Bonds Stay Up on Perceived Weakness
U.S. 10-year Treasury bond prices rose today, as traders bet that the credit
crisis has yet to come full force. Last week, bonds shot higher after the
central banks for the three major currencies announced they were pumping the
market with billions of dollars to provide liquidity and to keep the markets
afloat. Traders are pricing in a 100% chance that the Fed will be forced to cut
rates in September to manage slowing growth; despite Fed comments that inflation
is the number one focus, recent market activity suggests that major problems in
the market could be running deep.
The yen gained moderately against the euro, and and was flat on the dollar,
as traders continue to unwind carry trades. Traders are buying back previously
borrowed yen, to cover riskier positions in a volatile global market. Last week,
credit market concerns sent equity markets around the world tumbling, as major
funds and traders scrambled to get out of the market and assess the damage. The
dollar fell slightly against the euro. The euro also fell against the dollar,
hurting from yen strength. The dollar fell against the Canadian dollar, but rose
on the British pound.
Oil rose as much as 1.8% today, but gave up nearly all gains to close only
slightly higher. Oil has been falling lately, on concerns that slowing U.S.
growth will curb energy and gasoline demand. Today’s gains came on account of
speculation that central bank intervention could stave off a major economic
meltdown, and also a major storm in the Atlantic that could potentially disrupt
supply lines. Natural gas futures rose fractionally today, on no major
developments.
Gold was down fractionally, as the dollar gained on the euro today. Gold
normally trades inversely to the dollar and with oil; today’s euro weakness led
to gold selling, as traders sought safety in the dollar. Copper futures rose
2.4% on a global equity recovery rally.
Grains were mixed. Soybeans rose just over 1%, wheat was up fractionally and
corn fell about 0.7%.
The major averages began the day in positive territory following strong
retail sales data and another injection of cash by the Central Bank. The
averages have experienced little major movement throughout the session and into
the close. Click
here to read the rest of today’s
Stock Market Recap.
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