World stocks up on merger activity

LONDON – World stocks rose yesterday, helped by corporate merger news and positive momentum over government pledges to support the global recovery with stimulus efforts.

Gold prices rose above US$1 000 to near record highs, driven by a weaker dollar and expectations of low interest rates.Germany’s DAX rose 15,38 points, or 0,3 per cent, to 5 478,89 while Britain’s FTSE 100 gained 10,38 points, or 0,2 per cent, to 4 943,56. France’s CAC-40 was up 5,53, or 0,2 per cent, at 3 658,36 after Asia also rallied.Wall Street likewise rose on the open. The Dow Jones industrial average gained 39,22 points, or 0,4 percent, to 9 480,49. The broader Standard & Poor’s 500 index rose 6,42, or 0,6 per cent, to 1 022,82, and the Nasdaq composite index rose 10,48, or 0,5 per cent, to 2 029,26.A day after Kraft Foods Inc. proposed a 10,2 billion pound (US$16,7 billion) takeover of Cadbury PLC – which was rejected and created speculation of an industry-wide acquisition race for the British company – major UK mobile operators said they were considering a merger.Deutsche Telekom AG and France Telecom SA said they intend to combine their British mobile phone units – T-Mobile UK and Orange UK – to form the country’s biggest mobile operator. The company would have about 37 per cent of the UK mobile market and revenues of 7,7 billion pounds.The market reacted positively: France Telecom shares were up 5,2 per cent at 18,77 euro (US$27,17), Deutsche Telekom rose 2,6 per cent to 9,64 euro, and Vodafone gained 2,2 per cent to 137,45 pence.Jonathan Groocock, analyst at Investec Securities, said a deal could benefit the entire British mobile sector. ‘The final outcome would be improved market returns for all parties as margins could stabilise,’ he said in a research note.The increase in corporate activity suggests an improvement in businesses’ confidence and reinforces views that the worst of the global economic downturn is past.Still, many investors doubt that a strong recovery can be sustained over coming months, as unemployment continues to rise, putting pressure on households’ spending.The pledge by the Group of 20 nations at a summit in London to keep stimulus measures in place soothed these concerns, and the momentum from a strong rally on Monday lingered into yesterday.’I don’t know if the optimism is justified but people are buying into it,’ said Francis Lun, general manager at Fulbright Securities Ltd in Hong Kong.’The G-20 countries said they would continue to flood the system with liquidity so the economy doesn’t tank. That’s what investors wanted to hear. Investors always want to believe the good news and disregard the bad news,’ he said.In fact, some signs in financial markets suggested all was not well. Gold – which is typically bought as a safe haven asset – traded above US$1 000 per troy ounce at an 18-month high.’The upside in gold prices appears to counter the firmer tone to equity markets and may inject a note of caution about the rally in risk trades,’ said Mitul Kotecha, analyst at Calyon.In Asia, Australia’s index jumped 1,6 per cent on news that business confidence had reached a near six-year high.Japan’s Nikkei 225 stock average advanced 72,29 points, or 0,7 per cent, at 10 393,23 despite a steep fall in the nation’s current account surplus underlining prolonged weakness in exports – a key driver of growth for the world’s No. 2 economy.Hong Kong’s Hang Seng gained 440,50, or 2,1 per cent, to 21 069,81 while South Korea’s Kospi was up 0,7 per cent. The Shanghai index gained 1,7 per cent and Taiwan’s benchmark rose 1,2 per cent.Benchmark crude for October delivery jumped US$2,33 to US$70,35 ahead of an Opecd meeting today, which a Saudi oil minister suggested would decide to leave production unchanged.The dollar fell to 92,26 yen from 93,05 yen while the euro rose strongly to US$1,4469 from US$1,4332.-Nampa-AP