Commodities Signal Bubble Bursting as First-Half Ends Commodities are heading for their best first half in 35 years. The next six months may not be as rewarding because record prices for oil, copper and a dozen other raw materials may crimp consumption and encourage growth in supply. The 19 commodities in the Reuters/Jefferies CRB Index jumped 29 percent through June 27, the most since 1973 and more than any second-half gain in at least five decades, data compiled by Bloomberg show. The index rose another 0.6 percent as of 2:38 p.m. in London.
Gold off highs as dollar bounces from 1-month low Gold slipped from the five-week high it hit earlier in Monday's session, as the dollar bounced back from a one-month low against a basket of currencies. Firm oil prices, which are holding near the record highs they touched this morning, are continuing to support buying of the precious metal as an inflation hedge, however.
Bank Failures: How Bad Will It Be? Washington Mutual, Wachovia and National City are among the financial institutions that have announced huge losses and are looking for billions of dollars from private equity firms or others in the industry just to keep their doors open. In all likelihood, the bigger banks and savings and loan associations will survive the mortgage debacle and ensuing credit crunch, albeit somewhat battered and bruised. But smaller banks may not fare as well, although it doesn't appear that we'll see a cascade of bank failures. Nevertheless, the increased risk has prompted the Federal Deposit Insurance Corp., or FDIC, to beef up its staffing in anticipation of banks going belly-up.
New recession worry: Bank failures Construction loan problems threaten spike in smaller bank failures and add to worry over credit crunch. As if the economy wasn't already fighting enough strong headwinds, the risk of capital shortfalls and outright failure of the nation's banks is rising. The Federal Deposit Insurance Corp., the federal agency that backs bank deposits, last week reported the biggest jump in "problem institutions" it has seen since the savings and loan crisis of the late 1980s. While the extent of the problem is still low by historic standards, it identified 76 banks as in trouble - a 52% increase from a year ago.
Where will the economy go from here? Economist Irwin Kellner shares his outlook with columnist Marshall Loeb It's all too clear that the economy is in a rough patch. The dollar's weak, energy and food costs are high, the stock market is down, oil is at record levels, and housing values have lost years of gains. What's next?
Global economy could face deeper downturn Central banks' banker says world economy could see deeper, longer downturn than most expect The global economy could face a deeper downturn than many currently expect amid rising inflation and the turmoil on financial markets, the Bank for International Settlements said at its annual meeting Monday. "In the aftermath of a long credit-driven boom, it would not be surprising to see turmoil in financial markets, slowing real growth and temporarily rising inflation," the BIS said in its annual report. "While difficult to predict, their interaction does appear to point to a deeper and more protracted global downturn than the consensus view seems to expect."
Inflation worry limits Fed flexibility The past few days of trading have seen financial markets rocked by a realisation of just how fraught with dangers the US macroeconomic The core dynamic of the credit squeeze - financial sector weakness causing and then being amplified by economic weakness – has resurfaced. And it has been compounded by a resurgence of inflation risk, driven by record oil prices.
Volatility Drops Most Since 2001 as Dollar Fall Slows Currency volatility fell by the most since 2001 this quarter, reducing the chances central bankers will seek to bolster the dollar. JPMorgan Chase & Co.'s index of implied volatility on dollar options against the euro, the yen, the British pound, the Swiss franc and the Australian and Canadian dollars declined 2.21 percentage points to 10.28 percent. It's the biggest drop since the second quarter of 2001.
Oil rises to record on concerns about Iran Crude oil rose to a record above $143 a barrel on Monday on speculation the dispute over Iran's nuclear program may disrupt supply from the second-largest OPEC producer. Pressure on Iran to end its uranium enrichment program and the falling value of the U.S. dollar may drive prices to $170 a barrel, the president of the Organization of Petroleum Exporting Countries, Chakib Khelil, said Saturday. Oil is headed for its biggest six-month gain since 1999 as investors shun equities for commodities, looking for a hedge against a weaker dollar and quickening inflation.
U.S. Won't Let Iran Close Strait of Hormuz, Fifth Fleet Says The U.S. won't allow Iran to shut the Strait of Hormuz, through which the bulk of Middle East oil shipments is transported, a spokesman for the Fifth Fleet said. "They will not close it,'' Lieutenant Nate Christensen said in a telephone interview today from Bahrain, where the fleet is based. "The Strait of Hormuz is vital international waters.'' The head of Iran's Revolutionary Guard said on June 28 that Iran may seize control of the Strait if the country were attacked by Israel, Agence France-Presse reported.
Global stock markets keep grinding lower As the United States markets edge toward bear territory, losing nearly 20 percent of their value from last fall's peak, investors might wonder where they can turn for relief. The gloomy answer: nowhere. Many of the major markets in Europe and around the world have already entered a bear market. Germany and France are among the markets suffering the most, and once high-flying emerging markets in countries like China and India have collapsed even more drastically.
Eurozone inflation jumps to 4% Prices in the eurozone are rising at 4 per cent a year, the highest inflation rate the 15-nation bloc has seen since statistics began in 1997 and a further sign the European Central Bank will raise its main rate from 4 to 4.25 per cent on Thursday. Eurostat, the European Union’s statistics office, said on Monday in its initial “flash” estimate the annual rate of price rises jumped from 3.7 per cent in May to 4.0 per cent in June, twice as high as the ECB’s target of below but “close to” 2 per cent. Record-high energy prices were the main reason for the increase. The June rate is higher than the 3.9 per cent level predicted by economists and further grist to the mill of the inflation-hawks on the policy board of the Frankfurt-based institution.
Let Big Brokers Fail; Buy Gold Not Oil: Marc Faber The Federal Reserve should let the big investment banks go bust if they made unwise investment decisions, and investors should take refuge in gold, because the central bank has been "misleading" the markets, Marc Faber, editor and publisher of "The Gloom, Boom & Doom Report," told "Worldwide Exchange." Fears that another major investment bank may get into trouble have hammered stocks recently but some analysts have said the major Wall Street banks were safe as the Fed cannot afford to let them fail.
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