Bonds Fall, Oil And Gold Rally

U.S. 10-year Treasury bonds fell the most in over a year
today, after a jobs report showed that unemployment is at 5-year lows. The
report highlighted a robust job market, which significantly reduces the Fed’s
odds of cutting rates before March. Bonds shot up in June when the Fed
initiated a rate-pause, but slumped lower after the minutes from September’s Fed
meeting showed a lingering fear of inflation. This most recent job report
could sway investor sentiment to go bearish on bonds, as a growing economy would
lower demand for the safety of a long-term note.

The dollar rallied the most in a month against the euro and
yen today, after a government report showed unemployment levels were at 5-year
lows. The jobs number dampened speculation that the Fed would be cutting
rates before March, as a growing economy would need rate hikes to combat
inflation. The currency market has been dominated by interest rate and
inflationary news, so a positive jobs report would be expected to boost the
dollar in the global market. The ECB yesterday reiterated a hawkish
stance, which helped to boost the euro against the yen and dollar.

Crude oil futures rose 2.2% to close at $59.13 after the U.S.
government warned of planned attacks on Nigerian oil plants. Crude oil has
fallen steadily since reaching record highs in July, during a tense war between
Israel and Hezbollah and missile tests in North Korea. OPEC has recently
called for a reduction in global output to contain losses, but have not shown a
unified front in enforcing the cuts. Crude inventories are well above the
5-year average at this time, but any supply scare quickly sees a reaction in the
market. Natural gas rose 0.9% as maintenance in nuclear plants across the
U.S. continues to lead to higher demand in the energy, which is commonly used to
heat homes.

Gold futures rallied 0.2% as investors hedged against rising
oil prices. Oil and gold have been trading lockstep for some time, as
rising energy leads investors to seek safety in the metal. Gold is down
nearly 20% from its May highs. Copper futures fell 3.1% on speculation
that inventory updates next week will show a surplus in the metal, which is
commonly used in industrial and home building.

Softs traded mixed today. Cocoa was down 0.4%, coffee
rose 1.7%, orange juice fell 1.8% and sugar fell nearly 2%.

Grains also traded mixed. Corn fell 0.7%, wheat rose
0.2%, soy rose fractionally and oats rose 1%.

Meats traded lower today, with cattle down 0.5% and
porkbellies down 1%.


Service Sector Growth Accelerates More Than Expected In
October (full

Economy Adds 92,000 Jobs In October, Unemployment Rate Falls
Unexpectedly (full

John Patrick Lee