Oil on the Rise, Bonds Stand Still

U.S. 10-year Treasury bond yields remained
unchanged today, as investors wait for more data to bet on the future of the
U.S. economy. Bonds have fallen off of recent highs, which stemmed from
widespread sentiment that the U.S. economy was weak and inflation was
moderating. A string of positive reports helped to bring bond prices off
of their highest levels in nearly 11 months. A jobs report due out later
this week is expected to show a rise in jobless claims, but the overall
sentiment in the bond pit today was to watch and wait for more economic signals.

The dollar rose slightly against the euro and to
the highest levels in a month against the yen today. Movement in the
yen/dollar cross stemmed from the BoJ’s continued rate-pause and comments from
Governor Fukui which suggested that Japan will not see rate hikes any time soon.
The dollar has rebounded recently off of lows on a flurry of positive U.S.
economic data, which has helped to fight the perception that the economy is
slowing. Europe is the most favored currency at the moment, with the ECB
remaining committed to staying on top of inflation. A report yesterday
from Germany saw that German business confidence had risen more than expected
last month, which helped to boost the euro. The international currency
market favors currencies backed by hot, inflationary economies. Both the
U.S. and Japan have failed recently to convince global investors that rate hikes
are coming soon, while Europe has had no problem highlighting a growing,
inflationary economy.

Crude oil futures rose 0.4% to close at $63.72, a
3-month high, after a U.S. energy report showed that inventories had dropped
more than expected. OPEC has announced further international production
cuts, so the sparse supplies in U.S. inventories did much to fan fears that
crude supplies worldwide will start to fall. Crude is down 25% from record
July highs, and OPEC has been calling for unity and support among its member
nations in implementing a production cut. Oil futures are up nearly 10%
from last year’s levels. Natural gas fell over 4% to the lowest levels in
over 2 months today, as weather forecasts continue to be mild, and supplies
remain ample.

Gold prices fell fractionally today, after the
dollar held its ground against the euro today. The euro initially gained
on the dollar in early trading, but dollar strength carried the currency higher
through the day, sending gold lower. Investors commonly turn to gold as a
hedge against weakness in the dollar, so today’s move could be viewed in those
terms. Gold is down around 20% from May highs, but is still trading above
last year’s levels. Copper fell 2% to an 8-month low today, as rising
inventories and slowing growth in the U.S. continue to hamper the metal’s

Grades traded flat to mixed. Wheat and corn
both closed the day with fractional change, while soybean futures fell about 1%

Economic News

No major economic news to report today.

John Lee


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