Wall Street jumped over 1% to an all-time high this afternoon as markets celebrated an increase in merger activity, economic optimism and relief that the political crisis in Ukraine may avoid slipping out of control.
The Dow Jones industrial average surged 188 points to 16,292, the S&P 500 gained 21 points to 1,857 and the tech-heavy Nasdaq added 37 points to 3,699, a 14-year high.
Billionaire investor Carl Icahn renewed his call for eBay to spin off its PayPal division while RF Micro Devices, a radio frequency chipmaker, agreed to buy its rival TriQuint Semiconductor for $1.6 billion.
US investors also took their cue from Europe where markets rose after Ifo, the Munich-based think tank, reported German business confidence had risen to a 32-month high.
The upbeat mood meant investors did not focus on figures showing a slowdown in the US services sector in February, further evidence of the economic impact the harsh winter has had.
The prospect of growth in the eurozone boosted markets in Germany, France and Spain whose bond yields fell close to an eight-year low after Moody's upgraded the country's credit rating by one notch to Baa2 with a positive outlook. Eurozone inflation was revised from 0.7% to 0.8% but remains worryingly low.
The restoration of order in Ukraine after the ousting of former president Viktor Yanukovich (pictured) at the weekend also encouraged confidence that regional tensions in eastern Europe could be avoided.
Ukranian government bonds rallied even as acting president Oleksander Turchinov callled for an international donors' conference saying Ukraine needed a $35 billion bailout over two years to prevent it 'heading into the abyss'.
Russia has halted payment of the remaining $12 billion of a $15 billion loan struck between Moscow and Kiev after Yanukovich spurned a trade deal with the EU. It was this decision that sparked the protests that led to his downfall. His whereabouts remain unknown.
The FTSE 100 reversed an earlier fall, inspired by HSBC's lacklustre results (see below), to close 28 points or 0.4% higher at 6,865.
HSBC miss hits FTSE; Dixons, Carphone dial merger
11.31: The FTSE 100 slipped 31 points or 0.45% to 6,807 after banking giant HSBC’s full-year results missed forecasts and concerns about China weighed on miners.
The mid cap FTSE 250 index also slipped 65 points or 0.4% to 16,396 despite Dixons Retail and Carphone Warehouse lighting up their shares with the confirmation of merger talks.
HSBC (HSBA.L) shares slid 3.6% to 630.6p after a 9% rise in 2013 pre-tax profits to $22.6 billion fell short of the $24.3 billion analysts had expected.
A caution by the bank of ‘choppy markets’ as emerging markets adjust to the reduction in US quantitative easing also unsettled investors.
Miners traded lower in response to reports that Chinese banks were curbing their loans to property developers, a sign of unease in the world’s second largest economy. Rio Tinto (RIO.L) and Anglo American (AAL.L) dipped 1.6% and 1.5%.
Other blue chips on the slide were RSA Insurance Group (RSA.L), down 2.6% to 98.5p, as investors priced in a rights issue of up to £800 million, more than double what was originally expected when former RBS boss Stephen Hester took over.
Associated British Foods (ABF.L) fell 2.6% to £29.15 as it said its sugar business continued to struggle against low sugar prices and the strong pound. Its Primark fashion discount chain had a strong first half, however, enabling the group to say full-year earnings per share would be similar to last year’s.
Bunzl (BNZL.L) was the biggest gainer on the FTSE 100 as it shattered forecasts with a £372.2 million pre-tax, full-year profit. It promised more deals as it completed the acquisition of Baumer, a distributor of cleaning and healthcare products in Germany and the Czech Repbulic.
ARM Holdings (ARM.L), designer of chips for mobile phones, added a further 16.5p or 1.7% to 986.5p as Samsung Electronics unveiled its latest Galazy S5 smart phone. Reports suggest ARM may win new contracts at a big mobile phone techn event in Barcelona this week.
Dixons Retail (DXNS.L) rose 4.8% and Carphone’s (CPW.L) edged 1% higher as the two announced they were in preliminary merger discussions but said there was no certainty a deal would take place. The news is a blow to Phones 4 U, the mobile phone retailer with outlets in some Dixons' stores. Its bonds plunged below 94p from 98p.