The Great Escape

07/16/2009 9:57 am EST


Igor Greenwald

Chief Investment Strategist, MLP Profits

That was close. The run-up to Bastille Day found stocks languishing in a dank basement cell, starved for good news beyond the reprieve gratefully pocketed months ago.

Japan had suffered nine whippings in as many trading days, capped by a local election loss that had the political mob baying for the head of the unpopular prime minister. Latin America's rusty chains chafed. Even China caught a chill, the massive lending spree orchestrated from Beijing beginning to evoke the recent banking follies in America.

Well, so much for all that. The first glimmer of hope came when UBS (NYSE: UBS), the Swiss bank with keys on its logo, made nice with the IRS, indicating progress on US demands that it unlock the banking records of American citizens. Soon thereafter, Meredith Whitney, an analyst long bearish on US banks, was saying nice things about Goldman Sachs (NYSE: GS) and Bank of America (NYSE: BAC). Goldman obliged with trading profits that left everyone agog. Intel (NYSE: INTC) followed with another earnings home run, Asia's appetite for its microchips prodding the tech bulls in Taipei and Seoul.

Soon, buyers who'd been nowhere in sight for weeks were once again basking in the sunlight. And all the chart gazers who'd been predicting trouble were checking their sums, the better to come up with a different answer. Suddenly, no one could recall any recent urges to desert the barricades.

The renewed hunger for risk was boosting commodities deemed overpriced just last week and Asian markets emerging from a shallow correction.

China's relations with Australia grew more tense over the arrest of four Rio Tinto (LSE: RIO.L, NYSE: RTP) employees, one of them an Australian citizen. Australian miners and Chinese steel makers remained at odds in annual iron ore pricing talks. China is reportedly trying to stop its smaller mills from bidding up spot prices in the interim.

Australia warned that China's heavy-handedness could make it an unwelcome business partner in other parts of the world. How unwelcome is a question Germany is now contemplating, as Beijing Auto bids for majority control of GM's Opel. The Chinese firm is seeking fewer government guarantees than other bidders, but remains on the outside looking in as deal talks crawl along.

In other German automotive news, Volkswagen, the two families in control of Porsche and Qatar remained in talks about a possible merger of the feuding automakers with Qatari cash. Japanese brewers Kirin and Suntori hoped to combine more harmoniously.

Asia remains the most content continent, while Europe, the UK, and the US sweat the growing shortage of jobs. The French are now so hard up they're debating opening stores on Sundays.

Some of the Chinese factory owners who'd once plied the West with cheap goods are now driving cabs in Taipei, writes Robert Hsu. Meanwhile, the fortunate beneficiaries of China's strong domestic market are increasingly lounging around at five-star hotels.

If China prospers despite its many challenges, the outlook should remain bright for Thailand, a key agricultural exporter and potential tourist destination for the fast-growing ranks of Chinese yuppies. David Fuller deems it one of Asia's cheapest markets, thanks to a tradition of coups and a separatist rebellion.

As for Europe, they say smoking calms nerves. And so do healthy dividend yields derived from nicotine addiction, writes Douglas Moffitt.

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