Under the influence

December 30, 2013 - January 3, 2014

In North America...

Markets:  An interesting week with the end of 2013 and beginning of 2014. The S&P closed at a record high on its last trading day of 2013, but was unable to sustain upward momentum on Thursday and Friday, ending the week 0.6% down. Despite a weak start to the new year, people remain bullish on markets for 2014.

Similar pattern for the TSX, which ended the year up 9.55%. Most of the advance was made in the last five months, held down from further gains by mining companies. Approximately 50% of TSX sectors were up double digits or more by the end of 2013. Financials gained 22%, industrials were up 35% and consumer industries gained 40%. Gold, on the other half dropped 28% for the year, with the gold sector falling almost 50%. 

On the economic front, manufacturing data in the US and Eurozone were positive, suggesting sustained growth in 2014. Indeed, manufacturing activity delivered its fastest growth in almost three years, fuelling hopes that the global recovery will accelerate this year, and unemployment will continue to fall. On the upbeat note,  outgoing US Federal Reserve Chairman Bernanke, in his last speech before handing reigns over to the incoming Yellen, declared there were “grounds for cautious optimism” for both advanced and emerging economies around the world.

Companies: Fiat gained control over Chrysler last week, a deal was set in motion in 2009 after Fiat helped pull Chrysler out of bankruptcy. Fiat, which previously controlled 58.5% of Chrysler, bought the remaining shares not under its control for $4bn. Analysts suggest that the deal will prove critical to transforming both Chrysler, the smallest of Detroit's Big Three carmakers, and Fiat, a struggling European company, into a true global powerhouse. Shares of Fiat rose on Thursday by as much as 16% after the announcement. 

Also in M&A, Cyber security firm FireEye is buying Mandiant for $1 billion, a deal that marries FireEye’s threat protection with its target’s capabilities to respond to cyberattacks after they happen. Succinctly, FireEye monitoring company networks for security breaches while Mandiant does a similar service across devices. Of particular note is that FireEye's market value increased after the deal was announced. 

A buyer’s shares typically fall when a deal is announced because paying a premium gives away value and integrating an acquisition brings risks.

Meaning there is something happening in the mergers and acquisitions market in 2014. 

Otherwise: Recent research from Warwick business school in the UK shows a meaningful correlation between financial news and trading volume for stocks on the DJIA. The importance of digital media on stock market returns, and their prediction of market movements, is an increasingly discussed topic. However, the importance of print media on markets had not been carefully considered yet. This is an interesting area, with more room for research among sentiment, different markets (both in the US and globally) as well as the possible expansion into influence of media in politics and culture. Read the research here.  

Also, recreational marijuana sales became legal in Colorado. There are a limited number of outlets where consumers can buy the product. Retailers are expected to clear $400 million in weed sales this year.

In Europe...

Manufacturing data released last week was upbeat most European countries, with France the only one seemingly off kilter. 

While Germany, Italy and Spain showed marked expansion in factory output in December, the manufacturing purchasing managers' index for France showed a decline to a seven-month low.

In the coming week... 

Fourth quarter earnings will begin to be reported. 

Also, read about the Klee exhibit at the Tate Modern.