It is not safe to go in the water with Brexit European bank and trade fears mounting. The Fed will give minutes from the last FOMC meeting that was before the Brexit vote and what was said before, when there was little doubt that the referendum would actually pass. Oh boy.
Also today we have the U.S. Trade Balance at 7:30 A.M., ISM Non-Manufacturing Index at 9:00 A.M., Dairy Products at 2:00 P.M. and API Energy Stocks at 3:30 P.M. And the fear risk off trade is upon us.
The banking risk reminds me a lot of 2008 when demand was peaking and then the banks were dying on the vine. The initial concern was demand destruction. The markets tanked and then the evil speculators made a market in commodities very convincingly, and took the pressure off the failing banks while they took a loan from the government, (oops, you and me) and the commodity speculators saved the day with commerce moving which gave time for the banks and government to right the wrong ship.
In the overnight electronic session the Grains are taking a beating again, with rain and plenty more on the way adding pressure. The question is, will the rains be enough to quench the crops' thirst or will the very hot 90-degree weather take hold? If you believe yesterday’s crop progress report you would have a point for the bears, however, I still see another bullish rally this La Nina year. Remember it is not nice to fool Mother Nature! In the overnight electronic session the September corn is currently trading at 338 ½, which is 5 ½ cents lower. The trading range has been 346 ½ to 338 ¼.
On the ethanol front the July contract expires today. Do not place any orders in this contract today. There were no trades posted in the ethanol futures last night. The August contract settled at 1.587 and is currently showing 1 bid at 1.576 and 2 offers at 1.613.
On the crude oil front the market is hoping for a Brexit banking and trade bounce. We should see another draw on inventories, with renewed fighting in Nigeria tightening the export noose even further, and while demand destruction has not been proven or discounted after the busiest driving holiday in the summer. It is a little early to push the demand panic button. In the overnight electronic session the August crude oil is currently trading at 4610, which is 50 points lower. The trading range has been 4692 to 4592 and is looking heavy, with panic trading early with investors over rationalizing.
On the natural gas front this market is in continued sell off mode as well. My weather model forecast 90-degree temperatures with high percentages of humidity the rest of the week. This should put pressure on the power grid in the coming weeks and we will have to see what injection number there will be or even possibly a draw on tomorrow’s EIA Gas Storage. In the overnight electronic session the August contract is currently trading at 2.704, which is 6 cents lower. The trading range has been 2.799 to 2.697 so far.