Thursday, July 3, 2008

Jobs Data, Oil Data, Middle East Tension, ECB Rate Hike, and Soft Dollar

Thursday morning looks to be a big one in the market with jobs data, oil supply data, Middle East tension, and the ECB interest rate hike.

The jobless rate continued at 5.5% after the report showed a loss of 62,000 jobs in June. This was right in line with forecasts (60,000). Revised up were losses in April and May. The construction, manufacturing, business services, and retailers all had losses, but education, health services, hospitality, and government sectors all gained. The government alone hired 29,000 new employees.

The U.S. stockpiles of crude oil fell by 2 million barrels which was about 800k barrels short of the forecast. On the plus side, Gasoline supplies grew dramatically amid lower consumption and continued to trend lower. The high price of gas is said to have curtailed many driving and travel plans for Americans thus raising current supplies. Crude Oil was trading near $146 for the first time ever, and Gasoline was essentially flat.

With talk of Israel or the United States attacking Iran, the market and region seemed to be worried that Iran could try to close the Strait of Hormuz. This would be a big event where close to 40% of the world's oil supply passes. U.S. and Persian Gulf Naval Commanders have already stated that they will not allow the shipping channels to be closed.

The ECB (European Central Bank) raised its benchmark rate 25 basis points to 4.25%. This was the first move by the ECB in 13 months. On the news, the Euro strengthened against the dollar (not much since it was already forecast). The move down in the dollar though will most likely help "artificially" inflate oil prices based on oil being pegged with the dollar.

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