M&A Activity Lifts European Shares

 |  Includes: ACL, NVS
by: The LFB

Equity Futures: Dow +61.00. S&P +7.60. NASDAQ +20.75. Japanese Nikkei +31.00. German DAX +7.00.

European Trade: Equity markets are moving broadly higher after it emerged in European trade that Novartis (NYSE:NVS) is looking to obtain full ownership of Alcon (NYSE:ACL). This has created a bullish momentum in the cash and futures markets, since merger and acquisition (M&A) activity is a good sign that the economy is heading towards an expansionary cycle.

European cash markets have gained approximately 1%, with most of the moves happening around the opening bell, when it emerged that Novartis is looking to buy the majority stake in the drug producer Alcon for $39.3 Billion, in one of the biggest M&A moves of recent trade. Further aide came from U.K. macroeconomic data, which suggested that the manufacturing side of the economy expanded in the month of December at the fastest pace in two years.

In European trade, Germany’s DAX gained 0.90%, France’s CAC 40 rose 1.10%, while Luxembourg’s LuxX advanced an impressive 2.70%. However, in emerging Europe, shares traded rather mixed, with Greece’s ASE falling briefly beneath the breakeven line, but Poland’s WSE WIG Index surged 1.40%.

S&P futures added almost 8 point overnight, but the trading has been at slow speed. This might change as the market heads towards the U.S. open, when additional momentum usually joins the market. Investors are preparing for the U.S. ISM Manufacturing PMI numbers, which might propel the market higher on the back of a positive read.

TheLFB Charting Link

S&P Technical View: TheLFB Member Charts
4 Hour Chart Flows: Mixed Price Points: 1128, and 1135 Looking for: An ending diagonal (reversal pattern)

Momentum: The S&P futures market confirmed a Long momentum read on Nov 11th and built a solid near-term support base around 1095. The 1125 area will be a major resistance point to battle this week. The moves to test and hold support are impressive, and are backed with global equity markets that are also looking bullish.

Elliott Wave: S&P futures reversed on the last trading days of 2009, around the 1128 zone where a top may be in. However, we need to see an impulse structure to the down-side, before we can confirm a bearish reversal.

Overall, we are looking for an ending diagonal pattern, which is a pattern that indicates a coming turning point. In this case we can expect a decline in the equity market in the first part of 2010, which may attract Usd buyers.

If the 1128 resistance is taken out in the near-term, focus turns to 1135 as the next resistance zone for a potential reversal.

Upcoming Economic Moves:
10:00 EST Usd ISM Man PMI Exp. 54.2, Prev 53.6

Crude oil
was recently trading at $81.05 per barrel, higher by $1.70

Gold was recently trading up by $22.30 to $1118.50.

Disclosure: No positions