Perspective: Morning Commentary October 6

By: Arlan Suderman, Chief Commodities Economist

Mon, 06 Oct 2025, 13:26

October 6 – It’s day #6 of the partial government shutdown, and no resolution is in sight. Yet stocks continue to have an upward bias to them, suggesting that we could see more records set on Wall Street in anticipation of rate cuts from the Federal Reserve. The shutdown prevented Wall Street from seeing the monthly jobs report on Friday, although this week’s schedule of economic data releases was relatively quiet. The VIX is trading near 17 this morning, reflecting slightly elevated nerves on Wall Street once again, while the dollar index pushed higher to trade near 98.2, following Treasury yields higher. Yields on 10-year Treasuries gapped higher to trade near 4.16% this morning, while yields on 2-year Treasuries traded near 3.59%. Crude oil prices continued to bounce modestly following their recent slide to four-month lows, while the grain and oilseed markets are again modestly supported on ideas that President Trump will negotiate a commodity deal with President Xi of China at the end of this month.

Both Republican and Democrat plans for funding the government failed in the Senate on Friday, according to the news reports. But in reality, neither received an up or down vote. The Republicans have 53-votes in the Senate, giving them a 3-vote majority. But Senate rules require 60 votes, out of 100, to bring a measure to the floor for discussion and a final vote, with the exception of one reconciliation funding bill per year. The Republicans used that once-per-year opportunity to move their “One Big Beautiful Bill” to the floor for a vote this past summer. As such, they need at least seven Democrats to join them to allow their funding bill to come to the floor for discussion and a vote. That’s the vote that failed on Friday. The Republicans returned the favor by blocking the Democratic funding proposal from coming to the floor as well. As such, the Senate remains in a stalemate to reopen the government until enough members of one party or the other are willing to cross the line to support a funding measure to come to the floor for a vote, and then we’ll still need at least 51 votes to pass the funding measure at that point. This feels like a stalemate that may last for a while. The record shutdown lasted 35 days from December 2018 to January 2019, costing the U.S. economy $3 billion, or 0.02% of GDP.

The U.S. dollar and Treasury yields rallied overnight after France’s Prime Minister Sebastien Lecornu and his government resigned, leaving the French government in turmoil. Lecornu had just announced his cabinet hours earlier prior to his resignation. He was the fifth prime minister appointed by President Emmanuel Macron in the past two years, and the fifth to end up resigning after failing to develop a legislative coalition that could run the country. Macron now faces a decision of whether to call for another snap election, or to appoint his sixth prime minister of the past two years to try to pull together a coalition. Pressure is mounting from both the political right and left in France for Macron to resign. Meanwhile, France continues to operate without a government, providing another example of growing partisanship among significant governments around the world.

Crude oil prices firmed overnight as OPEC+ raised its output projections for November by less than feared, going up just 137K barrels per day. It’s widely believed that Saudi Arabia preferred a much larger increase – perhaps double, triple, or even four times that size. Yet, the recent price decline in anticipation of the cartel’s decision likely swayed members to be more moderate in their output increase to avoid more significant downward pressures on prices. A key question now is whether Russia will be able to sustain its output amid the ongoing Ukrainian strikes on its infrastructure? The next question is whether the U.S. economy can accelerate, and that likely hinges on whether President Trump chooses to remove policy uncertainty ahead of the 2026 mid-term elections?

Rare earth minerals and magnets are the center piece of U.S. trade negotiations with China, which controls 90% of the world’s supply of these processed products. These products are essential for the production of many electronics that have become a key piece of our economy. But more importantly, the high-grade products are essential components for the production of today’s advanced defense weapons. China agreed in May to allow the export of low- and mid-grade rare earth minerals and magnets that could not be used in the production of defense weapons and that agreement was reportedly just for six months. Meanwhile, the Trump Administration is rapidly trying to boost its own production and processing – here and in Greenland – with a plan to invest in at least five companies that have the ability to do so. The return on that investment will take time, and China is leveraging that time against the United States. Meanwhile, President Trump raised hopes last week that he will negotiate a block buster deal with China at the end of the month to purchase U.S. commodities, while also saying that his administration is working on a $10 - $14 billion assistance package for farmers. The type of deal that he’s hyping would be expected to significantly raise prices enough that a bailout package would no longer be needed for farmers. Could it be that his confidence in reaching such a deal is weaker than he’s letting on?

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