Last week finished with a sharp decline in the US stock market, as jumpiness over the Ukrainian situation pressured investors into selling ahead of the weekend, but we have seen a healthy rebound on Monday, with the market responding positively to new mergers and acquisitions activity.
By Peter Martin
Monday, April 28, 2014
Dow component Pfizer said it had approached British drugs giant AstraZeneca (one of the ten most highly-capitalized stocks in the UK’s blue-chip FTSE 100 index) over a potential takeover, after having lodged an unsuccessful multi-billion dollar bid back in January, Forest Laboratories also announced a bid for Furiex Pharmaceuticals, while General Electric’s $13 billion offer for French engineering firm Alstom is now being challenged by a counter-bid from Germany’s Siemens. Corporate M&A activity has topped well over $1 trillion this year so far and news of these potential deals has evidently encouraged investors. By late morning in New York, the Dow Jones Industrial Average was up 0.70% or 115 points at 16,476, while the S&P 500 Index gained 0.2% to stand at 1867.1, having been up as much as 0.7% earlier in the session.
We have seen indications that the arrival of spring has brought acceleration to certain sectors of the economy, and today there were signs that the housing market may be the latest area to rebound with winter’s retreat. The National Association of Realtors’ pending home sales index rose to a reading of 97.4 in March, bouncing back from February’s upwardly-revised 94.2 and marking an end to nine successive monthly declines. This represents a 3.4% increase from February to March, with gains led by the West and the South and this is likely to raise hopes that buyers are returning to the market with the improvement in temperatures.
The Dallas Fed became the latest Federal Reserve bank to indicate a recent upturn in manufacturing activity in its region, announcing a twelfth consecutive gain in its production index this month, which rose to a reading of 24.7 from March’s 17.1 The production index gauges manufacturing conditions in the state of Texas, and now stands at a four-year high. The broader business activity index increased to 11.7 from 4.9 last month, adding further evidence that the second quarter looks to have improved from the weather-hit first quarter.
We have some key macroeconomic data out this week, expectations of which are helping to shape the direction of the forex market today. UK gross domestic product data for the first quarter will be released on Tuesday, with a 0.9% rise expected, according to separate surveys conducted by Bloomberg and Reuters. Strength in recent economic indicators has led to this expectation that the UK economy is picking up pace, boosting demand for the pound, which has gained against the dollar for a third day, hitting a four-year high of 1.6858 earlier in today’s trading session. Just after midday in New York, GBP/USD was trading at 1.6804, up just 0.01%. The Fed begins a two-day Federal Open Market Committee meeting on Tuesday, in order to make the latest decision on near-term monetary policy. Expectations are for the federal funds rate to remain unchanged at close to zero with another $10 billion taper to the Fed’s monthly asset purchases.
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