Gold, Oil on the Rebound
U.S. 10-year Treasury bonds inched higher today, as traders and investors
continue to speculate that an economic slowdown is underway, fueled by a housing
slowdown and a credit crunch. Bonds have risen steadily since the beginning of
July, when the subprime mortgage meltdown began to unravel, and major hedge
funds began to identify previously unnoticed risks. Bonds typically rise on
negative economic news and fall on strength, so the bond market is taking a
defensive stand ahead of a possible economic recession.
The yen fell against the dollar and the euro, and the dollar pared losses
against the euro, after Fed Chief Bernanke said that the Fed was ready to help
the market when necessary. Traders are concerned that housing and credit
problems could undermine equity markets, and Bernanke was addressing those
concerns. August marks the second straight month in a row where the yen has
recorded a monthly gain over the euro. Lately, the yen has been trading inversely with global equity markets, on the
carry trade dynamic. In general, global equity markets have had a large hand in
directing currency movements over the past few weeks.
Crude oil futures rose about 0.7% today, as a storm threatened energy supply
lines near the Gulf of Mexico. Oil also rose as equity markets rallied, fueling
sentiments that slowing growth will not effect oil demand. Crude oil futures
have fallen steadily since the beginning of August, on fears that an economic
slowdown would lead to a major drop in crude demand. Natural gas futures fell
nearly 4% today.
Gold futures rose over 1%, on speculation that traders will seek safety from
risky U.S. and global equity markets. Gold normally trades inversely to the
dollar and with oil, which is what happened today. Traders bought gold to
protect from dollar weakness. Copper futures jumped 1.5%, as equities rallied.
Grains rose today. Soybeans rose 1.3%, and corn jumped over 5%.
Stocks ended the week on a positive note, after comments by Federal
Reserve Chairman Ben Bernanke’s, that the Fed was ready and willing to use all
available resources to keep the economy healthy. Investors were also encouraged
by President Bush’s plans to help borrowers avoid defaulting in the wake of the
sub-prime crisis. Click
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Stock Market Recap.
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