Oil Climbs As Saudi Arabia Signals Output Cuts
U.S. 10-year Treasury bonds declined today, after Philadelphia
manufacturing numbers led investors to believe that the Northeast’s economy
could be set to strengthen. Prices rose for 3 straight days on negative
economic news, but today’s Philly report bolstered investor sentiment that the
Fed will not cut rates soon. Bonds have risen steadily since June, when
the Fed announced its decision to end its rate-tightening cycle. With
signs of a slowing economy, investors sought the safety of the long term note.
Recently, prices have fallen on signs that the economy is not slowing as much as
was once thought.
The dollar fell the most in 3 months against the yen and euro
today, after the Philly manufacturing report showed declines in industrial
production and utilization, and a drop in producer prices. While bond
investors found long-term economic strength in the report, forex traders saw the
decline in production and manufacturing as a negative sign for the dollar,
causing the ensuing sell-off. The dollar, yen and euro have all been
trading heavily on interest rate and inflationary news, and the action following
this report falls in line with those expectations.
Crude oil futures rose 1.6% to close at $58.55, after Saudi
Arabia announced plans to reduce oil output by about 1 million barrels a day to
stem the falling price of oil. OPEC has been in the news lately, calling
for a wide-spread reduction in the global supply of oil to curb falling prices.
Oil is down over 20% from its record highs set in July. Natural gas rose
4.9% to an eight-week high today, as a cold snap hit the Northeast and
Midwestern U.S.
Gold futures rose 1.7% to close at $602.50, as oil rose and
the dollar fell. Gold is commonly used as a safety commodity in the face
of rising energy costs and as a hedge against inflation. Gold is down
nearly 20% from its May highs, as both oil and the metal fell from record highs
set earlier in the year. Copper rose 0.4% on signs that China’s
economy will keep growing, thereby spiking demand for the metal to be used in
housing projects.
Softs traded mixed today. Cocoa was up 1.7%, coffee fell
0.4%, orange juice fell 0.5% and sugar was flat for the day.
Grains traded mostly higher. Corn was up 0.16%, wheat
was up 0.1% and soy rose 0.6%; oats fell nearly 2%.
Meats fell today, with cattle down 0.4% and porkbellies down
0.3%.
Leading Indicators Index Rises Less Than Expected (full
story).
Weekly Jobless Claims Unexpectedly Fall Below 300,000 (full
story).
John Patrick Lee