Strained logic

9 June 2008 By Edward Hadas

It s not easy to find a coherent explanation for Friday s combination of higher US unemployment, falling stock prices and a oneday 9% jump in the oil price, although pundits can always try. But it looks like jittery investors feeding a liquiditydriven commodity panic.

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The US Labour Department reported unexpectedly bad unemployment data on Friday June 6. The jobless rate jumped to 5.5% in May, up from 5% in April as the economy lost 49,000 jobs. This was the largest monthly change since February 1986. Payrolls also shrank for a fifth straight month.

The S&P 500 closed down 3.1% at 1,360.68 points. The Dow Jones Industrial Average fell 3.4% to 12,209.81. The Nasdaq Composite Index dropped 1.9% to 2,474.56,

The dollar fell 1.1% against the euro to $1.5762 and oil prices recorded their biggest ever oneday advance in dollar terms, hitting a record of more than $139 per barrel.

Yields on US treasuries also fell as traders lowered expectations of interest rate hikes. The benchmark 10year note's yield declined to 3.94% from 4.06%.

The Chicago Board Options Exchange Volatility Index jumped 32% to 23.56, the highest since March 28.

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The S&P 500 closed down 3.1% at 1,360.68 points. The Dow Jones Industrial Average fell 3.4% to 12,209.81. The Nasdaq Composite Index dropped 1.9% to 2,474.56,

The dollar fell 1.1% against the euro to $1.5762 and oil prices recorded their biggest ever oneday advance in dollar terms, hitting a record of more than $139 per barrel.

Yields on US treasuries also fell as traders lowered expectations of interest rate hikes. The benchmark 10year note's yield declined to 3.94% from 4.06%.

The Chicago Board Options Exchange Volatility Index jumped 32% to 23.56, the highest since March 28.

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