Deals and Optimism Lift U.S., World Indexes

Marcus Jacob
20 Sep, 2010
New York City

Stocks surge in New York lifted indexes in Americas and Europe. Two deals totaling $2 billion contributed to the improving sentiment. The NBER declared the longest recession since the Great Depression lasted 18 months and ended in June 2009 that destroyed 8 million jobs. Oil and gold edged higher.

[R]4:00 PM New York – Stocks surge in New York lifted indexes in Americas and Europe. Two deals totaling $2 billion contributed to the improving sentiment. The NBER declared the longest recession since the Great Depression lasted 18 months and ended in June 2009 that destroyed 8 million jobs. Crude oil and gold edged higher.[/R]

U.S. stocks gained on renewed global economic optimism and two deals totaling $2 billion. Crude oil increased more than 2% and the dollar declined and cotton reached 15-year high and surpassed $1 per pound.

The longest U.S. recession since the Great Depression ended after 18 months in June 2009, according to the National Bureau of Economic Research.

The 43-month Great Depression that started in 1929 and ended in 1932 was followed by two 16-month recession in the periods during 1973-75 and 1981-82. The non-profit agency determines the business cycle based on changes in payrolls among other indicators.

The group takes anywhere between six to 18 months to determine when the recession ended as it relies on the broader measures other than changes in output only.

More than 8 million people have lost their jobs but the prospect of return to normal economic cycle and a recovery in the jobs market is not likely to happen soon. The committee said any new decline in the output will mark the start of a new recession and not “a continuation of the recession that began in 2007.”

The U.S. economy contracted 4.1% in the recession that started in December 2007 and ended in June 2009.

France based conglomerate Safran SA agreed to acquire U.S. based L-1 Identity Solutions for $1.6 billion. IBM agreed to buy Netezza for $27 a share.

Internet Brands surged after a private equity group offered 46% premium. Netezza Corp. soared more than 12% after IBM agreed to acquire the company. Lennar Corp traded higher after third quarter sales increased 14.5%.

Discover Financial Services reported third quarter net interest income declined to $1.15 billion. Illinois Tool Works Inc. reaffirmed its third quarter annual outlook. Lennar third quarter revenues increased 14.5%.

The European indexes rose after the Bundesbank expressed confidence that German banks could meet higher capital requirements. Greek current account deficit narrowed in July. L-1 Identity Solutions agreed to be acquired by France based conglomerate Safran SA and sell its smaller division to BAE Systems.

The UK indexes advanced after home prices fell 1.1% in September. The UK mortgage lending weakened in July and M4 money supply declined in August. BAE Systems agreed to buy L-1 Identity Solutions'' Intelligence Services Group for $295.8 million.

Shanghai stocks declined and dragged the index fell to five-week low. Stocks in Hong Kong searched for direction and closed unchanged. Net profit of centrally-administered government controlled companies grew at a slower pace in August.

Sustained international fund flows to India for the year and in the month lifted stocks for the sixth day in a row to 32-month high. Hindustan Copper to generate $1.2 billion in revenues from one-time sale of rocks.

Australian stocks traded lower as the dollar climbed and metals prices increased. Reserve Bank of Australia outlook suggested continued current growth in the economy in the near future. The rail network, QR National started its public offering that may raise as much as A$7 billion.

Commodities, Currencies and Yields

Dollar edged lower against euro to $1.306 and fell against the Japanese yen to 85.75. One UK pound fetched $1.5562.

Crude oil increased $1.20 to $74.86 a barrel for a front month contract, natural gas edged lower 0.19 cent to $3.83 per mBtu and gasoline increased 3.08 cents to 195.00 cents.

Gold increased $3.10 in New York trading to close at $1,280.60 per ounce, silver fell $0.01 to $20.80 per ounce and copper for the front month delivery decreased 1.20 cents to $3.51 per pound.

Yields on 10-year U.S. bonds decreased to 2.71% and on 30-year U.S. bonds yields edged down 3.87%.