Commodities Daily - June 23, 2020

> Oil prices shaken overnight by confusion about US-China trade deal. As we write, Brent is hovering below $43/bbl. New IMF economic growth forecasts and developed-market preliminary PMIs for June (IHS Markit) are on the radar today. In our view, the PMI readings have the potential to surprise to the upside, in which case Brent could test technical resistance at $43.6/bbl, with a break above that opening the path toward the $44.0-44.7/bbl technical range.> Gold prices held yesterday above the psychologically important $1,750/oz level. The mood in the gold market today will be largely determined by the preliminary PMIs from Europe and the US. If the prints come in better than expected, gold prices may fail to remain at their currently elevated levels. Technical support is at $1,742/oz. OIL PRICES SHAKEN OVERNIGHT BY CONFUSION ABOUT US-CHINA TRADE DEALEarly in the day yesterday, front-month Brent traded sideways in a range of $41.6-42.5/bbl, as major stock market indexes were also flat. Investors continued to monitor a possible second wave of coronavirus starting around the globe. In particular, South Korean health officials yesterday said they were in the midst of a second wave of infections concentrated in the densely populated Seoul metropolitan area.As we wrote yesterday, investors at the moment seem to be weighing the magnitude of the oil demand recovery against a rebound in new coronavirus cases. Support is coming from the fact that major oil market analytical sources are revising higher their global oil demand estimates for April (when demand plummeted due to lockdowns). Energy Aspects, for example, has said that global oil demand fell by less than 20% (around 18.5 mln bpd) at the height of the lockdowns in April, when most of the Northern Hemisphere (home to 90% of global manufacturing) was shut down. At the time, many had expected a demand decline of over 30 mln bpd and thought that global oil and refined product storage capacity would be insufficient. The stronger than expected April demand means that April stock builds could have been 25% smaller than had been assumed at the time.During the US trading session yesterday, Brent gained some positive momentum, as the S&P 500 was rising, with the weakening dollar also providing tailwinds. Generally, hopes about the economic recovery outweighed worries about a second wave and the business shutdowns it might cause. Brent eventually settled at $43.08/bbl, fixing $0.89/bbl above the previous settlement. Overnight, however, markets and oil were rattled by an interview in which White House trade advisor Peter Navarro said "it's over" when was asked about the US-China trade agreement. Brent immediately fell $1/bbl to $42.2/bbl, but managed to swiftly pare this loss, as Navarro quickly clarified that his comments were taken "wildly out of context" and US President Donald Trump confirmed in a tweet that the agreement was "fully intact" and said "hopefully they will continue to live up to the terms." Most recently, the US took actions against four Chinese media companies operating in the US, while China blocked poultry imports from a Tyson Foods plant where hundreds of people had tested positive for Covid-19. We believe that Trump will try to avoid putting the US-China trade deal at risk ahead of the US presidential election.As we write, Brent is hovering below $43/bbl. New IMF economic growth forecasts and developed-market preliminary PMIs for June (IHS Markit) are on the radar today, and API US oil and product stocks are due overnight. In our view, the PMI readings have the potential to surprise to the upside, in which case Brent could test technical resistance at $43.6/bbl, with a break above that opening the path toward the $44.0-44.7/bbl technical range. We note that overnight Saudi state TV reported that the Saudi-led coalition in Yemen had intercepted three ballistic missiles launched by the Houthi rebels there toward the Saudi cities of Najran and Jizan - this could also support oil prices LD PRICES HELD YESTERDAY ABOVE THE PSYCHOLOGICALLY IMPORTANT $1,750/OZ LEVELEarly in the day yesterday the dollar began to weaken, which supported gold. When the US session got underway, gold had climbed to $1,762/oz. In terms of data, on the bright side, the Chicago Fed's economic activity index surged to 2.61 in May after the negative 17.89 print in April. However, US existing home sales for May (3.91 mln versus the consensus of 4.09 mln) slightly disappointed investors. Media reports continue to indicate that the White House intends to unveil additional fiscal stimulus to combat the effects of the coronavirus, which is supporting gold prices. Also boosting demand for defensive assets yesterday were comments by trade advisor Peter Navarro, who initially stated that the trade deal between the US and China was dead, although he subsequently retracted the comment. The mood in the gold market today will largely be determined by the preliminary PMIs from Europe and the US. As we write, PMIs for June from France and Germany are in and have beaten expectations. The Markit manufacturing report for France came in at 52.1, well above the 46.0 consensus. This points to a fairly quick recovery in the economy following the removal of lockdown measures. If the PMIs from the eurozone and US outpace expectations, gold prices may struggle to hold their currently elevated levels. Technical support is at $1,742/