Oil Rises on OPEC

U.S. 10-year Treasury bond prices were
fractionally changed today, after an auction of $6 billion worth of 10-year
notes which occurred today. Bonds fell yesterday after the Fed minutes
were released, which showed an agreement among members that a rate hike could be
necessary to deal with inflationary pressures. Bond prices usually rise on
economic weakness and fall on strength, so investors took the hawkish Fed
minutes as a positive for the economy, sending prices lower.

The euro moved back to 2-year highs against the
dollar, and pushed on record highs against the yen today, after the ECB held
rates and said that rate hikes will occur later in the year. Despite
holding the overnight rate as-is, the President of the ECB said that interest
rates will be higher by the end of the year than they are now, which sent the
euro soaring. The currency market favors positive-growth, inflationary
economies, which Europe has consistently proven itself to be. Both the
U.S. and Japan are struggling to produce the positive numbers that necessitate a
rate hike, and their currencies are struggling against the euro because of that
underlying economic weakness.

Crude rose over 2% today, after the IEA said that
OPEC has reduced its output to the lowest levels in two years. During
crude’s dramatic fall from July record highs, OPEC repeatedly insisted on output
reductions to stem losses from the falling price of crude. After removing
nearly 2 million barrels a day from the global market, crude finally bounced
back in mid-January. Natural gas futures rose about 0.5% on forecasts for
continued cold weather in the Northern U.S.

Gold fell fractionally today, taking a breather
after a 5-week rally. Gold usually trades inversely to the dollar and with
oil. Lately, dollar weakness against the euro and rising oil prices have
helped gold push towards highs. Today, however, was a rest day for gold
prices. Copper fell about 2% today on speculation that high prices will
hurt demand from the U.S. and China.

Grains traded mixed today. Soybeans fell
just over 1%, corn fell just over 0.5% and wheat rose about 0.7%.


U.S. initial
jobless claims rose by 19,000 to the highest levels in almost 2 months.

John Lee

Associate Editor