Oil jumps $4

With the news of the interest rate cut by the US Federal Reserves (Fed), oil prices has now gone past the $94 per barrel. Fed cut interest rates by quarter-point to encourage lending and to ease the credit market.

The cut has led to a dive in the greenback, and major currencies around the world has seen a rise - in record high numbers - against the US dollar. This, couple with a decline in crude stocks has pushed oil prices to its current level.

As the KLSE opens this morning, the composite index is currently up by more than nine points. Leading the rise in share prices are plantation stocks such as the Kuala Lumpur Kepong (KLK), IOI Corp and Asiatic. Bursa is also doing well, but it seem that there will be much profit-taking today as investors try to cash in on gains from the past few days.

Personally, I have sold off most of my shares yesterday in view that there is a slim chance that Fed might not cut interest rates. But I'm back to buying today and hopefully the stock market will continue its bullish run for a few more days.

Some excerpts from around the news:

BBC:

US light crude ended the trading session up $4.15 to $94.53 a barrel, while London Brent traded at $90.63 a barrel, up $3.19 [...]

An array of factors have been driving oil prices higher. Oil prices have risen as the sliding greenback makes oil, which is priced dollars, cheaper to buy outside the US.

The dollar hit its weakest levels against the pound since 1981 on Wednesday. At the same time, oil investors have been casting a nervous eye on Turkey's threats to carry out a major military incursion into northern Iraq to attack Kurdish rebels [...]

CNN:

An interest rate cut boosts oil prices because it is meant to spur economic activity, which would drive up demand for oil.

A rate cut also pushes down the dollar, in which oil is priced. A falling dollar makes oil cheaper for foreign consumers and means oil producing countries have less incentive to raise production, both of which are bullish for oil prices [...]

Oil prices got a boost in premarket trade Wednesday after a report said the U.S. economy grew by a robust 3.9 percent rate in the third quarter, which was more than expected.

Oil prices sold off by more than $3 a barrel Tuesday after a report from influential trading house Goldman Sachs urged investors to sell oil now in order to lock in profits.

But crude is still near all-time highs, even adjusted for inflation. The last time oil was this high was the early 1980s, when it rose to $93 to $101 a barrel, depending on the inflation calculation used and the oil contract cited [...]

AFP:

In an accompanying statement to its second rate cut in as many months, the Federal Open Market Committee said that although financial market turmoil linked to a US housing downturn had eased in part, "the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction.

"Today's action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time."

The Fed slashed its federal funds rate by a half point to 4.75 percent on September 18 to ease a credit crunch tied to the housing slump.

Kathy Lien, chief strategist of Forex Capital Markets, said the latest Fed move was "giving the financial markets exactly what they wanted and nothing more." [...]

Telegraph UK:

The statement accompanying the decision was couched in far less reassuring tones than those that came with its emergency cut in September. It said the Fed remains concerned "the pace of economic expansion will likely slow in the near-term", adding that growth risks are to the "downside".
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However, it also voiced concern about the risks inflation poses to growth.

Economist James Knightley of ING said: "It seems as though the Fed is hinting that it doesn't see the need for a series of rate cuts as yet.

, The Dow Jones fell initially on the news but ended the day up 138 points at 13,930 [...]

China Passes U.S. in Top 10 List

In this piece of news, we see China passing the US in number of companies in the Top 10 list for world largest companies.

Five of the 10 biggest companies by market capitalization are now Chinese, compared with three that are located in America, after China's benchmark stock index almost tripled this year.

This came to happen when China Life Insurance Co. surpassed AT&T Inc. in terms of market value. The insurance company is China's largest insurer by premiums with a third-quarter net profit at 7.82 billion yuan (US$1 billion;€700 million).

While there are five "big" companies in the Top 10 list, only two of them are in the Top 50 by revenue, and they are China Petroleum and Chemical (Sinopec) and PetroChina.

Oil Sneaks Past $93

Ouch...

A Mexican oil company has just joined the growing list of factors pushing oil prices to dizzying heights. The state-run Petroleos Mexicanos, or Pemex, is shutting as much as 600,000 barrels, or about 19% of its daily crude output because of a storm, and the news has now pushed oil past the $93 mark. [Oil Sneaks Past $93 - Forbes.com]

Good news for oil palm plantation companies though. Palm oil demand will outpace supply as rising oil prices could spark interest in biofuels, a cheaper alternative to crude oil. On Monday, the stocks of plantation companies in Malaysia such as KLK, IOI Corp and Asiatic rose in accord to the record high crude palm oil prices. While there will be profit-taking in the next few days, there should continue to be some uptrend later today (perhaps the week) when the KLCI opens.

Meet-ups with the Dalai Lama anger China

Touchy, touchy. Apparently a lot of countries have angered China recently - because their leaders have been meeting up with the Dalai Lama and awarding him with various recognitions. According to the BBC:

Recently, world leaders have grown more vocal in their concern for human rights in Tibet.

In September, German Chancellor Angela Merkel met the Dalai Lama, incurring Beijing's wrath.

The historic Berlin meeting prompted China to withdraw from a German-Chinese symposium scheduled to be held in Munich and to cancel an annual event due to be held in Beijing in December to discuss human rights.

The Dalai Lama has also met Austrian Chancellor Alfred Gusenbauer and Australian Prime Minister John Howard this year, and is due to meet Canadian Prime Minister Stephen Harper later this month.

China was outraged when Canada granted the Dalai Lama honorary citizenship last year.

Looks like it's a matter of time before China becomes outraged with most of the developed countries. Now, what would China do if it comes to that? Would it:

1) Cut off all diplomatic ties with these countries? - And not do any business? No way!
2) Continue to declare their outrage? - And then fume peacefully at home while sipping tea?
3) Bring the matter to the UN? - Now, what use would that do?
4) Declare war? - OK, that was just something I threw in, despite the almost negligible probability that China would go to war because of the Dalai Lama. Perhaps as an excuse in the future?

One thing for sure is that China would be choosing its very own Dalai Lama in the future with the setting up of a new ruling in August (effective 1 Sept.), which includes a stipulation that senior monks, known as "living Buddhas," cannot be reincarnated without government permission. A move I believe that is focused on cutting off the official Dalai Lama's influence.

People will be confused and start asking, "Will the real Dalai Lama please stand up?"

This should solve all their anger problems with other countries. Oh...and there is then no more need to talk of human rights issues. Since there are no rights, where art the issues?

Talk about ruling with an iron grip.