Commodities Daily - June 29, 2020

> Oil ticks lower along with stock markets as virus spread picks up, threatening reopening. Today's agenda is rather uneventful. US coronavirus infection data is likely to take center stage during the US session, possibly pressuring risk assets yet again. Another bout of risk-off of a similar magnitude to the one observed on Friday could pressure Brent toward technical resistance at $39.6/bbl, with a break below likely causing a fall to $39/bbl, in our view.> Gold prices rising amid risk-off move in markets. This morning, gold has traded mostly in a narrow $1,770-1,775/oz range. It could rise to test the $1,778/oz technical resistance level later today (if it is broken, the price could rise all the way to $1,789/oz) if more downbeat coronavirus data is reported. On the other hand, should investors decide to take profits, gold could test $1,768/oz support (and then potentially fall to a corridor of $1,750-$1,760/oz, like what happened on Friday near the US open). Data-wise we would only highlight today's US pending home sales. Official Chinese PMIs are due early tomorrow morning and will be key during the Asian trading session.OIL TICKS LOWER ALONG WITH STOCK MARKETS AS VIRUS SPREAD PICKS UP, THREATENING REOPENINGAfter trading around the $41.5/bbl mark during the first half of the day on Friday, front-month Brent started to slide and during the US trading session touched an intraday low of $40.3/bbl. It eventually settled at $41.02/bbl, fixing $0.03/bbl below the previous settlement. The downturn in the oil and stock markets has been widely blamed on rising rates of Covid-19 infections in several key markets - particularly places in the US that reopened earlier than elsewhere. Global deaths from the pandemic have now topped half a million, while total cases rose past 10 mln on Sunday, a day on which a United Nations agency reported the most infections yet for a single day. As we noted on Friday, the surge in US coronavirus cases clouds the demand outlook and could exert substantial pressure on oil prices if there is a further deterioration, especially as infections are rising in some of the most important locations in terms of oil demand (nine of the country's top 20 gasoline-consuming states, including the top three - California, Texas and Florida - are seeing rising infection numbers). That could undermine the steady increase in refining output (US refiners now operating at nearly 75% of their capacity). Meanwhile, India and Brazil are now battling outbreaks of over 10,000 new cases daily, and new outbreaks are being reported in China, New Zealand and Australia, prompting governments to reimpose restrictions, according to Reuters. We, however, stick to our view that a second wave of the coronavirus is unlikely to derail the nascent oil demand recovery, as governments and people in general are now much better prepared for distancing measures both mentally and in terms of infrastructure, and there will be no need to shut down economies again. Furthermore, OPEC+'s JMMC now meets every month and could counter a second coronavirus wave with a recommendation for further cuts, which will be the main focus of its next meeting on July 15.This morning, Brent continues to hover above the $40/bbl mark with investors digesting a Bloomberg report that China's state-owned refining giants are in discussions to form a joint purchasing group to buy crude (the group represents refiners that import more than 5 mln bpd), a move that has the potential to alter the balance of power between sellers and buyers in the oil market. According to the report, the proposal has won the support of the government and relevant industry watchdogs. The group is set to collectively issue bids for certain Russian and African grades in the spot market. In our view, this initiative could potentially lead to purchase prices being reduced by some $0.5/bbl. Today's agenda is rather uneventful. US coronavirus infection data is likely to take center stage during the US session, possibly pressuring risk assets yet again. Another bout of risk-off of a similar magnitude to the one observed on Friday could pressure Brent toward technical resistance at $39.6/bbl, with a break below likely causing a fall to $39/bbl, in our view. LD PRICES RISING AMID RISK-OFF MOVE IN MARKETSEarly in the day on Friday, gold was trading in a range of $1,758-1,766/oz before falling to $1,750/oz early in US trading. However, with a risk-off move playing out on Wall Street, it ended up paring all of the earlier losses and meeting the close at $1,770/oz. As we noted in the oil section above, this move has been widely attributed to rising rates of Covid-19 infections in key markets, particularly the US. This morning, gold has traded mostly in a narrow $1,770-1,775/oz range. It could rise to test the $1,778/oz technical resistance level later today (if it is broken, the price could rise all the way to $1,789/oz) if more downbeat coronavirus data is reported. On the other hand, should investors decide to take profits, gold could test $1,768/oz support (and then potentially fall to a corridor of $1,750-1,760/oz, as happened on Friday near the US open). Nevertheless, given the current backdrop, downward moves are likely to prove short-lived, as the combination of low interest rates and seemingly endless support from central banks remains broadly supportive for gold.Today, the EU and UK will resume trade negotiations, while German and French officials are scheduled to meet to discuss their proposals for EU stimulus, which is potentially supportive for gold. In addition, two regional Fed presidents and IMF Managing Director Kristalina Georgieva are scheduled to speak. Data-wise we would only highlight today's US pending home sales. Official Chinese PMIs are due early tomorrow morning and will be key during the Asian trading session. Highlights for the week include Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin speaking on Capitol Hill tomorrow and US employment data on Thursday, while Friday is a holiday in the US, likely meaning reduced volumes across global