Wednesday was an ugly day for the markets at least. After several days of constant fretting about the health of the global recovery and worries over the prospects of corporate earnings, something finally gave way. But it wasn't the most likely candidate of the stock market. It wasn't the price of bonds giving way for fears of the next bankruptcy coming from Washington.
It was the Japanese yen that was a curious focal point. The mid-morning surge in the value of the Japanese yen was a huge deal. It was as though a large investor or several key players acted simultaneously to protect their institutions from the implications of another round of risk aversion.
The rise in the Japanese currency was meteoric shifting from around three whole yen against the dollar and 5% against the Australian dollar as currency speculators traded in currencies that often carry yield for those which are assumed safe because buyers flock to them when the going gets rough.
We're also seeing the precise opposite of a hideous dynamic of several months ago, when a weaker dollar was responsible for creating a circuitous demand for crude oil. Well, now the boot is on the other foot, with a rising dollar easily pushing oil bulls out of the way while falling prices are also accelerated by a refocus on an over supply of energy products.
The U.S. Energy Department created further selling pressures after announcing that gasoline supplies climbed almost 2 million barrels through last week, which was more than twice the expectation. Heating oil and diesel stockpiles grew to the highest reading in 24 years as demand fell to its lowest point in a decade.
Crude oil prices slipped to almost $60 per barrel for the first time in six weeks while gasoline prices are back to their lowest in two whole months. That's nice for the consumer as pump prices fell by 1.1 cents - the most in a day since February -- but it bodes ill for the health of the economy, which is why the Japanese yen burst higher Wednesday.
A broad gauge of 19 raw material prices fell by 2.3% Wednesday to its weakest point since May 1. Crude oil's 18% decline during the last week hasn't helped matters and of course that's leading share prices of oil exploration and refining companies lower on the prospects for a weakening economy. Gold prices fell 1.7% to $909 while copper prices heeded one analyst's forecast for a potential 64% slump in Chinese imports in the second half of the year.
The Daily Jurojin is a service of Tyche Research and is written by the Supreme Council of the Secret Order of Jurojin. More information can be found at www.jurojinweekly.com.
