Top Stories: Business and Finance
The following are the day's top business stories:
1. Jobless Rate in U.S. Drops to 9%; Storms Limit Gain in Payrolls to 36,000 2. Treasuries Decline, Dollar, Stocks Advance After Jobs Data; Loonie Surges 3. Unemployment Drop Indicates U.S. Payrolls About to Pick Up, Economists Say 4. Bank of America Creates Unit to Resolve Soured Mortgages, Led by Laughlin 5. Viking Global Hedge Fund's Dris Upitis Is Said to Resign as Senior Manager 6. Falcone's LightSquared Venture Is Said to Consider Bids on TerreStar, DBSD 7. Sanofi Better Smart Than Lucky as Options Lower Genzyme's Price: Real M&A 8. Gross Says Focus on Headline Inflation Data to Monitor Prices: Tom Keene 9. Mantega's Tax Is No Match for Rate Cut in Real-Lira Market: Brazil Credit 10.Auto Demand Signals U.S. New-Home Sales May Jump 36% in 2011: Chart of Day 11.Talking Cars Dodging Accidents May Mean More Profits for Siemens, Google 12.`You Will Be Lynched Today,' Says Egyptian Policeman: First-Person Account
1. Jobless Rate in U.S. Drops to 9%; Storms Limit Gain in Payrolls to 36,000
The U.S. jobless rate unexpectedly fell in January to the lowest level in 21 months, while payroll growth was depressed by winter storms. Unemployment declined to 9 percent from December´s 9.4 percent, the Labor Department said today in Washington. Employers added 36,000 workers, short of the 146,000 median gain projected by economists in a Bloomberg News survey. The dollar gained and Treasuries slid as the drop in unemployment pointed to a labor market that´s on the mend following the loss of almost 9 million jobs during the recession. The improvement may not be enough to satisfy Federal Reserve Chairman Ben S. Bernanke, who´s likely to keep interest rates near zero for another year, said Bill Gross, co-chief investment officer of Pacific Investment Management Co. "We´ve got at least 12 months ahead of us before the Fed feels comfortable in terms of a sustained period of job creation," Gross, who manages the world´s biggest bond fund, said in a radio interview on "Bloomberg Surveillance" with Tom Keene. "I would suspect that the Fed would believe that a more normal unemployment rate would certainly be something less than 8 percent."
2. Treasuries Decline, Dollar, Stocks Advance After Jobs Data; Loonie Surges
Treasuries fell for a fifth day and the dollar gained after the U.S. unemployment rate unexpectedly dropped to the lowest level since April 2009. U.S. benchmark stock gauges returned to the highest levels in 2½ years. Ten-year Treasury note yields rose 10 basis points to 3.64 percent, the highest since May, at 4 p.m. in New York. The dollar appreciated 0.4 percent to $1.3579 per euro. The Standard & Poor´s 500 Index, which has rallied 94 percent from a 12-year low in 2009, climbed 0.3 percent to 1,310.87, its highest close since June 2008. Canada´s currency rose to a 32-month high against the dollar as the nation added more jobs than forecast. The U.S. jobless rate for January dropped to 9 percent, below the 9.5 percent forecast in a Bloomberg survey of economists, even as employment increased at one-fourth the projected rate after winter storms depressed hiring. "We´re along the path to recovery," said James Gaul, a money manager at Boston Advisors LLC in Boston, which manages $1.7 billion. "The picture overall looks better. However, chances are we might need another full year to see consistent gains in payrolls."
3. Unemployment Drop Indicates U.S. Payrolls About to Pick Up, Economists Say
The plunge in U.S. unemployment over the past two months indicates payrolls are about to pick up, or may already have, economists said. The jobless rate unexpectedly dropped by 0.4 percentage point in January for a second month, bringing it down to 9 percent, the lowest level since April 2009, the Labor Department´s survey of households showed today in Washington. The survey showed employment climbed by 589,000, swamping the 36,000 increase in payrolls reported by the government´s separate poll of employers. While there is evidence that the payroll count may have been depressed by bad weather, that influence alone isn´t enough to explain the gap, economists said. The household survey is best able to capture employment in new business and also takes into account Americans who work for themselves, two areas that may be accelerating as the world´s largest economy improves. "The household survey has a history of leading payrolls in a recovery, so we´re setting ourselves up for a pretty strong improvement in payrolls," said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. "The numbers that look weak on the surface now will turn more robust by the March-April-May period. There´s ample evidence that firms are getting more comfortable about adding workers."
4. Bank of America Creates Unit to Resolve Soured Mortgages, Led by Laughlin
Bank of America Corp. Chief Executive Officer Brian T. Moynihan promoted a former colleague to clean up soured mortgages that fueled losses at the biggest U.S. lender by assets. Terry Laughlin will lead the new Legacy Asset Servicing unit for modifying delinquent mortgages, handling foreclosures and resolving investor disputes over faulty loans originated by the company. As of Dec. 31, the bank faced outstanding claims that it repurchase $10.7 billion in mortgages from investors who said they were duped into buying or backing loans based on overstated home values or borrowers´ incomes. The move separates the duties of resolving problem mortgages from the tasks of originating new business and servicing loans that are current. Barbara Desoer will continue to build the mortgage-lending operations, serving more than 12 million customers, the company said. The arrangement provides "greater focus on resolving legacy mortgage issues," Moynihan, 51, said in a statement. "We believe this will best serve customers, both those seeking homeownership and those who face mortgage challenges."
5. Viking Global Hedge Fund's Dris Upitis Is Said to Resign as Senior Manager
Dris Upitis, one of four management committee members at hedge fund Viking Global Investors LP, resigned, the second high-level departure in 10 months after Chief Investment Officer David Ott stepped down in April, according to two people with knowledge of the matter. Upitis and colleagues Tom Purcell, Dan Sundheim and Jim Parsons have overseen most of Viking´s $10 billion in capital since Ott stepped down in April, said the people, who asked not to be identified because the information isn´t public. Clients were notified of Upitis´ resignation in a note last week, the people said. Upitis was an analyst at Greenwich, Connecticut-based Viking Global for six years before being promoted to senior portfolio manager last year. The firm is run by Andreas Halvorsen, one of the "Tiger Cubs" who helped build Julian Robertson´s Tiger Management LLC into the world´s biggest hedge- fund group in the 1990s. After losing 4 percent in the first six months of 2010, Viking Global Equities gained 10 percent in the second half of the year after the fund reshuffled the managers, the people said. The long-short fund rose 3.8 percent last year, investors were told in the letter. That trailed the 7 percent increase of the BAIF Hedge Fund Index.
6. Falcone's LightSquared Venture Is Said to Consider Bids on TerreStar, DBSD
Philip Falcone´s LightSquared wireless venture is considering bidding on satellite companies TerreStar Corp. and DBSD North America Inc., according to two people with knowledge of the company´s plans. The two companies´ spectrum holdings would help LightSquared handle wireless traffic as it prepares to roll out a nationwide fourth-generation network, said the people, who declined to be identified because the plans aren´t public. LightSquared is backed by Falcone´s Harbinger Capital Partners hedge fund. LightSquared bids would set up a potential battle between Falcone and Charlie Ergen. Dish Network Corp., where Ergen is chief executive officer, said this week it reached agreement to buy DBSD for about $1 billion. DBSD, which filed for bankruptcy in May 2009, is a unit of Kirkland, Washington-based ICO Global Communications Ltd. TerreStar, also in bankruptcy, has a confirmation hearing on March 4 for approval of a reorganization plan in which control may go to EchoStar Corp., where Ergen is chairman. TerreStar is also looking for an asset sale that would give creditors more money, and is proposing bonuses for its top executives if such a deal is reached.
7. Sanofi Better Smart Than Lucky as Options Lower Genzyme's Price: Real M&A
Options contracts on Genzyme Corp.´s multiple sclerosis drug would decrease Sanofi-Aventis SA´s cost by as much as $1.6 billion in a takeover of the world´s largest maker of treatments for rare genetic diseases. Sanofi may offer $76 to $77 a share in cash and options, people with knowledge of the discussions, who declined to be identified because the matter is private, said this week. While the companies are still negotiating, Sanofi has sought to pay $71 in cash and issue contingent value rights, or payments tied to sales of Genzyme´s experimental drug Lemtrada, of about $5 to $6 a share, one person said. Genzyme wants a higher cash payment up front and a smaller CVR, the person said. If the drug fails to win regulatory approval, the options would be worthless. The CVRs would enable Sanofi to purchase Genzyme for $18.4 billion, a 52 percent discount to comparable biotechnology deals based on Genzyme´s estimated earnings, according to data compiled by Bloomberg. With Paris-based Sanofi facing a loss of patent protections and three years of falling profit, Chief Executive Officer Chris Viehbacher has spent more than $8 billion on takeovers since starting two years ago. The stock has still lagged behind health-care rivals in Europe. "It´s a creative tactic for Sanofi," said Michael Holland, who oversees more than $4 billion as chairman of New York-based Holland & Co. and was a general partner at private equity firm Blackstone Group LP. With CVRs, they also "protect themselves against the uncertainty of their drug performance in case things don´t go well. If all goes well, everyone comes out a winner," he said.
8. Gross Says Focus on Headline Inflation Data to Monitor Prices: Tom Keene
Surging demand for commodities from emerging markets should prompt investors to focus on the Labor Department´s main measure of inflation to gauge price increases, according to Pacific Investment Management Co.´s Bill Gross. Most economists concentrate on the so-called core inflation data, which strips out price changes from food and energy, because commodity prices are volatile and tend to revert to the mean, Gross, the manager of world´s biggest bond fund, said in a radio interview on "Bloomberg Surveillance" with Tom Keene. "To focus on the core as opposed to the headline would neglect the fact that emerging market countries have significantly higher demands not just for oil, not just for energy but also for food and commodity-related products," Gross said from Pimco´s headquarters in Newport Beach, California. "The mean reversion that Fed theorists expects may not occur. I would focus on the headline going forward." The cost of living in the U.S. climbed more than forecast in December, led by higher fuel and food prices, while other goods and services showed the smallest annual gain on record. The consumer price index rose 0.5 percent, more than the 0.4 percent median estimate of economists surveyed by Bloomberg News, Labor Department figures showed Jan. 14. The core rate rose 0.1 percent, in line with the median projection.
9. Mantega's Tax Is No Match for Rate Cut in Real-Lira Market: Brazil Credit
Brazil and Turkey offered the highest local interest rates among all economies tracked by Bloomberg as recently as 2006. Today, the pair has split, with Turkey having cut its benchmark rate below that of 15 countries while Brazil´s remains the fourth-highest. The difference swelled to 500 basis points, the most since 2005, after Turkey lowered its borrowing costs to 6.25 percent in January to weaken the lira while Brazil raised its benchmark 50 basis points. The widening gap pushed the real up 15.2 percent in the past three months to a record high against the lira, signaling Brazil´s efforts to weaken its currency by raising investment taxes is no match for rate reductions that reduce the allure of fixed-income assets, according to Edwin Gutierrez at Aberdeen Asset Management Plc. "If the goal was to weaken the currency, well, only one has been successful," Gutierrez, who helps manage about $6 billion in emerging-market debt, said in a telephone interview from London. "Brazil has been a glowing failure."
10.Auto Demand Signals U.S. New-Home Sales May Jump 36% in 2011: Chart of Day
Rising demand for cars and trucks signals U.S. new-home sales may jump more than 30 percent this year, according to Bank of America Merrill Lynch. The CHART OF THE DAY shows that new-home sales have tracked sales of lightweight vehicles in the past 40 years, based on data from the Census Bureau and the Bureau of Economic Analysis. Every 1 million in incremental automobile sales has coincided with 70,000 additional new-home transactions, according to a Bank of America Merrill Lynch report yesterday. "Auto sales are the best indicator that pent-up housing demand is on the verge of being released," wrote analysts led by Jonathan Ellis in New York. "The confidence required to buy a vehicle should enhance the likelihood an individual considers buying a home." Bank of America Merrill Lynch economists project vehicle sales will increase by 1.7 million units, or 15 percent, in 2011 from last year, indicating that new-home sales may jump by about 120,000, or 36 percent, the analysts wrote.
11.Talking Cars Dodging Accidents May Mean More Profits for Siemens, Google
Companies including Google Inc. and Siemens AG may be poised to share billions of dollars a year in revenue from technology that will let cars "talk" with each other to avoid accidents. The U.S. National Highway Traffic Safety Administration says it will decide in 2013 which technology standards to pursue for passenger vehicles. General Motors Co., Ford Motor Co., Toyota Motor Corp. and five other automakers are cooperating to develop a common platform for the devices. By 2025, the annual market for vehicle-to-vehicle communications systems may be 83 million units worldwide, according to iSuppli, a division of information and consulting company IHS Inc. Insurance companies may pay less in claims if the technology leads to fewer accidents. "Our vision in the end is for cars that don´t crash, and autonomous, driverless cars," said Nady Boules, director of GM´s electrical and controls integration lab in Warren, Michigan.
12.`You Will Be Lynched Today,' Says Egyptian Policeman: First-Person Account
Having a policeman say he wanted to kill me wasn´t my most frightening moment yesterday in Cairo. That came when police and civilians smashed our car windows -- with the five of us inside it -- jumped up and down on the roof, spat on us, pulled my hair, beat my friends and dragged us into a police van. The five of us were lucky: We emerged from our confrontation with President Hosni Mubarak´s police and operatives alive and relatively healthy. Violence over the past 11 days, much of it in Cairo´s Tahrir Square, has killed as many as 300 people in Egypt, according to the United Nations. But it was a day I never dreamed could occur in my native city. It happened not because I was a reporter, a Sudan-based contract journalist for Bloomberg News returning to Cairo for vacation. The friends giving me a ride downtown were just trying to take food and first-aid supplies to those injured the previous night in clashes with pro-Mubarak protesters. We got out of the car when we arrived at about 11:30 a.m. in Talaat Harb square near Tahrir, our planned transfer point for the medical supplies. We felt somewhat safe, as one of the demonstrators had told us it was a secure entrance. When I left the night before, it was controlled by anti-Mubarak protesters.
-0- Feb/05/2011 00:35 GMT