Oil Plummets, Bonds Ease Lower

U.S. 10-year Treasury bond prices fell
fractionally today, moving lower on Friday’s positive jobs report. Bond
prices are trading near 2-month lows on widespread feelings of economic
strength, which were spurred on by a rosy employment report on Friday.
Bonds typically rise on economic weakness and fall on strength; traders
continued to sell long-term safety in favor of riskier assets, like equities.
Bonds have been falling steadily for nearly 3 weeks, on a string of positive
economic reports.

The dollar continued to move off recent lows
against the euro, and was slightly higher against the yen. The dollar
bounced off 2-year lows on Friday against the euro, after an unexpectedly
positive jobs report was released. Strength in the jobs market pointed to
a growing economy, which forced traders to pare bets that the Fed will be forced
to cut rates soon. The dollar was at lows against the euro following a
positive German industrial report last week. The yen has also been a major
focus for traders as the effects of the international carry trade continue to
unfold. On global equity weakness, traders buy back borrowed yen to cover
riskier assets, sending the yen higher. Subsequent equities strength has
led to immediate yen weakness.

Crude oil futures fell around 3.5% as
geopolitical tensions simmer down after a tense few weeks during the Iran/UK
captive sailor situation. Iran worries helped to send crude to its record
highs last summer, and this most recent Iran standoff saw crude jump nearly 10
points in less than a month. Crude had been trading around $60 a barrel
for weeks until Iran captured 15 British sailors in the Persian Gulf, which
caused oil prices to jump immediately. Natural gas futures fell
fractionally today, giving up gains from early in the day.

Gold futures fell about 0.5% on crude’s decline.
Gold usually trades inversely to the dollar and with crude; today, crude action
dominated today’s gold trading, as traders dumped gold in the face of sagging
energy prices. Traders use gold as a hedge against rising energy prices.
Copper prices rose nearly 4% on expectations that worldwide demand will continue
to grow, and that struggling inventories will have trouble keeping up the pace.

Grains traded mixed today. Soybeans fell
about 1.5%, corn fell about 0.6% and wheat rose 0.8%.


No major economic
news to report for the U.S. today.

John Lee

Associate Editor