After a week of unprecedented drama, a strange sense of calm has settled over the stock market. The general mood among traders this weekend was 'the worst of the sell-off is behind us' and the short, sharp 20% correction created opportunities from the long side.
Right on cue, U.S. stocks were heading higher Monday morning. In recent trading, the Dow and S&P were each up more than 1%.
The bulls were further buoyed by another round of mergers, including Google's bid for Motorola Mobility and ConAgra's hostile offer for Ralcorp. The proposed bids each represent big premiums to Friday's closing prices, benefiting shareholders of the targeted companies and signaling some companies are looking to put money to work -- despite myriad uncertainties in the global economy.
Speaking of which, a smaller-than-expected contraction in Japan's GDP further aided the bulls' case early Monday.
On the other hand, Europe's sovereign debt-banking crisis remains far from resolved, as Henry and I discuss in the video above.
For better or worse, what happens in Europe will not stay in Europe and hopes are dimming for any major announcement from tomorrow's much-anticipated meeting between Germany's Angela Merkel and France's Nicolas Sarkozy.
Investors "expecting a big bang that will clear the whole sky over Europe and make all the problems disappear" will be disappointed, Merkel's chief spokesman told reporters Monday morning.
German officials have poured cold water on the idea of creating euro bonds, which George Soros and others see as a key part of solving the EU's debt crisis.
Meanwhile, the Swiss franc declined for a third-straight day amid speculation the Swiss National Bank will peg its currency to the euro. Similarly, Japanese officials are threatening to intervene to reduce the yen's value. Along with gold and Treasuries, the Swiss franc and Japanese yen were the biggest beneficiaries of the "flight to safety" trade that appears to be taking a breather…at least for moment.