FYI | Dec 05 2006
By Greg Peel
Pfizer announced last night that it had given up on its new cholesterol drug as tests suggested it could lead to heart attacks. I’m no doctor, but when we attempt to lower our cholesterol, what is it we’re trying to avoid?
This news could have been a dampener on trading, with the market still troubled by weak economic news and a falling US dollar. However, merger mania came to the rescue.
The biggest news was a proposal by the Bank of New York to buy Mellon Financial for US$16.5bn. Further M&A activity was announced in the semiconductor and hotel sectors. The dollar held steady for a change as the oil price staged a welcome US$1.50 pullback to US$62.58/bbl on Nymex.
The Dow closed up 90 points, or 0.74%, to 12,284. The S&P500 was up 0.89% and the Nasdaq exhibited its usual volatility by rising 1.46%.
The focus now turns to important wage and employment data due later in the week. These will be the last major numbers before Christmas, and could set the tone for yuletide cheer or lack thereof. The dollar is largely friendless at present, so it would take some impressive numbers to reverse the trend.
Gold held steady along with the dollar, despite the fall in the oil price. It becomes clearer ever day that the gold price is no longer shackled to the oil price, as it was when oil was sliding. That doesn’t mean that a higher oil price doesn’t still provide bullish sentiment for gold, however, particularly if linked to Middle East tension.
While gold stalled, silver continued on its merry romp. The silver price has now surpassed the previous six-month high of US$13.96/oz, ending trading in New York at US$14.08/oz. The next target is US$15.16/oz, being the high set in May when there was a frenzy of ETF buying in both silver and gold. Traders report a strong return from silver ETF investors, driven not only by US dollar weakness, but by a belief that silver is presently cheap compared to gold. GFMS expects ETF buying will drive silver to US$15/oz in the next few months. Others are even more bullish.
Base metal markets were unspectacular last night, although zinc keeps marching on, posting another 1% increase. The SPI overnight gained 22 points. Perhaps Bridge Street will be more positive today.