Good morning,
The market took a big tumble on Friday after all the markets became spooked by the appearance of the new Omicron Covid variant which is thought to be more transmissible and that existing vaccines may not be as affective. The market had opened 23 points lower against a very negative macro picture leaving a chart gap between 19.80 and 19.73. Initially, prices held at these lower levels but with crude dropping fast prices slid slowly lower through the morning. However, it was in the afternoon as US traders got to their desks after the Thanksgiving holiday that the losses increased culminating in the lows being hit late afternoon. It was the lowest level seen since 25th October when prices were on the way higher after the fund sell-off seen in mid-October. Eventually, some short covering was triggered with prices quickly pulling off the lows. The market, eventually, settled battered and bruised but 20 point off the lows. The HK ended 7 points firmer at +41 as some speculative buying noted while the KN ended 2 points weaker at +34. In London the structure improved with the HK ending at +1.80 while the KQ was stronger at +5.20. This also meant the WP improved with HH WP ending at 74.80 and the KK WP valued at 82.00. Friday was all about the macro with crude plunging over 13% at one point. Every commodity took a hit with fund selling meeting with thin and uncertain buying. The 19.56 trend line was broken which triggered fund long liquidation.
The emergence of the Omicron Covid variant was the catalyst to the macro sell-off on Friday with the equity market hit hard. While it appears to be more contagious and maybe more resistance to the current vaccines early indications are that it may not produce any worse symptoms than existing variants. Nevertheless, the world was already nervous of increasing cases across Europe and other regions so this news just added to the concerns. It is likely more information about the variant will be released this week – whether it calms the market remains to be seen but some believe it was a knee-jerk reaction and the markets will correct to a certain extent.
The Egyptian agricultural Ministry announced this morning that the country will produce 3 million tonnes of sugar this season which is higher than expected. The main reason is the increase in the sugar beet planted area with new production from the Canal sugar Project. The minister added that Egypt will not be an importer of sugar by the end of this year and is likely to become a net-exporter over the coming seasons.
The COT report is delayed by one day due to the Thanksgiving holiday although maybe somewhat irrelevant after Friday’s sell-off.
This morning, somewhat inevitably, the market opened 21 points firmer on the back of an improved macro picture with crude 5% higher and most other commodity markets higher. Prices improved another 10 points but then eased back to opening levels. The market is currently around 20 points firmer. The HK is unchanged at +41 while the KN is 2 points firmer at +36. In early London trading the HK is valued slightly at +1.20 and the KQ at +4.80. As mentioned the macro is positive but most markets are still well below their levels before Friday’s sell-off. The USD Index is firmer but still well below the levels reached earlier last week. All markets will remain nervous as the new Omicron story plays out. Sugar will remain beholden to the macro but could recover quickly if the macro remains positive. There was no fundamental reason for Friday’s weakness although much could change if the world is forced into lock-down again.
Contact the ADMISI Sugar Desk team:
Phone: +44(0) 20 7716 8598
Email: admisi.sugar@admisi.com
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Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
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