Why Treasuries Continue To Climb
The US equity futures
opened lower in sympathy with Europe’s (the Garman DAX was down 4.22%, and the
French CAC 2.38%) and were kept down by the Fed’s comments on
mortgage backed lenders. Although Mr. Greenspan has frequently voiced his
concerns about the inadequate risk management at the nation’s biggest mortgage
backed lenders, today’s comments on the matter by St. Louis Fed President Poole
weighed on the equity markets and the US dollar. Capital continued to flow into
safe haven instruments such as gold and treasuries.
Equities
The S&P and Dow futures look ready to make new
lows for the year after their dismal close today–only a close above their 21
day moving averages would improve this fate. The S&P futures
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finished down 2.52%; the Dow
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Fixed Income
Treasuries benefited from the Fed’s comments and
the continued geopolitical uncertainty surrounding Iraq, North Korea and Iran —
it appears as though the Persians, not wanting to be upstaged by their fellow
“axis of evil” team members, are now seeking a nuclear program of their own.
The 10-year contract
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The September Fed Funds Futures
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now pricing in a 25% chance of a 50 bp. cut, as a result of weaker-than-expected
economic growth.
Precious Metals
Gold also benefited from the continued
geopolitical uncertainty. Gold
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Energy
The natural gas April contract
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finished 9% lower at 6.37 on the back of better-than-usual weather in most of
the US for the next few days. And, April Sweet Crude Oil
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1.37% lower at 37.26 on the back of a possible production increase by OPEC,
should there be a supply shortfall during a possible war with Iraq.
Currencies
The US dollar continues to fall against the Swiss
franc, European euro, and Japanese yen, as global investors seek to exchange US
instruments for what they perceive to be safer ones. The US dollar index
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