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from Global Investing:

Oil prices — Geopolitics or growth?

It's the economy, stupid. Or isn't it?

Brent crude has risen 15 percent since the end of last year, focusing people's minds on the potential this has to choke off the recovery in world growth. But some reckon it is the recovery that's at least partly responsible for the surging oil prices --- economic data from United States and Germany has been strong of late. There are hopes that France and the United Kingdom may escape recession after all. And growth in the developing world has been robust.

Geopolitics of course is playing a role  as an increasing number of countries boycott Iranian oil and fret over a possible military strike by Israel on Iran's nuclear installations.  But Deutsche Bank analysts point out that world equity markets, an efficient real-time gauge of growth sentiment, have risen along with oil prices.

Their graphic (below) shows a remarkably close relationship between oil prices and the S&P 500. Click to enlarge

Deutsche says:

We find it hard to believe that a genuine concern about a real risk of war would have accompanied a 4.7 percent gain in the S&P 500 index during February to a post-Lehman high.

from Reuters Investigates:

No room at the Inn … but maybe a job in the Outback

By Rebekah Kebede

You wouldn't think you'd have to make hotel reservations months ahead of time in Karratha, a small, dusty town on the edge of the Outback  a 16-hour drive from  Perth, the nearest city. But with Australia’s commodities boom, Karratha is bursting at the seams and nowhere is it more apparent than when trying to find a place to stay.

(Above photo: A kangaroo stands atop iron ore rocks outside the remote outback town of Karattha in Western Australia. Reuters/Daniel Munoz)

About two weeks ahead of my trip up to Karratha, to do a special report on Australia's hunt for foreign labour, all hotel rooms within a 60-km radius were fully booked and after more than 20 calls, the travel agent was still coming up empty.

A few more desperate calls turned up a couple of rooms in a town called Roebourne, about 30 minutes away from Karratha at the Ieramugadu Inn, an old motel, which like many others in the area, had become worker accommodations as Karratha struggles to house the influx of labour into town. The bill came to over $200 a night—just shy of what it costs to book a room with a view of the Opera House in Sydney.  The amenities at the Ieramugadu were somewhat different: a complimentary can of bug repellent, tin-foil covered windows to keep out the light for those on night shift, and a view of a truck parking lot through a hole in the tin foil.

from Environment Forum:

The Green Gauge: Vedanta, Sterlite ordered to shut smelter

This month, Vedanta Resources and subsidiary Sterlite Industries (India) Ltd. made headlines for posing a public health risk to the surrounding community in southern India with pollution from a large copper smelter. They share the top spot in this issue of The Green Gauge, a breakdown of companies recently in the news for winning or losing credibility based on environment-related activity.

Selections of companies were made by Christopher Greenwald, director of data content at ASSET4, a Thomson Reuters business that provides investment research on the environmental, social and governance performance of major global corporations. These ratings are not recommendations to buy or sell.

Vedanta Resources, Sterlite Industries (India) Ltd. Vedanta Resources faces a new environmental setback in India after a Madras High Court ordered the closure of a large copper smelter at Tuticorin belonging to Vedanta’s Indian subsidiary, Sterlite Industries. Claiming that “the right to have a living atmosphere congenial to human existence is part of the right to life,” the Madras court argued that toxic emissions from the copper smelter, the 9th largest in the world, posed a public health risk to the surrounding community. The Indian Supreme Court granted permission for the facility to continue to operate while Vedanta appeals the verdict.

Murphy Oil Corp. Murphy Oil recently reached a settlement with the U.S. Justice Department as a result of violations of the Clean Air Act at its refineries in Meraux, Louisiana and Superior, Wisconsin. The settlement, which resulted from high emissions of sulfur dioxide (SO2), nitrogen oxides (NOx), volatile organic compounds (VOCs) and benzene at the facilities, requires Murphy to pay $1.25 million in a civil penalty, $1.5 million for a supplemental environmental project as well as to spend $142 million for upgraded pollution control equipment at the facilities. The total settlement amount of $144.75 million represents 16 percent of the company’s FY 2010 net profit.

Target Corp. A California judge has ordered Target to stop disposing of defective goods that should qualify as hazardous waste following a lawsuit filed by several cities and the state of California that could eventually result in significant fines against the company. The lawsuit contends that Target has routinely disposed of items such as pesticides, bleach, and electronics improperly throughout the state, including 5,000 pounds of unsalable hazardous waste that was sent to a local food bank in Los Angeles. Target denies the charges and claims that it has a comprehensive program to ensure that its waste disposal is compliant with California state laws.

Enbridge In the wake of a series of environmental problems in its pipeline system in the mid-West including a damaging spill in the Kalamazoo River in July, the Wisconsin Attorney General also announced that the company faces $1 million in fines due to violations of state air pollution laws. The violations, which date as far back as 2001, include failures to maintain proper seals on gaskets and storage tanks at the company’s Superior terminal.

from Afghan Journal:

Afghan mining roadshow opens; temptation, trepidation for India, China

Afghan authorities have organised a roadshow in London that opens on Friday aimed at drumming up interest in the country's mineral wealth variously estimated at anything from $1 trillion to $3 trillion.

India and China, the regional heavyweights, are the top candidates to fight for a piece of the action in their immediate neighbourhood. If there are such large reserves of copper, iron ore and key industrial metals such as lithium lying untapped in their neighbourhood you would expect them to invest heavily in Afghanistan to feed their supercharged economies.

But they are not rushing in yet with pick axes and shovels, and for the same reasons that deter Western investors. The security and logistical challenges of extracting the minerals and bringing them to the global market remain daunting.

Here's an analysis on a gold rush that may be a long time coming.

from Commodity Corner:

Live from London Metal Exchange Week 2009

The great and good of the global metals industry gather for London Metal Exchange week -- the flagship event for the industry.

With most base metal prices running way ahead of fundamentals, real and apparent demand unclear and leading economies at different stages of recovery or not, its a key time to take the temperature of banks, producers, consumers and funds involved in metals.

To follow us on Twitter look for hashtag LME.

from MacroScope:

China leading other markets?

It's becoming increasingly common to blame Chinese stocks for recent volatility in global markets.

In some places, numbers do back up why China and other markets are increasingly moving in tandem.

According to Brown Brothers Harriman, the correlation based on percentage change between Shanghai stocks and the S&P 500 index has risen to 18 percent in the last three months. This compares with year-to-date correlation of 9 percent and 4.5 percent in the past two years.

The correlation between the front month copper futures and the Shanghai composite has risen to above 30 percent in the past three months from 27.4 percent since January and 16.5 percent over the past two years.

Over the two past years, the correlation between the euro/dollar exchange rate and the Shanghai Composite is 12 percent, same as the year to date. In the most recent 3 months the correlation has risen to just above 21 percent, its highest since Q2 2007. The highest over the past decade was recorded in Aug 2005 with a correlation of about 40 percent.

The yen's correlation with the Chinese equity market is not statistically significant. Over the past two years, the correlation is about 4 percent and year to date it has fallen to a little more than 2 percent, but in the past three months has risen to about 5.5 percent.

from Commentaries:

Anglo dresses interims up as a defence

    Anglo American hasn't yet received a formal bid from Xstrata. But the miner's interim results read very much like a defence document.     The highlights alone give a pretty good idea of what chief executive Cynthia Carroll and new chairman John Parker will focus on if Xstrata does eventually pounce.     Anglo's case hinges on four things.     First, that its plan to cut $2 billion of costs by 2011 is ahead of target. Second, that it is getting on top of its $11 billion net debt, and third, that progress is being made in restructuring its problem child Anglo Platinum <AMSJ.J>. Lastly, Anglo acknowledges that it is an objective to reinstate the dividend.     Added to these elements, lest they appeared to have too defensive a flavour, is the promise of growth, largely through its Minas-Rio iron ore project in Brazil and its Los Bronces copper development.     Of these, cost savings are a crucial point of contention in the Xstrata debate, with the rival miner's chief executive Mick Davis confident he can squeeze a further $1 billion out of a combination with Anglo, taking the total to $3 billion.     Anglo isn't making any promises beyond those already given but the tone of the language -- which includes talk of being ahead on "asset optimisation", procurement and job reductions -- hints that it may be able to find more savings on its own, without handing anything to Xstrata.     So far the market seems largely happy to let Carroll stick to her plan -- highlighting Anglo's leading position in platinum, diamonds and iron ore alongside its cost cutting success. But investors might ask more searching questions in the event that Xstrata did come back offering a premium.

from Financial Regulatory Forum:

Finance ministers from Americas to meet on economic crisis

    By Rodrigo Martinez    SANTIAGO (Reuters) - Finance ministers from the Americas and leaders from multilateral lenders will huddle in Chile on Friday to evaluate their responses thus far to the global economic crisis and figure out the way ahead.    Chilean Finance Minister Andres Velasco told Reuters that turbulence has shown the International Monetary Fund and World Bank need more resources for the slump.    He also said he hopes the elected government of Honduras will be represented at the meeting in Chile after a military coup in the Central American country on Sunday that has been widely condemned by the international community.    "We will discuss counter-cyclical fiscal policies and the impact these have had," Velasco said of the meeting in the Chilean coastal city of Vina del Mar, which is being held as economies in the region suffer their sharpest downturns in years.    "Secondly, we need to think about how we can prepare countries for the post-crisis world. This implies taking steps to improve productivity and, for example, financing for infrastructure and construction."    Chile, the world's No. 1 copper producer, has won praise for building up savings from high metals prices during boom times and using the cash for an economic stimulus package.    Top executives from the World Bank, International Monetary Fund and the Inter-American Development Bank will also be at the meeting.    Some countries in the region have looked for credits from multilateral lenders to help weather the crisis.    "It's important for the IMF, for example, to have the resources in the short-term so that countries don't have liquidity problems -- Chile hasn't had trouble but other countries have," he said.     "The World Bank and IADB should also have more resources so they can loan out money faster for infrastructure and productivity programs."       SUPPORT FOR HONDURAS    Velasco was asked if finance ministers would issue a statement supporting ousted Honduran President Manuel Zelaya.    "There is a widely shared commitment to preserving democratic institutions in Honduras and this means that I hope the democratic government of Honduras can be represented at the meeting," he said.    World Bank President Robert Zoellick said on Tuesday that the lender has "paused" all loan programs to Honduras because of the political turmoil there.    Friday will be the second meeting of finance ministers from the Americas after one held in Mexico in 2008. (Editing by Leslie Adler)

from Commentaries:

Global market cross-currents, Fed in focus

With the big event for the week - the outcome of the Federal Reserve's Federal Open Market Committee - not due until Wednesday, global markets are left to focus on number of cross currents that are weighing on the stocks and oil and bolstering government bonds and the dollar.

The World Bank, which warned that the prospects for global economy continued to be "unusually uncertain," downwardly revised its 2009 outlooks for Japan,  the Euro Zone, and the United States. The organization expects global output to shrink by 2.9% this year , worse than an initial estimate of 1.7%.

Then there's the reemergence of merger Monday madness. Over the weekend, Xstrata said it's exploring a merger of equals with mining rival Anglo American, though talks are said to be preliminary.

Meanwhile, commodities are on their back foot with copper getting knocked down to a two-week low after data showed that China was chewing up the metal at a slower than expected rate. Oil also slipped back below $70 per barrel on a firmer dollar.

US Treasurys are up, with the 10-year benchmark rising 16/32 to yield 3.72% - a level that Ben Bernanke and other policymakers must feel relieved about as they prepare for the their two-day policy meeting that begins Tuesday. Two weeks ago, the yield made a run for 4%, but failed to breach the level that has become an important psychological line in the sand for investors.

The market is very much focused on what, if anything, the Fed says about its Treasury purchases. The bank has already commited to buy up $300 billion of US government securities as it attempts to keep interest rates low and the financial system stable.  Some would like the Fed to commit to even larger purchases, while others would like to see some sign that policymakers are planning to eventually unwind the trillions of dollars they've pumped into the system.

Stay tuned.

from Changing China:

Can China save the world?

China has long said that its biggest contribution to a world racked by financial turmoil would be to ensure that its own economy grows strongly, implying that a rising Chinese tide will lift all boats. The latest data show that Beijing has delivered on one part of the bargain; its economy, the toast of the world over the past five years, is once again ahead, far ahead, of the pack. 

Many investors and companies are confident that the second part of the bargain will follow – that China's recovery will be just the cure for markets still woozy from the financial battering. Such faith is not yet justified.

To be sure, China has already delivered a cortisone injection to some commodities, notably copper, the price of which has risen more than 40 percent this year. Strong stock markets, from Japan to Canada, since March are in part a play on positive sentiment spilling over from the Chinese rally that began in January. China also stands as the one growth market for global auto makers.