U.S stocks headed for a higher open on Wednesday as news the White House and congressional Democrats reached an agreement in principle to aid U.S. automakers. including General Motors , calmed investors’ worries.

But signs of further deterioration in the world economy and the profit outlook, including big job losses at an global mining company, fueled caution a day after stocks sell-off ended two straight days’ of gains.

Without government help. investors fear that a possible failure or bankruptcy in the auto sector could send shock waves through the economy and worsen unemployment.

Backers of the $15 billion proposal for bailing out U.S. automakers could come to a vote in the House as early as Wednesday, officials said.

“Investors have been concerned about the continued acceleration of the market free-falling with significant bad news events,” said Rick Meckler, president of investment firm LibertyView Capital Management in New York.

But news of the auto agreement should spur “more of a relief rally than the feeling that this is something good for the markets itself.”

S&P 500 futures were 10.90 points higher and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures climbed 84 points, and Nasdaq 100 futures gained 10 points.

Shares of GM were up 3.8 percent to $4.88 in premarket trade and Ford gained 3.7 percent to $3.35.

Also likely to lend support to the market was a rebound in oil prices, which could boost energy shares. U.S front-month crude was up 4 percent to $43.96 barrel.

Earnings news and outlooks continued to cast a pall. Shares of Eastman Kodak tumbled nearly 16 percent to $6 before the bell after the photography company warned 2008 revenue and profit will fall short of expectations.

Video game publisher Electronic Arts shares fell 10 percent to $17.40 in premarket trade a day after the company cut its outlook.

Stocks in Asia rose overnight, sending the Hang Seng index up nearly 6 percent, as investors bet on stimulus measures from Beijing. Hopes for a U.S. auto deal also contributed to the gains, but European shares edged lower.

Global miner Rio Tinto said it planned to cut 14,000 jobs and reduce capital expenditures by $4 billion in 2009. Chinese imports and exports unexpectedly fell in November, which underscored the breadth and the depth the global slump.

Year-to-date the S&P 500 is off 39.5 percent but has gained 18 percent since hitting a Nov. 21 low. From its October 2007 record high, the index is off about 43 percent.

Chuck Mikolajczak
NEW YORK, Dec 10 (Reuters)

A year ago this week that BHP, the world’s largest mining company, went public with its bid for Rio Tinto, the world’s second-largest mining company. The offer allotted three BHP shares for each share of Rio Tinto – a deal that valued Rio at roughly $127 billion.  Rio rejected the offer, but BHP returned in February with a sweetened offer of 3.4 BHP shares for each share of Rio Tinto. That offer, worth about $147 billion, was also rejected.

Rio insisted that both BHP offers “significantly undervalued Rio Tinto and its prospects,” particularly iron ore. Rio Tinto Chief Executive Officer Tom Albanese noted in January that his company achieved record high production for iron ore, alumina, aluminum, bauxite, gold and copper in 2007. The company said it produced 145 million tons of iron ore last year, a 9% increase over 2006.

However, commodity prices across the board have retreated from the record highs reached earlier this year, which might make BHP’s offer slightly more appealing.

Stock valuations have plummeted as well. And at current prices, Rio Tinto is trading at a 24% discount to the value of BHP’s all-share offer.

Rio Tinto has given no indication that it has warmed up to the BHP bid, but Albanese did acknowledge a significant decline in demand from China. During a mining trip in Africa, Albanese told Bloomberg News that the slowdown in China’s economy has been more pronounced than initially thought.

“[China’s economy] is decelerating more in the fourth quarter than we saw in the third quarter,” Albanese said in an interview at the company’s ilmenite mine in Madagascar. “That is going to lead to a deferred pickup in cumulative demand for most of the things we produce during the course of 2009.”

China’s economy registered a solid GDP expansion of 9% in the third quarter – a noticeable step down from the torrid 11.9% pace set in 2007.

If BHP succeeds in its takeover attempt, it would gain control of the largest aluminum producer in the world, which Rio became by successfully bidding for Canada’s Alcan Inc. for $38.1 billion last year.

It would also control 14% of the world’s thermal coal and 13% of the worldwide copper supply. More importantly BHP-RioTinto would dominate 38% of the seaborne iron ore trade.

That’s why regulators would like to see BHP divest some of its current iron ore holdings before it approves any merger. After a five-week preliminary review in July, the commission said that it had “serious doubts” about a combination that would control more than one-third of the world’s iron ore exports.

Some analysts have pointed out that the EC has previously approved takeovers after sending a list of objections and without demanding changes or divestments. But this is not likely to be one of those cases given the global magnitude of this particular merger.

“I think BHP will review the objections and seek remedies for them,” Tobias Woerner, an analyst at MF Global Securities told the New York Times. “At least BHP hasn’t rejected the objections out of hand and walked away from the deal. The objections should be manageable, but we don’t know what other factors will be at play here.”

Source: European Commission Voices Antitrust Concerns Over BHP’s Bid for Rio Tinto

You can see why… it’s the fastest growing nation in the world. Its building rate is mind blowing. And it’s set to continue – at ALL costs.

Over the next few years it plans to build the equivalent of ten New York Cities!

And since the recent earthquake the Chinese government has promised to rebuild all the damaged cities in Sichuan and the surrounding areas. This will accelerate demand for these products even further.

But China has a problem… and it’s a big fat expensive one.

You see, to make steel you need iron – and China doesn’t have enough high-grade iron ore within its borders…

It means they are at the mercy of the world’s big exporters – BHP Billiton, Rio Tinto and Vale.

These miners charge what rates they like to ship the stuff over… and the cost is phenomenal. China has NO CHOICE but cough up.

But one firm newly placed just outside its borders could be about to save their bacon… and it kicks off as early as next month!

An iron ore miner with an edge over all its competitors – including the Big Boys!

At first glance there’s nothing unique about this company. It’s a miner… it gigs for iron ore… its reserves are sound.

But they have one thing that gives their business the edge over all their competitors: Its location.

Consider this… the current freight rate from Australia (BHP and Rio’s ore) to China is around $50 per tonne. Rates from Brazil (Vale’s ore) to China standing at around $100 per tonne.

This means transport costs to China are many times of the cost of mining the ore.

Wouldn’t it be better for Chinese steel mills if they could get their iron sourced more locally so transport costs were slashed?

Of course it would. If you could offer the mills iron ore or pig iron on these terms the Chinese would snap your hand off…

Well this company is scheduled to produce its first ore for sale THIS MONTH.

I will be recommending this company in the next issue of Smart Commodities UK, which drops on Saturday 22 June. To get all the exclusive details on this as soon as they’re published click here.

You have no obligation to continue subscribing. You have three whole months to see if it’s for you. And even if you decide it isn’t, everything you get is yours to keep no matter what.

Why one broker thinks these shares are 100% undervalued

By 2012, the company plans to produce up to 10.7m tonnes of iron ore concentrate. From that up to 5 million tonnes of pig iron will be produced.

It also recently announced the acquisition of two mining licenses that could DOUBLE the iron resources of the company.

Broker Cannacord Adams recently reviewed all of the company’s projects and came up with a net asset per share valuation that is double the current share price.

With the outlook for ore prices, I reckon this valuation looks pretty conservative, because iron ore prices remain on the up.

Iron ore prices will continue rise China’s voracious demand has caused iron prices to rise significantly. Recently, Rio Tinto managed to secure a hike of 95% for supplies of iron ore to a few small Chinese firms after intense negotiations.

Renaissance Capital estimated that there was a 30m-tonne gap in expected iron ore shipments and actual deliveries in 2007. There have been problems with weather as well, with many mines flooding in Northern Australia and in Vale’s operations Brazil.

Citigroup is also bullish on the iron ore price. In a note to clients last week, the broker said: “The iron ore market remains under-supplied and only a sharp deceleration in Chinese steel production will change this. We expect iron ore to rise by 30% in 2009… but this may be conservative.”

I am very excited about the prospect for this share. I like the location of its mines, the quality of its management and the pricing outlook for its main source of revenues.

The valuation is attractive and the fact production is set to start imminently should secure good news flow in the months to come – but you’ll have to wait a couple of weeks to find out exactly which company it is as I complete my research.

So sign up here to be sure you’re ready!

Regards,

Garry White
Editor
Smart Commodities UK

Please note: Forecasts are not a reliable indicator of future results.

Source: New Iron Ore Discovery to Save China’s Multibillion Pound Building Spree

Nickel continued to hit the skids, dropping throughout and just managing to come off its intraday low at $11.2279/lb., 46¼ cents.

Zinc failed to hold above $1, as it slipped to close at $0.9891/lb., down 2¾ cents. Aluminum was up most of the day though it came off its highs around noon, to close at $1.3432/lb., up less than a penny, while lead’s woes were prolonged as it fell to $0.9683/lb., down a penny and a third.

Copper was unable to take any heart in the rising gold and oil prices, as traders remained focused on economic worries.

Also playing in were rising stocks. Inventories monitored by the LME gained 2,300 metric tons yesterday, nearly 2%, to 124,950 tons, although that left stockpiles still 11% smaller than a year ago.

“The underlying cost drivers for the base metals are favourable for headline prices this morning, with crude oil over $130 a barrel and the US dollar softer, especially against the (renminbi),” JP Morgan analyst Michael Jansen said.

“However, the base metals are trading in a mixed fashion with demand concerns carrying slightly more weight today than the other factors,” he was forced to conclude.

Analysts at RBC Capital Markets advanced a different theory for the weakness in the industrial metals, writing that, “Open interest in the metals has fallen in recent days, so we wonder actually if there were some long base metals/short oil and gold strategies that were put on and forced to stop out.”

They added that, “Also, we have not really seen the presence of so-called ‘hot money’ players in the base metals markets in recent days and would imagine they are very active in the oil markets, at least helping to propel prices there.”

In company news, Japan’s Sumitomo Metal Mining Company, which intends to be among the world’s top five nickel producers in the next decade, announced that it will spend about ¥200 billion (US$1.9 billion) to develop a nickel mine in the Solomon Islands in the South Pacific.

The company plans a smelter for the Solomons that will start processing in 2013, with an expected output of 30,000 tons per year. Sumimoto also has two major projects under development in the Philippines, and shares a 21% state with Mitsui in New Caledonia’s embattled Goro project.

Source: Base Metals Remain Weak

Australia is the sixth-largest country in the world in terms of land mass — and yet the entire Aussie population is on par with greater Los Angeles.

Also known as “the lucky country,” Australia is loaded with natural resources, and is one of the world’s largest exporters of minerals and other commodities. The rising tide of industrialization has Australia’s top 10 customers buying over 70% of their exports. China is projected to become Australia’s biggest customer, bar none, in the next three years.

In 2007, Australia also dominated mining company mergers and acquisitions in the Asia Pacific region. They alone accounted for 20% of the world’s 50 largest mining deals.

The insatiable appetite for resources from China, India and the rest of Asia should keep Australia strong… and their currency reflects this strength, as the Aussie dollar continues to make new highs.

Money flows to where it is best treated, and Australia is one of those favored places. There are many ways to play this trend, from the currency itself to various stock ideas. Readers of the Taipan newsletter are keeping up with both. Join us, and you can, too.

Sally Limantour

Editor, Taipan

The 5 Best Foreign Stocks to Own Right Now:  These companies are big, strong, and offer a safe alternative to the risky U.S. markets. More importantly, they could pay you $25,000 to $375,000 every year for the rest of your life. And you can own them without investing a single dime overseas. Follow this link for all the details…