While you were sleeping: M&A tops the agenda

While you were sleeping: M&A tops the agenda

(BusinessDesk) February 8 - Merger and acquisition activity is giving investors yet another reason to push equities higher as the global economic recovery continues to accelerate.

Today diversified industrial company Danaher Corp agreed to buy medical diagnostics company Beckman Coulter Inc for about US$6.8 billion and oil drilling company EnsCo Plc said it would buy rival Pride International Inc for about US$7.3 billion.

"If you are going to make major investments in the (health-care) space from a strategic standpoint, the timing is pretty good right now," Tim Nelson, an analyst at Nuveen Asset Management, told Reuters.

"We've seen bigger medtech companies buying smaller companies for growth," Nelson added. "Now we're seeing companies from outside the sector move into the sector in a search for value."

In midday trading, the Dow Jones Industrial Average gained 0.78%, the S&P 500 Index climbed 0.86% and the Nasdaq Composite Index advanced 1.37%.

“More and more people and companies see the economic recovery as sustainable,” Joseph Veranth, chief investment officer at Dana Investment Advisor, told Bloomberg.

“It’s no surprise that there are so many M&A deals going on. Earnings have been good and that’s indication that companies will have more cash to fund those deals,” he said.

Indeed earnings have been good and there was more good news to start the week. Loews Corp surpassed expectations by reporting a 16% jump in profit.

More than 70% of S&P 500 companies that have reported results so far posted better-than-expected earnings, according to Thomson Reuters data.

Bloomberg reported that more U.S. companies were exceeding sales forecasts than any time in four years. The sales growth is a sign that the world’s biggest economy is expanding at a faster pace, according to Bank of America Corp and Penn Capital Management.

Total revenue for S&P 500 companies may rise 7.5% this year, the most since 2007, to an all-time high of US$1,017.44 a share, according to analyst estimates compiled through February 6 by Bloomberg.

Equities also are getting a bump from commodities with copper extending its recent climb.

Copper climbed to a record as concerns about supply, especially from top producer Chile, added to a recent stream of positive economic data that boosted the outlook for industrial metals demand.

Three-month copper on the London Metal Exchange rose to US$10,104.50 from US$10,050 at the close on Friday. Earlier in the session it reached a record US$10,160.

Tin also rose to a record as investors worried about supply problems in top exporter Indonesia.

North Sea Brent crude oil rose today, as some investors remained concerned that unrest in Egypt could spread and disrupt energy supplies.

Iran, which holds the rotating presidency of the Organization of the Petroleum Exporting Countries, said it saw no need for an emergency OPEC meeting even if oil prices hit US$120.

"The risk of Egypt contagion to the region brings a geopolitical price premium to the markets," Christopher Bellew, a broker at Bache Commodities Limited, told Reuters. "As long as there is uncertainty, we will certainly hold the levels and there is scope to go higher."

(BusinessDesk)

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