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Wall Street falls on Monday’s open; takeovers offer bulls some distraction

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Takeover talk helped a few names on an otherwise cautious ‘risk off’ Wall Street open.

The mood across global equity market is broadly apprehensive as pro-democracy protests in Hong Kong add the latest layer of concern for investors coming to terms with an uncertain geopolitical landscape.

On Monday the Dow Jones began 160 points or 0.93% lower, while the S&P 500 and the NASDAQ each moved about 1% lower as well.

Although the uncertainties give investors some pause for thought, US stocks have yet to put in a real correction and many investors still find themselves on the bullish side – particularly as merger and acquisition activity boost certain names.

Shrek animator DreamWorks jumped more than 20% on Monday’s open following Hollywood reports that Japan’s SoftBank Corp was vying to buy the company in a deal worth US$3.4bn.

Such a deal would put a shine on what has otherwise been an ogre of a year for Dreamworks – even after Monday’s rally the stock remains down some 25% for 2014 thus far.

Deal talk remained a main mover of stocks elsewhere on Wall Street with Canadian gas firm Encana striking a US$7bn deal to buy Texas based Athlon Energy.

The deal expedites Encana’s transition towards oil and liquids from gas. It is not an uncommon strategy in North America as the shale gas industry has increasingly become the victim of its own success, with plentiful supplies squeezing gas prices and thus margins.

Encana will fork out about US$6bn of cash for the deal, and take on US$1bn of debt. In return it takes on production of around 30,000 barrels of oil per day. As a result, the Canadian group expects to hit its strategic target – to generate 75% of cash flow from liquids – two years ahead of schedule.

Athlon shares soared around 25% as trading got underway.

Silicon Valley enterprise software firm Tibco was another big M&A winner, rising more than 20% on Monday, with the news of a US$4bn private equity buy-out. It comes after activist investors invited bids for the business which was founded in 1997, when it was a Cisco backed Reuters subsidiary.

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