Rest Day Across the Board
U.S. 10-year Treasury bond prices were fractionally changed, as U.S. equity
markets staged a modest rally. Bonds rallied for most of the summer, on
expectations that housing issues will lead to a broad economic slowdown. Bond
prices fell ahead of the expected rate cut, and have been trying to find footing
since the Fed action. Bonds typically rise on economic weakness and fall on
strength, so traders assumed a defensive position through the summer, on
perceived U.S. weakness.
The dollar recovered slightly versus the euro and the yen, but equity
strength led to major yen selling today. The carry trade dynamic seems to have
returned on perceived strength in the global equity markets, leading traders to
borrow yen cheaply to reinvest in more profitable, and risky, assets. Over the
summer, the yen carry trade has led to major moves for the Japanese currency. As
global equities fall, traders buy back the yen to cover risky position, and then
sell the yen on rising global stocks. The dollar has also been a major focus
over the past few weeks, on anticipation of the Fed cut, which then led to major
dollar weakness versus the euro. Today, the dollar managed a mostly flat today
after an ugly start to the week.
Crude oil bounced about 0.5% after falling for 3 straight days, on worries
that a tropical depression in the Gulf of Mexico could slow oil production in
the gulf. Crude oil recently hit new record highs at $82.35, on worries that Q4
demand will outpace supply. Natural gas futures fell about 0.6%.
Gold fell about 0.4% on dollar weakness, and speculation that the rally was
overdone. Gold recently hit decades-old highs last week, on a weakening dollar
and rising oil prices. Gold usually trades inversely to the dollar and with oil,
a pattern gold futures followed closely through September. Copper futures fell
Grains were up today. Soybeans rose 1.8%, and corn gained about 1%.
Stocks rose on Wednesday, helped by news a deal was struck by the United
Auto Workers union and General Motors. Both GM and Ford shares rallied
today after the deal was announced. Click
here to read the rest of today’s
Stock Market Recap.