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Another rally for the dollar crushed commodities Thursday morning, and the precious metals were not spared from the bloodbath.
It was a sea of red for the rest of the metals, as well. The silver price was down 2.1% (-33¢) to $15.20/oz, a two-year low.
Platinum and palladium were each down more than 2.55%. The former slipped below $800/oz and the latter traded near $880/oz.
Manufacturing Index Rises
More than any other factor, the rising U.S. dollar steered market activity today. The greenback had plenty of positive economic data to rally on.
The Department of Labor reported first-time jobless claims this morning. Analysts were caught by surprise: initial claims fell by 8,000 last week to 207,000, when an increase to 220,000 was forecast.
It marks the lowest level for jobless claims in the U.S. since 1969.
In addition to unexpectedly good unemployment data, activity and sentiment at factories in the mid-Atlantic also picked up. This month's Philly Fed manufacturing survey rose to 25.7, a jump of nearly six points.
Any reading of the index above 0.0 represents economic expansion.
Despite the stronger outlook for U.S. manufacturing, stocks dipped lower at the opening bell in New York.
Equities were also down 0.5% in Europe, although shares in London nudged higher on the FTSE 100 index. Thanks to the dollar, the British pound sank again, slipping 0.65% to trade below $1.30.
Stock indices closed just barely lower in both Japan and China last night. The Chinese yuan slumped to a one-year low, trading at about 6.8 per dollar. The renminbi has fallen 6% since tariffs on Chinese goods were announced by President Trump a month ago.
Thus far, China seems to be taking the worst blows from the trade war—for now.
Buoyant Dollar Hits Commodities
Aside from dragging gold prices and its other peer currencies lower, the strong dollar also weighs on emerging markets. EMs have accumulated excessive dollar-denominated debt during the current business cycle (i.e. since the last recession).
Nonetheless, Treasurys were largely unchanged. The 10-year note was down slightly, yielding 2.87%.
With the 2-year Treasury yield at its highest since 2008, the spread with the benchmark 10-year yield is now a meager 27 basis points. If the yield curve inverts—meaning the spread goes negative, essentially—it has historically proven to augur a significant market correction within the next 18 months.
Oil prices moved lower again Thursday due in part to record-high U.S. crude output. Domestic production of oil is now projected to exceed 11 million barrels per day.
WTI crude lost 20¢ (-0.3%) to fall to $68.55/bbl, and Brent crude was off 50¢ (-0.7%) at $72.40/bbl.
Copper plunged along with the precious metals, losing 2.35% to trade below $2.70 per pound.
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