Stocks closed flat on the day even as word of UBL's death buoyed the markets early in the morning.
Players are worried with economic fundamentals not as great as many would like; the increasing focus on what happens to interest rates post QE (quantitative easing) is not helping sentiment either.
An abrupt end to QE would likely lead to a contraction in M2 monetary supply; the Federal Reserve will probably pre-empt this by reinvesting principal from securities in the market.
That being said, the U.S. dollar continues to sell off, fast approaching 1.5 against the Euro with European vs. U.S. interest rate policies driving the movements.
With oil trading at $113 a barrel (and oil denominated in USD), the USD sell-off is not such a bad thing for European economies.
As for UBL, the timing of the strike is strategic (an early "October surprise" of sorts).
Taking UBL out of the picture (now) accomplishes two important things:
It allows for a draw-down of forces out of the Af-Pak quagmire. More importantly for the markets (particularly for oil), it re-aligns facts on the ground in Yemen in what is a highly fluid situation.
M&A activity continues on the heels of Exelon's purchase last week of utility Constellation Energy for $8 billion (5 year Constellation CDS spreads tightened some 50 basis points on the take-over).
Pharmaceutical Teva announced its plan to buy Cephalon for $6.8 billion while in the energy space Arch Coal announced plans to buy ICG for $3.4 billion to potentially set up one of the largest coal producers in the world.
Market buzz continues around the IPO (initial public offering) of commodities trading giant Glencore, most recently famous for its bet on grain futures (in the wake of Russia's forest fires and floods in Australia).
Sovereign players such as Abu Dhabi are expected to be cornerstone investors in what is arguably one of the largest and most profitable commodities players in the world (active not just in actual trading, but also in mining / supply as well).
In new issues, with many companies still in their earnings black-out period, real-money investors showered attention on today's benchmark deals.
Altria hit the market with $1.5 billion of 10 year debt at +152 (pricing tightened from initial talk at +160 and the deal size grew from initial talk of $1 billion); the deal was heavily over-subscribed.
Waste disposal company Republic Services Group hit the market with a multi-part 7 year, 12 year, and 30 year issue; the 30-year issue saw particularly strong attention from real-money players.
Players will be looking to Friday's payroll numbers to get further direction on the economy.
