October 3 – Stock futures again had a negative tone to start trade this morning as this week’s jobs data continues to look good thus far, and amid the continued escalation of tensions in the Middle East. The VIX Is trading near 20 again this morning, while the dollar index continues to rise as a safe-haven asset, trading near 101.9 after posting fresh six-week highs. Yields on 10-year Treasuries are trading near 3.82%, which is just below four-week highs, while yields on 2-year Treasuries are trading near 3.68%. Crude oil prices are 2% higher today as the market continues to build war risk into the market, while the grain and oilseed sector was mostly in the red this morning.
First-time claims for unemployment benefits rose to 225K in the week ending September 28, up from 219K the previous week, but matching analyst expectations. We may see more of a rise in these numbers over the weeks to come from areas impacted by Hurricane Helene. The four-week moving average for claims slipped to 224.25K, down from 225.0K the previous week. Continuing claims for the week ending September 21 fell by 1K to 1.826 million. The four-week moving average dropped by 4,750 to 1.829 million. These are by no means at recessionary levels. Additional data released this morning from the Challenger Job-Cut report indicates that corporate announcements for possible layoffs over the next several months slipped to 72,821 in September, down from 75,891 the previous month.
It's the third day of the longshoreman’s strike at ports along the East and Gulf Coasts. Container ships are already backing up at the ports as trade comes to a halt. There are currently few signs of any progress in negotiations. Union members are asking for a 77% pay raise over the next six years, but that may be more of a negotiating point to leverage to get a halt to automation, which the union believes is replacing jobs at the ports.
Members of the European Union will vote tomorrow on a proposal to impose tariffs on Chinese made electric vehicles. The latest revised tariff rates would impose a 7.8% tariff for a Tesla that is imported, while the rate could go as high as 35.3% for SAIC and other producers who the EU deemed did not cooperate in its anti-subsidy investigation. These tariffs would come on top of the EU’s standard 10% car import duty. Reuters reports that France, Greece, Italy, and Poland will vote for the tariffs, which would bring the vote total above the required amount needed to implement the new plan. China has retaliated by launching anti-dumping investigations into EU exports of pork and brandy, along with an anti-subsidy probe into dairy products coming from the EU. China is also considering raising import duties on large engine gasoline vehicles that would hit Germany the hardest. China is taking these steps because the EU’s consideration of tariffs on Chinese EVs is yet another blow to its economy that has been hit hard by the West’s deleveraging from it over the past few years.
Are Russian grain export quota restrictions coming soon? The Union of Grain Exporters in Russia released a warning this week that the current pace of exports may threaten domestic supplies, leading to direct financial damage to Russian agrarians, as well as Russia’s reputation on the world grain market. It charged that exporters, in their zeal to build a history to get larger export quotas, are distorting objective pricing, while undermining the stability of supplies to consumers throughout the season. As such, they plan to appeal to the Russian Ministry of Agriculture to revise the methodology of quota distribution for the second half of the marketing year. Russia’s winter wheat crop was severely shortened by drought this past year, while excessive rains hurt the spring wheat crop. Yet, exporters have been pushing wheat through ports at a near record pace in an apparent attempt to grab market share for garnering larger quotas if restrictions are put in place. That has kept Black Sea cash wheat prices at very low levels below $220 per tonne for many weeks, although the price has just recently firmed back above that level. Fund managers have been unwinding their previously large short positions on the possibility of export restrictions later in the year, with those concerns heightened since the drought continues to adversely impact establishment of the 2025 winter wheat crop. One rain could dramatically ease those concerns, but thus far that rain is not on the horizon.
Meanwhile the rains continue to move forward in the forecast for Center-West Brazil. Forecast confidence is best for rains to return to much of the region starting in the 6- to 10-day period. Follow-through rains will be needed, but the current forecast, if it verifies, would provide enough moisture to spur rapid planting of Brazil’s soybean crop. Follow-through rains would allow for a normal crop of 165 to 170 million metric tons, up 15 to 20 mmt from the previous year. However, the late planting would result in a later harvest, pushing planting of the winter (safrinha) corn crop later than desired, raising the risks of a short crop if the rainy season ends at a normal or earlier time. But we’ll know more about that six months from now.
