Commodity prices/Housing/China

I included a chart in the CRB food index yesterday morning and during the trading day after the USDA ending stocks data came out (and were less than expected) corn rallied 3.8% to the highest since July 2019, soybeans by 3% to the highest since July 2016 and wheat by 1.8%. Strong Chinese imports has been a key catalyst here. Separately, aluminum is trading at the highest since March 2019. Crude oil has been the last commodity not to have joined the rally but that might be about to change as today it’s trading at a level last seen in September 1st. I repeat my belief that energy stocks will outperform FAANGM in the next two years.

CRUDE OIL Dec contract

SOYBEANS

Another new record low mortgage rate of 2.98% was again not enough to lift purchase applications which continue to moderate. They fell 2.6% w/o/w and that is the 6th week in the past 7 of declines and they now sit at the lowest level since May. They are still up 16.5% y/o/y but that pace is slowing down too. I’m sure the lack of inventory is a factor, but I believe that price increases got too aggressive and some buyers are calling a time out, particularly the 1st time buyer. Refi’s were up by .6% w/o/w and 67% y/o/y.

PURCHASE APPLICATIONS

China’s loan growth data for October was about as expected. Aggregate financing totaled 1.42T yuan vs the estimate of 1.4T of which bank loans were 690b. This is s sharp slowdown from the prior two months and is the smallest total since last October not including the Lunar New Yr holiday distortion in February. This said, October usually sees a cyclical moderation due to Golden Week. M2 money supply growth was 10.5% y/o/y vs 10.9% in September. Because of its success in containing Covid, along with other Asian nations, life in many ways has recovered in China to pre Covid levels and the PBOC has hinted at slowing the monetary spigot in response. We’ll see. Chinese stocks for a 2nd day traded weak because of worries about possible anti-trust (their version of it) moves against Chinese big tech. The yuan is also weaker.