueling speculation that the country was deliberately weakening its currency. While it has fallen 1.8% this week, the currency rose on Friday after the People’s Bank of China set its daily fixing at a stronger-than-expected level.

    However, China’s painful experience with devaluing the yuan in 2015, which prompted capital to flee the nation, is likely to dissuade a similar move, according to Tao Wang, UBS Group AG’s chief China economist and head of Asia economic research. “China doesn’t like the self-fulfilling outflows that come as a result of depreciation, which tend to diminish domestic confidence,” she said. “In addition, yuan depreciation last year angered the Trump administration and led to higher U.S. tariffs.”

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