Perspective: Morning Commentary for November 4

By: Arlan Suderman, Chief Commodities Economist

Fri, 04 Nov 2022, 13:29

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

November 4 – China is the talk of Wall Street to close out the week, as chatter increases that it will soon open up its economy once again despite rapidly rising Covid-19 numbers. That spurred buying in both the equities and in the commodities early this morning, with the VIX slipping below 25 for the first time in more than seven weeks. The monthly jobs report created a few minutes of wild swings by the Algos, but then the markets ended up back where they were prior to the data release, adding to overnight gains as they trade China rumors once again. The dollar index pulled back notably this morning to trade near 111.7. Yet, yields on 10-year Treasuries are trading near 4.13% this morning, while yields on 2-year Treasuries are trading near 4.71%, after setting new 15-year highs. Crude oil prices are up by more than 4% on the China rumors, while the grain and oilseed markets are also pushing higher.

The economy created 261K non-farm payroll jobs in October, up from analyst expectations of 210K. Furthermore, the September number was revised to 315K jobs created, up from the 263K originally reported. This initially sent stock futures tumbling on expectations that the strong jobs market would spur a more hawkish response from the Federal Reserve, but then values quickly recovered on ideas that we already knew that following Wednesday’s comments from Fed Chair Jerome Powell. Powell didn’t reveal any jobs numbers, but he stated that the data still supported sustaining their monetary tightening policy, so this really doesn’t change anything. The unemployment rate ticked higher to 3.7%, up from 3.5% the previous month and above analyst expectations of 3.6%. However, the labor participation rate slipped back to 62.2%, down from 62.3% previously. Average hourly earnings rose 0.4% month-on-month in October, up from analyst expectations they would remain unchanged at up 0.3%. Average hourly earnings were up 4.7% year-on-year in October, matching analyst expectations, but down from 5.0% the previous month. The average hourly workweek was unchanged at 34.5 hours.

China’s Covid numbers continue to soar, with daily infections rising 20% from the previous day to 3,871 on Thursday. That’s the highest daily total since Shanghai ended its citywide lockdown in late May. Yet, there’s growing speculation that China has no choice but to make changes to its dynamic-zero Covid policy to save its economy. Chinese health officials are expected to hold a press conference tomorrow on Covid-19, but no other details were given on the content of the discussion at the event. A former Chinese disease control official reportedly told a conference hosted by Citi today that China will make substantial changes to its dynamic-zero policy in the coming months. There’s also been an unofficial media report that regulators are working on plans to fully restore international flights, which are currently less than 5% of pre-Covid levels. Reopening China’s economy could create a surge in demand for goods and services, increasing demand for commodities and giving the global economy a shot in the arm, just as reopening other economies has done to this point.

Commercial soybean stocks continue to decline in China, falling to 3.64 million metric tons over the past week, down 38% from the five-year average for late October. That pulled weekly crush down to 1.65 mmt over the past week, with soymeal supplies falling to a fresh seven-year low of 268K metric tons. However, soybean arrivals are expected to pick up notably as we move through the month, with November and December arrivals expected to hit 8 mmt and 9.5 mmt respectively. China will also slow the release of soybeans from its reserve stocks as shipments pick up momentum. It’s next auction of 0.5 mmt is scheduled for next Friday – two weeks after its last sale. These auctions had previously been held weekly. That could also mean that reserve supplies are getting tight. China is expected to refill those reserves at some point. That would likely happen with cheaper Brazilian supplies over the coming year if Brazil were able to produce a normal yield this year on expanded acreage. StoneX Brazil currently has this year’s crop pegged at 154.35 mmt, assuming that the rains continue to fall over the next 60 days. That would be an increase of 1 billion bushels, or 21%, from the previous year’s crop. It should also be noted that Chinese media reports that traders are currently taking steps to bring the first Brazilian soymeal shipment to China in a test of its feasibility. China has no interest in sacrificing its crush industry – the largest in the world – but it is examining potential alternative ways to acquire protein if relations with the United States continue to deteriorate.

Grain and oilseed prices are riding the wave of optimism this morning tied to rumors that China is about to reopen its economy, although traders also continue to keep their eyes on headlines regarding the possible extension, or not, of the Ukraine trade agreement. USDA’s crop report on Wednesday should add also more fundamental fodder.

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Perspective: Morning Commentary for August 7

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Mike CastleThu, 06 Aug 2026, 13:24

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Energy
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August 5 – The Dow Jones is ripping higher for yet another session, up safely over 500 points at the time of this writing to carve out another record high; the S&P and NASDAQ are a bit less enthusiastic but the former is still making its own record high, while the latter is less than 500 points off its own top thanks to a strong ongoing week of trade. The dollar is churning lower this morning in an effort to re-test Monday’s 1 ½-month low, while the ten-year note has flipped higher in the mid-morning hours. The CME FedWatch tool interesting has market odds of a quarter-point rate hike next month coming closer to a 50-50 proposition as crude oil prices decline.

Mike CastleWed, 05 Aug 2026, 15:19

Grains & Oilseeds

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