THE FINANCIAL TIMES: Crude oil prices briefly hit the psychologically important $100-a-barrel level and gold prices jumped to an all-time high as investors on Wednesday poured money into commodities following deepening fears about the weakness of US dollar.
The oil price rally soured the first stock trading day of the year, with the S&P 500 down at midday by 1.4 per cent.
Higher energy prices could limit central banks’ ability to lower interest rates to cushion the impact of the credit squeeze and also reduce consumer purchasing power, weakening the economy even further.
The dollar fragility, which makes dollar-denominated commodities cheaper to non-US investors, comes after the US manufacturing sector slumped to its lowest level in five years during December, igniting a sharp rally in government bonds.
The Institute for Supply Management said that its manufacturing index for December fell to 47.7, its lowest level since April 2003, and well below the 50.8 in November. A reading below 50 indicates a contraction in activity and has historically served as a harbinger of a recession. Dollar fear sparks rush to oil and gold >>> By Javier Blas in London and Michael Mackenzie in New York
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