Last week (November 22-26) coincided with the Thanksgiving holiday, and the ICE futures market maintained a stable trend before the holiday. However, after the holiday, the super variant of the new coronavirus “Omicron” raided the world, causing financial markets to suffer heavy losses and panic. The sell-off led to a rare plunge in U.S. stock markets and oil prices. ICE cotton futures fell 400 points and technical graphics were destroyed.
Compared with the Delta strain, the new variant strain of the new coronavirus “Omicron” announced by South Africa this time contains a large number of mutations, some of which are “worrying.” According to CNBC, this mutated strain may not only cause a greater risk of transmission, but may even have stronger vaccine resistance. The WHO said that the mutated strain of “Omicron” increases the risk of reinfection of the virus in humans. Currently, the mutant strain is spreading at an alarming rate in Africa and outside Africa, and New York in the United States has entered a “disaster emergency state.”
Although this virus has caused a new impact on the market, the true situation of the mutated strain is still under observation. South Africa released news over the weekend that the strain is a mild disease and its symptoms are still no different from those of a common cold. , market concerns have eased. Although new strains of the virus will cause concerns about economic recovery in a short period of time, countries around the world are actively taking countermeasures. After two years of fighting the epidemic, countries’ anti-epidemic capabilities and experience have significantly improved, and the market does not need to panic too much.
At the same time, the emergence of the new virus has also weakened market expectations for the Federal Reserve to raise interest rates, which also caused the U.S. dollar index to fall sharply last Friday, which may help stabilize the commodity market in the short term. However, since Powell has been nominated for re-election by Biden, it is only a matter of time before interest rates are raised, and the inhibitory effect on commodities has begun to appear. If U.S. economic data continues to improve under the new epidemic, interest rate hikes will only get closer to us.
For the cotton market, the impact of macroeconomics and emergencies is usually short-lived. The current fundamentals of the cotton market have not changed. After short-term selling and adjustments, demand is still the determining factor in the direction of cotton prices. Judging from the situation of US cotton exports last week, signings and shipments have recovered. According to the analysis of foreign industry organizations, the current potential replenishment demand in various countries is still strong. According to surveys of U.S. textile mills and foreign buyers, their operating conditions are performing well. This price correction will also provide an excellent opportunity for textile mills to replenish their inventory at low prices. However, if external market turbulence continues, factory purchases will also remain cautious.
After the panic is released, financial markets will get back on track, and cotton may return to its original position sooner. After all, the expected Chinese imports have not yet happened, and the market will not be willing to “fall” in any case. After a moderate correction, cotton prices will start at a more suitable platform.
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