G-8, Oil, Euro, Copper and China

123jump.com Staff
30 Nov, -0001
New York City

Summit of G-8 nations in Scotland may be disconnected with the realities in the markets and wishes of its population. The stagnant growth in Europe, rising global oil prices and lack of global trade growth and plight of farmers around the world are not some of the items of on the agenda. The security and terrorism driven agenda are increasingly viewed as the inability of the U.S. and UK to separate the terrorism, economical and political issues.

As the leaders of world’s wealthy nations converge in Scotland to discuss the agenda for the G-8 summit chaired by the Prime Minister of Britain, the group appears to be increasingly disconnected with the demands of their nations’ population and driven by narrow political beliefs. The coming shortage of oil, lack of global trade growth and miseries of farmers in the developing nations, and growing Asian economies which has diminished the importance of Italy and Russia as global powers are the current realities that G-8 nations are not willing to address.

IMF’s Director Rodrigo Rato sees no reason for ECB to cut rat at this time, according to the German newspaper interview. There are growing political pressures on European Central Bank to lower interest rates and jump start the European economies.

The U.S. dollar continues its ascent against euro to 13 month high this evening in the European trading. Dollar is up 14 percent against euro and 8.8 against yen since the beginning of the year. Against euro, dollar rose to $1.1901 in London trading from $1.1959 at close in NY on July 1st. The dollar closed at 111.57 yen from 111.78 yen and having traded as high as 111.88 yen.

GE has agreed to sell its 42.5% stake in Dabhol electricity plant once owned by Enron to Maharashtra State Electricity Board, the state electricity company where Dhabol pant is located, its only customer. With this purchase MSEB’s stake will increase to 57.5%. The rest of the holding is in the hand of Bechtel, the company that built the plant for $1.1 billion, and is in negotiations with MSEB to find a settlement. GE will drop all legal claims against the government of India including $6 billion arbitration claim. GE, which has history of playing tough with emerging market governments, is relenting in this case as it eyes future projects in India.

Copper prices extended its rally as Placer Dome’s Copper mine in Zaldivar, Chile entered into the strike. Workers demand for better pay and healthcare is the reason for the strike. Chile, largest copper producer in the world and the mine produces one percent of the world’s copper production. The world copper prices may rally in the coming days if the strike continues. The management anticipates that the strike may reduce the output of the mine by 25% depending on strike’s duration.

China Construction Bank has agreed to sell $1 billion of stake to Singapore’s Temasek, government entity with $54 billion to invest, in its planned IPO later this year. This is the second investment in the Bank in less than six weeks, as last month Bank of America agreed to acquire 9 percent for $3.5 billion.

The option contracts to buy oil at $80 per barrel in December 2005 has jumped from 77 in January this year to 6,900 this month. There is an increasing perception among oil traders that the oil price may climb higher than $80 if the U.S. attacks Iran and OPEC is unlikely to raise its production in coming months.