Bonds Shoot Higher On Weak Economic Data

U.S. 10-year Treasury notes continued to climb today, after
reports were released today that showed business activity and consumer
confidence fell last month. The reports point to a slowing economy, which
led to demand in the safety of the long-term rates. Bonds shot up in June,
when the Fed pause was first initiated, but began to fall back a month ago, when
the September minutes showed a lingering fear of inflation. With the
latest hold, and more economic reports showing a slowing economy, bond prices
look set to continue rising.

The dollar dropped to five-week lows against the yen and euro
today, after a consumer confidence report showed a decline this month, and
another report showed that business activity also declined in October. The
currencies have been trading heavily on interest rate and inflationary news, so
the negative economic reports created a somewhat predictable negative
environment for the dollar. The euro is the strongest currency out of the
three at the moment, as the ECB is set to raise rates again before the year is
out, despite negative German economic data in the last month. The BoJ,
however, has wavered in its public position on rate hikes, and the U.S. Fed
looks set to keep rates at 5.25% through the end of the year.

Crude oil futures rose fractionally, erasing moderate losses
from earlier in the day. Crude fell through the morning, the selling
spurred on by warm weather and high inventories. Inventories were 12%
above the 5-year average for supplies last week, and are expected to be around
the same this week. Crude got as low as $57.02 today, but the low price
attracted buyers, which sparked a run-up to positive territory in the last
half-hour of trading. Natural gas rose 1.5% during the day.

Gold fell today to close down fractionally, the first drop in
six sessions. The intraday plunge in oil led to a slide in the precious
metal, which is used as a hedge against rising oil prices and weakness in the
dollar. Despite weakness in the dollar, gold fell during the day lockstep
with oil. Oil managed a late-day comeback, which gold did not follow.
Gold is down nearly 20% from its May highs, and has been edging lower since
then. Copper futures traded fractionally higher today.

Softs traded mixed today. Cocoa was down 0.1%, coffee
rose 0.2%, orange juice rose 0.7%, and sugar rose nearly 1%.

Grains traded lower across the board. Corn fell 2.6%,
wheat fell 3.6%, soy fell 1.4% and oats fell 3.6%.

Meats rose fractionally, with cattle up 0.3% and porkbellies
up 0.1%.


Chicago-Area Manufacturing Growth Slows More Than Expected In
October (full

Consumer Confidence Unexpectedly Deteriorates In October (full

John Patrick Lee