Markets are up across the globe on a parade of good news. A $10 billion bailout for Dubai really ignited the rebound on Monday. News that Citigroup is paying back the TARP only added to the bounce in banks. Plus, some major M&A news in the energy sector has traders wondering who's next to be acquired. Yet in spite of all the bullish headlines the major indices can't seem to breakout through the top of their trading range.
The Dubai bailout news reversed the Asian markets from intraday losses. The Hong Kong Hang Seng bounced from a -1.6% loss to a +0.8% gain. The Chinese Shanghai index closed up 1.7%. The Japanese NIKKEI rallied off its lows but closed with a fractional decline of -0.02%. The gains were more even across Europe. European banks had the biggest exposure to Dubai so it's natural that they would lead the rally on Monday. The three major markets extended their bounce to their days in a row. The French CAC-40 gained 0.7%. The German DAX rose 0.8%. The English FTSE rallied 1.0%.
A couple of weeks ago Dubai sent shockwaves around the world when it asked creditors to accept a moratorium on Dubai's debt payments. Today the Dubai stock market soared more than 10% on news that its wealthy neighbor Abu Dhabi would provide $10 billion to Dubai. About $4.1 billion would be used to repay real estate developer Nakheel's bonds, which matured today.
Elsewhere in the banking sector news that Citigroup was repaying the TARP money added to the positive tone. During the financial crisis Citigroup took in $45 billion in TARP funds to stay afloat. Back in September Citigroup converted $25 billion of that debt into common stock. Today the company announced it would repay the remaining $20 billion by selling $17 billion in common stock and $3.5 billion in "tangible equity units". Once completed the U.S. government, currently Citigroup's largest shareholder, will sell $5 billion of its common stock and eventually sell the rest of its 34% stake in Citigroup over the next six to twelve months. Paying back the TARP funds released Citigroup from any government control over executive pay. While on the subject of pay, the bank said it would issue $1.7 billion in stock equivalents to give to employees instead of cash as part of their compensation.
Another big headline on Monday was news that ExxonMobil (XOM), the largest oil company in the U.S., was buying XTO Energy for $31 billion in an all stock deal. XTO shareholders will receive 0.7098 shares of XOM for every one share of XTO. As part of the deal XOM assumes $10 billion in XTO's debt. The merger gives XOM a much larger footprint in the U.S. natural gas industry. Shares of XTO are up about 15% near $47.65. XOM is down 4.6% at $69.50.
In other news Accenture is the first major sponsor to cut ties with Tiger Woods following recent events in Tiger's life. Accenture claims that Tiger is "no longer the right representative" for the company.
Commodities are mixed with a minor decline in the dollar. Gold is up just over $3.00 to $1,124 an ounce. Crude oil extends its losses with a 0.5% decline to $69.50 a barrel. The S&P 500 is inching higher but it's struggling to break through the top of its trading range in the 1,113-1,115 zone. The NASDAQ composite is up about 0.9% as it nears resistance in the 2,210 region. The Dow Industrials are hovering around resistance at the 10,500 level. The small cap Russell 2000 is showing the most strength with a 1.1% gain and a new relative high.
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
A quick scan of the OptionInvestor.com play list reveals that BUCY is showing some relative strength. The stock is up 3.3%. CPLA is up 2.4%. EQIX is up 3.0% and hitting new 2009 highs. FDX is up 2.8% and near its 2009 highs. GS is still under performing the rest of the market.