Traders Anticipate U.S. Weakness

By John Lee

U.S. 10-year Treasury bonds were up slightly today, as traders speculated that key economic reports to come later this week would point to U.S. economic growth weakness. Bonds have been trading within a fairly tight range since the middle of April. Bonds typically rise on weakness and fall on strength; employment numbers Friday pointed to slowing growth and rising inflation, which sent bonds higher.

The euro pushed against the dollar towards record highs today, as traders speculated that economic reports to come later this week from the U.S. will evidence weakness and slowing growth. Traders are worried in particular about a retail sales report that is released on Friday. The euro also gained slightly against the yen today. The U.S. dollar also fell against the Canadian dollar and the yen this morning, on anticipation of economic weakness. The Canadian dollar rose to an 11-month high against the U.S. currency, after U.S. company Alcoa offered to buy the Canadian company Alcan for $26.9 billion. The Canadian dollar has been surging against the U.S. dollar lately on similar M&A news and rumors. The U.S. currency managed to bounce back to near flat against the yen.

Crude oil futures fell about 0.6% today, on speculation that U.S. refineries will be up and running before summer begins. Refineries usually shut down in late March and April for cleaning and repairs, and to gear up for summer, which is usually a period of high energy use. Crude fell today as traders bet that the refineries will be able to fully handle any spike in energy demand. Natural gas futures fell about 2% on mild weather across the Northern U.S.

Gold futures rose fractionally today, on anticipation of U.S. weakness. Gold usually trades inversely to the dollar and with oil; today's traders bought gold as a hedge against U.S. dollar weakness. Copper fell over 1% after a major mining strike in Peru ended.

Grains fell across the board. Soybeans fell about 0.6%, wheat dropped fractionally and corn fell nearly 3%.
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