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Perspective: Morning Commentary for June 24

By: Arlan Suderman, Chief Commodities Economist

Perspective: Morning Commentary
 
Matt Zeller
Senior Market Intelligence Analyst
Matt.Zeller@stonex.com

June 24 – The Federal Reserve still believes it can walk the fine line of raising interest rates to combat inflation, without sending the U.S. economy into a recession – a “soft landing”, per se. The labor market remains robust, with strong payroll employment growth continuing, though the housing market is still a concern, and supply-chain issues need to keep moderating. The Dow Jones Industrials are trending steady-to-higher into the end of the week with equities traders still fearing that rising interest rate environment, with another 75-basis-point rate hike still widely expected by the trade at the next Fed meeting in late July. Fed Governor Michelle Bowman yesterday said she favors that move next month and a series of 50-point increases in subsequent meetings.

 

The University of Michigan will publish its final June reading on economic sentiment at 9 AM CDT, though new home sales statistics also come out at that time, another indicator for a housing marketing that may be teetering on the brink of a major slowdown. May sales are seen steady month-over-month at a 590k annualized rate, compared to 591k in April, which was the largest drop in nine years and the weakest since the start of the pandemic. Also potentially on tap today (?) is a delayed weekly energy report from the DOE, delayed due to “systems issues” yesterday, though no real update has yet been given by the department of energy as to when it will come out.

 

WTI crude oil is on the mend this morning after its collapse continued into mid-week this week, but crude is working on two straight inside sessions to close out the week at this point. It’s working on gains exceeding $2 per barrel as of the time of this writing. Libya’s oil minister said that production data was being withheld, raising doubts on how large recent output declines have been as a result of eastern oil blockades. OPEC will meet on June 30 and are expected to stay with their existing plan of accelerating oil production hikes in July and August. U.S. President Biden’s gas tax holiday proposal to Congress this week is unlikely to pass, finding opposition from both sides (as well as basic economic theory). Another government idea was banning fuel exports, which immediately met pushback from top energy executives. Pump prices are starting to slow organically as high prices cure high prices.

 

The spot July CBOT corn contract put in another interesting technical low overnight as the grain markets reversed course in the early morning hours, despite wheat driving the strongest rebound with around a 30-cents bounce from its overnight bottom. The grains have no real fundamental support heading into the weekend, other than a tight overall S&D situation and the upcoming June stocks and acreage reports. Upcoming U.S. corn belt weather should be generally favorable for crop development, and world powers continue to deliver a lot of rhetoric on the Ukraine grain situation – with no real action yet to be seen…

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