Commodities Daily - October 2, 2020

> Oil extends losses after Trump tests positive for Covid-19; US jobs report eyed. Today, investors will be focused on the September US jobs report, which, judging by the consensus for the NFP change, is expected to reflect ongoing deceleration in the pace of the labor market recovery. However, we think the data could surprise to the upside, as September is the first month when expanded jobless benefits ended, so there might have been more active job-seeking. Should our expectations play out, this would provide support to risk assets such as oil and could potentially overturn the negative momentum in oil and stock markets, which has picked up this morning after it was reported that US President Trump has tested positive for the coronavirus. The current global risk-off environment could pressure Brent toward the $36.6-39.3/bbl technical corridor, but we expect the US jobs report to spark a rebound back to the $40.80/bbl resistance level later in the day.> Gold draws support from Trump's positive Covid-19 test. We expect US nonfarm payrolls to surprise to the upside today, which would likely shake investors out of their recent caution that caused them to shift to dollars this month and to begin expanding their portfolios, which would benefit gold. We therefore expect bullion climb toward the next technical resistance at $1,925/oz today.OIL EXTENDS LOSSES AFTER TRUMP TESTS POSITIVE FOR COVID-19; US JOBS REPORT EYED.Having hovered below the $42.5/bbl mark at the start of the day yesterday, front-month Brent began to slide and hit the $40/bbl mark in the early US trading hours. It eventually settled at $40.93/bbl, fixing $1.37/bbl below the previous settlement, which is below its 100d MA, signaling further selling pressure ahead. One of the catalysts behind this correction was the September ISM US manufacturing PMI, which fell short of expectations, while US weekly initial jobless claims remained elevated at 837k and personal income was reported to have declined 2.7% m-o-m in August. In addition, the prospects for a new US fiscal stimulus package remain uncertain, with US House Speaker Nancy Pelosi saying there are still major differences to be bridged. Democrats have now passed their own bill worth $2.2 trln in the House, its size down versus their previous $3.4 trln plan, though Republican Senate Majority Leader Mitch McConnell has come out against the bill, claiming it is full of irrelevant items.Meanwhile, from an oil market fundamentals standpoint, there have been numerous negative developments recently, including the return of Libyan output and what seems to be higher exports from Saudi Arabia, Iraq and Russia. Note that according to CDU-TEK, Russian September oil production was 9.932 mln bpd, up 0.6% m-o-m, with Bloomberg, citing pipeline operator Transneft, reporting that exports of Russian crude are expected to increase to 3.4 mln bpd in October from 3.12 mln bpd in September. This comes against the backdrop of a new wave of coronavirus cases around the world, the impact of which we can see in UK car usage slumping last week on new virus restrictions and European refineries struggling to cope with diesel overstocking and having to lower crude purchases.Today, investors will be focused on the September US jobs report, which, judging by the consensus for the NFP change, is expected to reflect ongoing deceleration in the pace of the labor market recovery. However, we think the data could surprise to the upside, as September is the first month when expanded jobless benefits ended, so there might have been more active job-seeking. Should our expectations play out, this would provide support to risk assets such as oil and could potentially overturn the negative momentum in oil and stock markets, which has picked up this morning after it was reported that US President Trump has tested positive for the coronavirus. The current global risk-off environment could pressure Brent toward the $36.6-39.3/bbl technical corridor, but we expect the US jobs report to spark a rebound back to the $40.80/bbl resistance level later in the day.GOLD DRAWS SUPPORT FROM TRUMP'S POSITIVE COVID-19 TESTGold was hovering above $1,885/oz at the start of the day yesterday before climbing all the way to the $1,910/oz mark as the dollar remained depressed. Although some of yesterday's US economic data failed to beat the consensus estimates, there were no signs of a strong deceleration in economic momentum that many had feared amid the absence of more fiscal support measures. This helped to keep inflation expectations high, which should be support gold given its role as a traditional hedge against inflation. However, at the start of this morning's Asian trading session, gold slipped to $1,895/oz amid dollar strength following news that US President Donald Trump had tested positive for Covid-19 shortly after one of his closest aides had fallen ill. The political uncertainty triggered by this event boosted gold to $1,915/oz, though the White House's physician said that Trump would continue to carry out his duties. We believe this news could produce negative reverberations for gold at some point, as it comes at a challenging time when the US stimulus deadlock needs a strong push. Today, we expect gold to exhibit elevated volatility, which is usual around the release of the closely watched US monthly jobs report. We expect US nonfarm payrolls to surprise to the upside, as the expiry of the $600 add-on to jobless benefits may have encouraged many Americans to look for a job. We think this would likely shake investors out of their recent caution that caused them to shift to dollars this month and to begin expanding their portfolios, which would benefit gold. We therefore expect bullion climb toward the next technical resistance at $1,925/oz today.