U.S. equity markets are extending their losses this morning after Weekly Initial Jobless Claims rose more than expected. What is clear from this report is that the jobs market has become stagnant. This point will be clarified, however, with the release of tomorrow’s U.S. Non-Farm Payroll Report.
September Treasury futures are rallying this morning. Yields continue to plunge as investors lose faith in higher risk assets while increasing bets the weakening economy will continue to force the Fed to keep interest rates at historically low levels.
The expected slowdown in the global economy is pressuring September Crude Oil. Disappointing Chinese manufacturing news indicates there is a slow down in growth. The weakening oil market is anticipating a slow down in demand.
August Gold is trading lower despite the weaker Dollar. This could be a sign that traders are abandoning the traditional Dollar/Gold relationship and focusing on the fact that a slow down in the global economy could mean that inflation will be subdued for a prolonged period. Investors who speculated that government spending would lead to runaway inflation may be reconsidering their assessment now that it appears financial austerity rather than excessive spending is the new theme.
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