Oil Continues To Fall; Yen Takes A Plunge
U.S. 10-year Treasury bond yields jumped away from recent
5-month lows today, ahead of a government auction tomorrow of $8 billion in
securities. The Fed meets next week to decide whether to raise interest
rates, and the recent drop in bond price can be accounted for by the slowdown in
negative data coming from the US. Interest rate futures show that there is
just under a 90% chance that the Fed will keep rates at 5.25% during the next
meeting on September 20th.
The yen fell to 7-week lows against the dollar today, and had
the biggest one-day drop since April against the euro. A Japanese
government report showed that machine orders fell the most in July in 20 years,
prompting fears that the BOJ will not in fact need to raise rates before the
year is out. Japan has wavered in its statements and reports concerning
the prospects of a coming hike, and this data lends credence to the idea that
the Japanese economy is not hot enough to warrant a hike. The ECB, on the
other hand, is keeping a hawkish public position on the possibilities of a hike
this year. The euro made modest gains against the dollar today, as the
global community awaits the U.S. Fed’s decision on September 20th.
Crude oil futures extended a 6-day decline, falling 1% to
close at $65.57. OPEC’s President Edmund Daukoru said that the
organization is concerned about the speed of the decline, which investors feel
is being fueled by a slowing global economy. Healthy U.S. stockpiles of
crude and a slowing economy should lead to a decrease in demand, which is
increasing the rate of crude’s decline. Natural gas also continued to
fall, down 0.4% to the lowest levels in almost two years. Moderate weather
and a weak hurricane season has helped to contribute to natural gas’ slide.
Gold fell just over 3% to close at $591.60 an ounce as falling
energy prices continue to eat away at gold’s luster. Oil and gold have
been trading hand-in-hand over the summer, as demand for scarce energies fueled
demand for safe-haven futures. Silver fell nearly 6% in trading
Softs traded lower today. Cocoa was down 0.1%, coffee
fell 2.1%, orange juice fell nearly 2% and sugar fell 4%.
Grains traded mostly lower today, with corn down 1.3%, wheat
down 0.5%, soy fell 0.9% and oats traded flat.
Meats traded mixed, with cattle up fractionally and
porkbellies down 3%.
John Patrick Lee