Trader Talk

U.S. Retail, Banks, Builders Down; China Metals Hot

The retailers, financials, and home builders are leading the market down. Again. These groups have outperformed because of the short covering in the past two weeks; that bid may now be fading.

Action in China

I mentioned the big up move in China; the Shanghai Composite up 8.3% overnight, a record.

1. There’s considerable speculation that the Chinese government will act to boost stocks and the economy after the worst snowstorms in decades.

2. Plus, the Chinese government announced fast track approval for two new stock funds, ending a five-month freeze -- another sign the government may be easing up on its attempt to constrict stock trading.

3. Also helping: Aluminum Corp. of China has joined with Alcoa to buy a 9 percent stake in iron ore giant Rio Tinto. Remember, BHP Billiton has made a takeover bid for Rio Tinto, which Rio has rejected.

The Chinese government clearly does not want the combined iron ore pricing power that a Rio Tinto-BHP Billiton combination would represent. The speculation is that Aluminum Corp. itself, with the help of the Chinese government, may make a bid for Rio. Aluminum Corp has said it is not planning to make a bid at this time -- but reserves the right to do so.

Vale of Brazil is also in talks to buy Xstrata, in another mega deal in the metals business.

Questions?  Comments?