No End in Sight for Oil, Gold Rallies
U.S. 10-year Treasury bonds rose ahead of tomorrow’s key Fed rate
announcement. Traders are unsure if the Fed will cut rates, and 10-year bond
prices rose on the uncertainty. Bond prices usually rise on negative news, and
fall on positive news. Before the last Fed cut, bond prices fell because traders
had already priced in the expected cut. This time, we are seeing rising prices,
perhaps illustrating the underlying fear and uncertainty in the marketplace.
The yen sank versus the dollar and the euro today, as recent equity strength
leads to yen selling. In the so-called carry trade, traders borrow yen cheaply
to reinvest in more profitable, but risky, assets. Yen traders sold yen to
reinvest in equities. The dollar was slightly lower than the euro today, but
most of the action revolved around yen weakness. The dollar also plummeted
versus the Canadian dollar, and also fell on the British pound.
Crude oil futures hit new all-time record highs today above $93 a barrel,
exacerbating fears of an oil demand shortage. Traders are concerned that U.S.
demand is far outpacing supply, and Middle East tensions are helping to ratchet
prices higher. Natural gas futures were also higher, by just under 2%.
Gold futures also added onto gains into new high territory. Gold rose with
rising oil prices. Usually, gold trades inversely to the dollar and with oil,
which is exactly what happened today. Traders bought gold to hedge against
rising oil prices. Copper futures fell about 0.4%.
Grains were also higher today. Soybeans rose 1.5%, while corn was up just
over 1%.
The major markets rose today, despite a number of negative and mixed stock
earnings reports. Commodity stocks led the way, as rising oil and gold prices
continue to weigh on the stock markets. Click
here to read the rest of today’s
Stock Market Recap.
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