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Perspective: Morning Commentary for August 24

By: Arlan Suderman, Chief Commodities Economist

Perspective: Morning Commentary
 
Matt Zeller
Senior Market Analyst

August 24 – Dow Jones futures indicate a slight rebound this morning but equities markets are wavering overall after a three-day decline; economic news as of late has favored the concerning side if anything, but the trade is widely expecting Fed Chair Powell to offer up a hawkish message at the Jackson Hole symposium on Friday. The economy is still seen having enough momentum to survive higher interest rates. Employment and GDP numbers are on tap tomorrow will be watched closely ahead of the speech, which will set the tone ahead of the September 20-21 FOMC meeting. The market is currently looking for a 50-basis-point rate hike next month (though a 75-bps raise has not been ruled out), followed by another 50-bps gain in Nov and a smaller 25-bps increase in December.

 

MBA Mortgage Applications fell by just 1.2% on the week ending 8/19, only around half the previous week’s cut with both purchases and refinancings lower on the week. Housing data remains shaky as of late, and pending home sales for July are on the way later this morning (expected down 2.6% from June). Durable goods orders were unchanged in July, down rom a 2.2% rise in June and below expectations for a 0.8% rise; however, orders ex-transportation did rise more than expected a +0.3%, with orders ex-defense up 1.2% last month.

 

WTI crude oil is following through on a bounce off the $90 per barrel mark Monday and a solid rally yesterday, with global benchmark Brent crude topping the $100/bbl mark today after Saudi Arabia suggested a potential OPEC output cut earlier this week. OPEC came back on that by saying cuts “may not be imminent” and would likely coincide with returning Iranian production as well. Regardless, the threat of a global economic slowdown looms with inflation on the rise and central banks taking action. U.S. crude oil inventories are expected to fall by more than a million barrels in this week’s DOE report, after a surprise 7+ mln bbl cut last week that dipped overall inventories under the 425 mln bbl mark – the lowest on this comparable week since 2018.

 

Day two of the 2022 Pro Farmer Crop Tour found some better results than the first day, but not nearly good enough to ease the trade’s fears; Nebraska corn yields were pegged at just 158.5 bushels per acre, well below last year and average (and the lowest since 2013), with pod counts below comparables as well (the lowest since 2012) and a low chance of said pods filling out by harvest. Indiana corn yields were well below last year as well but roughly in line with the three-year average tour figure at 177.85 bpa, with soybean pod counts also in line with average; both estimates were still their lowest for the state since 2019. The eastern leg of the tour should presumably find some better crops today in Illinois and eastern Iowa, though the trade will be watching closely for reports from western scouts as the tour enters western Iowa – the drier half of the key production state. Overlaying the PF route chart (though that’s evening meeting locations only) below left with the current Drought Monitor below right – the western leg is essentially circling the worst of the U.S. drought areas, hence the ugly anecdotal evidence thus far…

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This material should be construed as market commentary and represents the opinions and viewpoints of the author, and does not reflect tailored advice associated with any specific account.


The views are current only through the date stated and are subject to change at any time based upon market or other conditions, and StoneX Group Inc. (“SGI”) disclaims any responsibility to update such views. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. Past performance does not guarantee future results.


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