Typical three way days: Soybeans were on their fifth bullish session in a row. The movement feels a bit out of steam though and it was a two sided sessions skewed on the downside. But F6 closed up +4.25 cents to 1,034.25 cents. Opposite behaviour for Wheat, closing -5.75 cents on Z6, the 400 cents support was tested but market failed to close below: it ended up at 401.50 cents. And with this, Corn could not make its mind up and the battle around 350 cents was tough due to options expiry on Friday. So Corn finished virtually flat, Z6 just ticking down, settling at 350.75 cents. Funds bought 500 Corn, 3,000 Soybeans and sold 3,000 Wheat. MATIF was down -€0.50 in light volume, CME EU went down -€1.00 in the record low volume for the front month: 2 lots. Open interest is still 25,000T so it seems like the delivery will be make or break. It would be a step backward if it was to fail as it potentially brings what Euronext is missing: a simpler delivery process with no ‘obligation’ to take the grain out of the silo (punitive fees if grains was to stay in), a greater number of delivery points,… Story ain’t over just yet though.
Thanksgiving Day today, US fellas will be busy eating Turkey and market will be closed. MATIF is starting the day just ticking up, CME EU is down -€1.25 on Z6 and the market is back in contango as H7 is up +€1.50. Quiet day to expect in terms of volume, but movements can be significant on those days, watch out!
Algeria is tendering for Barley.
US Crude Oil inventories has shown a surprise withdrawal of -1.3M barrels while a build-up of +0.3M barrels was expected. But no major move as traders are still very cautious about what’s going to happen with the OPEC deal. NYMEX Crude is currently trading just below $48 and ICE Brent with more or less a premium of +$1. It’s another picture on ethanol. Despite a cut in production (by -3,000 barrels per day to 1.01M barrels per day), stocks rose by 343,000 barrels to 18.95M barrels. Ethanol futures closed on their high on day anyway! Indeed, US Environment Protection Agency raised by 6% the target for bio fuels incorporation to 12.28b gallons. There’s corn galore so that’s a way to get rid of the stockpile.
On currencies, the UK Autumn Statement was expected with fears. Well, the range of yesterday was screaming “cannot care less”, everything was mainly known and widely expected. A bit doom and gloom but one cans say they want to be over cautious to deliver better… And to send a subliminal scamongering message “Brexit is bad”, as the Government is clearly not the composed with the most Brexit fanatics (Mr Hammond, Chancellor of the Exchequer, campaigned for ‘Remain’ and MP Theresa May was a façade ‘Brexit’, a remain ‘Behind’ the scenes)… Article 50 is still to be triggered in March and time is running! If the parliamentary battle is starting early 2017, this is going to be a very tight schedule. Mr Hammond, Chancellor of the Exchequer, exposed the key fiscal points in the Commons: there will be a raise of insurance premiums on home and cars, the inception of the idea to end eventually the triple lock (public pensions are raising yearly by +2.5%, earning or inflation, whichever is higher which is costing £6b per year to the government). On the spending side, they will set up a public bond paying 2.2% interest (while the UK Gilt for 2, 5, 10 and 30 years are respectively 0.13%, 0.64%, 1.43% and 2.07%), will spend in excess of £6b on infrastructure (road, rail and housing), will keep the freeze on the fuel duty,… Where will they find the money? Especially considering, as expected, the forecast growth has been smashed to +1.4% from +2.2%. By increasing government borrowing to £68.2b this year, £59b next year, £46.5b the year after, and £21.9b, £20.7b and £17.2b the following years. In other words, by the end of the fiscal year 2020-2021, the UK has just increased its borrowing target by £122b, Brexit to be blamed for most of it. At this stage, public debt is set to reach 84.8% of the GDP (71.3% expected previously). Market was unimpressed as it was widely expected already and it’s screaming: under forecast, over deliver. GBPUSD is trading around 1.2450. But interestingly enough GBPEUR rebounded sharply, it’s currently trading above 1.18.
On the other side of the pond, US Durable Goods Orders were excellent to +4.8% month on month (+1.2% expected), excluding transportation (Core) it is still a good +1% (versus +0.2% expected). HPI (House Price Index, with backed by Fannie Mae and Freddie Mac) was up +0.6% (+0.5% expected). Flash Manufacturing PMI was also better than expected to 53.9 (53.6 expected) and UoM Consumer Sentiment was also above expectations to 93.8 (91.6 expected). But Unemployment Claims were slightly above expectations to 251k (10k more than expected). But all the eyes were directed towards the FOMC minutes… They now how to maintain the suspense the FED! The rate hike will come ‘relatively soon’… Yep, your telling this since a while but when are you going to actually act? However, improving labour market and inflation picking up, should really mean there will be a rate hike on the 14th of December, 93.5% of the traders are expecting 0.5% to 0.75%… If they are coming with a status quo they would lose credibility, if they’re coming with +0.25%… ‘The mountain has laboured and brought forth a mouse’! With the confidence growing, there was some pressure on EURUSD and is currently trading around 1.0650.