FYI | Jun 06 2006
By Greg Peel
One thing is certain in the current volatile climate and that is that any little thing will set the market off in a big way.
Morning trade in the US lacked any particular economic data release, so the focus turned to the ongoing situation in Iran. Oil futures hit three-week highs at US$74/bbl after Ayatollah Khamenei suggested any wrong move by the US against Iran’s nuclear facilities would result in a serious disruption to regional energy flow.
Oil prices began to drift off again, however, but then Fed Chairman Bernanke stepped into the frame once more. Bernanke commented that the US economy had shown signs of slowing and that consumer spending had appeared to have been hit. He then said "the Committee will be vigilant to ensure that the recent pattern of elevated monthly core inflation readings is not sustained" and all hell broke loose.
As a result the probability of a June rate hike, as measured by the market, jumped from 50% to 75%. The Dow closed the day down 199 points.
Gold fell some US$6.00/oz overnight, but base metal markets were unremarkable at the close.