Oil Continues to Surge on Iran Tension

U.S. 10-year Treasury bonds gave up gains today
to fall fractionally, after Fed Chairman Bernanke said that the economy is
growing moderately. Bonds moved higher last week after the Fed removed key
hawkish language from its announcement, but prices have fallen since then, and
fell more today on Bernanke’s positive outlook. Housing has been a major
focus for bonds for some time now; weak housing numbers were a major factor in the U.S. economic slowdown during the second half of 2006.

The yen surged against the dollar and the euro
today, as traders bought back the yen to cover riskier asset positions.
The U.S. stock markets have been under pressure for the last two days, and have
fallen off of a recent rally effort. The global equities selloff at the
end of February produced similar yen action, as traders exited carry trades to
cover themselves from riskier positions. As traders buy back the yen they
had initially borrowed, the yen gains in strength.

Crude oil rose 2.4% today, as tensions continue
to escalate over the Iran/UK hostage situation. Geopolitical tensions were
a primary factor in crude’s record prices this July, and similar supply fears
are driving crude higher right now. Crude has risen steadily after
breaking through key resistance at $60 a barrel, and the hostage situation is
only driving prices higher. Energy use also usually increases during the
summer, so more traders are buying in anticipation of higher demand during the
heat. Natural gas rose over 2%, mostly trading in-line with crude’s

Gold gained fractionally today, trading higher
with crude on geopolitical concerns. Gold usually trades in-line with
crude and inversely to the dollar, which is exactly what happened today.
Copper prices rose fractionally today, on a continued decline of global copper

Grains traded mixed today. Soybeans rose
nearly 2%, wheat rose about 0.7% and corn fell about 1%.


U.S. durable goods
orders fell for a second month in a row last month.

John Lee

Associate Editor