June and Second Quarter in Figures
June 30, 2010
The impression of a strong dollar in June is not corroborated by its changes since end-May. The advance against the euro, while exceeding 10% in the quarter, was smaller than 1.0% in the final month of the quarter. And the dollar lost ground against the yen both in the second quarter and the month of June. Ten-year bond yields continue to drop more sharply in the United States than elsewhere. Movements in bond yields and equities reveal that deflation is a greater threat than inflation. After scaring governments into making significant budget cutbacks, market forces have sent a message that says, “thank you, and by the way austerity now puts your economy in much greater danger of relapsing into recession.” A quarterly decline of almost 10% in oil prices despite the BP disaster is consistent with the heightened possibility of a resumed recession. The advancing price of gold, however, doesn’t fit the story. Gold tends to rise when the dollar depreciates and/or inflation intensifies. That’s not what’s happening now. In the depression, gold was one of the few assets to appreciate. More generally, the current strength of the yellow metal suggests a bunker mentality just in case “the end of the world as we know it” lies just ahead.
| 10-Yr Yield | 06/30/10 | Chg vs End-May | Chg vs End-March |
| U.S. | 2.93% | -35 Basis Points | -90 Basis Points |
| Germany | 2.58% | +2 | -51 |
| Japan | 1.09% | -17 | -31 |
| U.K. | 3.35% | -23 | -1 |
| Canada | 3.08% | -28 | -28 |
| Switzerland | 1.53% | -4 | -37 |
| 3-month euros | |||
| U.S. | 0.53% | -24 Basis Points | +24 Basis Points |
| Euroland | 0.71% | +20 | +13 |
| Japan | 0.24% | -1 | 0 |
| U.K. | 0.73% | -15 | +8 |
| Canada | 0.84% | +24 | +43 |
| Swiss | 0.11% | 0 | -14 |
| FX | Pct Chg in USD | Pct Chg in USD | |
| EUR/USD | 1.2228 | +0.6% | +10.5% |
| USD/JPY | 88.46 | -3.1% | -5.3% |
| USD/CHF | 1.0783 | -6.7% | +2.3% |
| GBP/USD | 1.4944 | -2.7% | +1.6% |
| AUD/USD | 0.8405 | +0.6% | +9.1% |
| NZD/USD | 0.6849 | -0.7% | +3.7% |
| USD/CAD | 1.0649 | +2.0% | +4.9% |
| Equities | Pct Change | Pct Change | |
| Nasdaq | 2109 | -6.6% | -12.1% |
| Djia | 9774 | -3.6% | -10.0% |
| Dax | 5966 | 0.0% | -3.1% |
| Nikkei | 9383 | -4.0% | -15.4% |
| Ftse | 4917 | -5.2% | -13.4% |
| Canada TSE | 11294 | -7.4% | -6.2% |
| Swiss SMI | 6128 | -2.9% | -10.8% |
| Commodities | Pct Change | Pct Change | |
| Oil, $ per brl | 75.63 | +2.2% | -9.7% |
| Gold, $ per oz | 1242.25 | +2.2% | +11.6% |
Copyright Larry Greenberg 2010. All rights reserved. No secondary distribution without express permission.
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