March: In like a bear, out like a bull
Indices fell during the month’s early trading days of March, before surging in the latter half of the month. In addition to rising stock prices, March also saw an increase in merger and acquisition activity, manufacturing, and pending U.S. home sales. Meanwhile, interest rates in Canada, the U.K. and Europe were ratcheted lower, and economic growth forecasts of some central bankers and the Organization for Economic Co-ordination and Development also fell.
Strongest market rally in decades
Stock markets finished the first quarter of 2009 higher after a rally three weeks in length and counting. Since falling to multi-year lows March 9, the TSX main index finished the quarter up about 15% while the Dow Jones industrial average had risen 16%. On the second trading day of April, investors sent indexes up another 3%, with the Dow Jones breaking the 8,000 mark for the first time in nearly two months.
Easy money continues
Early in the month, the Bank of Canada took its short-term interests rates nearly as low as they can go on Tuesday, slicing the trend-setting overnight rate half a percentage point to an all-time low of 0.5%. Meanwhile, the Bank of England cut its key rate by another 50 basis points on Thursday to a record low of 0.5%, and the European Central Bank cut interest rates to an all-time low of 1.5%. Australia’s central bank was the only one to announce that rates would remain unchanged.
Economic indicators split
February U.S. home sales were released this month, and were an improvement from January levels. Meanwhile, Total Durable Goods Orders rose for the first time in five months, showing the largest monthly gain since December 2007. While March showed some signs that the global economy is trying to find a bottom, significant restructuring is still underway in many sectors of the economy. Indeed, an ADP survey of private employment in the U.S. showed a record 742,000 jobs were lost during the month.
Leaders cautiously optimistic
Early in the month, European Central Bank President Jean-Claude Trichet reiterated his expectation that the euro zone economy will pick up by 2010. Closer to home, Bank of Canada Governor Mark Carney was slowly backing away from his controversial prediction of 3.8% economic growth in 2010, telling a meeting of G-20 financial watchdogs in England that his forecast of a recovery by the second half of 2009 will likely be adjusted downwards. In the U.S., Federal Reserve Chairman Ben Bernanke made an unprecedented appearance on the television program 60 Minutes in which he defended steps taken by the government to resuscitate the banking system, adding that sustained recovery can only happen once the financial sector has achieved solid footing.
Flurry of M&A activity
Mergers and acquisitions were fast and furious during March. Suncor and Petro-Canada announced a deal that would make the new entity the fifth-largest energy company in North America. In the pharmaceutical world, Switzerland’s Roche launched a USD$46.8 billion bid for U.S.-based Genentech, and Merck and Schering announced a merger worth USD$41.1 billion. Meanwhile, computer giants Sun and IBM are said to be actively engaged in merger talks.