By James Langton
(November 4 – 09:30 EST) – Markets look set to rally this morning on the heels of rate hikes in Europe, rallies in Asia, and optimism on Wall Street. Worldwide markets are up in overnight and early-morning trading. S&P futures are about 11 points to the good as well.
The big news today is that the European Central Bank raised its interest rates 50 basis points to 3% this morning. The consensus expectation was for a 25 bps hike, but many were prepared for as much as 50 bps so reaction has been rather positive. Many traders like the aggressive move, feeling that this takes the pressure off for further hikes this year. The Bank of England announced a 25 bps hike of its own to 5.5%.
European markets have all popped up in response to the news. The FTSE 100 is up 48 points so far, or about three-quarters of a percent. The German DAX has added 68 points, while the French CAC 40 is up 22 points.
Meanwhile on Wall Street traders are thinking that the U.S. Federal Reserve Board may not follow the hikes in Europe in Australia. Influential Washington Post columnist, John Berry, writes that there is dissension at the Fed over rate hikes. He suggests there may not be enough willingness to get the Fed moving before the end of the year.
On the stock front, some mergers have markets moving too. Yesterday’s hot rumour was consumated today . Drug giants American Home Products Corp. and Warner-Lambert Co. agreed to merge in a US$72 billion transaction. The deal will create the world’s largest drugmaker.
JDS Uniphase Corp., Canada’s own stock market darling and the world’s biggest maker of fiber-optic equipment parts is buying Optical Coating Laboratory Inc. in a US$2.8 billion deal. Optical Coating is JDS supplier.
Overnight in Asia stocks rallied on the heels of yesterday’s rally on Wall Street, and expectations of further rises. Japan’s Nikkei was up 2%, or 356 points. While the Hang Seng index was up almost 3%, or 395 points.