November 12 – Mixed consolidation was the story overnight, as stock futures consolidated just below Monday’s record highs. The focus continues to be on the impacts of the Trump election and anticipation for what that might mean for the U.S. and global economy. However, traders are also anticipating inflation data to be released on Wednesday and Thursday of this week, followed by retail sales data on Friday. The VIX continues to trade near 15 this morning, while the dollar index continued its Trump rally to a fresh four-month high above 105.9, although it has now pulled back to trade near 105.8. Yields on 10-year Treasuries following yesterday’s holiday are pushing higher to trade near 4.39%, while yields on 2-year Treasuries are trading near 4.34%, which is their highest level since July. Crude oil prices bounced 1% this morning, while the grain and oilseed markets were quietly mixed.
President-Elect Donald Trump’s cabinet is the focus of speculation this week, as it will provide some indication on policy direction going forward. One of the first reported decisions was to name Tom Homan as his “Border Czar” within days of winning the presidential election. Homan is the former acting director for U.S. Immigration and Customs Enforcement, and he has previously advocated deportation of illegal immigrants. This suggests that we can expect executive actions on Day One of Trump 2.0 to seal the southern border of the United States, while we’ll likely quickly see efforts to start arresting and deporting those here in the workforce illegally, starting with those with criminal ties. Trump reportedly also picked South Dakota Governor Kristi Noem to serve as the next Homeland Security Secretary. These two picks, if verified, would suggest a high priority on securing the border, while the deportation move will raise some concerns on Wall Street about a tighter labor market going forward.
We also know that Trump picked Susie Wiles to be his Chief of Staff, while it is reported that he asked Mike Waltz, a retired Army National Guard officer and war veteran to be his national security advisor. This again reflects an emphasis on national security. Waltz is seen as a hawk on China policy. It is believed that Trump will name New York Representative Lee Zeldin to be his choice to head the Environmental Protection Agency. Zeldin posted on “X” that, “We will retore US energy dominance, revitalize our auto industry to bring back American jobs, and make the US the global leader of AI. We will do so while protecting access to clean air and water.” Trump has stated that Zeldin “will ensure fair and swift deregulatory decisions that will be enacted in a way to unleash the power of American businesses, while at the same time maintaining the highest environmental standards, including the cleanest air and water on the planet.” The ability of Republicans to take control of the Senate helps pave the way for the approval of Trump’s cabinet picks so that he can quickly move forward with his anticipated policy changes.
Alibaba, one of China’s e-commerce giants, reported strong sales in China’s annual online shopping festival, or Chinese Black Friday. More than 9,600 brands doubled their sales as of Sunday at midnight, prompted by government subsidies and discounts on the platform to spur buying interest. Presales during the shopping festival drove China’s sub-index tracking total business volume of the e-commerce logistics index to a five-year high 133.7 in October, up 2.5 points on the month. The increase came as M2 money supply in China rose 7.5% year-on-year in October, up from 6.8% in September. Meanwhile, M1 money supply – what is more immediately available to the consumer – fell for the sixth consecutive month, dropping by 6.1% year-on-year, although an improvement from the 7.4% decline seen in September. This improvement suggests that stimulus policies have had some impact on boosting positive money flow. The narrowing gap between M1 & M2 suggest a small shift from an emphasis on saving toward one of spending by the consumer. Yet, overall credit use in China saw deeper contraction in October, despite those stimulus packages. Household loans, mostly for home loans, rose 56% year-on-year, while enterprise loans dropped 56% year-on-year, indicating that the business sector continues to struggle with low prices, sluggish demand, and poor profitability.
Chinese buyers acquired just 20 cargoes of soybeans last week, with just half of those sourced from the United States. Commitments for shipment in December and January remain quite low, increasing the odds that we will see a notable decline in year-on-year shipments during the period as China pulls from its vast reserves ahead of the Brazilian harvest. There’s great fear within China that Trump 2.0 will mean another trade war, although soybeans purchased today could still be shipped before such a trade war could be initiated after Trump’s January 20 inauguration. January soybeans turned back after twice being unable to sustain a move above the 100-day moving average as traders took note of favorable growing conditions in Brazil and an anticipated big harvest coming in another 60 days. Wheat prices stabilized overnight after suffering chart damage on Monday’s selloff, which allowed corn prices to firm again as they remain poised for a possible retest of the double-top just below $4.35 on the charts.
