How Financial News Sources Make Sense of Market Moves

As we were putting together today’s edition of The Daily Reckoning, the prices of gold and crude oil were both down more than one percent. MarketWatch blamed Europe.

“Oil futures struggled to hold on to $90 a barrel Wednesday, less than two weeks after topping $100,” the financial news source explained, “under pressure from renewed concerns about the euro zone…”

Maybe so…or maybe “renewed concerns about the euro zone” was just the phrase MarketWatch blindly pulled out of its “Box of Explanations.”

You know the ones. You’ve read them hundreds of times. “Share prices slid this morning due to…”

A) “…flare-ups in the Middle East.”
B) “…today’s disappointing [insert your favorite economic report here].”
C) “…riots in Greece.”
D) “…anxiety that the economy is not responding to Fed stimulus.”
E) “…renewed inflation fears.”
F) “…renewed deflation fears.”

But yesterday’s financial offending data point was the shaky eurozone.

“Spain’s borrowing costs surged on Wednesday,” MarketWatch explained. “The difficulties Spain faced on international bond markets come as a second night of protests against austerity measures rocked Madrid and the region of Catalonia announced elections that could potentially lead to independence of the region, Spain’s economic cornerstone.”

“The renewed escalation of the debt crisis in the euro zone,” chimed the research team at Commerzbank, “has sparked gloomier sentiment on the financial markets once again and is also putting oil prices under pressure,”

So there you have it; apparently the folks at Commerzbank have their own “Box of Explanations” for the day-to-day noise in the financial markets.

Whatever the real causes may be, the prices of gold and oil both slipped during the early part of yesterday’s trading. But only one of these trends is likely to last, predicts Chris Mayer, editor of Mayer’s Special Situations, in his essay “Buy Gold, Sell Oil.” While Chris believes the oil price is likely to continue trending lower, he foresees a bold move to the upside for our favorite yellow metal.

Eric Fry
for The Daily Reckoning