Shares rise, fall on deal speculation
US stocks rallied late on Thursday, with the US share market posting its largest one-day gain in six years, driven by the news that the US government was piecing together a permanent and broad-based plan to stabilise financial markets.
Financials also benefited from news that the US’ top three pension funds stopped lending shares in a number of key financial companies to short sellers.
Morgan Stanley added 3.7 per cent after being linked with a possible merger with Washington Mutual in an effort to keep both entities afloat. Morgan Stanley was also in talks with state owned China Investment Corporation to sell a 49 per cent stake.
Many said the deal with China Investment Corporation was Morgan Stanley’s preferred option.
Meanwhile, Washington Mutual rocketed 48.8 per cent on reports that both Wells Fargo and Citigroup were considering an acquisition of the embattled lender.
Goldman Sachs closed 5.7 per cent lower after falling as much as 25 per cent in intra-day trade.
Elsewhere in the sector, Bank of America gained 12.4 per cent, while Merrill Lynch added 14 per cent. On Monday, Bank of America said it would buy Merrill Lynch in a US$50 billion stock deal.
Insurance giant AIG jumped 31.2 per cent despite news that it would be dropped from the Dow Jones Industrial Average from next week.
In the UK, British shares retreated despite the news of the central banks agreeing to pump billions of dollars into financial markets. Even Lloyds’ agreement to acquire HBOS wasn’t enough to pull the market above the line.
Meanwhile, Britain’s Financial Services Authority said it would ban the short-selling of shares in publicly traded financial companies through mid-January.
Royal Bank of Scotland shed 4.5 per cent and Standard Chartered lost 1.9 per cent.
Barclays fell 5.3 per cent after raising £701 million to help it absorb the acquisition of Lehman Brothers’ North American investment banking operations.
Insurer Old Mutual sank 15.5 per cent saying it had a US$237 million exposure to AIG.
Among the European financials, Credit Suisse and UBS added 2.8 per cent and 1.6 per cent respectively. BNP Paribas was up 3 per cent and Societe Generale picked up 2.7 per cent.
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