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 A recovery in mergers and acquisitions has helped drive stock
markets to multi-year highs, and sentiment was helped by a report
that the world's No. 1 brewer, Anheuser-Busch InBev, was working on
a bid for rival SABMiller.
Earlier, the weakest growth in Chinese manufacturing in nearly six
years drove Asian markets down 1 percent and oil to less than $97
dollars a barrel, hammering European oil and gas stocks.
"There's certainly been a flurry of activity around the SABMiller
story and that has helped," said one London-based broker. "We'll
see. There have been rumors on this front for months."
SABMiller shares jumped 10 percent in value, leading European blue
chips 0.1 percent higher. <.FTEU3>
Equities still have fundamental support, chiefly from the billions
in funds central banks have pumped into the financial system over
the past five years, which banks have chiefly used to buy stocks.
Although the Fed will probably decide when it meets this month to
end its own bond purchases in October, more than $4 trillion of
extra money would still be circulating. Meanwhile, the European
Central Bank will accept the first round of requests for loans in a
new targeted funding operation on Thursday.
Brent crude oil, however, slumped to a more than two-year low under
$97 per barrel as the lackluster data from China, the world's top
energy consumer, cast raised doubts about demand at a time of
abundant supply.
European oil and gas stocks - among the most exposed to signs of
weakening demand from China - fell as much as 1.3 percent before
recovering.
"Economic growth in China is one of the key drivers of world growth
and generally of oil demand," said Ric Spooner, chief market analyst
at CMC Markets. "It seems likely that (oil) demand growth won't keep
up with the growth in supply capacity."
SANCTION THIS
Another worry is Russia's escalating conflict with the West over
Ukraine. The United States and European Union imposed fresh
sanctions on Moscow last week, hampering exploration of Russia's
huge Arctic and shale oil reserves and setting rules on tougher
financing of existing Russian projects. Rosneft <ROSN.MM>, one of
several large companies affected, saw shares inch up on Monday after
the Russian government said it would create a multi-billion- dollar
fund to help companies - although the funding announced for it fell
far short of the almost $40 billion Rosneft says it needs.
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The dollar, whose rise since early July is its longest winning
streak since 1997, continued to strengthen, and bank analysts
said expectations for further gains were likely to weigh on
commodities.
At the same time, the boom in shale gas exploration in the United
States has removed one of the big sources of tension from the global
market.
"A strong dollar has an impact on commodity prices generally, but
there is also the issue of shale gas in the U.S.," said Jane Foley,
a senior currencies analyst with Rabobank in London. "Clearly the
U.S. can't export shale gas but it means that some of their previous
suppliers are looking for new markets. There is a lot of supply out
there that would have historically gone into the U.S. but is now
going to other global markets."
JOCKS AWAY?
Sterling, which has recovered some ground in the past few days,
slipped after another round of polls that showed Thursday's vote on
Scottish independence remains too close to call.
A vote by the Scots to leave the United Kingdom would have
wide-ranging consequences and could drive sterling sharply lower,
but the market pricing also encapsulates the risk of a snap back in
the event of a vote for the status quo.
One-week implied volatility - the best measure of the scale of the
risks to the pound seen by markets - was at its highest in four
years.
"While likely to be highly volatile, sterling should hold above last
week's lows ahead of, and then rise following, the confirmation of a
‘No’ outcome from Thursday's Scottish referendum," Credit Agricole
analysts said in a note.
(Additional reporting by John Geddie; Editing by Larry King)
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