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The Globe and Mail

At the open: Dow hits fresh 5-year high, office retailers surge

Traders Peter Tuchman, left, and Kevin Lodewick work on the floor of the New York Stock Exchange.

Richard Drew/AP

North American stock markets opened higher, encouraged by some upbeat news out of Europe's biggest economy and more evidence that merger and acquisition activity is picking up speed. The Dow Jones industrial average retook the 14,000 level and edged up to its highest level in more than five years.

In early trading, the S&P/TSX composite index was up 58 points, or 0.4 per cent, at 12,744; the S&P 500 was up 4 points, or 0.2 per cent, at 1,524; and the Dow Jones industrial average was up 57 points, or 0.4 per cent, at 14,038. The Dow hit a high so far today of 14,044, surpassing the previous highest point in more than five years of 14,038 on Feb. 12.

The ZEW Center for European Economic Research reported today that its index of German investor and analyst expectations rose to 48.2 this month from 31.5 in January. The much sharper-than-expected gain left it at its highest level since April 2010. Spirits were also buoyed in Europe by Spain reporting a trade deficit for January of €1.29-billion, about half of what economists had forecast.

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Closer to home, a large deal involving Canadian insurer Great-West Lifeco Inc., and a possible merger of Office Depot Inc. and OfficeMax Inc., has rekindled thoughts that the corporate sector is long overdue for a bout of merger and acquisitions.

Great-West Lifeco agreed to buy Irish Life Group Ltd.,  Ireland's largest life, pensions and investment manager, for $1.75-billion. Shares in Great-West remain halted on the TSX. Meanwhile, the Wall Street Journal reported that Office Depot Inc. and retail competitor OfficeMax Inc. are in advanced discussions to merge. The deal, if it happens, was expected to involve an exchange of stock. Office Depot shares are up 21 per cent and OfficeMax is up 29 per cent.

Internet giant Google Inc. was enjoying strong gains in its stock today, with shares up 1.2 per cent to above the $800 (U.S.) level for the first time in history.

Overall though, traders are still showing reluctance to bid up stocks further given feelings that the market could be due for a pullback after seven straight weekly gains for the S&P 500. The average daily price moves for the index have fallen to 0.43 per cent this year from an average of 1.08 per cent over the past five years, according to Bloomberg News. That's the steepest drop for any corresponding period since the 1930s.

There are also fears of what's to come on the political front in Washington, where large spending cuts are set to take effect on March 1, the so-called sequester. There has been little in the way of negotiations between Democrats and Republicans on a deal to limit the cuts, which may dampen economic conditions in the world's biggest economy later this year.

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