Investors betting on Chinese stimulus, central bank action

Markets started yet another potentially crucial week on a solid note as investors bet on more central bank action and that China would enact more stimulus measures following a dispiriting manufacturing survey.

However, with Wall Street out of action because of the Labor Day holiday, the August trading lull continued into the first trading day of the new month.

Monday’s trading was dominated by a survey suggesting that China’s manufacturing sector was contracting. Though that is a bad sign for the global economy, investors think it makes it more likely that the country’s authorities will ease monetary policy soon.

Options available to Beijing include reducing interest rates, lowering the amount banks have to hold in reserve or increasing spending. China’s economic growth has already fallen to a three-year low of 7.6 percent in the second quarter.

Hopes that more stimulus in China was in the cards helped European markets post solid gains. Britain’s FTSE 100 advanced 0.8 percent to 5,758, while Germany’s DAX added 0.6 percent to 7,014. The CAC-40 in France was 1.19 percent higher at 3,453.

Later in the week, all eyes will be on Thursday’s European Central Bank monthly policy meeting. Its president, Mario Draghi, is expected to announce a bond-buying program that’s intended to keep a lid on the borrowing costs of countries such as Spain and Italy.

 

Canadian company to buy dermatology products firm

Valeant Pharmaceuticals International has agreed to buy dermatology products maker Medicis Pharmaceutical for about $2.6 billion in cash in a deal to strengthen its position in skin treatments and care.

Montreal-based Valeant, Canada’s largest publicly traded pharmaceuticals company, said Monday that it has agreed to pay $44 per share for Medicis, a 39 percent premium over Friday’s closing price of $31.87 for the Scottsdale, Ariz., target company.

The boards of both companies have approved the deal. It needs approval by Medicis shareholders and regulatory clearance. The companies hope to complete the deal in 2013.

Valeant Chairman and CEO J. Michael Pearson said the deal would be “a significant next step” toward making his company the leader in dermatology by expanding its products to treat acne as well as injectable aesthetic products often used to smooth out wrinkles and make people look younger. Pearson has made about 50 acquisitions since taking over as CEO in 2008.