Markets Regain Momentum Based on Latest Mergers
Corporate mergers and acquisitions all but dried up during last year’s financial crisis. But on Monday, Wall Street bounded higher on signs that companies once again had enough cash, credit and confidence to undertake big-ticket deals.
Announcements of two separate deals by Xerox and the pharmaceutical company Abbott Laboratories were the latest in a small flurry of corporate deal-making. Last week, the computer maker Dell made a play to expand its presence in the computer services sector by buying Perot Systems, and Kraft Foods has been in a takeover drama with the British candy maker Cadbury.
To investors, the revival of merger activity – however slight – was another sign that credit was flowing again, and the financial system was gradually returning to normal. Initial public stock offerings have also ticked up in recent weeks.
“It sends a very loud message to investors that corporate America’s feeling good about the recovery, and it’s time to expand,” said Peter Cardillo, chief market economist at Avalon Partners.
World Bank Head Sees Dollar’s Role Diminishing
The president of the World Bank said on Monday that America’s days as an unchallenged economic superpower might be numbered and that dollar was likely to lose its favored position as the euro and the Chinese renminbi assume bigger roles.
“The United States would be mistaken to take for granted the dollar’s place as the world’s predominant reserve currency,” the World Bank president, Robert B. Zoellick, said in a speech at the School for Advanced International Studies at Johns Hopkins. “Looking forward, there will increasingly be other options to the dollar.”
Zoellick, who previously served as the U.S. trade representative and as deputy secretary of state under President George W. Bush, said that the euro provided a “respectable alternative” for financing international transactions and that there was “every reason to believe that the euro’s acceptability could grow.”
In the next 10 to 20 years, he said, the dollar will face growing competition from China’s currency, the renminbi. Though Chinese leaders have minimized their currency’s use in international transactions, largely so they could keep greater control over exchange rates, Zoellick said the renminbi would “evolve into a force in financial markets.”
The World Bank, which is financed by governments around the globe and lends money primarily to poor countries, has no say over the economic policies of large nations or over currency matters.
But Zoellick’s comments were unusual, in part because he seemed intent on being provocative. He argued that the United States and a handful of other rich nations could no longer dominate the world economy and suggested that America was losing its clout. He also took issue with a central piece of the Obama administration’s proposal regarding the country’s financial regulatory system.
Michigan Must Cut a Budget Deal — Or Shut Down
State lawmakers in Michigan will convene a last-minute session on Tuesday to close a $2.8 billion budget gap and stave off a possible government shutdown on Thursday.
Under consideration are eliminating a scholarship program and other forms of financial aid for college students, cutting back health care for the poor and decreasing state aid to townships and cities.
Michigan is suffering from a protracted economic downturn that predates the national recession. As the national economy sputtered this year, it caused more grief and challenges in Lansing, the state capital, where deep budget cuts started seven years ago when many states were enjoying surpluses.
Despite federal aid to the automobile industry and federal stimulus money to help save jobs and services, Michigan’s projected shortfall grew this year, to $2.8 billion this month from $1.8 billion in July. The proposed budget for next year is $8 billion.
Programs already hurting, like the Michigan Promise grant program for college tuition, may be entirely cut.
In Pitch for Games, A Gamble for Obama
President Barack Obama announced on Monday that he will fly to Copenhagen this week to lobby the International Olympic Committee for the 2016 Summer Games.
Obama changed his mind and decided to take a gamble no other U.S. president has taken at the urging of his close friend and senior adviser, Valerie Jarrett, who has been deeply involved in promoting Chicago’s bid. He said he hopes to trump the presence in Copenhagen of his counterparts from rival countries seeking the games — Brazil, Japan and Spain — and replicate the success that Tony Blair of Britain and Vladimir V. Putin of Russia had in recent years by personally lobbying for their nations’ bids.
“Having the leader of the Free World there supporting the bid sends a good message,” Michelle Obama, who was originally tapped to go to Copenhagen without her husband.
At the same time, crossing the ocean for a dramatic personal plea on behalf of his adopted hometown involves at least some political hazards for the president. Obama risks looking parochial at a time of enormous challenges and, perhaps even worse, risks a major international embarrassment if the committee rebuffs him and rejects Chicago in favor of Rio de Janeiro, Tokyo or Madrid.