Dollar Slumps, Gold Hits Yearly Highs

U.S. 10-year Treasury bonds fell today, on a firm global equities rally, and
a drop in U.S. jobless claims. With the housing market under major pressure,
jobs have been an underlying support for the U.S. economy, a last resort for
positive-thinkers. The positive jobs number helped assuage worries that the U.S.
economy is slowing, even possibly heading for a recession. Bonds rose through
the summer to hit yearly highs before falling on anticipation of a rate cut.
Despite falling recently, traders are still positioned defensively in respect to
bonds.

The euro surged today, and the yen fell across the board. Today, the BoJ kept
its interest rate at 0.5%. the lowest in the industrialized world. The low
lending rates will continue to feed the carry trade, in which traders borrow yen
cheaply, and invest the borrowed yen in more profitable assets to turn a quick
profit. The carry trade has played a huge role in yen movement in the last
months, as equity markets seem to be leading the yen around by its nose. The
dollar was also up on the yen.

Crude oil prices shot higher today, rising by 2.4%, after an unexpected drop
in U.S. energy inventories that was reported yesterday. Crude prices have
basically been consolidating since hitting new highs a few weeks ago, and
rallied hard today to get close to those new records. Prices fell over 10% at
the end of the summer, but rallied to new highs into fall. Natural gas futures
fell nearly 2% today.

Gold futures rose to 27-year highs, on major dollar weakness versus the euro.
Despite positive reports out of the U.S., the dollar slumped versus the euro,
prompting gold buying for safety. Gold normally trades inversely to the dollar
and with oil, which is exactly what happened today. Copper futures were also up
today.

Grains were mixed. Soybeans gained about 1.3%, while corn fell nearly 1%.

Stocks reversed course in the afternoon to close lower. Earlier in the
day, the NASDAQ hit a 6-year high but tech stocks lead the decline and posted
the steepest losses. Click

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Stock Market Recap
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Economic News

The U.S. trade deficit narrowed more than
expected in August.