6.20.08
There were a lot things going on in the Market this week but most of them were in the Bearish camp. Fed fund futures indicate a smaller chance of a Fed rate hike in the near term after The Wall Street Journal reported that the Fed is unlikely to raise the fed funds rate before autumn.
China raised retail gasoline and diesel prices on Thursday by up to 18 percent, less than two months before Beijing hosts the Olympics games. The rise shows China following its neighbors from India to Indonesia in bowing to the pressure of near $140 crude oil. It comes just days before a crisis meeting of the world's biggest oil producers and consumers in Jeddah, Saudi Arabia, where they hope to draw up plans to combat oil's relentless rally, blamed by some on cheap fuel in countries like China. Oil fell $4.57 on the news and Gasoline dropped 0.11 cents a gallon.
24 hours later however, the news was just the reverse. Oil was up $2.69 a barrel at $134.62 and for the week was down a mere 24 cents. Friday’s action was caused in a large part by Pentagon officials saying a large scale Israeli military exercise in the eastern Mediterranean early this month could have been a demonstration of Jerusalem's ability to attack Iranian nuclear facilities.
The financial sector encountered some marked selling pressure after financial behemoth Citigoup (C 20.17, -0.23) stated it will continue to have substantial marks on sub-prime exposure this quarter and will likely incur an adjustment on par with that of last quarter.
On a relative note, U.S. Treasury Secretary Paulson made note in a speech that a revaluation of assets are challenging some institutions and capital raises are expected to continue and to broaden. He also stated certain capital markets remain under stress.
On another front, investors were awaiting the outcome of a weekend summit in Saudi Arabia between oil consuming and producing nations to discuss high oil prices.
The dollar fell against the euro Friday, putting more upward pressure on oil prices. Many investors buy commodities such as oil as a hedge against inflation when the greenback weakens. A falling dollar makes oil less expensive to investors overseas.
At the pump, meanwhile, gas prices inched 0.2 cent higher to a national average of $4.075 a gallon Friday, according to AAA and the Oil Price Information Service. Gas prices have drifted lower this week since hitting a record $4.08 a gallon on Monday.
Gas prices will likely hold steady near current levels, as long as oil continues trading in its current range between roughly $132 and $138, analysts say.
Diesel fuel, used to transport the vast majority of the world's food, consumer and industrial goods, fell 0.5 cent overnight to a national average of $4.786 a gallon. Diesel reached a record $4.797 on Monday.
We are still on the sidelines and 100% in CASH. It is just to dangerous out there right now. Let’s wait for better conditions to prevail.
Till next week
The MTA Staff
