Reuters and Bloomberg New York and Hong Kong
THE DOLLAR rose and global equity markets surged yesterday on merger and acquisition activity among drugmakers on both sides of the Atlantic, while Chinese stocks hit a seven-year high on an ambitious government plan to create a modern Silk Road.
A spate of deals lifted major US and European indexes more than 1 percent as the dollar gained versus other currencies on the view the Federal Reserve will raise interest rates this year.
Health insurer UnitedHealth Group Inc agreed to buy Catamaran in a deal worth about $12.8 billion (R154bn). Also yesterday, Israel’s Teva Pharmaceutical Industries said it would buy US biopharmaceutical firm Auspex Pharmaceuticals for an equity value of $3.5bn, and Ireland’s Horizon Pharma agreed to buy US drugmaker Hyperion Therapeutics for about $1.1bn.
Earlier, China unveiled details of an ambitious plan to improve links from Asia to Europe and Africa that President Xi Jinping said in a decade would generate $2.5 trillion in annual trade with the countries involved.
Germany's DAX index rose 1.8 percent, just 1 percent below its all-time high, while the FTSEurofirst index of 300 leading European companies gained 1.18 percent to close at 1 596.31. cent, while gold slid 1.3 percent.
Shares rose in early New York trading amid increased corporate mergers.
“A lot of it is certainly merger related, there's no question about that, and that gins up confidence among everyday investors. If the insiders are willing to make big acquisitions, why not the rest of us?” said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.
China central bank chief Zhou Xiaochuan said the nation’s pace of economic expansion had tumbled “a bit” too much. Federal Reserve chair Janet Yellen said on Friday that she expected US interest rates to rise this year, with subsequent increases to be gradual.
“Comments from Yellen as well as the Bank of China are driving equity markets higher again,” said Teis Knuthsen, the chief investment officer at Saxo Bank’s private banking unit in Hellerup.
China rates
China has room to act with both interest rates and “quantitative” measures, the People’s Bank of China’s (PBOC) Zhou said in remarks at the Boao Forum for Asia, an annual conference on the southern Chinese island of Hainan.
Analysts surveyed by Bloomberg News expect the PBOC will lower both benchmark lending rates and banks’ required reserve ratios, adding to cuts made in recent months.
Investors are parsing economic data this week for clues on the timing of the rate increase. The MSCI Emerging Markets index climbed the most in one week, heading for the first quarterly rally since June. The Shanghai Composite index jumped to a seven-year high, capping a 17 percent gain so far this year. Gold declined 1.3 percent after halting its longest run of daily gains since August 2012 on Friday.
The dollar climbed versus its 16 major counterparts, rising most against the Australian and New Zealand currencies.