Daily Financial Commentary

    

07/28/10

Improving earnings are moving stocks higher, and the euro and copper are stronger on better confidence in Europe’s economy.  Initial jobless claims were very close to estimates and Exxon Mobil rose the most since 2003. 

Since peaking in early June, not long after the height of the European banking crisis, the dollar continues its slide.  The dollar is now down nearly 8% from its peak just 6 weeks ago.  A weaker dollar is positive for exports, perhaps being a catalyst for an economy looking for anything to provide growth. 

Commodities are also up more than 8% since the same early June timeframe.  Considering the safe haven of gold is down more than 6%, the move has been concentrated in the industrial area.  For example, copper is up nearly 19% from the June lows.  There is an interesting dichotomy when you compare the commodity complex against Treasuries; lower Treasury yields in the same horizon would seem to be contrary to the story being told by commodities.

The architects of the Financial Reform bill, Chris Dodd and Barney Frank, are planning hearings to discuss the status of global bank-capital standards in September.  Basel III capital standards may force banks to increase capital levels, as much as double in some cases.      

Treasury yields at 10:45am EST are as follows:  2-year note 0.60%; 3-year note 0.90%; 5-year note 1.69%, 10-year note 3.01%, and the 30-year bond 4.12%.    

Dave Filby, CFA