Short the weekend, cover Monday. That game — which was very much in evidence in the financial crisis two years ago — was evident over the weekend. Puts were bought on Friday to hedge against what happened the previous weekend, when traders (and everyone else) were caught off-guard by the events in Libya.
S&P futures, which were flat overnight, have risen in the morning, primarily due to the drop in oil and a statement that rebels in control of the the Arabian Gulf Oil Company, Libya's largest oil producer, have said they are resuming oil shipments.
Saudi Arabia's stock market, which had plunged to a nine-month low overnight, also recovered and closed down only 0.15 percent.
1) Nursing home operator Ventas announced it will buy competitor Nationwide Health Properties* for $7.4 billion in stock, about a 16 percent premium from Friday's market cap. Nationwide Health shareholders will get 0.7866 shares of Ventas in exchange for each of their shares. The deal would create the biggest healthcare REIT in the country, with the company operating numerous hospitals, nursing facilities, and housing communities for the elderly.
The crude reality of higher oil prices:
a) The International Air Transport Association (IATA) reported an 8.2 percent year-over-year rise in January passenger traffic. But despite those encouraging numbers, it warned that "2011 is starting out as a very challenging year for airlines." Higher taxes in Europe and the jump in oil prices in the wake of the Middle East unrest could be problematic ahead. The head of IATA, Giovanni Bisignani, noted that airlines would incur $1.6 billion in additional costs for every $1 increase in oil prices.
b) In an interview with The Wall Street Journal the chief economist at the International Energy Agency (IEA) warned that soaring oil prices could threaten Europe's economic recovery. Fatih Birol said that if oil prices remained over $100 on average this year, EU countries would be forced to spend an extra $375 billion on oil imports. He notes that as a percentage of GDP, that amount would be double the average the EU nations paid for oil imports between 1971 and 2008.
c) Brazilian economists raised their 2011 inflation forecasts for the 12th straight week. They now expect inflation to rise 5.80 percent, significantly higher than the 4.5 percent target set by the country's central bank. Concurrently, the economists cut their estimates for GDP growth this year to 4.3 percent, down from 4.5 percent.
*A previous version of this story had misspelled the name of Nationwide Health Properties.
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