Perspective: Morning Commentary for November 20

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

November 20 – Stock futures pushed quietly higher overnight as traders continue to digest Donald Trump’s cabinet picks, while also positioning for Nvidia’s earnings report due after the bell this evening. The VIX is trading below 17 this morning, while the dollar index remains strong near 106.7. Yields on 10-year Treasuries are trading near 4.42%, while yields on 2-year Treasuries are trading near 4.30%. Crude oil prices are nearly 1% higher in early trade, while the grain and oilseed markets were all in the red overnight.

President-Elect Donald Trump nominated Howard Lutnick to head the Commerce Department on Tuesday. Lutnick is a Wall Street CEO who also co-chaired his transition team. The Commerce Department has a wide array of responsibilities, overseeing everything from the U.S. Census Bureau to investment promotion, to weather forecasting. But most importantly here, the Commerce Department has authority over export controls, while also managing the U.S. tariff program on trade. Trump 1.0 used the Commerce Department to implement tariffs on China, while President Biden continued those programs to a great extent – even adding to them. In fact, the Biden Administration used the Commerce Department extensively to issue sweeping export controls on advanced computer chips and chipmaking equipment that might be going to China. Lutnick doesn’t speak much about China, but he is seen as a major proponent of tariffs, especially those aimed at China. The Trump transition team also noted that he would be given oversight over the U.S. Trade Representative when appointed.

Chinese President Xi Jinping is in Brazil for the G-20 meetings this week, with President Biden currently in attendance as well. Xi is expected to sign a significant trade agreement with Brazil while there, which may be meant to send a message to Trump as much as it is anything else. Both countries are founding partners in the BRICS coalition. Brazil is a major supplier of agricultural commodities needed by China, and China is a major supplier of consumer goods desired by Brazil as its economy grows, including electric vehicles. In fact, EVs produced by China’s BYD brand currently dominate market share within Brazil. EV production and sales represent a sector that China has chosen to build its economy around going forward. China desires Brazil’s agricultural commodities that allow it to continue deleveraging from dependency on the United States. The details of the agreement have not yet been released, but here's what we can expect. Previous agreements China signed with the United States typically were more ceremonial than they were meaningful. They rarely committed China to buy more than they were planning on purchasing anyway, and they typically lacked detail that would hold China accountable. In reality, China has been moving toward greater dependency on Brazilian commodities for years. Brazil’s cheap currency makes Brazilian commodities cheaper to buy when they are available, and its annual expansion of production makes them more readily available, except for years when adverse weather curtails production. The bottom line is that the anticipated trade agreement likely to be signed as early as today has significance in what it represents – the shifting of trade allegiances away from the United States – but it really just reflects what was already occurring.

It's more of a tossup now whether the Federal Reserve will cut its benchmark interest rate again at its December meeting on the 18^th. The market is currently trading expectations that we will just see two, perhaps three, rate cuts between now and June. That represents a dramatic shift in market expectations from two months ago when the central bank kicked off its rate cutting phase with a 50-basis point reduction. Central bankers allowed the market to think that there would be at least that much more in cuts before the end of the year, with perhaps four or five more cuts by June. Jerome Powell did all but declare victory over its fight with inflation at the Jackson Hole Symposium in late August, stating that its focus now was no the deteriorating job market. Suddenly, Powell is speaking now of a solid jobs market and lingering inflation concerns. No doubt policymakers are considering the implications of anticipated tax cuts, deregulation, and tariffs under Trump 2.0. Look for the Fed to roll out more analysis on what to expect going forward at the December meeting, although it will remain somewhat coy on the details until it sees how things play out in the months ahead. Don’t rule out the possibility of a rate hike at some point next year.

Donald Trump was elected president on November 5. Each day now that passes without China pushing the Taiwan issue gives greater confidence that Xi Jinping will likely wait until after Trump 2.0 to act, although the risk will remain with us going forward as a potential black swan event. In the meantime, we will continue to see Brazil grab market share in global trade for corn and soybeans, while domestic demand will hinge on policy direction impacting using these commodities and their products as a feedstock for liquid biofuel production. Managed money is currently leaning its support toward corn, while shorting soybeans, with little in the way of a meaningful weather threat currently at play in South America.

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.

Market Intelligence

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.

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.
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 November 20

Discover more insights

Top Third Closing Audio Comments

Top Third Opening Audio Comments

Top Third Closing Audio Comments