Need to Know: Try this high-flying commodity to resist the fallout from Italy

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The déjà vu factor is out there in spades, from another Cavs-Warriors match-up, to messes on the European political front.

While things seem calmer on the North Korean front, the Italians are bringing the stress today, as the establishment fights off a populist revolt that could put the country’s euro-club membership at stake. Expect election talk there and in Spain, where the prime minister is facing his own fight for survival.

What this means is that investors are bailing on the euro EURUSD, -0.7484%  and piling into the dollar this morning, which looks ready to sock Wall Street in the mouth as traders return from the long weekend. Also not helping, oil prices have picked up where they left off, deep in the red.

Our call of the day centers on a commodity that’s blissfully removed from the above issues, and flying out of the gate this morning.

“After yesterday’s public holiday in the U.S., cotton trading on the exchange in New York CTZ8, +4.62%  has started with a bang today: immediately after trading began, the price surged by 4 cents – the limit up – to a four-year high of 90.65,” note analysts at Commerzbank. Prices are up nearly 5% this month so far, and 19% year-to-date.

This is partly due to extremely dry conditions in Texas, the biggest U.S. cotton-growing state. It’s also on back of hopes that China will become increasingly reliant on imports, having reduced its own stocks over the years, with a focus on quantity and, most of all, quality, the analysts say.

“Being the world’s largest cotton exporter, the U.S would be the first choice here,” the Commerzbank team says. And if the U.S. and China can reach a trade agreement, that’s an even bigger positive for cotton, as the latter has in the past threatened punitive tariffs on cotton imports.

As Reuters reported Monday, Kansas and Oklahoma farmers have been jumping on the bandwagon, hopping out of wheat to plant cotton, which needs just a little bit of water to keep growing, but not as much as its grainy rival.

Cotton demand may also good news for Deere DE, +0.52% The Reuters article noted huge demand for machines that harvest cotton, whether new or used, notably from those Kansas and Oklahoma crop-switchers.

The market

A pretty downbeat morning is building, with Dow YMM8, -0.76%  , S&P 500 ESM8, -0.81%  and Nasdaq Composite NQM8, -0.65%  futures getting pulled into the red. On Friday, the Dow DJIA, -0.24%  , S&P SPX, -0.24%  and Nasdaq COMP, +0.13%  finished lower, driven by losses for energy stocks. Markets were closed Monday for Memorial Day.

WTI CLN8, -1.36%  oil prices are still under pressure. The dollar DXY, +0.82%  is well up, while gold GCM8, -0.05%  is mostly flat.

Asia ADOW, -0.59%  stocks had a largely downbeat session, while Europe SXXP, -1.42%  is swimming in red ink over those political headlines.

See more in Market Snapshot.

The buzz

Political drama is back with a vengeance in Europe. Another round of elections could be coming in Italy after the president blocked efforts by a euroskeptic coalition to form a government. And Spain’s prime minister faces a confidence vote Friday stemming from a corruption case involving top party officials. Italian bond yields are surging.

Read: Here’s why markets are worried about Italian politics — again

Meanwhile, there’s been a flurry of diplomatic activity to try to salvage that North Korea-U.S. summit, with officials from both sides meeting to try to get a denuclearization deal ahead of time, and the U.S. holding off on fresh sanctions on Pyongyang to keep things moving.

Elsewhere, the EU’s top trade dog is making a last-minute effort to secure a steel trade waiver from the U.S., before the clock on tariffs runs out on Friday.

Verint Systems VRNT, +2.20%   is looking to buy Israel cyber-surveillance specialist NSO Group for $1 billion.

Apple AAPL, +0.23%  reportedly plans to put high-end OLED screens on all its new phones, which didn’t go down too well with some of its suppliers in Asia.

Starbucks SBUX, +0.42%  will close 8,000 stores Tuesday to carry out antiracism training, after last month’s arrest of two African-American men at a Philly outlet.

Case-Shiller home prices and consumer confidence are both on the way this morning.

The chart

Making the rounds has been this chart that resurfaced over the weekend. It shows how long it takes for the S&P 500 to recapture lost ground after a pullback.

The Real Investment Advice inflation-adjusted log shows that on average, it takes about 20 years for a market to build back to its precrash highs.

The quote
Getty Images for Concordia Summit

George Soros is worried about Europe.

“The European Union is in an existential crisis. Everything that could go wrong has gone wrong.” — That was a timely comment from George Soros, the hedge-fund manager best known for taking down the British pound in 1992

In a speech for the European Council on Foreign Relations in Paris on Tuesday, Soros goes on to talk at length about the many problems facing Europe, saying the region needs to “do something drastic to escape,” such as “reinvent” itself.

The stat

4th — For the fourth straight year, the NBA Finals will be a face-off between the Cleveland Cavaliers and the Golden State Warriors. Zzz.

Random reads

Poor Rudy Giuliani — booed on his birthday by Yankees fans.

France offers hero immigrant citizenship and a job after he climbed a building to rescue a child

Two deaths after subtropical storm Alberto hits North Carolina

Book-reading, it’s not a competition.

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