|Offer Price (US Cents/Kg)|
|Tone Market: Rangebound|
|Latex In Bulk||Sellers||495.00|
Marzo 5 - marzo 7 Tire Technology Expo 2019 - Hannover, Alemania
Marzo 18 - marzo 19 World Rubber Summit 2019 - Singapore Expo, Singapur
Julio 24 - julio 26 Latin & Caribbean Tyre Expo 2019 - Centro de Convenciones Amador en Panamá.
Septiembre 10 – septiembre 12 IRC2019 - International Rubber Conference – Londres, Reino Unido
Octubre 7 – octubre 10 International Elastomer Conference 2019 – Cleveland, Ohio
Noviembre 11 – noviembre 15 XV Jornadas Latinoamericanas de Tecnología del Caucho – Querétaro, México
• Mr. Trump on the upcoming G-20 meeting in Osaka: “If he shows up, good. If he doesn’t…” He’s not talking about Elvis Presley.
• Mr. Trump also says he’s “perfectly happy” to impose tariffs on the remaining $300 billion of Chinese imports should the two superpowers fail to agree a deal. The one he’s not fussed about. Billions in profit anyway.
• U.S. Secretary of State Pompeo has said, at a G-20 energy ministers meeting in Japan, that the US will “guarantee safe commercial navigation going forward with its partners.”
• Is the Fed’s Mr. Powell hinting at “potentially aggressive interest-rate cuts”? The market’s betting on three if not four. Hint this coming Wednesday?
• China’s central bank pressed the green button on the second phase of RRR cuts, the next and third scheduled for July 15th
• Vietnam’s VRG dropped its official floor prices by $15 on its dry rubbers today, $10 on Latex.
• Shanghai down $30-day session-to-day session but pulled back $11 at night, Tokyo RSS3 down $27 but spot squeezed, now $334 over November, STR20 up $8. SICOM’s RSS3 up $7 to down $28, TSR20 down $12-18-bit spot grade differential now $489/ton.
• WTI crude last at $52.30/bbl, Brent $61.50/bbl.
• Gold last $1344.60/oz.
• Equities all focused on the Fed, Asia 5:8 down, Europe 5:10 down, Wall Street 3:0 up.
The Market: With eleven days to go to the G-20 meeting in Osaka, the jockeying begins as its hijackers - the USA and China - head for the High Noon Show. Provided both attend as neither seems too bothered now: Nonchalant versus Inscrutable. Over the weekend, US Commerce Secretary Wilbur Ross seemed to downplay prospects of a meaningful trade deal resulting from the potential meeting between the two presidents. Just last Friday, Mr. Trump said that “it doesn’t matter” if the meeting takes place: “If he shows up, good. If he doesn’t -- in the meantime, we’re taking in billions of dollars a month. Eventually, they’re going to make a deal, because they’re going to have to.” That said, it was noticeably reported that Mr. Trump delayed a China-critical human rights record speech by vice president Pence, so as not to upset Beijing ahead of potential talks in Japan. So, maybe he does care after all? Fast forward to today and Wilbur Ross again, who says that his president is “perfectly happy” to impose tariffs on the remaining $300 billion of Chinese imports should the two superpowers fail to agree a deal. But then they need to be in Osaka to talk to each other, no? Facetime? Monty Python might have enjoyed a field day as Mr. Ross added that President Trump is giving “very serious thought” to…what? Why, to imposing tariffs on ALL auto imports, including those from the EU! So, we’re back there again. Everybody knows where they stand for a least 48-hrs. Guess that as the “billions of dollars” are rolling into the Treasury, if the additional China tariffs are imposed, it’ll be open season on the rest of the world too as the US’s economic ammunition is loosed off. Nothing like money for nothing. And just to remind us what High Noon is all about, Mr. Trump has warned that should he not be re-elected, “there will be an ‘epic’ stock market crash.”
There’s economic ammunition and the real thing. Saudi Arabia’s crown prince has blamed his nemesis, Iran, for the Strait of Hormuz tanker attacks last week as, in his mind, “There’s no doubt Iran was responsible for the attacks,” and the U.S. Secretary of State has said, at a G-20 energy ministers meeting in Japan, that the US will “guarantee safe commercial navigation going forward with its partners.”
On dealing with an increasingly delinquent global economy, economists see the Bank of Japan’s next move as one of expanding stimulus, a strengthening yen, thanks to expected Fed interest-rate cuts, seen as the key instigator of same. Meantime bullied or otherwise, the Fed Chairman Jerome Powell’s increasing assurances that the central bank’s “overarching” goal is in sustaining U.S. economic expansion can only mean that “potentially aggressive interest-rate cuts” are in the offing. The Fed’s upcoming meeting in Washington Tuesday and Wednesday may provide a hint. But there’s a problem: the impending G-20 meeting, AND its faint possibility that a trade deal could be agreed, mean it’s probably best not to rock a leaky boat – just in case. If Mr. Powell dropped the rates this week, that might be seen as an attempt to “strengthen the U.S.’s hand,” and could be seen by many as “an abdication of Fed independence.” Best be non-committal until Osaka closes. Meantime, it seems that the general market has lost its confidence in the Fed’s ability to keep inflation near its official 2 percent target as the so-called ‘break-even’ rate for inflation over the next 10 years is now at its lowest since the 2016 presidential election, deflation once again the scare, the negativity surrounding it potentially forcing the hand that ultimately cuts the Fed’s rates. Bullying isn’t just the President’s domain: the markets on his side. What will Mr. Powell do? It’s widely expected that there are three rate cuts to come. Some see just one, others see as many as four, which would require a cut at every meeting from July into the end of the year. There’s a school of thought that favors Mr. Powell making a more precise hint than is usual for him later this week.
China’s central bank today said that the second phase of an RRR cut put about 100 billion-yuan ($14.44 billion) worth of long term funds into the market, a third phase of the RRR cuts being scheduled for July 15 as Beijing battles to right its ship.
On a similar subject, Euro zone policy-makers and economists convene in Portugal, ostensibly “to celebrate two decades of the euro zone”, but more likely to wonder and consider what’s left in the ammunition box “to defend its economy from a barrage of U.S. trade threats and political strife such as Brexit.”
Vietnam reduced its official floor prices by $15 on its dry rubbers, $10 on Latex.
There’s not much give on physical prices, the Tire Majors, while buying at a discount to most first-hand offers, still paying a small premium over equivalent paper positions and still over the $1500 FOB mark. And SIR prices are already substantially cheaper than STR and SMR values, so the potential for lower levels seems to be limited although mildly positive sentiment seems to be stronger in S.E. Asia than it is in Europe or the USA although, of the two, the latter is seeing the better business.
The Paper Markets: On a day session-to-day session basis, Shanghai lost another $30 today but, given that eight of those dollars were already lost on last Friday’s night session and that today’s actually pulled back $11, on balance it’s not as -bad as it might initially have looked. It wouldn’t be surprising to hear the strains of Tchaikovsky’s ‘Nutcracker’ suite wafting over spot Tocom RSS3 as that particular local drama widened the spot-to-six months forward backwardation by another $55 from Friday to a massive $334 today. It could also be the reason why traders are shunning that market for now as it looks as if today’s turnover of just over 10,000 tons was not only the lowest of the year but probably also something of an embarrassment as it was ‘overtaken’ by the STR20 contract. On Friday we applauded what we though were an end to that contract’s charade of copy/pasting its volumes from previous the day to this day’s first session, ditto this day’s full session to the kerb session. Seems the copy/paster simply fell asleep on Friday as we’re back to déjà vu volumes again. Fake is fake whatever you dress it in and wins nil points with prospective investors. While RSS3’s benchmark lost $27, STR20 was $8 up. If you believe in fairies. RSS3, unfortunately, comprehensively broke its downside support. Not that SICOM’s RSS3 contract distinguished itself: volume for a whole day’s effort, admittedly electronic, just 90 tons but they managed to mark it up $7 on the spot position, the only positive closing position, while another lost $28, the twelve month backwardation widening from Friday’s to today’s by $25 to $234. Good luck to the LTC fixers! The staple TSR20 contract was $12 to $20 down, the spot grade differential now just $11 short of $500. Needless to say, SICOM’s volume eclipsed Tokyo’s by comfortably over 2:1.
Tocom kerb: November RSS3 closed today at 200.5 the intraday swing $27
Resistance remains at: 209.5, 214.8, 234.8
New Support is at: 202.5, 195.7, 187.1, 180.2
December TSR20 closed today at 163.6, the intraday swing $21
Shanghai daily open position: Sep +45,980mt
The Tire Majors: bought August at $3 to $8 over the equivalent closing SICOM settlement, September at $9 over, October’s bid at $10 ignored.
Crude oil: Looks like economic worries hold more sway over current crude sentiment than on-fire tankers in the Gulf of Oman or an energy minister’s assurances. An energy consultancy’s morning note: “China’s industrial output growth (is) falling to the lowest level in 17 years amid trade tensions with the U.S. Today, oil markets will have to digest more demand concerns as India implemented retaliatory tariffs on a number of U.S. goods yesterday.” Not helping much either was last Friday’s poor IEA outlook for demand growth this year based on deteriorating prospects for global trade. A Danish bank’s commodity strategist: “Seven consecutive weeks of selling has now reduced the combined long in Brent and WTI crude oil by 41% to 421,000 lots, a near-four-month low,” and “This is before the tanker attacks in the Gulf of Oman briefly boosted prices before being capped again by demand fears and another counter-seasonal rise in US crude oil stocks.” The Saudi energy minister Khalid al-Falih’s comments today that OPEC was “moving towards a consensus on extending a production cut agreement” within the next three weeks feel on seemingly deaf ears as WTI closed around the middle of a $51.77 to $52.74/bbl range, Brent at 9.20/bbl more.
Gold: Prices fell some way from Friday’s 14-month peak although they’d already done that on Friday evening and were actually up a fraction at one point today, potential investors waiting for directional clues from the Fed starting tomorrow on US interest rates. A merchant bank’s analyst: “The dollar is slightly down but the profit taking is overpowering any tailwind,” after bullion’s latest fall from grace as Friday’s strong U.S. retail sales slightly dented expectations of a rate cut even though market bets for monetary easing at the July meeting stay firm at 85%. A market analyst: “We may ... see a bit of a correction in gold, with $1,320 being notable support to the downside.” But not yet. The SPDR Gold Trust’s holdings rose 0.6% to 764.10 tonnes on Friday while, according to the CFTC, speculators raised their net long positions in COMEX gold earlier last week. At day’s end here, gold was trading comfortably at the better end of a $1336.60 to $1347.10/oz range.
(*Copper: a little better at $2.650)
(*Bitcoin: off its best but well up at $9,214)
Equities: Asia Pacific exchanges, ultimately down 5:8, started this week’s Fed watch, movement limited as few are prepared to jump the wrong gun. Ditto the European bourses, 5:10 down, the three main ones 0.44 percent up to 0.09 percent down, Lufthansa dragging down the airlines sector, its shares down by some 12 percent after issuing a profit warning. Wall Street opened little changed but advanced with a little help from the tech sector, the Dow last at around 40 points positive, the Nasdaq up 0.70 percent and the S&P tracking the Dow at 0.18 percent better.
General economic/political ribbon: Brexit vs. EU, Parliament vs. itself (if it’s asked for its opinion), Italy vs. EU, Iran vs. USA, USA vs. China. No need to go on.
Disclaimer: This report is strictly for information only. INPOL is not liable for any inaccuracies, errors or omission in the report. This report is intended for general circulation and does not constitute an offer or solicitation to buy or sell any investment or commodity product(s). It does not take into account the specific objectives, financial situation or particular needs of any person. Investors should seek advice from a financial or commodity adviser before investing in any investment products or adopting any investment strategies.