Perspective: Morning Commentary for September 16

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

September 16 – A cautious tone remains in place across Wall Street to start Fed week, as traders position for Wednesday afternoon’s monetary policy statement from the Federal Open Market Committee. Fed fund futures trading priced in just 14% odds of a 50-basis point rate cut on Thursday of last week, but that soared to 47% at one point on Friday morning, and it is traded near 65% odds this morning, with just 35% odds of a 25-basis point cut. Chatter emerged Friday that the Fed may have leaked out intentions to cut its benchmark rate by 50 basis points to avoid surprises with this week’s announcement. That chatter still cannot be confirmed, but we at StoneX first told you earlier last week that the Fed had shown some interest in frontloading the rate cuts. I disagree with such a move, but the decision is in their hands – not mine.

A 50-basis point rate cut risks re-emerging inflation pressures at a time when fiscal stimulus remains high, as evidenced by the strong monetary base still in the economy. It also risked sending a message to Wall Street that “the economy is in worse shape than believed.” A leak from the Fed, if that’s what it was, could be an effort to avoid the latter by preparing the market for such a cut as merely “catching up” with needed policy. We need to prepare for the possibility that the Fed may be more aggressive in its rate cuts, as the markets will start expecting another 50-basis point rate cut at the next meeting if they get one this week. The market is already pricing in the possibility that we could see 225 basis points of cuts by the June meeting, taking us down to 3%. First, a rapid closing of the gap between U.S. and Japanese yields – they’re prepared to raise rates again soon – could trigger more yen carry trade unwinds. There’s currently a debate on the quantity of those still in play. Second, it could trigger a boom in consumer demand for durable goods and housing, with housing prices already at record high levels.

Stock futures are mixed as we start the new week, with the VIX trading near 17, and the dollar index trading near 100.6. That puts the dollar index just above one-year lows, with a triple bottom on the charts. Yields on 10-year Treasuries are trading near 3.66% this morning, while yields on 2-year Treasuries are trading near 3.58% - quite a change from the inversion of the past couple of years. Crude oil prices are 2% higher, with roughly a fifth of Gulf crude oil production still offline following Hurricane Francine, while the grain and oilseed markets were mostly weaker in overnight trade. The crude oil market is watching this week’s Fed meeting very closely. A larger rate cut that would provide greater stimulation of the economy would be expected to boost demand for energy.

Gold prices continue to post fresh record highs on lower interest rate expectations. Historically, gold has been a popular asset during times of turmoil in the world, and we certainly have that. Rising geopolitical tensions in several parts of the world, combined with U.S. election uncertainty, certainly add to that turmoil. A second assassination attempt on former President Donald Trump over the weekend adds to that uncertainty. Historically, gold has also been a popular asset in times of low interest rates, when people start talking about inflation risks. We’ve been in a period of primarily commodity deflation over the past couple of years as the Federal Reserve pushed interest rates higher to push inflation down. The question is, will a reversal in Fed policy – particularly if it overreacts with its cuts amid ongoing fiscal stimulus – result in a return of commodity inflation as demand surges once again?

The grain and oilseed markets pulled back overnight, following recent solid gains. The market feels greater confidence now that it has priced in the size of the big Midwest corn and soybean crops, after USDA’s yield estimates were little changed from August, and similar to private estimates. We’ll see an increasing flow of harvest results in the days and weeks ahead to provide guidance, while traders will also be increasingly focused on export sales and shipments, as well as South American weather. It’s still quite dry in Center-West Brazil, although rains are increasing for southern Brazil. In fact, parts of southern Brazil are seeing flooding problems. But the primary focus remains on when the monsoon rains will return to Center-West Brazil to facilitate planting of the 2024-25 soybean crop. Timely planting is needed so that the 2025 winter (safrinha) corn crop can be planted in a timely manner. The European weekly forecast models consistently called for several weeks for normal to above-normal rains to return to Center-West Brazil by the first week of October. That would be later than preferred by farmers there, but still in time to allow for good crops. Those models turned drier over the weekend, but not dry, supporting futures this morning. We’ll need to monitor the trend, but they’re now calling for normal rains in early October, rather than normal to above-normal rainfall. They suggest that the region could see 2 – 3” of rainfall in the first three weeks of October. That’s enough to support planting and emergence of the soybean crop if the current forecast verifies. Our team in Brazil is still focused on expectations of a normal soybean crop in Brazil, with production north of 165 million metric tons, up from 149 mmt the previous year.

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.

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided.

References to certain OTC products or swaps are made on behalf of StoneX Markets, LLC (SXM), a member of the National Futures Association (NFA) and provisionally registered with the U.S. Commodity Futures Trading Commission (CFTC) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ and who have been accepted as customers of SXM.

StoneX Financial Inc. (SFI) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI is registered with the U.S. Securities and Exchange Commission (SEC) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Advisor. References to certain securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to certain exchange-traded futures and options are made on behalf of the FCM Division of SFI. Wealth Management is offered through SA Stone Wealth Management Inc., member FINRA/SIPC, and SA Stone Investment Advisors Inc., an SEC-registered investment advisor, both wholly owned subsidiaries of SGI.

StoneX Financial Ltd (SFL) is registered in England and Wales, company no. 5616586. SFL is authorised and regulated by the Financial Conduct Authority (FCA) (registration number FRN:446717) to provide services to professional and eligible customers including: arrangement, execution and, where required, clearing derivative transactions in exchange traded futures and options. SFL is also authorised to engage in the arrangement and execution of transactions in certain OTC products, certain securities trading, precious metals trading and payment services to eligible customers. SFL is authorised and regulated by the FCA under the Payment Services Regulations 2017 for the provision of payment services. SFL is a category 1 ring-dealing member of the London Metal Exchange. In addition SFL also engages in other physically delivered commodities business and other general business activities which are unregulated and not required to be authorised by the FCA.

StoneX APAC Pte. Ltd. (“SAP”) (Co. Reg. No 200616676W) is regulated as a Dealer (PS20190001002) under the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019 for purposes of anti-money laundering and countering the financing of terrorism. SAP is an “Approved International Trading Company” authorized to act as a “Spot Commodity Broker” under the Commodity Trading Act.

StoneX Financial Pte Ltd (Co. Reg. No 201130598R) (“SFP”) is regulated by the Monetary Authority of Singapore and is a Capital Markets Service Licensee (for dealing in capital market products), an Exempt Financial Adviser (for advising on investment products and issuing or promulgating analyses/ reports on investment products) and a Major Payment Institution (for cross-border money transfer service).

SFP may distribute analysis/report produced by its respective foreign affiliates within the StoneX Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations Recipients should contact SFP at (65) 6309 1000 for any matters arising from, or in connection with, this webinar.

StoneX Financial (HK) Limited (CE)No.: BCQ152) (“SHK”) is regulated by the Hong Kong Securities and Futures Commission for Dealing in Securities and Dealing in Futures Contracts.

StoneX Financial Pty Ltd (“SFA”)(ACN: 141 774 727) holds an Australian Financial Service License and is regulated by the Australian Securities and Investments Commission (AFSL: 345646).

StoneX Securities Co., Ltd. (“SSJ”)(Co. Reg. No 010401047199) is regulated by the Japanese Financial Services Agency as a Type-I Financial Instruments Business Operator (Kanto Local Finance Bureau (FIBO)No.291’), is a member of the Financial Futures Association of Japan for dealing and broking FX and FX Option transactions, and is a member of the Japan Securities Dealers Association for dealing and broking stock indices and option transactions.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. Past performance of any futures or option is not indicative of future success. Indicators are not a trading system and are not published as a specific trade recommendation. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

The report/analysis herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Discover more insights

Our subscribers have access to comprehensive market analysis from StoneX spanning commodities, equities, currencies and more.

Explore subscriptions

StoneX: We open markets

Our market expertise, advanced platforms, global reach, culture of full transparency and commitment to our clients’ success all set us apart in the financial marketplace.

Reach

With access to 40+ derivatives exchanges, 180+ foreign exchange markets, nearly every global securities marketplace and numerous bi-lateral liquidity venues, StoneX’s digital network and deep relationships can take clients anywhere they want to go.
Transparency

As a publicly traded company meeting the highest standards of regulatory compliance in the markets we serve; our financials and record of accomplishment are matters of public record. StoneX’s commitment to “doing the right thing over the easy thing” sets us apart in the industry and helps us build respect, client trust and new partnerships.
Expertise

From our proprietary Market Intelligence platform, to “boots on the ground” expertise from award-winning traders and professionals, we connect our clients directly to actionable insights they can use to make more informed decisions and achieve their goals in the global markets.

Tell us about yourself. Are you a:

First name

Last name

Company

Country

Province/Region

By submitting this form, you are sending StoneX Group Inc. and its subsidiaries your personal information to be used for marketing purposes. View our Privacy notice to learn more.

First name

Last name

Company

Account number

Account holder name (if different from above)

By submitting this form, you are sending StoneX Group Inc. and its subsidiaries your personal information to be used for marketing purposes. View our Privacy notice to learn more.

Perspective: Morning Commentary for September 16

Discover more insights

N25 Bean Oil: Short Term bullish momentum confirmed

Perspective: Morning Commentary for May 16

Corn: inflection point