DECEMBER 28, 2018
GOVERNMENT SHUTDOWN CREATES MORE UNCERTAINTY FOR MARKETS
- Where Will Traders Go From Here
- Equity Markets and Crude Oil Also Suffer
- Continued Volatility Expected
- Resumption of Trade Talks a Possible Bright Spot
The hot topic heading into this past weekend was the likelihood of a government shutdown. Cotton futures at the Intercontinental Exchange (ICE) last Friday showed how traders felt about the uncertainty by closing down 188 points on the March contract, which settled at 73.18 cents per pound. At midnight, the government did indeed shutdown and gave traders the weekend to decide where to go from here.
MARKETS TUMBLE
The Christmas Eve-shortened trading day on Monday closed with March futures settling down 63 points at 72.55 cents per pound. Macroeconomics were not handing anyone any early Christmas gifts as equity markets had their worst Christmas Eve with the Dow Industrials closing down 2.9 percent on the day. Other markets were hit even harder as crude oil was down more than 6 percent, making sellers the clear winners.
A BRIEF REBOUND
Wednesday finally brought some stronger finishes to the markets as March futures closed up 95 points at 73.50 cents per pound, while the Dow recovered from the Christmas Eve selling with a record 1,086-point gain. One thing for sure, most of the markets, including cotton, have been and may continue to be highly volatile.
REVERSE COURSE
The cotton market’s gains Wednesday were erased Thursday as the March contract closed down 144 points at 72.06 cents per pound. Although the week had some negative market results, it did provide favorable weather needed to get producers closer to wrapping up harvest.
COTTON CLASSING CONTINUES
Going forward, we understand FSA offices will not operate after Friday, December 28 until the government reopens. However, USDA classing offices will continue to operate since it is a fee-based service, but reports, such as weekly export sales, will not be published. In addition, no CFTC On-Call or Commitments of Traders reports will be released.
TRADE TALKS SCHEDULED
Meanwhile, the United States and China are scheduled to resume trade talks during the week of January 7. Until we get a better picture of trade direction with China, the length of our government shutdown and perhaps a stronger signal on future interest rate movement, the ride along the way may be bumpy.
From all of us at PCCA, we wish you and your family a Happy New Year.
Source: PCCA