StonexHero

Perspective: Morning Commentary for October 10

StonexHero
Perspective: Morning Commentary
 
Arlan Suderman
Chief Commodities Economist

 

 

October 10 – September inflation data came in a bit hotter than expected this morning, while first-time claims for unemployment benefits jumped more than expected as well. The combination pushed stock futures modestly lower, while elevating the VIX to trade above 21. The dollar index is trading near 102.9 this morning, after posting fresh eight-week highs. Yields on 10-year Treasuries are trading near 4.08%, after hitting fresh 10-week highs this morning, while yields on 2-year Treasuries are trading near 3.97%. Both initially popped higher following the inflation data release, but then came back down on the weekly jobless numbers. Crude oil prices are rebounding this morning on renewed Middle East geopolitical risk concerns, while the grain and oilseed markets are again mixed.

 

The headline consumer price index rose 0.2% month-on-month in September, matching the previous month’s pace, but above analyst expectations that it would decline to 0.1%. The headline CPI rose 2.4% year-on-year in September, down from 2.5% the previous month, but exceeding analyst expectations of 2.3%. But it continues to be the core numbers that exclude the more volatile food and energy sectors that grab the attention of traders and of policymakers. The core CPI rose 0.3% month-on-month in September, matching the previous month’s pace, but exceeding analyst expectations that it would decline to 0.2%. The core CPI rose 3.3% year-on-year in September, up from 3.2% the previous month, and up from analyst expectations of 3.2%.

 

The data was quite divergent over the past month, providing a mixed message. Energy prices dropped 1.9% month-on-month in September, with energy commodities down 4.0%, gasoline down 4.1%, and fuel oil down 6.0% month-on-month. Medical care commodities also declined by 0.7% month-on-month. However, food prices were up 0.4% on the month, while energy services (including both electricity and natural gas) were up 0.7% on the month. Apparel prices were up 1.1% month-on-month, while transportation services rose 1.4%. New and used vehicles were up 0.2% and 0.3% respectively on the month. Again, the concern is the lingering sticky inflation in the service sector – especially for transportation services. Shelter inflation slowed to just 0.2% on the month, which was a positive, but I look for that to rise again down the road as consumers take advantage of lower interest rates to increase demand for houses once again. The bottom line is that it would be a stretch to use today’s data as evidence of renewed reinflation, but it does indicate that it’s premature to say that the battle against inflation is dead, and that we remain vulnerable when/if energy prices surge again.

 

First-time claims for unemployment benefits jumped to 258K in the week ending October 5, up from 225K the previous week, and up from analyst expectations of 226K. The four-week moving average rose to 231K, up from 224.25K the previous week. Pouring through the data we see that weekly claims dropped in many of the states most impacted by Hurricane Helene in the week ending September 28 as people focused on the approaching storm, but then claims jumped in the week following the storm’s impact. I wouldn’t be surprised if we continue to see more increases in the weeks ahead, combined with increased claims in Florida from the impact of Hurricane Milton. Continuing claims for the week ending September 28 rose by 42K to 1.861 million, with the four-week moving average rising by 4,500 to 1.832 million. Look for these numbers to continue to rise following the devastation of Helene and Milton in the weeks ahead.

 

Wheat prices found support again overnight from the lingering dryness in the Black Sea winter wheat belt. Forecast models are encouraging for rains to reach western areas of the belt, with 1.0 – 1.5” expected in central Ukraine in the next few days, with much lighter amounts stretching east into Russia. In fact, much of Russia’s winter wheat belt is expected to receive less than 0.5”, with many areas seeing less than 0.25”. Additional support comes from the fact that Russia has stepped up attacks on Ukraine’s export infrastructure, including a few ships being directly hit over the past week. Ukraine is listed as a high-risk area by marine insurers, resulting in higher costs for insurance coverage. One insurer noted that ships hauling commodities from Ukraine were at a “heightened risk of direct attack by Russian forces.” Ukraine officials deny there there’s been an increase in insurance rates, but one Ukrainian broker told Reuters, “Our clients tell us that some owners are cancelling vessels and give bombing as the reason.” The question then is, at what point would Ukraine consider retaliation directly on Russia’s ability to export grain and oil? Regardless, Russian exporters are expected to meet tomorrow with authorities to consider ways of curtailing exports in the months ahead. This has been widely anticipated by the markets, accounting in part for the rise in wheat futures over the past couple of months. Meanwhile, corn and soybean prices continue to feel the impact of a rapid harvest of this year’s big U.S. crops that are struggling to find sufficient storage space. Further downward pressure comes from the actual arrival of the long-anticipated rains to dry areas of Center-West Brazil.   

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 over-the-counter (“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’ (“ECP”) 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 Adviser. References to 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 exchange-traded futures and options are made on behalf of the FCM Division of SFI . StoneX is a trading name of StoneX Financial Ltd (“SFL”). SFL is registered in England and Wales, Company No. 5616586. SFL is authorized and regulated by the Financial Conduct Authority [FRN 446717] to provide 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 & regulated by the Financial Conduct Authority 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 Financial Conduct Authority. StoneX Group Inc. acts as agent for SFL in New York with respect to its payments services business. StoneX APAC Pte. Ltd. acts as agent for SFL in Singapore with respect to its payments services business. ‘StoneX’ is the trade name used by StoneX Group Inc. and all its associated entities and subsidiaries.

 

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.

 

© 2024 StoneX Group Inc. All Rights Reserved.



Discover more insights

Our subscribers have access to comprehensive market analysis from StoneX spanning commodities, equities, currencies and more.
See why StoneX is a partner of choice
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.

  • Partnership icon
    Globality

    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.

  • Price tag
    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.

  • PC Monitor Blue
    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.

+
!

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.