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Life is beautiful
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Fed Chairman gave a gift to investors last week and pushing the index back to the upper level.As I predicted, Fed kept the rates steady and made a consumer friendly statement.However truth is different.I do not believe they can overcome inflation pressures over time.However it was a profitable week for the markets as well as me.
I think the stock buyback program of many companies is an indicator of the more beautiful days coming by.Recent M&A activity and buyback programs indicate even a stronger stock market. We have some pullbacks too. Federal Reserve Chairman Ben Bernanke might not be in any rush to cut short-term interest rates, but his gentler monetary policy stance this week has investors rediscovering their old friend risk.
Starting last week a rash of high-yield "junk" bonds has been issued, several mergers and acquisitions have been announced, and U.S., European and Asian stock markets climbed back to their highs following the February 27 market fall-out.
Adding fuel to the fire, in its statement on Wednesday the Fed changed its language with reference to the likelihood of further interest rate increases. The long-standing phrase that the "extent and timing of any additional firming that may be needed" was replaced with the more neutral phrase "future policy adjustments".
Shares of Morgan Stanley benefitted from the bank reporting record earnings, but its stock gained further following the Fed's decision. Other financial shares jumped as well, with those of No. 1 U.S. bank Citigroup Inc. rising 2.7 percent while rival Bank of America Corp. advanced 2.2 percent.
Investors have shown the same appetite in one of the riskiest part of the credit spectrum. Through Tuesday, $34.4 billion of high yielding "junk" bonds have been issued and priced, up 71 percent from $20.2 billion in the same period 2006, according to financial data provider Dealogic.
For its part, the Morgan Stanley Capital International All-Country World Index life-time high set on February 26.
In recent days the FTSEurofirst 300 index has closed in on its six year high of 1,542.45 set on February 26 while the Nikkei climbed 4.4 percent this week in its best weekly performance since the end of January.
Dealogic said takeovers are the big driver of new issuance in the junk bond market.
For example, Freeport-McMoRan Copper & Gold Inc., whose creditworthiness is rated lower-tier junk, last week sold $6 billion in bonds in a three-part deal to finance its $26 billion take over of PhelpsDodge Corp. It was the largest high-yield bond sale since 1989.
After the big late February sell-off, some market strategists predicted that cash mergers would taper off due to credit market turmoil and rising risk aversion.
Thirteen new cash takeovers for a whopping $24.6 billion were announced during the past 10 trading days, including the seven deals for $9.5 billion announced during this past week, noted Biderman.
Moreover, new stock buybacks have been surging.
Thirty-three new stock buybacks for $17.1 billion were announced during this past week, including eight buybacks for $338 million announced on Thursday.
But while a more neutral monetary policy stance by the Fed has reinvigorated risk-takers, corporations know to get while the getting is good.
Private-equity giant Blackstone, the New York firm known for takeovers such as last month's buyout of Equity Office Properties, filed an initial public offering late Thursday to sell $4 billion in shares to the public.
I believe stock market will go up this year in general and we will have a moderate economic growth.I thnik Fed won’t be successful to bring down the inflation to comfort zone however obviously Fed has a corporate friendly approach. I will be cautious for the week although the stock market has a good mood. |
| Tarih
: 26.03.2007 |
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© 2006 Mert TOKER All Rights Reserved. |
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