Montreal, Canada

Global mergers and acquisitions have accelerated markedly this year and that’s generally bullish for capital markets. More deals imply business leaders believe there’s high value in the marketplace coupled by low interest rates to support buyout financing. If you can find an attractive target and your business forecast is bullish, then this is a good time to finance a takeover.

Asia dominates deal-flow in 2010 with the United States lagging. This month, however, BHP Billiton had offered to buy Canada’s Potash Corporation and Intel bid for security software firm, McAfee Inc. on Thursday.

Despite the deal-flow this week, the markets are struggling again as employment trends cast a dark pall on the recovery. Yesterday’s surge in jobless claims to 500,000 is bad news for the economy; the stock market is finally waking up to this reality after acting like a lost Boy Scout over the last several weeks seeking some sort of direction. Bonds, however, smell trouble and have accurately discounted a softening economy or, possibly, a double-dip recession on the way.

Mergers aren’t necessarily positive for the economy as, more often than not, jobs are lost amid a corporate consolidation and takeover. I can’t remember too many mergers in the past resulting in new jobs creation; it’s usually the opposite. That’s especially the case when a merger is done vis-à-vis leveraged finance – a regular theme prior to the 2008 credit explosion.

The problem is most businesses are still hoarding cash. Fortune 500 companies are harboring about $2 trillion in cash this summer and, for the most part, don’t seem intent on putting it to work on employment or capital spending. The reason: The economy stinks.