Oil Slides As Ernesto Forecasted To Miss The Gulf
U.S. 10-year bond yields rose today, pushing up from recent
4-month lows ahead of the government auction of $36 billion in 2-year and 5-year
securities. Bond price has been on the rise over the past two months as
the Fed kept rates the same, and investors bet that the Fed is done raising
rates for the time being. Some investors are even speculating that the Fed
will begin to lower rates at the end of the year and moving into 2007.
The yen dropped hard against the dollar and the euro today,
bringing the currency to record lows against the euro. Investors are
betting heavily that the ECB could raise rates twice before the year is out,
whereas the Bank of Japan could not raise rates at all. For the last two
months investors have been speculating on the prospects of a BoJ/ECB rate
showdown, with both countries touting hot growth and a need to contain
inflation. Japan, however, has seen numbers coming in shy of analysts
estimates, and investors have begun to think that Japan has no real need to
raise rates. The dollar fell slightly against the yen and moderately
against the euro in today’s trading.
Crude oil fell 2.6% to $70.61 on forecasts that show Tropical
Storm Ernesto moving away from the gas and oil producing areas in the Gulf
Coast. With Hurricane Katrina’s one-year anniversary at hand, investors
are watching the weather channels closely to monitor any and all storms that
could hurt crude supply and send prices soaring. The situation in the
Middle East is also weighing on sentiment, but there does appear to be a
sustained lull in the fighting right now, helping prices to ease back from their
highs. Natural gas also plummeted on the weather news, falling 9.6% in
Gold fell 1% to close at $623.90 an ounce as oil fell.
Oil and gold have been trading hand-in-hand, and a drop in energy prices means
that investors are not worrying about inflation as much. Gold, a
safe-haven metal, loses its luster as investors feel less concerned with rising
oil and fighting inflation. Silver also fell, down nearly 3% on the day,
while copper and aluminum both traded slightly higher for the day.
The grains traded mixed on the day. Corn fell slightly,
wheat rose 1.7%, soy fell 1% and oats rose fractionally.
The softs traded mixed, but mostly lower today. Cocoa
fell 3.6%, coffee fell 2.8%, sugar dropped 1.4% while orange juice rose 0.7%.
The meats traded higher today, with cattle up 0.4% and
porkbellies up 1.8%.
John Patrick Lee