Bonds Continue To Rise, Oil Falls

U.S. 10-year bond notes continued to rise today, after a
housing report showed an unexpected increase in new homes last month, and the
consumer price index spiked the most in a decade. Prices shot up in June
after the Fed decided to keep overnight rates at 5.25%, but pulled back sharply
3 weeks ago after a positive jobs number. Prices have begun to rise
recently on more and more negative economic data, but the positive housing
numbers failed to send prices falling again.

The dollar reversed a two-day decline against the yen and euro
today, advancing gains after a U.S. housing report showed that housing starts
rose unexpectedly last month. The housing data came in stronger than
expected, which spurred on hopes that the recent slide in the housing market
could be nearing an end. The yen, euro and dollar have all been trading
heavily on inflationary news and interest rate prospects.

Crude oil futures fell 2.3% to close at $57.59 a barrel today,
after the Energy Department announced an unexpected surge in crude inventories,
which puts current reserve levels 14% higher than 5 years ago. Crude oil
has fallen dramatically from its July highs, dropping nearly 25%. Natural
gas rose 5.9% on expectations that winter weather will cause a surge in demand
for the energy commonly used to heat houses.

Gold futures fell 0.2% to close at $592.60 an ounce, trading
in-line with oil. Oil and gold have traded closely together through the
summer, as investors seek out the safe-haven commodity in the face of rising oil
prices and inflation pressures. Gold has fallen nearly 20% from its May
highs. Copper fell today, despite a report that the U.S. housing market
looks to be in good shape.

Softs mostly fell today. Cocoa fell 1.7%, coffee fell
0.2%, orange juice fell 0.2% and sugar plummeted nearly 8%.

Grains traded mixed for the day. Corn was down 1.7%,
wheat fell 3.5%, coy rose 0.6% and oats fell 0.2%.


Housing Starts Show Unexpected Increase In September (full

Consumer Prices Fall More Than Expected, Core Prices Increase
Modestly (full

John Patrick Lee