FYI | Mar 29 2007
By Greg Peel
FNArena feels some vindication in having articulated for many months that the world seemed to have forgotten about Iran. The spectre of accelerated Gulf tensions has always loomed, but until recently this news story had been relegated to the bench. As the oil price drifted lower, the world put on its rose-coloured glasses.
Nothing ever changed in Iran. The weather, strangely enough, can change from day to day. What OPEC says and what OPEC does are mutually exclusive concepts. Nymex oil rose another US$1.15 last night to close at US$64.08/bbl.
Last week Wall Street became excited when the five words “additional firming may be needed” were omitted from the Fed’s monetary policy statement accompanying an unchanged interest rate. Wall Street convinced itself that with the economy not looking too sharp, and sub-prime being the buzzword of the day, a rate cut was surely not far off. In a case of boy crying wolf, traders were happy to ignore the now ubiquitous comment from the Fed that there is always a “risk that inflation will fail to moderate as expected”.
Oil is a very big part of headline inflation. So it was that Fed chairman Bernanke chose yesterday to remind his countrymen of that ever present inflation threat. The fact that February durable goods orders posted a disappointing result was enough to exacerbate an already damp mood on Wall Street which had produced two days of stock market weakness. The realisation that there may not be a rate cut ahead made it three.
The Dow was down 96 points to 12,300, and the Nasdaq and S&P 500 posted similar negative 0.8% results. Every single economic sector posted losses on the day – even energy.
Gold posted an up and down day, reaching over US$668/oz at one point but drifting off on futures/options expiries towards the close. Spot was trading at US$665.10/oz on the bell. Base metals prices were mixed but unspectacular.
The SPI Overnight closed down 21 points, suggesting that yesterday’s weak mood on the local bourse will continue into today. Will the bargain hunters return once more? Or are things starting to look a bit wobbly?