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NY Open: Drugs can’t ease Wall Street’s Apple fears

Equities 4 minutes to read
Michael O’Neill

FX Trader,

Summary:  Traders may have dismissed the Asia “Twilight Zone Flash Crash” as just an anomaly in an extremely thin market, but even a big-ticket pharma takeover hasn't brightened the mood much.

Echo’s from Apple’s (AAP: Nasdaq) bombshell earnings forecast downgrade reverberated on Wall Street this morning. The Dow Jones Industrial Average opened in negative territory and had dropped 1.43% by 14:00 GMT. The S&P 500 followed suit, losing 1.44% while the Nasdaq shed 1.92%.  

What do you do if you have an extra $34.8 billion in cash lying around? If you are Bristol Meyers Squibb (BMY: NYSE), you buy (merge) with Celgene Corporation (CELG: Nasdaq). BMY: NYSE announced that it had entered into a definitive merger agreement with CELG: Nasdaq for $50.00 per share in cash and one BMY share. The press release touts compelling strategic and financial benefits as the rationale for the deal. CELG shareholders were impressed, and the stock rose 27.8% at the open. BMY shareholders were not nearly as thrilled, and that share price dropped 12.30% in early New York trading.

New York traders appear to have dismissed the Asia “Twilight Zone Flash Crash” as just an anomaly in an extremely thin market, one that is notorious for dramatic and unjustified price activity. The commodity bloc currencies are higher than where they closed as are EUR and the Swiss franc. USDJPY is the laggard as falling US Treasury yields weigh on the currency.

The US dollar is being undermined by mixed to soft economic data. The fickle ADP employment report surprised to the topside while the more important ISM Manufacturing PMI for December disappointed.

USDCAD appears to have re-correlated itself with West Texas Intermediate prices dropping from an overnight peak of 1.3657 to 1.3509 after the ISM report.  WTI rallied from an overnight low of $45.39/barrel to $$7.47/b before falling back to $46.58 in NY. Traders are encouraged by the double bottom at $42.60/b, an improved dialogue to the US/China trade talks and the onset of the Opec production cuts.
Chart: USDCAD 30 minute with WTI oil.     Source: Saxo Bank

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