Weaker Dollar Driving Commodities

Banks and commodity stocks are rallying this morning in Europe and the U.S.; most bourses are up 2 to 3 percent. Shanghai was up 1.9 percent after hitting 52-week lows Monday.

Helping commodities and commodity stocks: a weaker dollar, and positive comments about the global economy from the Reserve Bank of Australia (RBA), which left the overnight cash rate unchanged at 4.50 percent for the second time.

The Aussie central bank said, "The global economy has continued to expand over recent months...the expansion remains uneven, with the major advanced countries recording only modest growth overall, but growth in Asia and Latin America, to date, very strong. There are indications that growth in China is now starting to moderate to a more sustainable rate."

Mao is rolling in his grave. Helping China is early indications that demand for the Agricultural Bank of China IPO is strong. They're selling 15 percent of the company; it's the last of the four major state banks to go public. It is set to price tonight in Shanghai and Hong Kong and may raise as much as $23 billion; not clear if it can break the IPO record of $22 billion raised by its competitor, Industrial and Commercial Bank of China, in 2006.

The bank was founded by Mao Zedong himself in 1951 as the rural lending arm of the central bank.

It's been all-Asia or Russia in terms of big IPOs this year; none of the top 10 IPOs in the year have come from the U.S.


1) Walgreen reported a stronger-than-expected 2.0 percent rise in June same-store sales. General merchandise comps rose 2.2 percent, while pharmacy same-store sales rose 1.9 percent, boosted by a 3.4 percent rise in prescriptions filled.

2) BP rises 5 percent to back over $31 after the oil firm denied that it would issue new shares to raise capital to help fund the oil spill cleanup costs.

Separately, the Royal Bank of Scotland upgraded BP's stock to a "buy" reflecting its belief that the costs related to the oil spill will be less than what the market has already priced in.

3) Goldman Sachs is up 1 percent after being upgraded to "overweight" at JPMorgan. The analysts cited Goldman's "best in class" risk management and its belief that the firm would not need to raise more money to satisfy capital requirements.

Meanwhile JPMorgan downgraded Deutsche Bank to "underweight" as the analysts feel the German bank has the weakest capital level of the big investment banks.

4) The Semiconductor Industry Association (SIA) reported a 4.5 percent increase in semiconductor sales in May from the prior month. Sales of computers and cell phones are expected to remain strong this year, and semiconductor sales are still seen growing 28 percent this year.

SIA President George Scalise noted that "growing concerns about issues such as government debt, declining consumer confidence, and pressures on government spending do not appear to have affected worldwide semiconductor sales to date."

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