Us Markets Followup Record Setting Session
US stock markets opened in the green following yesterday’s record-setting day, boosted by news of Burger King’s $11.4 billion merger with Tim Hortons as the presidents of Ukraine and Russia met in Belarus.
Tuesday, August 26, 2014 - 00:00
The gains suggest that equity markets may have further to climb. The S&P 500 rose by 0.16% to 2001.12 after breaking through the psychologically important benchmark of 2000 for the first time during intraday trading yesterday. The headline index is up over 8% so far this year, boosted by a strengthening recovery and on-going monetary accommodation. The Dow Jones Industrial Average also increased, rising 0.21% to 17,113.22.
Markets reacted positively after Burger King and Tim Hortons announced a successful conclusion to their merger plans this morning. The new company will be the third largest quick-serve chain in the world, with around $23 billion annual revenue from over 18,000 restaurants in more than 100 countries. It will be headquartered in Canada, as Burger King adopts a ‘tax inversion’ aimed at lowering its overall corporate tax rate. The successful takeover comes following several notable failures, including Pfizer’s unsuccessful bid for AstraZeneca.
There was mixed news on business spending as the Census announced a record 22.6% (Consensus: 7.5%) surge in durable goods orders in July. The headline figure is misleading as it was impacted by several large aircraft orders for Boeing at the London Farnborough air show. Many of the planes will not begin production for several years and so any boost to economic output remains some way off. Nonetheless, the eye-popping figure may provide some feel-good factor to traders. The nondefense ex-transportation component, which excludes the one-off impact, actually fell 0.8% (Consensus: +0.5%).
Elsewhere, housing market data pointed to a broad-based slowdown in activity in that sector. The June S&P/Case-Shiller 20-city index was down 0.1% on the month (Consensus: 0.0%) for the second straight monthly decline. Drops in Atlanta (-1.5%), Detroit (-1.6%) and Minneapolis (-2.3%) more than offset gains in Las Vegas (+0.8%), Portland (+0.2%) and Seattle (+0.2%). The measure was up 8.1% over the past twelve months (Consensus: 8.3%) down from a 9.3% figure in May. All twenty metro areas reported an easing in annual house price growth this June compared to one year ago.
Across the Atlantic, Russian President, Vladimir Putin, began talks with his Ukrainian counterpart, Petro Poroshenko in Belarus. The meeting, aimed at easing tension in eastern Europe, came as Russian soldiers captured in Ukrainian territory said they were there ‘by accident’. The former Soviet state has been battling pro-Moscow rebels for several months, with approximately 2200 deaths so far. Putin is expected to push for an immediate ceasefire, which may prove unpalatable to Poroshenko whose troops are thought to have the upper hand. Any positive outcome may provide support to risk assets.
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