The broad indexes ended Veterans Day flat, as eurozone finance ministers in Brussels to discuss the release of bailout money to Greece, after Greece's Parliament passed the required austerity budget over the weekend.
In a major piece of M&A news for the brokerage industry, Jefferies (JEFF) announced an agreement early Monday to be acquired by Leucadia (LUK), in an all-stock deal that values Jefferies at approximately $3.6 billion. Leucadia already held a 28.6% stake in Jefferies, and agreed to exchange 0.81 LUK shares for each remaining Jefferies share. Based on Friday's closing prices, the deal valued Jefferies at $17.66 a share, which was a 24% premium. Shares of Jefferies rose 14% to close at $16.27.
The Leucadia deal will allow Jefferies to continue operating independently, with a much stronger capital base.The market appeared to stabilize after last week's election turmoil, although the looming "fiscal cliff," continued to dominate the news. President Obama and Republican members of Congress have both indicated some willingness to compromise, in order to avoid the expiration of income tax cuts passed while George W. Bush was president and extended by Obama in 2010. The August 2010 agreement between President Obama and the Republican majority in the House of Representatives to raise the federal debt ceiling requires a major cut in federal spending, along with the expiration of the tax cuts beginning next year, unless another deal is struck. KBW analyst Fred Cannon on Monday said that last week's selloff of financial stocks "represented Round 1 in share trading on Fiscal Cliff worries, and is likely indicative of trading in future rounds of investor concerns as debates rage in Washington on the Fiscal Cliff." Cannon said that "although we expect the Fiscal Cliff to be averted, we doubt any definitive action will happen before December." The Federal Reserve is expected to release the economic scenarios to be used in its 2013 round of bank stress tests this week, and "the severity of the scenarios they release could determine the level of capital distribution from those firms in 2013," according to Cannon.
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