The Middle East Dominated The Futures Market This Week

The situation in the Middle East continues to dominate the
futures market action.  As events unfold, investors seek safety
in commodities as the price of oil skyrockets on the prospects of losing Iran’s
crude supply.

Two-year Treasuries gained more than the 10-year notes for the
second straight day, as investors sought the safety of the short-term benchnote. 
The 2-year yield dropped to a one month low.  Escalating fighting in the
Middle East continues to shake the world economy, leaving investors to scramble
for the safest zones.

The Japanese yen fell to a three-week low against the dollar
after the BOJ raised rates a quarter point today.  Speculation from both
sides led to moves up and down the past two weeks in the Yen, and the BOJ’s
promise to keep rates low led investors to sell the Yen.  The Fed and ECB
are anticipated to raise rates further this year, fueling demand for the Euro
and the Dollar.  The Japanese rate hike was the first in 6 years, and many
investors see it as the dawn of a new Japanese economic era.

Crude oil futures reached new record highs, hitting $78.40
before closing at $77.50 a barrel.  Geopolitical events remain at the
forefront of the commodities and energy sectors, as investors see the demand for
crude and safe haven futures explode.

Gold futures rose to six-week highs as investors sought safety
in the commodities as the Israel situation continues to worsen.  Gold rose
$13.60 to $668 an ounce; the price of gold has risen over 8% in the last two
months as Iran continues to defy the international community, North Korea
continues to plan missile tests and the situation in Palestine worsens daily.

The grains traded mixed today.  Soybeans were up
fractionally despite a report of a surplus in supply.  Wheat also rose
fractionally after the USDA announced that South Korea had bought nearly 50,000
tons of hard wheat.

The softs closed slightly down for the day, as supply for
sugar and coffee grows during the Brazilian harvest season.  Sugar closed
down 2% and coffee closed down fractionally.

Despite another confirmed case of mad cow disease in Canada,
feeder cattle traded down fractionally for the day.

Economic News

Business Inventories Rise More Than Expected In May (full

Import Prices Increase Modestly In June (full

Retail Sales Fall Unexpectedly On Drop In Auto Sales (full

BoJ Raises Key Interest Rates, To Adjust Rates “gradually”,
Upgrades View On Economic Growth (full

John Patrick Lee