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U.S. 10-year Treasury bonds inched higher today, as traders and investors continue to speculate that an economic slowdown is underway, fueled by a housing slowdown and a credit crunch. Bonds have risen steadily since the beginning of July, when the subprime mortgage meltdown began to unravel, and major hedge funds began to identify previously unnoticed risks. Bonds typically rise on negative economic news and fall on strength, so the bond market is taking a defensive stand ahead of a possible economic recession.
The yen fell against the dollar and the euro, and the dollar pared losses against the euro, after Fed Chief Bernanke said that the Fed was ready to help the market when necessary. Traders are concerned that housing and credit problems could undermine equity markets, and Bernanke was addressing those concerns. August marks the second straight month in a row where the yen has recorded a monthly gain over the euro. Lately, the yen has been trading inversely with global equity markets, on the carry trade dynamic. In general, global equity markets have had a large hand in directing currency movements over the past few weeks.
Crude oil futures rose about 0.7% today, as a storm threatened energy supply lines near the Gulf of Mexico. Oil also rose as equity markets rallied, fueling sentiments that slowing growth will not effect oil demand. Crude oil futures have fallen steadily since the beginning of August, on fears that an economic slowdown would lead to a major drop in crude demand. Natural gas futures fell nearly 4% today.
Gold futures rose over 1%, on speculation that traders will seek safety from risky U.S. and global equity markets. Gold normally trades inversely to the dollar and with oil, which is what happened today. Traders bought gold to protect from dollar weakness. Copper futures jumped 1.5%, as equities rallied.
Grains rose today. Soybeans rose 1.3%, and corn jumped over 5%.
Stocks ended the week on a positive note, after comments by Federal Reserve Chairman Ben Bernanke's, that the Fed was ready and willing to use all available resources to keep the economy healthy. Investors were also encouraged by President Bush's plans to help borrowers avoid defaulting in the wake of the sub-prime crisis. Click here to read the rest of today's Stock Market Recap.
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