Perspective: Morning Commentary for January 3

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

January 3 – Stock futures bounced following yesterday’s selloff, as the dollar pulled back from yesterday’s 25-month high, while Treasury yields did the same. Yet, traders continue to monitor declining markets in China, where government officials are fighting an uphill battle to win the confidence of the consumer. The VIX is trading near 17 this morning, while the dollar index pulls back to trade near 109.0. Yields on 10-year Treasuries are trading near 4.56%, while yields on 2-year Treasuries are trading near 4.24%. Crude oil prices are modestly higher as they consolidate just below yesterday’s 11-week highs, while the grain and oilseed sector is mostly weaker today.

Active selling was again the feature for China’s stock market today, with the Shanghai composite index down another 1.57%, and the Shenzhen composite index down by 1.89%, following big losses on Thursday. Consumer-related stocks led the selloff today, with the composite index tracking Chinese retailers published by WIND falling by more than 6.44% today. The past two days of selling come after President Xi Jinping addressed the nation via television earlier in the week, stating that all is well with the Chinese economy, and promising to do whatever was necessary to make sure that remains the case. Yet, investors are not happy with the year-end performance of consumer related indicators. The market is pushing Xi toward even greater stimulus measures, which are pushing the yuan to its preset limits of weakness versus the dollar, raising questions about whether authorities will be forced to allow the yuan to weaken further.

It’s not a good week for President Xi Jinping. The markets responded negatively to his national address, resulting in even more consumer anxiety. Year-end economic data suggests that the massive stimulus done thus far – at the expense of expanding government debt – has only scratched the surface at turning around the economy. The yuan is weakening at a time when he wants it to be seen as a strong alternative to the dollar. Government debt is growing, and he’s only seeing limited results from the investment. And in a few weeks, President-Elect Donald Trump is expected to put more tariffs on Chinese consumer goods being shipped to the United States. He knows that negotiations will need to occur. He’d like to be negotiating from a position of strength, but right now the opposite is true. And so, he finds himself needing to accumulate some bargaining chips. Today China announced fresh export bans on 28 American companies, including Raytheon, Boeing, and Lockheed Martin, while it also tightened export controls on battery technology. That though was followed by President Joe Biden proposing a ban targeting Chinese produced drones, which account for a large portion of the drones sold in the United States.

China’s yuan hit a fresh 14-month low versus the dollar today amid worries about its economic problems and expectations for more rate cuts to stimulate the economy. China is expected to allow local governments to increase issuance of special bonds to 4.7 trillion yuan this year, up from 3.9 trillion in 2024, which could push the overall budget deficit to 13 trillion yuan, or 9 – 10% of gross domestic product. Xi also gave government workers who are loyal to him a surprise pay increase this week, seeking to lock down that loyalty while also stimulating consumer spending. Yet that also increases the money supply, which is also bearish the yuan. China’s central bank indicated that it is likely to cut interest rates from the current level of 1.5% “at an appropriate time” later this year, according to the Financial Times. China’s central bank controls a band within which the yuan can trade. The band currently allows the yuan to trade as low as 7.3316 to the dollar. It is currently trading at 7.3190 to the dollar, versus 7.2994 yesterday. A weaker yuan makes imports of U.S. commodities more expensive, but it also helps offset the costs of potential tariffs that might be imposed by Trump on goods coming from China to the United States.

Today is also a big day for the incoming Trump Administration. The U.S. House of Representatives will vote on whether to keep Mike Johnson as Speaker of the House. He cannot lose another vote, or it could turn into another weeks-long battle to secure a new leader. That could delay certification of the 2024 election, while also delay work on the U.S. debt ceiling issue, as well as delay the start of work on the aggressive Trump agenda. As such, Trump is campaigning to get all Republican votes behind Johnson, but it is yet unclear whether he has the votes.

Grain and oilseed prices pulled back overnight in active farmer selling – on both sides of the equator. The strong dollar adds additional headwinds for these commodities, although crude oil continues to push higher. A surge of Arctic air into the heart of America over the coming days will increase heating demand, while ice and snow snarl transportation. Livestock performance will decline, while near-term movement of grain will likely decline as well. Argentina and southern Brazil continue to dry out, although good rains prior to this dry stretch are carrying crops for the time being. Nonetheless, traders are taking notice of the expanding dryness.

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.

© 2025 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 January 3

Discover more insights

Top Third Opening Audio Comments

Perspective: Morning Commentary for January 6

Brazil Weather Forecast