By James Langton
(September 27 – 9:10 ET) – The markets are poised for a strong rally this morning. Some good news from the weekend diplomacy schedule, combined with a little Merger Monday mania in Europe, has put some air into European stocks. S&P futures are pointing to a strong opening rally.
Over the weekend, the G-7 finance ministers managed to convince the Japanese to loosen up its money supply to chill out the yen. Despite the agreement, traders remain skeptical – they’ll believe it when they see it.
The other big backroom deal is that 14 central banks, including England, Switzerland and Sweden, agreed not to sell any more gold than they have already announced. The 14 central bankers and the European central bank also agreed to sell no more than a combined 400 tonnes annually and a total of 2.000 tonnes over the next five years.
The gold price is rallying strongly on the news. It is currently bid at US$282.30 in New York, up US$13.90.
In Europe, the FTSE 100 is up 85 points in London. Paris’ CAC 40 has added 35 points, and the German DAX is up about 34 points.
Apart from the currency and gold news, Veba AG, Germany’s biggest utility, is closing its deal for Viag AG, a US$14.4 billion takeover that’s sending utilities higher; National Westminster Bank PLC is believed to be awaiting a competing “white knight” bid after Friday’s surprising hostile bid from Bank of Scotland PLC; and drinks giant Allied Domecq PLC will reportedly receive a bid from Pernod Ricard SA of about US$6.5 billion. All of the deals are bringing some buyers into the other stocks in these sectors.
Over in Asia, stocks had another down day. The skepticism over the forcefulness of the Bank of Japan’s move against the yen caused Japan to relinquish an earlier rally. The Nikkei finished down 50 points. While speculation about Hong Kong’s government selling off some of the stocks it bought up during last year’s Asian contagion sent its stocks down heavily. The Hang Seng index dropped more than 2%, 272 points, on the news.
There is no scheduled major economic news on either side of the border today. In fact, it’s a quiet week on the data front until Thursday, when both countries report GDP.