Commodity Play Remains The Big Trade

While GM is grabbing the headlines, stock traders over the weekend were talking about:

1) The continuing strength of the China/commodity play. Both the Chinese PMI (mostly state enterprise) and the CLSA PMI (mostly private sector weighted) continued their expansion for the third straight month.

China's Shanghai Index is up 3.4 percent to its highest level since August; Russia RTS Interfax Index is up 6.6 percent, at its highest level since October.

Also helping commodity-based marketsis the weak dollar, which is down again today. The Dollar Index is breaking through its December lows and is now at its lowest level since September of last year.

As a result of the Asian rally and the weak dollar, commodity stocks that trade in the U.S. are up this morning: Rio Tinto up 8 percent, ArcelorMittal, CNOOC and Aluminum Corp of China up 6 percent

European banks like Lloyds are also trading up mid-single digits.

2) Treasury Secretary's Geithner's meetingswith Chinese officials and his attempts to calm the bond market here (he is saying they deficit is a top priority).

3) The U.S. stock market's attempt to break out of its trading range and over its 200-daymoving average. While the S&P moved sideways for most of May, that is enough to bring it right to the door of the elusive 200-day moving average.

The S&P closed Friday at 917, the 200 day moving average is 928.60, but with futures up strong it could blow through that this morning. It has not been at the 200-day moving average since May 2008 and according to Miller Tabak has not closed above that since December, 2007.


1) Prudential Financialtrading down slightly as it announced a $1.25 billion common stock offering. The company intends to use the proceeds from this offering for general corporate purposes. The life insurer also released a one-sentence statement early Monday saying it does not need capital from the TARP.

2) Goldman Sachsis selling up to $1.9 billion worth of shares of Industrial and Commercial Bank of China. The shares being sold represent approximately 20% of Goldman's 4.93% state in the Chinese bank. The shares sold at a discount of 4-6 percent to the Chinese lender's Monday closing price. ICBC is the world's largest lender by market value.

3) Worldwide sales of semiconductors rose 6.4% in April to $15.6 billion, according to the Semiconductor Industry Association. This marks the first month-to-month gain seen in the industry since September. Better-than-expected strength in the personal-computer market and improving forecasts for PCs and cell phone sales lead the gain. However April sales are 25 percent lower than the same time last year, when sales were $20.9 billion.




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