【Fujitomi】The soft U.S. employment report is favored, and NY precious metals broadly surge

(NY Precious Metals)
New York gold on the 2nd surged sharply against a backdrop of a weaker dollar, climbing above the 1280 level. The New York near-month August gold contract was up 10.1 dollars from the previous day at 1280.2 dollars, and the New York near-month July platinum contract was up 24.4 dollars at 953.4 dollars.
In the May US employment report, nonfarm payrolls rose by 138,000, well below market expectations of 180,000. There were also revisions that April payrolls increased from 211,000 to 174,000, reinforcing a weak market impression. The unemployment rate fell from 4.4% to 4.3%, and the average hourly wage rose from $26.18 to $26.22, indicating some strength, but the market largely felt that a September rate hike in the US would be unlikely. Despite the dollar’s rapid advance pushing back above the 1280 level, the Dow Jones industrial average also extended gains, making buying around the 1280 level less appealing. Market participants are watching the testimony of the former FBI Director on the 8th, which could raise risk concerns and push NY gold higher. NY platinum has rebounded sharply, but the general view is that this is a technical rebound rather than a fundamental recovery.

(WTI Crude Oil, NY Petroleum Products, North Sea Brent)
On the 2nd, WTI crude briefly plunged sharply but recovered the losses as the dollar weakened. WTI near-month July contract was down 0.70 dollars at 47.66 dollars, North Sea Brent near-month August contract was flat in dollar terms. RBOB gasoline July contract was down 2.43 cents at 157.71 cents, and NY heating oil near-month July contract was down 1.69 cents at 148.48 cents.
With the US pulling out of the Paris Agreement, expectations grew that US oil output would rise further, leading to a fall in European trading hours. WTI fell below 47 dollars for a time. There were reports that OPEC discussed broader production cuts, but actual output reductions were about 300,000 barrels per day. However, Libya and Nigeria had increased production to the May level of 300,000 bpd, so even if implemented, the effect would be limited. Moreover, the 300,000 bpd addition was seen as insufficient, contributing to disappointing sentiment about further OPEC cuts. For now, the dollar's weakness provides some respite from the decline, but the supply-demand balance remains weak. Baker Hughes reported 11 more oil rigs operating in the US, for a total of 733 rigs, marking 20 consecutive weeks of increases.

(CBOT Soybeans)
On the 2nd, CBOT soybeans surged on bargain buying. The near-month July contract rose 11.25 cents to 923.50 cents, and the new-crop November contract rose 9.75 cents to 927.50 cents.
A sharp dollar decline fueled by weak US employment data sparked speculative buying on expectations that a weaker dollar would boost US soybean exports, leading to a spike in Chicago soybeans. However, global supply remains abundant. Improved weather conditions in the US Corn Belt are expected to advance soybean planting rapidly from Sunday, and the dollar’s weakness is not likely to sustain support. The market may once again move lower on weak fundamentals. The dollar’s weakness has triggered several forced recoveries, but US soybean demand did not actually recover.

(CBOT Corn)
On the 2nd, CBOT corn followed soybeans higher and edged up slightly. The near-month July contract rose 1.50 cents to 372.00 cents, and the new-crop December contract rose 1.50 cents to 390.75 cents.
The sharp dollar decline following weak US employment data has turned the grains market sentiment. However, the surrounding fundamentals have not changed. Weather in the US Corn Belt is expected to improve, especially in the eastern belt where drought concerns had been noted. The crop condition reports to be released early next week are still expected to be deteriorating, but improvements in the following week's reports are anticipated. Even with deteriorating conditions, assessments of the current crop are based on plant height and leaf count, so a yield decline is not yet certain. The gains into the close were likely trimmed by selling hedges amid expectations of crop improvement.
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