While you were sleeping: Records and takeover deals

Tuesday 10th June 2014

all Street touched record highs, with Germany’s DAX closing at a record high, amid a flurry of takeover deals and optimism about the global economic outlook.

In the final hour of trading in New York, the Dow Jones Industrial Average eked out a 0.02 percent gain, the Standard & Poor’s 500 Index edged 0.09 percent higher, and the Nasdaq Composite Index rose 0.3 percent. Earlier in the session the Dow reached a record high 16,970.17, while the S&P 500 touched a record 1,955.55.

In the Dow, gains in shares of JPMorgan Chase, up 1.1 percent, and those of Walt Disney, up 1 percent, offset declines in shares of Microsoft, down 0.8 percent, and those of Pfizer, down 0.5 percent.

There were several merger and acquisition deals. Tyson Foods offered to buy Hillshire Brands for about US$8.55 billion, including debt, Merck agreed to buy Idenix Pharmaceuticals in a deal worth about US$3.85 billion, while Analog Devices will acquire Hittite Microwave in a transaction valued at about US$2 billion.

Shares of Family Dollar Stores soared, last up 13.9 percent, after records showed that Carl Icahn had acquired a 9.4 percent stake.

“My view is the Goldilocks economy is back -- not too cold, not too hot, but just right,” Michael Arone, the Boston-based chief investment strategist at State Street Global Advisors’ US Intermediary Business, told Bloomberg News. “What we’re starting to see is companies starting to do capital expenditures and M&A to invest in their businesses.”

Meanwhile, St Louis Federal Reserve Bank President James Bullard said the Federal Open Market Committee is much closer to its macroeconomic goals than in any of the past five years.

“The monetary policy stance remains far from its pre-crisis settings,” Bullard told the Tennessee Bankers Association's annual meeting in Palm Beach, Florida, adding that the “likely reasons” were that labour markets did not seem fully recovered, while inflation had been low.

“The (Fed’s decision-making) committee now faces a classic challenge concerning the appropriate pace of monetary policy normalisation,” Bullard said.

After the speech, Bullard told reporters that the Fed might raise rates sooner than anticipated.

“If you get 3 percent growth for the rest of this year, if you get unemployment coming down below 6 percent, if you continue to have jobs growth at 200,000, if you continue to see inflation moving back up toward target, I think if we get to the fall of the year and all of those things are transpiring as I’m suggesting they will, that will change the conversation about monetary policy, and there will be more sentiment toward an earlier rate hike,” Bullard said, according to the Wall Street Journal.

In Europe, the Stoxx 600 Index finished the day with a 0.4 percent increase from the previous close. Elsewhere, Germany’s DAX, France’s CAC 40, and the UK’s FTSE 100 all ended their sessions with a 0.2 percent gain for the day.

Germany’s DAX finished the day at 10,008.63, closing above 10,000 for the first time.

The euro, however, weakened, declining 0.4 percent against the greenback to US$1.3586.

BusinessDesk.co.nz

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