Oil Shoots Higher on U.S. Announcement
U.S. 10-year Treasury bond prices fell today,
after an $8 billion auction of 20-year inflation-protected bonds sold on high
demand. Bond prices have been range-bound over the past week of trading,
but today, prices pushed closer to 2-month lows. The U.S. economy has been
able to produce a string of turn-around positive-growth reports, which have sent
bond prices lower since the beginning of December. Prices initially shot
higher last June when the Fed initiated a rate-pause to deal with a struggling
housing market and slowing growth. Prices rose steadily through the second
half of 2006, on continued weak reports. Since December, though, prices
have been pushing lower on positive housing, manufacturing, labor and confidence
reports. Bond prices tend to move lower during periods of economic
strength, and higher during weakness. Investors should remain focused on
key housing and manufacturing reports for more yield-related information.
The euro moved to record highs against the yen,
and moved higher against the dollar, after multiple reports were released today
in Europe which point to a growing economy. Consumer spending and
industrial reports both pointed to accelerating growth, keeping the door open
for future rate hikes. Investors speculated that the ECB would be forced
to lift rates by June to deal with inflationary and growth pressures. The
yen has been in major trouble lately on the global market, with Japan remaining
unable to produce any sort of positive report. The U.S. is pushing back
against lows on a string of positive-growth reports. The international
currency market favors currencies backed by growing, inflationary economies with
a need to raise interest rates, which puts the euro in the best light out of the
major currencies.
Crude oil rose over 4% to close at $54.96 a
barrel today, after the U.S. Department of Energy announced plans to double its
strategic oil reserve over the next 2 decades. With the U.S. buying up
such a large share of the global market, shares shot higher today, after already
being boosted by a cold snap across the northern U.S. Cold weather usually
equates to higher prices, but the U.S. announcement helped to send prices even
higher today. Natural gas prices rose nearly 4% to 1-month highs, as cold
weather and continued forecasts signal a spike in energy demand.
Gold futures rose nearly 2%. Gold usually
moves inversely to the dollar and with oil, which is exactly what happened
today. Investors sought safety in gold in the face of dollar weakness and
rising energy prices. Copper prices rose 2% on signs of increased demand
from the U.S. and China.
Grain prices rose across the board today.
Corn rose 0.6% and soybeans rose nearly 1% on speculation that ethanol and
alternative fuel demand will jump in the coming years; traders speculated that
President Bush will address the issue of alternative energy resources in the
State of the Union speech tonight. Wheat rose just over 3% in today’s
session.
Economic News
No major U.S. economic news to report today.
John Lee
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