Oil leapt 6 percent on Monday to more than $43 a barrel, as a rebound in global equity markets and further evidence of supply cuts by top exporter Saudi Arabia helped the market break a six-session losing streak.

Prices dropped 25 percent last week, their biggest weekly fall in nearly 18 years, depressed by the world economic outlook.

U.S. crude for January delivery was up $2.56 to $43.37 a barrel by 1003 GMT. It fell more than 6 percent on Friday to close at $40.81, its lowest since December 2004.

London Brent crude rose $2.56 to $42.30 a barrel.

“Prices are higher on account of a short-covering bounce from extremely oversold conditions,” Edward Meir, of futures broker MF Global, said.

“OPEC’s meeting is nine days away, meaning that we could see some strengthening leading into the meeting,” he said.

Oil has fallen more than $100 a barrel from a record peak above $147 in July, as the credit crisis has started to hurt the wider economy and shrink demand for fuel.

Members of the Organization of the Petroleum Exporting Countries have called for more supply cuts when the producer group meets on Dec. 17 in Algeria.

SAUDI CUTS BACK

OPEC has already agreed to cut about 2 million barrels per day (bpd) of production. Top exporter Saudi Arabia has just provided further evidence of its intent to keep the taps tight.

The kingdom told at least two oil refiners in Asia on Monday it would deepen oil supply cuts to as much as 10 percent of normal contracted volumes in January versus a 5 percent cut in December supplies. It also reduced January supplies to some European refiners.

But OPEC may need to make an additional cut of as much as 2 million bpd to bolster prices in a market where demand is falling.

“The current downturn in prices has already priced in at least a 1.5 million bpd cut,” Tetsu Emori, a commodities fund manager at Japan’s Astmax Co. Ltd, said.

Monday’s rally spanned the commodities complex, with gold and copper rebounding strongly. European shares were firmer after strong gains in Asia.

Oil’s steep losses on Friday followed a U.S. employment report which showed the heaviest job losses in 34 years in the world’s top energy consumer.

But global markets have taken heart from efforts by Washington to finalize a rescue for the struggling U.S. auto industry.

Oil could also find support from predictions of a cold winter in the United States, with December set to be the coldest since 2000 on average.

Jane Merriman, Osamu Tsukimori, Jonathan Leff
LONDON, Dec 8 (Reuters)

Platinum fell off into the New York open, then traded tightly rangebound between $810 and $820 straight through the day, ending at $814/oz., down $39. Overnight, platinum has edged higher.

Silver declined slowly from the far East to the Comex open, steadied there for a bit, then fell off a cliff around mid-morning, dipping as low as $9.55 before rising back up and going flat on the Globex, closing at $9.75/oz., down 39 cents. Overnight, silver is little changed. (Click here for charts)

It was a rough day for the precious metals, which fared poorly as equities markets were plunging, crude was sinking, and the dollar was taking a leather sap to the euro.

With more than $28 trillion in value having been erased from global equity markets this year, gold is in a sense being held captive for a while.

Even long-term bull Zachary Oxman, of Wisdom Financial, has been forced to concede that, “Gold and commodities as a whole are continuing their almost-perfect correlation to the stock market … The trade now, if you believe the market is due to fall further, is surprisingly short gold.”

But that doesn’t mean he’s throwing in the towel. Few gold bugs are.

“While gold has not performed as well as expected over the past month, it continues to be sought after as a good diversifier,” said David Beahm, a vice president at precious metals retailer Blanchard & Co.

Beahm added that the price of gold is following the dollar and “while the dollar remains strong, it is only a matter of time until it begins to fall again.”

Sentiment regard platinum, however, is just plain glum. “Nobody’s going to buy cars,” says Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois Kaplan said. “You’ll see platinum trade $100 to $250 lower than gold. It happens in every recession. Platinum is industrial, and catalytic converters and jewelry are going to get slammed.”

Source: Precious metals slide along with equities -  Platinum outlook particularly bleak

But our other big national deficit is creating a different problem, as well as the potential for one low-risk, high-return investment opportunity. Here’s the bottom line…

Because the United States has run such a large and persistent trade deficit for so many years, other countries – like China – have been able to run up large current account surpluses. These surpluses, in turn, have enabled them to accumulate substantial foreign exchange reserves.

For years, this money was invested in the world’s safest securities: U.S. Treasuries. But the returns from these securities haven’t been so hot lately. Especially when you’re a foreign investor watching the greenback wilt like last week’s roses.

Many world governments are now putting their money to work elsewhere. (Can you blame them?) Sovereign Wealth Funds are their vehicle.

Sovereign Wealth Funds are the financial assets of a country – usually part of the national savings – that are owned and organized into a state-controlled fund. These funds are increasingly moving money into global equity markets. And the sums involved are fairly staggering.

Current assets controlled by Sovereign Wealth Funds are estimated to be $3 trillion. They are expected to reach at least three times this amount over the next five years.

This is a bit scary to some investors, because these funds are entirely secretive. There is no world body to which they have to disclose what they are buying or when.

But here’s a common sense insight. They aren’t buying small or mid-cap companies. There isn’t enough liquidity in these to allow them to enter or exit their positions efficiently.

No, these funds must invest in the world’s biggest companies. As an individual investor, you might benefit from picking up giant companies like General Electric or British Petroleum or HSBC.

Or you can do it the easy way, by plunking for a few shares of the Dow Jones Global Titans Fund (AMEX: DGT).

This exchange-traded fund (ETF) holds 30 of the world’s largest publicly traded companies. It also pays a 2.5% dividend, 25% more than the average money market is paying right now.

Its major holdings include the companies I mentioned above, plus other market bellwethers like AT&T, Johnson & Johnson, Nestle, Microsoft and Proctor & Gamble.

The Global Titans Fund has several advantages. It is well diversified, liquid, and gives you instant foreign currency diversification. (60% of the holdings are in the United States, the rest are in international markets.)

It also uses a passive indexing approach, so it is both cost-effective and highly tax-efficient. Annual expenses are only one half of one percent.

This fund was originally brought to my attention by Eric Roseman, the Sovereign Society’s savvy Investment Director. (To read Eric’s views and learn more about international money flows, global investing and financial privacy, I suggest you check out the Sovereign Society’s Off Shore A-Letter. It’s quite good – and it’s free.)

In sum, the Dow Jones Global Titans Fund is holding exactly the mega-cap global companies that Sovereign Wealth Funds are likely to plow money into for many years to come.

My suggestion? Pick up a few shares now. And let the world’s most powerful creditors push your shares higher in the weeks and months ahead.

Good investing,

Alex

Source: How to Turn Sovereign Wealth Into Personal Wealth

From November through March U.S. stocks (and most global equity markets) suffered a string of five-straight monthly declines. That’s a very rare occurrence that has only happened on a handful of occasions in the past 40 years.

Sure enough, April saw a sharp reversal of the five-month downtrend. The Dow Jones Industrial Average had fallen over 11% at the March low. But the Dow got up off the mat in April and rose 4.5%. The Dow wasn’t alone. In fact, international stock markets pulled off much more dramatic reversals.

Japan is perhaps the most striking turnaround. I’ve been bullish on Japan since last year… and had been proven way too early through March. But Japan rallied strongly last month – soaring 11% in April alone – it’s biggest single-month gain since 1995! In spite of this rally, Japan remains one of the world’s most undervalued major markets, but now it looks like global investors are catching on.

Hong Kong, another one of my favorite overseas markets, also pulled off a major turnaround in April. After dropping -18% in the first quarter of 2008, the Hang Seng Index jumped 13% last month.

Taiwan, another favorite, rose 4% in April. Mainland China bounced back too – 6.3% last month. But Shanghai shares still have lots of “heavy lifting” ahead -they’re still down 30% year to date.

Perhaps the biggest surprise was commodities. Gold and crude oil rallied pretty much in tandem through the end of 2007 and early 2008. Oil was up another 12% in April – adding to gains of nearly 20% year to date.

The yellow metal however declined nearly 6% last month. That’s gold’s second consecutive monthly decline – perhaps this precious metal will go for five in a row too!

Of course last month’s market action could prove very fleeting indeed. And I doubt that the ultimate “bottom” of this bear market has yet been reached. However, with such broad-based strength in equity markets around the world, we may be in for a decent rally that has some legs.

On Wednesday, the Fed cut rates again as I expected to 2%. The financial media seems convinced that the Fed intends to “pause” sometime soon. That has helped the beleaguered U.S. dollar (talk about a bear market!) to stabilize somewhat.

If the buck can stage a more convincing reversal of fortune at this point, I would expect commodities to correct further, while global stocks (particularly emerging markets) should continue to get a boost. Stay tuned…MIKE BURNICK, Senior Editor & Global Markets Analyst

Stocks bend to the breaking point, but refuse to snap. Instead, global equity markets tread water for a while…maybe bounce a little bit, but then roll-over yet again. So is this more of the same? I don’t think so. In fact, I’m seeing some signs that indicate a very profitable trading rally may be close at hand. Here’s why: My own personal “canary in the coal mine” indicator is quietly outperforming the S&P 500. That’s a potential BUY signal.

Keep your Eye on the Lagging Sectors

When every bull market breaks down and rolls over into a growling bear, there’s usually one key sector that leads the way down. In the last bear market, technology led the way down – especially internet shares.

In this bear market, it was clearly the housing sector that stumbled first. In fact, the Philadelphia (PHLX) Housing Sector Index peaked way back in the summer of 2005 (see graph above) while the rest of the stock market was soaring.

By mid-2006, the PHLX Housing Index was already down 20% from its peak – in bear-market territory! Of course a year after that, MOST of the major market indexes – both in the U.S. and globally – were also in decline. Housing started it all.

Most people aren’t aware of this. But as you can see in the chart above, so far this year the PHLX Housing Index is actually UP about 7% while the S&P 500 is DOWN about 7%.

That’s a major divergence for the stock market’s most beaten-down sector. It tells me that perhaps the worst is over for the industry that started this bear market.

If investors are already looking ahead to a recovery in housing, it stands to reason that the same thing should begin happening with other sectors too. In fact, I’m closely watching the beleaguered financial sector right now, because it’s next on my list for a potential bottom formation.

Bottom line: I doubt that this bear market is over just yet. In fact, the probabilities still suggest lower-lows. However, I’m watching closely for more signs of a powerful bear-market rally. It could ignite shares at any time, and provide some great short-term trading opportunities using call options.

MIKE BURNICK, Senior Editor & Global Market Analyst

P.S. Last week, I sent out a signal to subscribers of my Market Shock Trader service, telling them to buy call options on a leading player in the home mortgage market. I see big upside potential in this trade over the next few months. To get all the details, and a risk-free trial, just click here.