U.S. stock futures signal plunge today
In Today’s Updates
* If markets abhor uncertainty, watch out today
* Global trade rebounding much more quickly this year than after 2008 financial crisis
* Oil markets shift lower ahead of U.S. trading start
* Copper used to be signal of state of U.S. industrial economy, but now for China
* Fitch expects full demand recovery for most commodities by 2021
* Shell is jumping on the bandwagon of its European rivals BP and Eni
* Ag market gleanings from CFTC's Commitments of Traders report
* Battle royal to fill Ginsburg slot on Supreme Court
* House wants to clear stopgap spending measure this week; Senate next
* USDA releases cost/benefit analysis of CFAP 2; enrollment begins today
* China fighters again crossed mid-point of Taiwan Strait
* Oracle deal for TikTok scores Trump's 'blessing'
* Tencent's WeChat ito remain operating in U.S. after federal judge ruling
* How much corn has China already purchased from all origins for 2020-21?
* China making plans to stockpile energy and ag products
U.S. food & beverage industry update:
* Meat prices are falling at grocery stores
Politics & Elections:
* Biden leads Trump by 8 points in new Wall Street Journal/NBC News poll
* Trump has one-point lead over Biden in Rasmussen Reports’ weekly survey
* Michigan judge: Ballots postmarked by Nov. 2 must count if arrive 14 days after Nov. 3
* Is Pennsylvania ground zero for presidential outcome?
Other Items of Note:
* Officials: Envelope addressed to Trump tested positive for ricin
Equities today: Global stock markets lower overnight, with U.S. stock futures set to open with solid losses — Dow futures were down 500 at the time of this writing. The death of U.S. Supreme Court Justice Ruth Bader Ginsburg has thrown the U.S. Congress into even more uncertainty than usual for the nearly dysfunctional body. That adds to the hurdles regarding a new Covid/stimulus package, but lawmakers are still expected to come to some type of agreement regarding a stopgap spending measure for fiscal year 2021 which begins Oct. 1. Investors also appear worried that a global recovery could be hampered by a rise in coronavirus infections, especially with no vaccine breakthrough yet.
U.S. equities Friday: The Dow fell 244.56 points, 0.88%, at 27,657.42. The Nasdaq declined 116.99 points, 1.07%, at 10,793.28. The S&P 500 lost 37.54 points, 1.12%, at 3,319.47.
On tap today:
• USDA Grain Export Inspections, 10 a.m. ET.
• USDA Crop Progress, 4 p.m. ET.
• European Central Bank President Christine Lagarde speaks to the Franco-German Parliamentary Assembly at 8:45 a.m. ET.
• Federal Reserve governor Lael Brainard speaks about the Community Reinvestment Act at 12 p.m. ET, Dallas Fed President Robert Kaplan speaks at 6 p.m. ET, and New York Fed President John Williams speaks to the Congressional Black Caucus Foundation at 6 p.m. ET.
Global trade is rebounding much more quickly this year than it did after the 2008 financial crisis, lifting parts of the world economy and defying predictions the pandemic could send globalization into permanent retreat, the Wall Street Journal reports (link). When the new coronavirus hit earlier this year, international trade in goods suffered the biggest year-over-year drop since the Great Depression. Economists warned of rising protectionism, and some companies said they would reassess overseas supply chains that were vulnerable to unexpected shocks. Trade remains below pre-pandemic levels. Still, it has snapped back robustly — and had recovered about half of this year’s historic loss by June.
• Outside markets: The U.S. dollar index solidly higher. Gold prices today are sharply down, despite the keener uncertainty in the marketplace. Meantime, the yield on the U.S. Treasury 10-year note is trading around 0.67% today.
• Oil markets have shifted lower ahead of the U.S. trading start as a potential return of Libyan oil production weighed on prices despite concerns over Covid and another tropical storm threat in the U.S. Gulf of Mexico. U.S. crude has dropped to around $40.30 per barrel while Brent crude is trading under $42.340 per barrel. Prices were firmer in Asian action but gains were not substantial from where prices finished Friday. U.S. crude was up 11 cents at $41.22 per barrel while Brent crude gained 9 cents at $43.24 per barrel.
• Copper used to be a decent signal of the state of the U.S. industrial economy, but over the past few decades it has been much better as an indicator of Chinese policy, Barron's notes. China accounts for a little more than half of total demand, and basically all of the incremental demand since 2000. The copper price plunged when the pandemic hit China in the second half of January and again when the virus curbed global demand for Chinese exports in March. Since then, however, the copper price has gained almost 50%. “Not coincidentally, the Chinese government has responded to the pandemic by aggressively boosting credit supply to the businesses that drive copper demand,” says Barron's.
• Fitch expects a full demand recovery for most commodities by 2021.
• Shell is jumping on the bandwagon of its European rivals BP and Eni, which have both announced plans to reduce their focus on oil and gas in the coming decade. Sources tell Reuters that the oil major is looking to slash up to 40% off the cost of producing oil and gas so it can overhaul its business and focus more on renewable energy and power markets. Shell's new cost-cutting review, known internally as Project Reshape and expected to be completed this year, will affect its three main divisions and any savings will come on top of a $4 billion target set in the wake of the Covid-19 crisis.
• Ag market nuggets from CFTC's Commitments of Traders report (Source: Bloomberg):
— Net bullish soybean bets boosted to two-year high
— Net bullish soybean-meal bets boosted to five-month high
— Net bullish soybean-oil bets rise to seven-month high
— Net bullish corn bets rise to 13-month high
— Net bullish Chicago wheat bets cut to three-week low
— Net bullish New York cocoa bets rise to six-month high
— Net bullish raw-sugar bets cut to seven-week low
— Hedge funds boost net bullish cotton bets
— Net bullish cattle bets boosted to three-week high
— Funds boost net bullish hog bets to 15-month high
— Net bullish feeder-cattle bets cut to two-month low
— Net bullish orange-juice bets cut to 19-week low
— Ruth Bader Ginsburg's death adds even more uncertainty to a very uncertain Washington. The worst of American politics (and that is a cringe-worthy phrase) may resurrect itself as both political parties gear up for a contentious debate to fill the Supreme Court opening following Ginsburg death Friday evening. Link to our special report on that topic issued Saturday.
— House wants to clear stopgap spending measure this week; Senate next. Replenishing funding for USDA's Commodity Credit Corporation (CCC) is one of the lingering issues. Link to The Week Ahead for updates on this and the latest on the hurdles confronting another Covid-19/stimulus measure.
— USDA's CFAP 2 should total around $13.2 billion, according to the department's cost/benefit analysis (link for details). USDA should today or soon release a payment calculator that will help participants regarding the new program. Enrollment for CFAP begins today and runs through Dec. 11.
— Update on China:
- Taiwanese jets were scrambled for the second day in a row as Chinese fighters again crossed the mid-point of the Taiwan Strait, which separates the two countries. In recent months China has rattled more sabres than usual at Taiwan, which it considers part of its territory and whose relations with America have been growing warmer.
- Oracle deal for TikTok scores Trump's 'blessing'. Oracle reached a deal with China's ByteDance to host video-sharing app TikTok and take a minority stake in the company along with Walmart. "I have given the deal my blessing,” President Trump declared, adding that new unit TikTok Global would create more than 25,000 new jobs in the U.S. and pay more than $5 billion in new tax dollars to the Treasury. Meanwhile, Tencent's WeChat is set to remain operating in the U.S. after a federal judge issued an injunction against Trump's executive order that would have banned the Chinese social media app.
- How much corn has China already purchased from all origins for 2020-21? A poll of export contacts signal 22 million tons, of which around 12 million tons is likely from the United States. If so, USDA's current estimate of 7 million tons is very low.
- China making plans to stockpile energy and ag products. China is instructing authorities in its eastern Zheijiang province to start making plans to build stockpiling bases for energy and ag productions. The move is said to be part of the country’s efforts to build regional free-trade zones. The above- and underground facilities are expected to cover around 46 square miles and would be an extension of a plan to build Zheijiang’s Zhoushan port into a marine fuel hub. The oil storage facilities could become part of China’s national reserves.
- U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.
— Food and beverage industry update:
- Meat prices are falling at grocery stores as last spring’s shortages fade and livestock clog farms. Prices for ground beef and pork loins have returned to pre-pandemic levels, after surging as Covid-19 sickened meat-plant workers and forced shutdowns. Last spring’s plant closures left cattle and hogs lingering — and getting fatter — on U.S. ranches and farms. Meanwhile, fallout from the coronavirus has kept steakhouses idle and reduced meat exports. The result is relief for cash-strapped consumers, and more financial pain in farm country, where producers have struggled for years with low prices for livestock and poultry, according to a Wall Street Journal report (link).
— Coronavirus update:
- Summary: Global cases of Covid-19 are now at 31,079,041 with 960,992 deaths, according to data compiled by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU). The US case count is at 6,811,694 with 199,512 deaths.
Link to Covid Case Tracker
Link to Our World in Data
POLITICS & ELECTIONS
— 2020 Presidential Election Interactive Map
— The Green Papers
— Real Clear Politics
— Presidential debates: Scheduled to occur Sept. 29, Oct. 15 and Oct. 22.
— VP debate: Scheduled for Oct. 7.
— Days until election
- Biden leads Trump by 8 points in new Wall Street Journal/NBC News poll. The poll shows former Vice President Joe Biden is maintaining his lead over President Trump. Some 51% of registered voters nationally say they would vote for Biden if the election were held today, while 43% back Trump. That 8-point lead remains largely unchanged from a month ago. Link for details.
- President Trump has now edged to a one-point lead over Democratic nominee Joe Biden in the latest Rasmussen Reports’ weekly White House Watch survey. While statistically insignificant, it’s the first time Trump has been ahead. Link for details.
- A judge in Michigan ruled that ballots postmarked by Nov. 2 must be counted if they arrive no more than 14 days after the election on Nov. 3. The ruling was made to protect voting rights: a surge in postal voting is expected because of the pandemic. Trump won Michigan by fewer than 11,000 votes in 2016. Polls suggest Joe Biden is ahead.
- Is Pennsylvania ground zero for presidential outcome? An analysis from FiveThirtyEight's Nathaniel Rakich details how the entire election could hinge on Pennsylvania: "Pennsylvania is so important that our model gives Trump an 84% chance of winning the presidency if he carries the state — and it gives Biden a 96% chance of winning if Pennsylvania goes blue." Trump will make his third visit to the state this month on Tuesday, for a rally in Moon Township.
OTHER ITEMS OF NOTE
- Envelope addressed to Trump tested positive for ricin, officials say. The FBI and Secret Service are investigating an envelope mailed to President Trump that tested positive for the poison ricin, officials said Saturday. The piece of mail was apparently shipped from Canada, and a field test showed it contained ricin, according to an official. Ricin can be made from castor beans. The FBI’s Washington Field Office said in a statement that federal agents “are investigating a suspicious letter received at a U.S. government mail facility. At this time, there is no known threat to public safety.”