The week was filled with extreme contrasts that echoed throughout the world. Stalling retail sales pushed the dollar to new lows as treasuries rallied with an unprecedented zeal. Speculation that the Federal Reserve wont raise interest rates this year was fueled by lackluster retail sales. On the other hand, gold & oil are making valiant comebacks. These shocking new developments are paving the way for a peculiar financial rally.
Dollar Falters As Gold & Crude Make Comebacks
Unfortunately for US investors, the future is far from certain. The 10-year benchmark note yield shocked experts as it dipped below 1.5%. The dollar also sent shockwaves throughout the market when it continued to decline, heading dangerously close to a seven-week low. U.S. retailers are feeling the heat as wholesale prices unexpectedly sank by record numbers. Many blamed these slides on the increasingly unlikeliness of the Federal Reserve’s rate hikes this year. Future traders are now showing 42% odds, which is considerably lower than the 49% predicted on Thursday.
These epic failures were mirrored by impressive comebacks. Optimism that central banks will support global growth was boosted as the Fed took a conservative approach to raising borrowing costs. This overwhelmingly positive outlook helped stocks & bonds make impressive rallies. Oil experienced its best week since April as gold joined the comeback with unexpected paced gains.
While 10-year treasury notes continued to sink, bonds across the world soared. As the Bank of England’s first week of expanded bond buying plan came to an end, U.K. gilts accomplished their 4th weekly gain. Spanish & Italian government bonds joined the party by reaching their own 4th weekly advance. This was especially impressive for Spain, who rapidly snapped back from record lows last Thursday. The German economy also showed signs of recovery with a 0.4% expansion in the second quarter. This was quite a bit less than the 0.7% expansion 3 months ago, but anything is better than what’s happening in Italy. Preliminary figures showed that they fell painfully short of the 0.2% growth forecasts, with gross domestic products remaining unchanged.
Currencies around the world were not immune from this financial turbulence. The dollar took a heavy blow as it dropped 0.4%, leaving it at its lowest levels since June 24th. The greenback ended up sliding 0.9% to 101.07 yen as well as falling 0.8% to $1.1221 per euro. Doubts about China’s economic recovery lead the yuan to weaken by 0.1%. These fears were based on data that highlighted slowing factory output to investment. Chinese retail sales, industrial production & fixed asset investment all fell noticeably short of economists’ estimates. A series of bombings in Thailand caused the baht to fall for the first time this week. The full effects of these terrorist attacks on Thailand’s booming tourism industry remains to be seen.
Commodities around the world surprised investors with strong comebacks. Gold rallied by 1.2%, bumping it up to $1,354.21 an ounce. More precious metals jumped onboard this growth, with silver & platinum experiencing similar growth. Crude had a record week with a 5% weekly jump. This is great news as informal discussions are being planned by big industry players to help stabilize the oil market.
In the end, this was an exciting week for gold, bonds & crude. Even though the dollar took a hit, a comeback isn’t out of the question. These bold recoveries & pitfalls are showcasing the volatility of the current market. Investors around the world will have to stay tuned to see what surprising developments happen next.