Housing Data Boosts U.S. Sentiment

U.S. 10-year Treasury bond prices fell to the
lowest levels in nearly 4-months, after a positive housing report was released
today. However, traders bought back bonds through the day, driving them to close
just higher than yesterday. A selloff in the equity markets could have pushed
prices higher. Traders have been closely monitoring the housing sector for
months now, as the sector experienced a massive slowdown which reverberated
throughout the entire economy. A turnaround in the housing market would signal a
turnaround in the broader markets for most investors, and the housing strength
from today’s report boosted U.S. sentiment. Bonds typically fall on positive
news, and rise on negative news, so traders obviously took the housing report as
a good sign for the U.S. economy. Bonds rose though, as the stock markets sold

The dollar rose to 6-week highs over the euro
today, after better than expected housing sales numbers were released. The yen
rebounded strongly against the dollar and the euro, and on no major news. The
so-called carry trade was reversed as traders bought back borrowed yen to cover
riskier positions. The U.S. dollar managed a weak bounce against the Canadian
dollar, and closed near flat after a big down day yesterday against the British

Crude oil
futures dropped 2.3% today on speculation that
refinery shutdowns will cause crude inventories at a key loading point in the
U.S. to build up. Crude refineries are still not at full capacity, a number of
them having been shut down over the past month or so for cleaning and repair.
Summer is typically a period of high demand for energy, so refineries will shut
down ahead of the summer to tighten up before the rush of summer demand. When
the refineries get shut down, crude supplies grow because less crude oil is
being converted into gasoline. Natural gas futures fell about 1% today after the
Energy Department released gas inventories which were higher than expected.

Gold futures rose fractionally today. Gold
usually trades inversely to the dollar and with oil. It is not clear what
exactly dominated today’s gold trading. Gold initially fell on dollar strength
against the euro, and falling crude prices, but by the end of the session, gold
was above yesterday’s closing price. Copper prices fell over 3% on fears that
supplies in China will exceed demand.

Grains rose across the board today. Soybeans rose
about 0.6%, corn gained over 2% and wheat jumped over 3%.


New home sales
rose the most in 14 years last month.

Initial jobless claims fell to the lowest level in more than a year last

John Lee

Associate Editor