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ICE Cotton Ended With Triple Digit Losses On Pandemic Concerns

26 Feb 2020 8:04 am
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Mumbai (Commodities Control) – Cotton futures extended losses on Tuesday, after touching a more than two-month low in the previous session, as a sharp rise in the new coronavirus cases outside China sparked worries of a global economic slowdown. Active contract on ICE slipped for fourth consecutive day.

Cotton contracts for May slipped 126 points to settle at 66.70 cents per lb. It traded within a range of 66.52 and 67.75 cents a lb. July Cotton closed at 66.92, down 140 points and December Cotton ended at 66.75, down 146 points.

May cotton has now closed for the 2nd straight day below the 100-day moving average, with the 20-day average having crossed over the 50-day to the downside. That’s often a bearish sign.

"It's just trading on some of the broader big-picture markets with the coronavirus going around," said Bailey Thomen, cotton risk management associate with INTL FCStone.

The outbreak's impact on cotton exports in the longer term is a concern, Thomen added.

Wall Street added to losses after a World Health Organization official said the coronavirus was "a rapidly escalating epidemic."

Beyond mainland China, the virus has spread to about 30 countries and territories, among which outbreaks in Iran, Italy and South Korea are of particular concern.

Tuesday’s appearance for the first time in both Austria and Croatia has made it a worldwide threat. The Centers for Disease Control (CDC) has now warned Americans to expect an outbreak in the U.S. That has since been downplayed by Larry Kudlow at the White House.

The disease has infected 80,000 people and killed 2,663 in China.

But the WHO says the epidemic there has peaked and been declining since Feb. 2.

However, "since prices have dropped so low, we are finding some good value discovery at these prices and cotton is being purchased in the physical market," Thomen added, citing that as a factor that prevents prices from falling further.

Total futures market volume fell by 51,226 to 25,529 lots. Data showed total open interest fell 1,805 to 196,787 contracts in the previous session.

Certificated cotton stocks deliverable as of Feb. 24 totaled 34,062 480-lb bales, unchanged from 34,062 in the previous session.

Support and Resistance for Cotton #2 lies at 65.13 cents and 68.33 cents/lb, respectively.

(Commodities Control Bureau)

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