A remarkably resilient start to the trading week, from an equity standpoint, considering the release of some fairly mixed macro news. Japan’s latest economic data showed the country moved into recession in the last quarter, as the economy contracted 1.6% against and expected 2.1% gain. One has to assume that the Bank of Japan had some understanding that this sharp reversal in the economy was on the cards, prompting the central banks actions of a week or so ago.
The G20 meeting came to a close with warnings from David Cameron that the global economy still has red lights flashing on the dashboard. To this point Australian Prime Minister Tony Abbott announced economic pledges agreed by the world leaders to boost their economies by at least 2.1% by 2018. This would in theory add another $2 trillion to the global economy. Whilst you believe that the major economic countries of the world are focused on a path to stimulate economic growth this should help under pin risk assets prices. One has to assume as the year 2018 was mentioned this pro-growth stance is here for a while yet. The resurgence of tensions between Russia and the West also seemed to have little impact on investor sentiment. Likewise on the oil price as the Brent crude remains well below $80 a barrel
Mario Draghi appeared in front of European law makers on Monday acknowledging that the eurozone economy weakened over the summer, going on to reiterate again the ECB are unanimous to do more to stimulate the economy if required. As macro indicators in the euro area continue to fall, he is starting to sound like a broken record. Having said that today he did appear to open the door to the idea of the possibility of the ECB buying government debt. Probably hoping that the mere suggestion of the idea is enough to stimulate economic activity.
The resurgence in 2014 of mergers and takeovers carried on Monday as Actavis announced it will acquire Allergan for $66bn dollars. Allergan amongst other things is responsible for Botox. The deal is to be funded approximately 50% cash and 50% Activis shares.