World stocks up on M&A activity, stimulus pledge

[September 08, 2009]  LONDON (AP) -- European and Asian stock markets rose Tuesday, helped by more merger news as well as positive momentum from a weekend pledge by 20 rich and developing countries to keep supporting the global recovery with stimulus efforts.

Futures indicated Wall Street would also rise at the open, after U.S. stocks missed out on a rally Monday because of the Labor Day holiday.

Germany's DAX rose 20.63 points, or 0.4 percent, to 5,484.14 while Britain's FTSE 100 gained 25.61 points, or 0.5 percent, to 4,958.79. France's CAC-40 was up 12.14, or 0.3 percent, at 3,664.97.

A day after Kraft Foods Inc. proposed a 10.2 billion pound ($16.7 billion) takeover of Cadbury PLC -- which was rejected and created speculation of an industry-wide acquisition race for the British company -- major U.K. 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 percent of the U.K. mobile market and revenues of 7.7 billion pounds.

The market reacted positively: France Telecom shares were up 3.1 percent at euro18.40, Deutsche Telekom rose 0.5 percent to euro9.45, and Vodafone gained 1.6 percent to 136.7 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 stabilize," 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 Tuesday.

"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 $1,000 per troy ounce.

"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 percent 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 percent, 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 percent, to 21,069.81 while South Korea's Kospi was up 0.7 percent at 1,619.69. The Shanghai index gained 1.7 percent and Taiwan's benchmark rose 1.2 percent.

Stock futures pointed to gains on Wall Street when trading resumes Tuesday. Dow futures rose 89 points to 9,519 and Standard & Poor's 500 futures added 10.10 to 1,025.70.

Oil prices rose above $69 ahead of an OPEC meeting Wednesday and as a Saudi oil minister suggested the cartel would not change output levels. Benchmark crude for October delivery was up $1.46 at $69.48.

The dollar fell to 92.29 yen from 93.05 yen while the euro rose strongly to $1.4434 from $1.4332.

[Associated Press; By CARLO PIOVANO]

Associated Press writer Stephen Wright in Bangkok contributed to this report.

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