Perspective: Mid-Day Commentary for November 26

By: Arlan Suderman, Chief Commodities Economist

Tue, 26 Nov 2024, 17:35

Perspective: Mid-Day Commentary

Arlan Suderman

Chief Commodities Economist

November 26 - This morning's data dump saw disappointing new home sales at a time when actual prices continued to rise faster than expected as consumer confidence continues to rise, while the manufacturing sector continues to struggle. Stocks are mixed at midday, while the VIX trades near 14, reflecting calm on Wall Street. The dollar index is trading back above 107.0 at midday as the euro slides. Yields on 10-year Treasuries are trading near 4.31%, while yields on 2-year Treasuries are trading near 4.28%. Crude oil prices are sliding again on soft demand, while the grain and oilseed markets are mixed to weaker. Feeder cattle futures surged Monday on reports that USDA could suspend the imports of feeders from Mexico after an animal there was found to have the New World Screwworm, but added strength today on Trump's promised 25% tariff on Mexico. Roughly 30,000 head of feeder cattle per week flow north into the United States from Mexico.

President-Elect Donald Trump used his Truth Social media late Monday to announce that he would use his executive order powers on day one of his second term in office to impose 25% tariffs on Canada and Mexico and 10% tariffs on all goods coming from China until the flow of illegal immigrants and drugs across the U.S. border stopped. The post had an immediate impact, with Bloomberg reporting that Canadian Prime Minister Justin Trudeau engaged Trump in a phone conversation shortly after the posts to discuss border security and trade. Twenty-five percent tariffs are large enough to get the attention of leaders, and this one had that effect. As such, we'll likely see Canada and the United States work out a workable solution relatively quickly - perhaps in time to spare the effects of the tariffs. Trump was also successful in garnering a workable solution with the former president of Mexico in his first term in office, although it is still unclear how the recently elected president of Mexico will respond. Initially, she's kicking back. Mexico has it within its power to respond as they did in Trump 1.0, although that may also hinge greatly on the ability of the newly elected Mexican president to get the cooperation of the drug cartels.

China is a different story. The U.S. is China's largest trading partner at 16.2% market share last year, with trade totaling $583 billion. The U.S. economy is resilient, while China's economy is struggling. China is in a much weaker negotiating position than it was during Trump 1.0, but it is also a very proud nation that doesn't want to be seen as yielding to the United States. The surge of fentanyl into the United States was one of the bigger emotional issues to emerge in the presidential campaign, with nearly 75,000 deaths in the U.S. from fentanyl overdoses last year alone. China, and to some extent India, export most of the precursors to fentanyl to Mexico, where it is produced and smuggled into the United States by the Mexican cartels. There continues to be cautious optimism within China that a trade agreement will be reached with the United States that could include increased purchases of U.S. agricultural commodities in return for easing tariff pressure on consumer goods flowing into the United States. As such, Brazil could be a loser in this negotiation if it loses the recent gains in market share, as shown below in any U.S. trade agreement with China. That's all speculation of course, but one that the world will be watching.

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Perspective: Mid-Day Commentary for August 7

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Perspective: Morning Commentary for August 7

August 7 – The U.S. economy unexpectedly lost 23k jobs in July, dramatically below market expectations of an 80k increase and marking the worst Non-Farm Payrolls print since February. Furthermore, May and June were both revised sharply downward, with combined revisions showing 103k fewer jobs than previously reported. Outside of the healthcare sector, which added 22k jobs in July, the losses were very broad-based. Government payrolls saw the largest decline, shedding 53k jobs in July, the largest seen since October 2025, while June was revised down to show a loss of 10k jobs as well. The private sector at least saw growth, adding 30k jobs in July, now matching the month prior after it was revised down from the 49k initially reported, and substantially missing forecasts of 78k jobs being added. This is a sharp reversal in course from the largely better than expected U.S. labor data seen earlier this week.

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