Perspective: Morning Commentary for October 31

By: Arlan Suderman, Chief Commodities Economist

Mon, 31 Oct 2022, 13:32

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

October 31 – Stock futures had a weaker tone to them overnight, as Wall Street braces for this week’s meeting of the Federal Reserve, and as the war intensifies in the Black Sea Region as food inflation risks rise again. Eurozone inflation hits new record highs, raising economic fears once again. The VIX is trading near 27 this morning, after falling below 26 on Friday for the first time in more than five weeks. The dollar index firmed to trade near 111.4 this morning. Yields on 10-year Treasuries are trading near 4.05% ahead of this week’s Fed meeting, while yields on 2-year Treasuries are trading near 4.49%. Crude oil prices are 1% weaker on the re-emerging economic concerns, while the grain and oilseed markets rose sharply overnight, led by wheat, as food shortage fears rise again after Russia pulls out of the Black Sea trade agreement.

The Federal Reserve will begin two days of meetings tomorrow morning, culminating in another expected 75-basis point rate hike. There’s little debate about that currently, with market expectations squarely focused on such a hike. However, the primary focus will be on the wording in the Fed’s statement to be released Wednesday afternoon, as well as Fed Chair Jerome Powell’s press conference comments following the statement’s release. Wall Street traders will be parsing words for any signs of an imminent pivot by the Fed to begin slowing hawkish monetary policy momentum, or even reversing it. Wall Street continues to hope for such a pivot sooner rather than later, and it continues to trade those expectations, only to be disappointed when the Fed stays the course. We could see volatile trade on Wednesday afternoon leading into the end of the week if the Fed either a) disappoints Wall Street once again, or b) confirms an anticipated approaching pivot. My bias continues to be that the Fed will stay the course, as it tends to go too far in each direction before pivoting. And no, I do not believe that it has gone too far yet at this point. As such, I fear that Wall Street will be disappointed once again on Wednesday.

The European Central Bank is expected to push forward with a 75-basis point rate hike in December, after data released today revealed that euro zone inflation surged more than expected in October. The 19 countries sharing the euro saw a combined inflation rate of 10.7% year-on-year in October, up from 9.9% the previous month, which beat the average analyst guess of 10.2%. The ECB has already raised its benchmark rate by 200 basis points over the past three month, while promising more hikes as soon as December. Euro zone inflation excluding food and energy rose 6.4% year-on-year in October, up from 6.0% the previous month, raising fears that high inflation is becoming entrenched in the economy. Europe’s economy has far more challenges tied to the Ukraine war that the ECB must consider, but it also cannot afford to see the euro lose too much value to the dollar as the Federal Reserve continues to push rates higher. The ECB’s benchmark rate is still below 2%, after spending recent years in negative territory, while the Fed is expected to push its benchmark rate to at least 4.25% by December when the ECB acts again. That could keep the dollar strong versus the euro, leading Europe to import even more inflation.

Russia suspended participation in the grain agreement Saturday that allowed ships to depart from three Ukraine ports with grain through “safe corridors.” That agreement was supposed to go until November 21, with Ukraine and the United Nations eager to extend it. The suspension came after Ukraine allegedly at dealt a blow to Russia’s Black Sea Fleet in a late week attack. Ukraine calls the accusations a false narrative used to weaponize food. Ukraine continues to push forward with grain shipments, with 12 ships carrying 354.5K metric tons of agricultural products leaving port today, while four more ships were allowed to enter port for loading. Ukraine says it has the support of the United Nations and Turkey as it continues to move grain even as risks for doing so increase. Meanwhile, Russia suggests that it will contribute a half million metric tons of grain to needy countries with the support of Turkey. It has yet to implement an actual blockade of shipments departing Ukraine, although the risks to shippers would seem to be increasing, which will not be missed by insurers.

Saudi Arabia may be taking one step closer to joining the BRIC nations in an attempt to isolate the United States and other members of the West who oppose China and Russia. Chinese President Xi Jinping is expected to visit Saudi Arabia, according to today’s edition of China Direct, published by our Shanghai office, with both sides pushing for the oil-rich country to join the coalition of nations. This would guarantee China the oil that it needs when/if it makes a move on Taiwan. For today, the trade is focused on Ukraine’s ability to export, or not. The rising risks in that arena should make speculators reluctant to hold short positions leading up to next week’s USDA report.

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Perspective: Morning Commentary for August 7

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Mike CastleThu, 06 Aug 2026, 13:24

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August 5 – The Dow Jones is ripping higher for yet another session, up safely over 500 points at the time of this writing to carve out another record high; the S&P and NASDAQ are a bit less enthusiastic but the former is still making its own record high, while the latter is less than 500 points off its own top thanks to a strong ongoing week of trade. The dollar is churning lower this morning in an effort to re-test Monday’s 1 ½-month low, while the ten-year note has flipped higher in the mid-morning hours. The CME FedWatch tool interesting has market odds of a quarter-point rate hike next month coming closer to a 50-50 proposition as crude oil prices decline.

Mike CastleWed, 05 Aug 2026, 15:19

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