For people sick of volatility, there's evidence that adding another volatile investment — managed commodities — can calm a portfolio. This isn't a strategy for everyone, particularly those prone to nervous tics, but it may work for you. A futures contract is the obligation to make or take delivery of a certain amount of a commodity by a set date. A corn futures contract, for example, might be for 5,000 bushels of corn for delivery in September. Futures aren't just for agriculture: You can trade futures on metals, energy and financial indexes, too.
Thursday, July 5, 2012
Commodity funds can reduce your portfolio's riskiness
Stocks Climb as Commodities Rise on China Rates; Euro Pares Drop
Stocks and U.S. equity index futures climbed, commodities rallied and the euro pared declines after China cut interest rates. Spanish bonds stayed lower after an auction. The Stoxx Europe 600 Index added 0.6 percent at 7:02 a.m. in London. Futures on the Standard & Poor’s 500 Index were little changed. Brent crude jumped 1.8 percent and the S&P GSCI index of commodities climbed 0.5 percent. Spain’s 10-year yield climbed above 6.6 percent for the first time in almost one week. The euro slipped 0.1 percent. The yield on the 10-year Treasury note fell four basis points to 1.60 percent as trading resumed following the Independence Day holiday.
Gold falls after cenbank easing, eyes US payrolls
Gold fell on Thursday on a dollar rally and frustrations over a lack of more aggressive market stimulus from central banks after China, Europe and Britain eased their monetary policies. Bullion, which has tumbled several times this year after the Federal Reserve did not mention easing, was under pressure again after the top three central banks loosened monetary policy and signaled a growing level of alarm about the world economy. Gold's inflation-hedge appeal was weakened by the prospect of a global economic slowdown.
Corn soars 5 pct, soy closing in on 2008 high
U.S. corn surged 5 percent on Thursday to its highest price in over a year and soybeans jumped to within sight of their record high as new forecasts offered no sign of rain relief for withering crops. With fields now at the mercy of what may be the worst Midwest drought in nearly a quarter century, grain traders ignored the potentially bearish influence of a rising U.S. dollar and focused on growing signs that one of the biggest corn crops ever planted by U.S. farmers is now shrinking by the day. Corn prices have surged by nearly 30 percent over the past two weeks, dragging wheat and soybean prices up with them and threatening to kick off another bout of food-inflation fears.
Oil Rises to One-Month High as Strike Halts Norway Output
Oil rose to its highest in a month in London as China reduced interest rates for the second time in four weeks, while a strike prompted Norway’s largest oil producer to announce it would halt production. Brent futures gained as much as 2.6 percent. China’s one- year lending rate will fall by 31 basis points and the one-year deposit rate will drop by 25 basis points effective tomorrow, the People’s Bank of China said on its website today. About 2 million barrels a day of oil equivalent may be affected if a planned lockout of Norwegian oil workers goes ahead, according to Statoil ASA. (STL) Oil pared gains as the dollar strengthened after the European Central Bank cut interest rates. “This strike and potential shutdown negatively impacts North Sea supply, as such the price of the Brent benchmark; that’s why this is significant,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. “The government has the legal right to end the strike and prevent the shutdown. The question is when they’ll use it.”
Copper dips on strong dollar; shrugs off rate cuts
Copper fell slightly on Thursday, reversing direction as the dollar strengthened on disappointment that the European Central Bank declined to adopt strong measures to stimulate the economy. Metals rose early in the day after an unexpected Chinese rate cut, the second in a month, with investors hoping it would revive declining growth and metals demand in the world's biggest consumer of raw materials. But a slide in the euro against the dollar to a one-month low pressured metals priced in dollars, making it more expensive for investors in other currencies.
NY sugar and coffee end down after slipping off peaks
ICE raw sugar futures and arabica coffee future closed down a shade on Thursday, falling from 2-1/2-month highs as the U.S. dollar rallied and selling hit the commodity complex. U.S. cocoa futures likewise closed lower after tapping a 3-1/2-month high. Arabica coffee futures ended easier. The markets were closed Wednesday for the U.S. Independence Day holiday.
US covered bond market headed for slowdown
The US covered bond market is heading into a dismal second half, with new Canadian legislation holding up deals in the months ahead, and possibly making issuance of the collateralized bonds less attractive to Canadian banks. Most Canadian banks have either already rushed to market in the first half to beat the legislation, or have shelved deals altogether until the new rules are enacted -- a process that could take months. "The timing of US dollar covered bond supply during the second half of 2012 is uncertain," said Riz Sheikh, head of Americas covered bond structuring at Barclays in New York.
Gold rises ahead of ECB, real focus on US jobs
Gold prices rose towards two-week highs on Thursday, with investors reluctant to make big bets after pricing in an expected European Central Bank (ECB) rate cut, with investors moving on to focus fully on key U.S. jobs data on Friday. Spot gold was up 0.2 percent at $1,618 an ounce by 1004 GMT, treading water along with equities and the euro, also little changed ahead of the ECB meeting, where policy makers are likely to cut rates to a record low to contain the debt crisis.
Euro, Stocks Drop Italy, Spain Bonds After ECB Decision
The euro sank to a one-month low as Spanish and Italian bonds plunged, while stocks retreated, as the European Central Bank disappointed investors anticipating a more aggressive effort to fight the debt crisis. The euro tumbled 1.2 percent to $1.2380 at 11:49 a.m. in New York and the Dollar Index surged the most this year. Ten- year Spanish and Italian bond yields increased at least 20 basis points. The Standard & Poor’s 500 Index lost 0.3 percent and the Stoxx Europe 600 Index (SXXP) slipped 0.2 percent. The S&P GSCI index of commodities reversed losses to rise 0.2 percent. Ten-year Treasury note rates slipped four basis points to 1.59 percent as trading resumed following the Independence Day holiday.
As U.S. Corn Belt Bakes, Wheat Heats Up in Europe
A change in the weather is enough to recreate the world, wrote Marcel Proust. Global grain markets are being transformed by extreme heat and dryness in a key U.S. growing region. Fields in the Midwest are baking under relentless sunshine, raising concern over crops in the country's corn belt. Led by corn, grain prices have soared. In July, the bulk of the corn crop will pollinate, a critical phase of growth that leaves the plants highly sensitive to heat. If the weather worsens this month, as forecasts suggest, that could mean prices will rise further in the near term, according to Goldman Sachs. The bank said it could cut its yield estimate from the current 153.5 bushels per acre. The U.S. Department of Agriculture last week raised its estimate for the amount of land on which U.S. farmers planted corn this year to 96.4 million acres. Farmers planted 5% more acres of corn this year than last year, boosting the total to the highest level since 1937, the agency said.
For Midwest Corn Crop, the Pressure Rises, Like the Heat
Across a wide stretch of the Midwest, sweltering temperatures and a lack of rain are threatening what had been expected to be the nation’s largest corn crop in generations. Already, some farmers in Illinois and Missouri have given up on parched and stunted fields, mowing them over. National experts say parts of five corn-growing states, including Indiana, Kentucky and Ohio, are experiencing severe or extreme drought conditions. And in at least nine states, conditions in one-fifth to one-half of cornfields have been deemed poor or very poor, federal authorities reported this week, a notable shift from the high expectations of just a month ago. Crop insurance agents and agricultural economists are watching closely, a few comparing the situation with the devastating drought of 1988, when corn yields shriveled significantly, while some farmers have begun alluding, unhappily, to the Dust Bowl of the 1930s.
Nymex Crude Lower On Dollar Strength
U.S. crude-oil futures rallied briefly Thursday after weekly U.S. government data showed that crude-oil inventories fell by significantly more than expected. U.S. light, sweet crude oil for August delivery initially shot up as high as $88.03, or 37 cents, after the data were released before retreating somewhat. Crude oil is currently down 15 cents to $87.51. The U.S. Energy Information Administration said U.S. crude-oil inventories fell by 4.3 million barrels in the week ended June 29.
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