July 13, 2024

Deal-Making Pushes Wall Street Higher

Stocks rose on Monday after Wendy’s/Arby’s Group said it would sell control of its Arby’s business to a private equity firm. VF Corporation, whose brands include Wrangler and The North Face, also said it would buy boot maker Timberland for more than $2.2 billion.

The deals gave investors some much-needed confidence. In early trading, the Dow Jones industrial average is up 43 points, or 0.4 percent, at 11,996 points. The Standard Poor’s 500 is up 4 points, or 0.3 percent, at 1,275. The Nasdaq is up 8, or 0.3 percent, at 2,652.

Markets were also higher in Europe. In Europe, the FTSE 100 index of leading British shares was up 0.4 percent at 5,786.16 points, while France’s CAC 40 rose 0.4 percent to 3,821.86. Germany’s DAX was 0.5 percent higher, at 7,101.84 points. Trading activity in Europe was low as many countries, including Germany and France, were on national holiday for the Monday after Pentecost, though stock markets remained open for business.

The deal-making comes after weak economic news has sent stocks lower for six straight weeks. On Friday, the Dow fell below 12,000 for the first time since March.

Concerns over the American economic recovery and expectations that China will raise interest rates again have weighed on stock markets, while the euro was steady at the start of a potentially crucial week in the Greek debt crisis.

Over the last month the economic news, particularly out of the United States, has turned distinctly negative. Investors are now worried that the rise in share prices in the early part of the year may have been overdone.

Nouriel Roubini, the New York University economics professor notorious for predicting the 2008 financial crisis, cautioned against risky investments.

“In the last month, things have changed, the evidence is that maybe this is not just a soft patch but something worse,” he said in a speech in Singapore. “If your horizon is the next two or three months, I would be a bit defensive on equities. …This is time to be cautious, and safe rather than sorry.”

Given the public holidays in many parts of Europe and a light economic calendar in the United States, analysts were skeptical that stocks would gain any momentum over the day.

Tuesday may have more to offer, with the release of Chinese inflation data that is expected to stoke concerns that the central bank will tighten monetary policy again soon. Retail sales figures in the United States for May will also provide an insight into the state of the economic recovery; consumer spending accounts for around 70 percent of the nation’s economy.

“All stock markets remain under pressure going into this week, and in the short-term at least, it is difficult to see the catalyst that is going to spark off a sustainable rally,” said David Jones, chief market strategist at IG Index.

In the currency markets, investors continue to monitor any developments surrounding the Greek debt crisis ahead of next week’s meeting of euro zone finance ministers in Brussels, where a fresh Greek bailout is on the agenda.

On Friday, the euro sank amid signs that policy makers in Europe have divergent views on how to deal with the Greek crisis, with the European Central Bank and the German government at odds on getting Greece’s bondholders to share some of the pain in helping the country.

Germany’s finance minister, Wolfgang Schäuble, has proposed that bondholders contribute a “substantial” portion of a fresh bailout package for Greece by giving the country an extra seven years to repay existing bonds. But the European Central Bank president, Jean-Claude Trichet, has said nothing should be done that would be deemed “a credit event” by the ratings agencies and that any private sector involvement has to be done on a voluntary basis.

“A failure to achieve a workable agreement by the end of the eurogroup meeting next Monday threatens the real risk of what Schäuble described last week as the first unorderly default within the euro zone,” said Simon Derrick, senior currency strategist at the Bank of New York Mellon.

By early afternoon London time, the euro was up 0.4 percent at $1.4379. That’s 3 cents lower than the one-month highs it reached only last Thursday.

Earlier in Asian trading, Japan’s Nikkei 225 dropped 0.7 percent to close at 9,448.21 after the government reported that core machinery orders fell unexpectedly by 3.3 percent during April. The drop came as companies canceled orders following a devastating March 11 earthquake and tsunami in northeastern Japan that destroyed or damaged scores of factories.

The decline was the first in four months, evidence that the twin disasters continue to take their toll on Japan’s economy.

South Korea’s Kospi closed 0.1 percent higher at 2,048.74 while Hong Kong’s Hang Seng Index finished 0.4 percent higher at 22,508.08.

But mainland Chinese shares edged lower as market players reacted to data showing a dip in bank lending and awaited the inflation figures that could show the consumer price index surging to more than 6 percent.

The Shanghai Composite Index fell 0.2 percent to 2,700.38 after dipping more than 1 percent earlier in the day. The Shenzhen Composite Index fell 0.2 percent to 1,110.89.

In the oil markets, crude continued to fall on concerns over the global economic recovery and speculation that Saudi Arabia would decide to raise production levels despite last week’s surprise decision by the OPEC oil cartel to maintain current levels.

Benchmark oil for July delivery was down 87 cents at $98.43 a barrel in electronic trading on the New York Mercantile Exchange.

Article source: http://www.nytimes.com/2011/06/14/business/14markets.html?partner=rss&emc=rss

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