Market Drivers for April 28 2014

Cable at fresh yearly highs as Pfizer/AZTA talks confirmed

JPY Retail Sales up 11 ahead of tax increase

Nikkei -0.99% Europe 0.46%

Oil $101/bbl

Gold $1303/oz.

Europe and Asia:

JPY Retail Sales 11.0% vs. 10.9%

EUR GE Import Prices -0.6%


North America:

USD Pending Home Sales 10:00 AM AM

The dollar was weaker across the board with the exception of the yen on the first trading day of the week, as investors put aside the growing tensions in east Ukraine and focused instead on a string of M&A activity in Europe that helped to lift European equities higher in morning Frankfurt trade.

Pfizer confirmed last week’s rumors of its interest in AstraZeneca – a deal that is reported to be near the 100 Billion mark. The news helped push cable to fresh yearly highs as the pair finally cleared the 1.6850 level on the assumption that M&A flows from the transaction could prove to be enormous.

Euro also kept pace but the reason for its rise was less clear. The pair hit a high of 1.3876 on reports that Russian banks were heavy buyers. It is unclear whether buying was simply end of the month flows or whether there was continued capital flight in Russia as a result of a new round of sanction set to be announced by President Obama.

Mr. Obama is expected to issue new sanctions that will target individuals and companies and will target some high-tech exports in Russia. This is another gradual move to punish Russia economically, but US has refrained from issuing full sectoral bans against banking or defense companies, although it reserved the right to do so in the future.

The conflict in Ukraine remains at a slow boil, as neither side is backing down and the prospect of further violence remains very real as Russian separatists have refused to surrender their positions. Any military move by Ukraine that results in casualties of Russian separatists could prompt a full incursion by Russian armed forces, but for now the markets remain non-plussed by the events as consensus view continues to believe that the issue will be solved diplomatically.

In North America today, the eco calendar is nearly barren with only Pending Homes on the docket. Given the recent weakness in all the housing indicators the prospects of a downside miss are quite possible although the news is unlikely to have much impact on the market. USD/JPY continues to hover in a 102.00-102.50 zone as it awaits a slew of economic data later this week.

After historically low volatility over the past two weeks, the currency markets appear to have finally come alive today and given the large amount of economic data along with the ever present geo-political risks,G-10 currencies look like they are finally ready to wake from their slumber.

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