Monday Markets

Just because we’re not open doesn’t mean the world isn’t turning!

Asia was flying this morning with the Hang Seng shooting back up 449 points to finish back over 20,000.  That is perfect and should put our FXI calls back in the money, I don’t think we could have played them much better!  All of Asia is up nicely even as China makes moves to address its trade imbalance.

Japan’s economy is so good they might have to raise rates, hopefully we didn’t miss the bus on MTU, which I’ve had on my watch list but forgot about…  Chinese airline stocks flew up on news that China would lower fuel charges (pretty obvious and we were asleep at the wheel there!). 

The energy sector followed through with solid gains and oil was trading up about .50 in European trading on continuing rumors of OPEC stepping in.  Gee, I hope they are as effective as last time! 

As it’s a day off, today is a nice day to play the lemonade game and see how hard OPEC’s job really is.  You can read my dissertation on the matter in my September article: "OPEC: Lemonade Cartel" where I predicted (to great derision by oil bulls) that production cuts would backfire.

Here’s a great big picture article from the WSJ on how cheaper oil can boost the overall economy.   It took three people to write this one and it neatly summarizes a lot of the things I’ve been saying about how great a pop in the oil bubble will be for the broader economy.

"In our view, we are witnessing the definitive end of the commodity price boom that began late in 2001," wrote ABN Amro analysts in a piece Tuesday.

As I’ve said in the past, OPEC has simply pushed it too far this time and set wheels in motion that will not be halted by a minor pullback in prices.  An Asian energy summit was held and the entire continent has pledged to set a list of goals for ""reliable, adequate and affordable energy supplies essential for sustaining economic growth and competitiveness."

From the Journal:

The declaration calls for moves to improve energy efficiency and reduce dependence on fossil fuels, while urging countries to expand renewable energy systems and biofuel production and "for interested parties, civilian nuclear power."  Poor OPEC, that’s 3Bn people who’ve just told you where to stick your oil!

China has been seeking greater influence over key energy markets while striving to alleviate worries over its huge and growing appetite for oil. "China attaches great importance to energy security and energy cooperation," Premier Wen Jiabao said in a speech to the summit, adding that his nation "will continue to rely on itself to meet its energy need and priority will be given to raising energy efficiency." He said there needed to be stronger dialogue on energy security as well as increased conservation and research on clean and alternative sources.

All right!  A world leader we can all get behind!

PTR is developing a biomass project to produce an additional 15M barrels a year of ethanol by 2010 and China is working with our pals in Iran to set up a $3.6Bn LNG project headed by CEO.  RDS.A, TOT and REP are already working on major projects with the Iranians, so it’s hard to vilify China for claiming their stake…

Samsung will worry the chip and cell phone sector tomorrow as net profits fell 8% on margin issues but sales are strong and the outlook is good, especially LCDs.  Also, (see article) you never can tell with Korean accounting rules and earnings may be better than they seem.

We have even more good news for our plays on GLW and TXN as Sharp announces they will spend $2.5Bn to boost capacity for high-end big-screen LCDs, a move that will double their monthly capacity by July with a triple to 90,000 40 and 50 inch TVs a month by 2008!  Sharp is Japan’s number one seller but is an also-ran in the states so far.  Not to be outdone, our watch list company MC is going to spend 280 Billion yen (only $2Bn) to double their production capacity in what is already the world’s largest plasma display factory.

The future is indeed so bright we have to wear shades!

Europe is chugging along this morning and having a grand old time without us.  GE didn’t take a day off and plunked down $4.8Bn to buy a British aerospace division from Smiths, a move that has been years in the making.

"This acquisition is consistent with our strategy to invest in high-technology infrastructure businesses that deliver strong growth, earnings expansion and higher margins," GE Chairman and Chief Executive Jeff Immelt said. "GE Aviation is growing about 10% a year and this acquisition gives us a technology growth platform that will be accretive to our net income and will deliver immediate and future value for our investors."

Needless to say, that gave quite a boost to the whole sector, it’s really too bad we can’t play those dominos!  Oil is still going nowhere in European trading but neither is the dollar so I have a lot of work to do this afternoon to peg down resistance points.  Oil firms are firming though and BP is still very pleased with the change in management, up 1% ahead of the Baker report, out this week.

Condi Rice is going to take a stab at fixing that whole Israel/Palestine thing this week – that should be fun!  She’ll get the ball rolling with $86M in cash for "Palestinian security forces."  According to Al-Jazeera, it’s part of a $586M package promised to Abbas.  "Be confident that we will not misuse any aid received from any party," he said.  Oh I feel so much better!

Apparently the Bush administration has decided the mistake we made with Arafat was not making him so rich he could afford a good suit!  Abbas seems more like a guy we can bribe work with so we’re going the cash route – hey, anything is worth a shot at this point!

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No big excitement at the close of Europe today.

We all need to cover if oil runs up this week.  Inventory is not until Thursday so tomorrow is likely to be shenanigans day but they only got oil up to $53.25 in todays light, electronic NYMEX trading and Brent, which was actively traded only nudged up to $53.39.

As a rule, Brent is usually about a buck more expensive than NYMEX, maybe .75 at this level (it’s been at $70 for so long I forget what normal is!).

OPEC still hasn’t called a meeting because the last one was such a disaster they don’t know what to do with themselves…