Given the lack of government reporting – which in normal times levels the playing field for specs, as merchants can rely on sources on the ground – the rise in awaiting stocks may have spooked the specs. Puzzling traders though was the only modest decrease in Open Interest and unfortunately as the CFTC Commitment of Traders report misses its second release in a row, little light will be shed until the shutdown ends.
Physical demand has been stoked below 84 cents, helped by the preponderance of import quota in China and mills’ need for prompt delivery. Look for Chinese reserve purchases to gather pace in coming weeks, amidst the release of additional import quota.
At week’s end there is renewed optimism that hitting the debt limit will be avoided, albeit via only a temporary extension. It remains uncertain whether the government will reopen in the meantime, but stocks on Thursday posted strong gains, the VIX fell, and bond yields settled down. There has been talk of shifting the debate from Obamacare to a “grand bargain” on government spending and taxes, which would be welcome were it not occurring against the backdrop of financial Armageddon.
Preliminary non-government employment indicators have started to demonstrate fresh weakness. Janet Yellen was officially nominated to succeed Bernanke as Fed Chairman; if the debt ceiling were unthinkably breached, it would be up to the Fed to save the day in the bond market.
Apparel/Garments | On 28th May 2017
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