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M&A activity boosts world stocks; oil firmer

M&A activity boosts world stocks; oil firmer
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First Published: Mon, Aug 23 2010. 05 01 PM IST
Updated: Mon, Aug 23 2010. 05 01 PM IST
London: World stocks rose from last week’s one-month low on Monday as a slew of corporate takeover activity and an encouraging euro zone business survey helped ease concerns about a global economic slowdown.
Mining shares gained as financial markets bet Australia’s inconclusive weekend elections would lead to a change of government, spelling the end to a plan to impose tax on major iron ore and coal mines.
A Markit survey showed the euro zone’s economic recovery moderated slightly this month but companies are more optimistic about the coming months. In the corporate sector, increasing merger and acquisition activity is boosting investor sentiment as companies utilise high cash balances and historically low borrowing costs to look for bargain buys and expand their business.
HSBC is in talks to buy a stake in South Africa’s Nedbank in a potential $6.8 billion deal. In Asia, an estimated $58 billion worth of M&A was playing out on Monday.
Positive corporate news helped ease concerns that a renewed spike in US unemployment may drag the economy down, forcing the Federal Reserve to implement additional monetary easing.
“The whole market is geared to M&A activity,” said David Buik, senior partner at BCG Partners.
“We’re of the opinion that the quality of economic data across the world is poor, but on the other side of the coin there is enough M&A activity out there to limit any kind of a fall in the immediate future.” The MSCI world equity index rose 0.3% after hitting a one-month low last week. The Thomson Reuters global stock index added 0.2%.
M&A BOOST
The FTSEurofirst 300 index was up 0.8%. US stock futures were up 0.6%, pointing to a firmer open on Wall Street later.
Markit’s Eurozone Flash Services Purchasing Managers’ Index, made up of surveys of around 2,000 businesses ranging from banks to restaurants, came in at a better-than-expected 55.6 in August, compared with 55.8 in July.
Old Mutual was up nearly five% after HSBC said it would buy up to 70% of Nedbank, in which Old Mutual has a controlling stake., Basic resources shares were the top gainers Foster Group closed up more than 7% after sources told Reuters beverage groups SABMiller and Asahi Breweries were looking at the Australian brewer’s beer operations, valued at more than $10 billion.
Thomson Reuters data showed global mergers and acquisitions have hit nearly $200 billion so far in August. Emerging stocks ticked up 0.1% on the day.
US crude oil rose 0.4% to $74.11 a barrel, off Friday’s six-week low of $73.19. Prices had fallen more than 10% from an 4 August high of $82.97 as concerns about the global economy darkened the outlook for energy demand.
The bund future fell 18 ticks.
ELECTION RESULTS HIT AUSSIE
The Australian dollar briefly hit a one-month low of $0.8833 as the country faced a week of political wrangling after Sunday’s inconclusive election.
The US dollar was down around 0.1% against a basket of major currencies. The yen gained 0.3% to 85.32 per dollar, which in turn weighed on Tokyo stocks.
Japanese Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa discussed the yen on Monday and agreed to work closely, disappointing those who had expected a bolder policy response after the yen’s surge to 15-year highs beyond 85 earlier this month.
“In the absence of a further sharp appreciation of the exchange rate towards 80 or a disorderly slide in the equity markets, we do not anticipate any easing of monetary policy until the scheduled policy meeting due on 6-7 September, when we expect a further expansion of the BOJ’s funds-supplying facility,” Daiwa Capital Markets said in a note to clients.
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First Published: Mon, Aug 23 2010. 05 01 PM IST
More Topics: M&A | Markets | Earnings | HSBC | US |