Oil and Gold Move Lower with Equities

U.S. 10-year Treasury bond prices were basically
unchanged today, after reaching monthly highs last week on a global equities
selloff. Bond prices usually move up on economic strength and down on
weakness; last week’s global meltdown pushed bonds to their highest levels since
early December, a sign of relative economic weakness. Bonds have been
moving steadily higher since the end of January, when a number of key economic
indicators, including housing and manufacturing, turned negative. Housing
should remain a key focus for traders moving towards the end of Q1.

The yen pushed to 3-month highs against the
dollar and the euro today, as carry trades continue to unwind in the global
marketplace. A recent selloff in the global equities market has spurned a
massive unloading of carry trades, in which an investor borrows yen cheaply to
purchase more profitable assets in other markets. The yen had reached
record lows against the euro and yearly lows against the dollar before last
week’s slide led investors to reduce risk by exiting their carry trades.
The yen’s move could be seen as a snap-back against extended oversold

Crude oil fell about 1.5%, on general sentiments
that major weakness in the equities markets will equate to less demand for fuel
consumptions. Despite the slide last week, crude managed to hold above $60
a barrel, which is a crucial level just broken 2 weeks before on diminishing
supplies. Investors felt that with instability in the global equities
market, there will be less demand for heating and other fuel supplies.
Natural gas was up fractionally, after falling over 7% last week.

Gold futures fell over 0.5% today, on continued
weakness stemming from a global equities slide. Investors sold the metal
to protect against losses in the equity markets; gold is also used as a market
proxy, so major weakness in the global markets also contributed to gold’s move
lower today. Copper fell about 0.3%.

Grains traded mixed today. Corn rose 1.6%,
wheat rose 1.3% and soybeans fell about 0.4%.


The ISM index fell
to 54.3 in February, the slowest rate of growth in nearly 4 years.

John Lee

Associate Editor