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Major equity markets head towards record levels

The market value of global equities reached a record $63.8 trillion this week as several indices approached all-time highs. Futures on the S&P 500 indicate that the US benchmark index will move again into positive territory today after retreating 0.1% yesterday. The S&P 500 reached a record 1911.91 points on the 27th. This morning all eyes will be on the German DAX index as it is expected to breach 10,000 points for the first time ever. The Asia-Pacific gauge has also rebounded 9% since reaching a trough in February.

The global rally in equities reflects optimism that the US economy can withstand a reduction in stimulus and that Chinese authorities will act on slowing growth. In Europe, policy action by the ECB next week is eagerly awaited.

Meanwhile Apple Inc. has agreed to buy Beats Electronics LLC for $3 Billion. This is the biggest-ever acquisition for Apple and creates, arguably, the highest profile partnerships in the music industry. Apple will probably integrate its iTunes music offering with Beats’ internet-based streaming applications. This is a significant turnaround for Apple; Steve Jobs once famously said that music fans will never want to ‘hire’ their music. Apple will now be able to compete head-on with services such as Spotify. Apple will also be able to leverage on the Beats’ brand. Thus the next iPhone will be expected to sport significant integration with Beats. A Beats logo and headphones will probably be the cherry on the cake.

Many will recall that until very recently Beats was controlled by HTC; Apple’s primary competitor before the emergence of Samsung. However, HTC blundered its way into debt and losses losing Beats along the way. This demonstrates that integration between two big boys may not always straightforward albeit few at this point expect Apple to mishandle Beats.

Elsewhere in Europe, German Chancellor Angela Merkel appears to have diluted support for pre-election favorite Jean-Claude Juncker’s bid to be European Commission president. British Prime Minister David Cameron has openly opposed Juncker, who is regarded as an old-style European pushing for federalism. Heavy losses to Eurosceptic parties mainly in Britain and France, but also across the continent have derailed the status quo in the EU.

David Cameron is insisting that first European leaders have to set the direction forward. A president able to carry out that mandate can be agreed upon and elected afterwards. Prior to last weekend David Cameron’s rhetoric was largely sidelined. However, following results the message sent by the people cannot be left ignored.

France remains the major problem. While Britain is experiencing above average economic growth and protest stems from the fact that Britain wants to retain as much control of its economy as possible, France’s arguments appear hollow as populist economic decisions have stagnated one of the EUs largest economies. Final decisions are not expected until late June, however, last week’s elections may be a turning point towards a more efficient and growth oriented EU.

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