Oil Rallies on Nigeria Concerns

U.S. 10-year Treasury bonds rose, in
response to a rally in European bonds that occurred today. As European rates
shot higher today, traders saw U.S. bond prices in a favorable light. Bonds
usually fall on economic strength and rise on weakness. The European economy has
produced noticeably stronger reports as of late, so traders bought up cheap
U.S. bonds on speculated U.S. economic weakness. Key housing and business
spending reports are due out from the U.S. this week, and investors are
anticipating potentially weak numbers.

The yen rose against the dollar and the euro
today, and the dollar also rose against the euro. The yen has been trading near
record lows against the euro, and yearly lows against the dollar. The yen
rallied after Standard & Poor’s raised Japan’s debt rating, which helped
increase the attractiveness of investing in the Japanese currency. The currency
market favors positive growth and inflation, which places Europe in the best
light. Both Japan and the U.S. have had trouble competing with Europe’s
consistent, inflationary economic reports.

Crude oil futures rose about 1.7% on continued
worries that Nigeria’s elections which occurred over the weekend could present
supply problems. The politically corrupt country held elections this weekend,
and there is a serious potential for terrorist or government groups to sabotage
the country’s oil output, which could affect global supplies. Crude has been
very sensitive to geopolitical events lately, evidenced in the recent Iran/UK
hostage price spike, in addition to the record highs from this summer. Natural
gas futures rose 1.7% in-line with other energy components.

Gold fell fractionally today, as the dollar
gained strength against the euro. Gold usually trades inversely to the dollar
and with oil, and it was dollar action that dominated today’s gold trading.
Traders sold gold in the face of a strong dollar. Copper futures rose about 0.7%
on higher import demands from China.

Grains fell across the board today. Corn
dropped 2.4%, wheat fell nearly 2% and soybeans fell around 0.3%.


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

John Lee

Associate Editor