After strong gains in the US and Asia while we were sleeping off the bank holiday weekend last night, European stock markets shot up nearly 4% this morning. News of a higher bid from JP Morgan for Bear Stearns (now revised to $2.1bn) was one reason for the sudden optimism, as was an upturn in US house sales (which appeared to surprise almost everyone).
While we were tucking into our Easter eggs this weekend, JP Morgan was busy increasing its offer for Bear Stearns by no less than 500% (from $2 a share to $10 a share). The hike’s been positioned as a way of getting the deal done quickly – but the cynic might suggest it’s also a tacit admission that the original bid was far too low to start with, and a desperate attempt to appease those Bear shareholders who were horrified at the prospect of actually paying someone to take the bank off their hands. But either way, the revised bid should mean JP Morgan boss Jamie Dimon can get his hands on enough shares to make the takeover a formality.
Just to show that the weekend snowfalls have melted even the hardest of hearts, even the CBI provided some reasons for cheer this morning. Of course its latest quarterly outlook was still a bit gloomy, suggesting growth would be below Government forecasts and warning that the economy was in for ‘a bumpier ride’. But on closer inspection, we noticed they’re also predicting that slower growth will bring down inflation and interest rates. And boss Richard Lambert also suggested that ‘outside the financial and property sectors, the mood of business is... nothing like as gloomy as you might guess from reading today's headlines’.
And he wasn’t finished there. ‘After a few good years, the UK corporate balance sheet is in good shape,’ he added. ‘Our flexible labour market is a real force for stability and our best bet is still that our economy will continue to show modest growth this year and next, before starting a gradual recovery.’ By CBI standards, that’s positively gushing.
Some of the more optimistic analysts are even suggesting that the markets have bottomed out, and will now enjoy a big rally. This sounds a bit optimistic (at least until the credit market defrosts a bit) but there is definitely some good cheer in the air at least. Let’s just hope that it lasts longer than the weekend snow did...