Corporate dealmaking hopes boost world markets, 5th Ld-Writethru


LONDON (AP) — European and U.S. stock markets rose sharply Monday after a batch of corporate deals stoked hopes of further mergers and acquisitions in the new year.

In Europe, the FTSE 100 index of leading British shares closed up 97.18 points, or 1.9 percent, at 5,293.99 while Germany’s DAX spiked 99.32 points, or 1.7 percent, to 5,930.53. The CAC-40 in France was 77.62 points, or 2.1 percent, higher at 3,872.06.

On Wall Street, the Dow Jones industrial average was 110.42 points, or 1.1 percent, higher at 10,439.31 around midday New York time while the broader Standard & Poor’s 500 index jumped rose 13.24 points, or 1.2 percent, to 1,115.71.

The gains come amid hopes that companies are becoming more willing to part with their cash to expand — mergers and acquisitions indicate confidence in the economic outlook and that stock values have at least stabilized.

Those hopes were fueled by the news that French drug maker Sanofi-Aventis SA is buying U.S. health care products company Chattem Inc. for $1.9 billion, while mining equipment maker Bucyrus International Inc. is buying Terex Corp.’s mining equipment division for $1.3 billion. Meanwhile Dutch auto maker Spyker Cars submitted a new offer to buy Saab from General Motors Co.

“There’s a little bit of M&A activity in the background that’s doing its bit for optimism,” said Keith Bowman, an equity strategist at Hargreaves Lansdown stockbrokers in London.

Bowman also said there’s still a “tail wind from earnings” last week from software company Oracle Corp. and BlackBerry maker Research In Motion Ltd.

Though trading volumes over the Christmas and New Year period will dry up, investors are fully aware that they will soon be confronted with the start of the fourth quarter U.S. reporting season — aluminum company Alcoa Inc. is expected to kick-off the latest results on Jan 11.

Activity in all markets is being affected heavily by the upcoming year-end — many investors have already packed up for the year for the Christmas and New Year break. With others set to follow suit in the coming days, trading could well be fairly volatile, especially if they decide to book profits accumulated over the nine-month bull run.

“With volumes steadily dropping ahead of the holiday, most are happy to sit the next couple of weeks out and look at the markets with a fresh pair of eyes in 2010,” said Philip Gillett, a sales trader at IG Index.

“For the short-term at least, it seems unlikely that stock markets will make much progress,” he added.

Earlier, Asia experienced a mixed session, with Japan’s Nikkei index boosted by figures showing that the country’s exports fell by their smallest amount in 14 months during November. The news raised hopes that a turnaround in Japan’s export sector, the engine of the country’s economy, is sustainable.

However, sentiment in the region was dampened by sluggish sessions in Hong Kong and Shanghai as investors were spooked by signs China’s government may step up restrictions on the booming real estate sector and the country’s banks may have to raise billions in new capital.

The Nikkei advanced 41.42 points, or 0.4 percent, to 10,183.47. Markets in Taiwan and Thailand also rose.

Hong Kong’s benchmark dropped 227.78 points, or 1.1 percent, to 20,948.10. China’s Shanghai index was down most of the day before closing 0.3 percent higher at 3,122.97. And South Korea’s Kospi fell 0.2 percent while Australia’s main market lost 0.3 percent.

The euro recovered modestly after hitting a three and a half month low of $1.4281, trading flat on the day at $1.4305.

The dollar has bounced back from 15-month lows against the euro in the last three weeks amid mounting expectations that the U.S. Federal Reserve will start withdrawing its extraordinary liquidity measures and raising interest rates sooner than expected. Meanwhile, the euro has been dogged by concerns over the economic situation in a number of European countries.

Meanwhile, the dollar was 0.7 percent higher at 90.95 yen — as recently as late November, the dollar had sunk to a 14-year low of 84.81 yen.

Oil prices were slightly higher, with benchmark crude for January delivery up 63 cents to $73.99.