Good morning. Equities around the world got a one-two punch for global growth on Friday! Kudos go to Mario Draghi but even more to the People Bank of China (PBOC). Mr. Draghi, President of the ECB, stated on Friday the economy in the eurozone was weaker than had been feared and inflation lower than had been hoped and that monetary expansion was in the imminent future. This will most likely come in the form of the ECB purchasing corporate debt securities and maybe, eventually, individual sovereign debt securities. Remember, the ECB does not have a eurozone wide debt instrument to purchase like the Fed, Bank of Japan and many other central banks do making QE a bit more difficult to implement. Mario’s words supported equities but it was the PBOC that really brought out the buyers. In a surprise move (and it’s always the “surprise moves” that move markets the most!) the Bank cut its interest rates on one year time deposits by 25 basis points to 2.75% and the one year lending rate by 40 basis points to 5.6%. So let’s do the numbers. The Dow rose a nice 91 points, 0.51%, closing at 17,810, the S&P 500 added 11, 0.55%, to 2,064 and the Nasdaq also added 11, .024%, to 4,713. And once again I’m extremely pleased to report the Dow and S&P closed at record highs! The Nasdaq is not at record highs it is at its highest level since 2000. And it was a good week too with the major indices closing higher for the 5th consecutive week with the Dow and S&P up about 1% and the Nasdaq gaining 0.5%. It sure seems a long time since early October when we saw stocks fall hard and fast nearly erasing all of the year’s gains.

This morning the world markets are continuing to react to the Chinese rate cut and Mr. Draghi’s comment on Friday. The Asian markets all closed higher, by widely varying degrees I must add, the European market are looking pretty good with only the UK’s FTSE trading in the red and that’s by less than 0.1%, and all the U.S. bourses nicely positive with Dow futures up 34 points. That’s it folks. If’s there’s one lesson we’ve learned over the past 5 years it’s that stock markets love QE, in any form!

Oil got a boost from Friday’s QE announcement with WTI closing 66¢ higher at $76.51 and Brent jumping more, $1.03, to $80.36. Quite frankly though, it’s a pretty lame response to what was very positive news for equities. The big news for oil will be the results from OPEC’s meeting in Vienna this Thursday. Already the pre-meeting meetings are taking place and the pre-meeting press conferences and lobbying efforts by the “hawks” within OPEC are in full swing. The official Iranian news agency, IRNA, is reporting that Iran’s oil minister, Mr. Bijan Namdar Zananeh has already notified the other oil producers in the Persian Gulf, the UAE, Kuwait and Qatar, of the message he is carrying from Iran’s President to the Saudi King and that is that the oil market in coming years will be experiencing more supplies and less demand and that OPEC’s members need to react accordingly. The rumor is that OPEC production will cut production up to 1 million bpd. Take this with a very big grain of salt. Besides, even if OPEC cuts a million bpd it will be insufficient to restore even modest strength to oil prices. It won’t take long for producers in the Marcellus, Eagle Ford, Permian and Bakken to take that slack up. And who’s kidding who? Anyone who believes that the OPEC nations will not turn upon one another is completely naïve. The will do everything they can to maximize cash flow. The promises OPEC countries like Iran have made to its citizens in the form of public assistance programs, subsidized energy, subsidized food and subsidized health cares are all predicated upon a stream of cash from oil exports. These massive subsidies cannot be cut without creating massive public anger and at an extreme, violence and a regime change.

Even with equities trading higher oil can’t rally with WTI being down 49¢ this morning

Courtesy of MDA information Systems LLC

What a ride natural gas has been. Earlier this month the cold weather earlier this month drove cash prices for natural gas prices up almost $1.00 with futures prices testing $4.50. So how cold was it earlier this month? So cold that natural gas demand set a single day record for any day in the history of November at 105.4 Bcf/d besting the old record set last year by more than 1.0 Bcf/d. As the weather, more specifically the forecast, has changed so has prices. The forecast on Friday showed a shift to more moderate temperatures and then the noon update came out which translated into lopping off 39 Bcf of demand and the bulls became hamburger. The December contract, which expires tomorrow, closed down 22.3¢ at $4.266/MMBtu. That’s more than 5%. If any bulls survived Friday’s trading they’re dead today with natty down 18.6¢ this morning. One quick look at the weather forecast and you’ll see why. Lots of yellow, orange and red on the map over the large gas consuming regions of the country in the 11-15 day time frame. This weather forecast is lining up nicely for those of you who’s natural gas and electricity costs for December will be set on tomorrow’s close. Have a nice day.