Bonds Pare Losses on General Growth Worries

Treasuries fell fractionally today, coming back from moderate losses from the morning. Bond prices opened lower than yesterday's close, after a jobless claims report showed that fewer people had applied for unemployment than was previously expected. Despite the positive economic news, bonds climbed today to close even, on general subprime and housing worries. Yesterday Fed Chief Bernanke said that the housing slowdown could cause problems in other parts of the U.S. economy and lead to an overall slowdown. Bonds rose on the news yesterday, but were flat today.

The euro crept higher today against the yen and the dollar, with the yen still trading near record lows. Traders initially thought that the equity market shakeup would lead to yen strength, as traders bought back borrowed yen to cover risky assets. The so-called carry trade has led to a number of yen rallies recently, on significant market declines. Today, however, the strength of the U.S. stock market rebound led traders to keep business as usual, buying euros over the yen and dollar. The dollar rose slightly against the yen. The dollar fell against the Canadian dollar, but managed a rally against the British pound.

Crude oil futures rose over 1% today, as traders feared that an oil field shutdown in Africa would lead to major supply issues. A major oil company said that all deliveries from the producing area would be suspended until the problem is amended. Oil trades sensitively to any supply-related news, especially during summer, which is a period of high demand and energy use. Oil has been rising steadily so far this summer. Natural gas futures rose 1.6% after supplies rose less than expected last week.

Gold futures rose 0.7% today, as the dollar fell against the euro. Gold normally trades inversely to the dollar and with oil, and today, traders focused on the falling dollar. Traders bought gold to offset dollar weakness. Copper futures gained nearly 3% on speculations of hot global growth.

Grains traded mixed today. Soybeans gained about 0.6% and corn fell 1.8%.

The major indices showed strength in Thursday's session with the Dow adding 0.6%, the S&P 500 up 0.5%, and the Nasdaq up 0.8%. Strong earnings helped boost the markets today, despite comments from the Fed that it would not be cutting rates anytime soon. Click here to read the rest of the Stock Market Recap.

John Lee
Associate Editor
johnl@tradingmarkets.com

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