Bonds Push Higher on Underlying U.S. Weakness
Bond prices rallied back near 3-year highs today, on a smattering of mixed
reports that indicate a recession could be on the way. Housing numbers out today
showed that the median price of a new house dropped 13% from the year earlier, a
calling card of the housing and credit troubles which are plaguing the U.S.
economy. Traders are betting that a recession is on the way, and also that the
Fed will cut rates for the third time before the end of the year.
The dollar rose against the euro, but fell against the yen, after Goldman
Sachs advised clients to prepare for dollar strength. The Goldman memo helped to
alleviate concerns that the dollar was in a free-fall, and today’s positive GDP
numbers also helped to boost the dollar. The yen rose against the dollar and the
euro, as traders reversed the carry trade on perceived risk. Despite positive
U.S. data and sentiment, traders still feel that risk levels are too high,
prompting yen buy-backs as traders cover riskier positions.
Crude oil futures rose slightly today, after losing around 10% this week
alone. Crude hit record highs just off $100 last week, and have fallen sharply
this week from the overbought conditions. An inventory report out this week
pointed to more crude supplies than were expected, which also helped to speed up
the energy decline. Natural gas futures dropped fractionally today.
Gold futures were down about 0.7%. Gold normally trades inversely to the
dollar and with oil. The major currencies were mixed, and gold seemed to ignore
rising oil prices today. Traders sold gold despite some dollar strength and
falling energy prices. Copper futures jumped about 2.6%.
Grains were mixed today. Soybeans were up fractionally, while corn fell 1%.
After the biggest two-day rally in more than five years, stocks closed
fractionally higher on Thursday. Click
here to read the rest of today’s
Stock Market Recap.
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