Top Stories: Business and Finance
The following are the day's top business stories:
1. Sanofi Is Still Reviewing Genzyme Books as It Nears $19.2 Billion Takeover 2. Russia Follows China in Using Reserve Ratios to Curtail Inflation Threat 3. S&P 500 Beating Sales Estimates by Most Since 2006 With Economy Recovering 4. Record Bond Buyers Chase Highest Currency Returns After Lira: India Credit 5. Japanese Stocks Rise for Second Day on U.S. Jobs, Earnings; Toyota Climbs 6. BHP, Rio Help Mine Record $52 Billion Profit as Costs Pummel ArcelorMittal 7. Fed Spending 40% on Benchmark Treasuries as Newest Bonds Proving Cheapest 8. Euro Buying Time for Merkel as Bund Yields Hit Two-Year High to Treasuries 9. Gillard Sees Budget Cuts, Levy to Meet Cost of Australian Floods, Cyclone 10.Japan Bankruptcies May Climb for First Time Since 2009: Chart of the Day 11.Facebook May Never Surpass Mixi in Japan, `FarmVille' Developer Zynga Says 12.Gruebel's Rebuilt UBS Trailing Credit Suisse Competing for Money From Rich
1. Sanofi Is Still Reviewing Genzyme Books as It Nears $19.2 Billion Takeover
Sanofi-Aventis SA is still examining the books of Genzyme Corp. as it works toward a $19.2 billion takeover of the U.S. biotechnology company. Sanofi and Genzyme are discussing a price of about $74 a share plus potential additional payments tied to the performance of a Genzyme drug, and the boards were slated to meet today, four people with knowledge of the plan said earlier. An announcement was possible as early as tomorrow, they said. "As we have previously said, we´ve signed a confidentiality agreement with Genzyme and are continuing to review non-public information," Jean-Marc Podvin, a spokesman for Paris-based Sanofi, said in a telephone interview today. "We have no further comment." Acquiring Genzyme, the world´s largest maker of medicines for rare genetic disorders, would help Sanofi Chief Executive Officer Chris Viehbacher compensate for revenue losses as some of Sanofi´s biggest-selling products face competition from generic versions. Sanofi would gain treatments for Fabry, Gaucher and Pompe diseases.
2. Russia Follows China in Using Reserve Ratios to Curtail Inflation Threat
Russia, the only one of the so-called BRIC countries without capital controls, is following China and Turkey in relying on reserve requirements to drain cash from the economy and avoid luring more speculative investment. "We stand ready to continue increasing mandatory requirements, if needed," Bank Rossii Chairman Sergey Ignatiev said in Frankfurt on Feb. 4. Policy makers will "act decisively to meet the forecast" for 2011 annual inflation of between 6 percent and 7 percent, he said. The central bank on Jan. 31 increased the mandatory reserve ratio while unexpectedly leaving its deposit rates unchanged after inflation in January accelerated to the fastest in 15 months. Policy makers cited the threat of rising capital inflows driven by higher oil prices. Emerging economies are weighing the need to curb inflation against the risk of attracting speculative capital from near- zero interest rates in the U.S. and Europe. The threat of a stronger ruble and stifled exports may be a "big headache" for Russia, central banker Alexei Ulyukayev said last month.
3. S&P 500 Beating Sales Estimates by Most Since 2006 With Economy Recovering
More U.S. companies are exceeding sales forecasts than any time in four years, helping extend the biggest stock-market rally since 1936. Caterpillar Inc. and United Parcel Service Inc., barometers for the economy because of their building and delivery businesses, are among the 72 percent of Standard & Poor´s 500 Index companies that reported more revenue last quarter than analysts estimated, the largest proportion since at least 2006, according to data compiled by Bloomberg. Sales beat projections by an average 2.3 percent, the most in two years, the data show. While U.S. earnings have surpassed Wall Street estimates for seven straight quarters, sales have trailed forecasts on average since 2008, as the U.S. ended its worst recession in seven decades and employers cut as many as 8.75 million workers. Bank of America Corp. and Penn Capital Management say unexpected revenue growth shows the economy is expanding enough that companies can stop firing people and closing plants. "You really did need top-line growth because the cost- cutting got to where you couldn´t cut any more," said Eric Green, a money manager at Penn Capital Management in Philadelphia, which oversees $5.6 billion. "But you´re seeing it now. Many companies are having that nice top-line growth, and as that goes up, it should have a magnified affect on earnings. It´s very positive for the equity markets."
4. Record Bond Buyers Chase Highest Currency Returns After Lira: India Credit
International investors are buying India´s bonds at a record pace to lock in the highest yields since 2008 with the rupee forecast to provide the world´s biggest returns after the Turkish lira. Foreign funds acquired $2.45 billion of corporate and government debt last month, the most since the Securities & Exchange Board of India started publishing the data in 1997. Ten-year notes offer a yield of 8.15 percent, the highest among the region´s investment-grade bonds and more than double the 3.57 percent on Treasuries, data compiled by Bloomberg show. The rupee may return 13 percent including interest-rate income this year, more than four times the 3 percent gain predicted for China´s yuan, according to Bloomberg data. India´s economic growth will accelerate to 8.6 percent in the 12 months to March, the fastest since 2008, a government report may show today, giving the Reserve Bank of India leeway to add to seven interest rate increases in a year to tackle inflation. "Foreign investors are clearly chasing yields, drawing additional comfort from the fact that the rupee should do reasonably well," Bhanu Baweja, the London-based global head of emerging-market fixed-income and currency strategy at UBS AG, said in a Feb. 3 interview. "The RBI has been proactive in taking steps to contain inflation, which still remains a policy concern."
5. Japanese Stocks Rise for Second Day on U.S. Jobs, Earnings; Toyota Climbs
Japan´s stocks gained for a second day after earnings rose and the U.S. unemployment rate unexpectedly fell, boosting confidence in the global economic recovery. Toyota Motor Corp., the world´s largest carmaker, advanced 1.3 percent. Sega Sammy Holdings Inc., a maker of video-game and pachinko machines, climbed 2.8 percent after the company said nine-month profit rose. NSK Ltd., a bearing maker, gained 2.7 percent after the company raised its profit forecast. "Employment in the U.S. is improving steadily, although the pace is slow," said Tomochika Kitaoka, a senior strategist in Tokyo at Mizuho Securities Co. "If employment keeps recovering, even if the pace is slow, a sense of security in a cyclical recovery of the U.S. economy will start to spread." The Nikkei 225 Stock Average rose 0.9 percent to 10,635.05 as of 9:05 a.m. in Tokyo. The broader Topix index gained 0.8 percent to 942.71 with five stocks advancing for each that fell.
6. BHP, Rio Help Mine Record $52 Billion Profit as Costs Pummel ArcelorMittal
BHP Billiton Ltd., Vale SA and Rio Tinto Group, the world´s three largest mining companies, are set for record profit totaling $52 billion as they accelerate earnings growth at the expense of their biggest customers. The companies, also the largest iron-ore exporters, may post an average 66 percent jump in the annual earnings they report this year compared with 2007, according to analyst estimates compiled by Bloomberg. In contrast, ArcelorMittal, Baoshan Iron & Steel Co., Posco and Nippon Steel Corp., the largest publicly traded steelmakers, may see an average 31 percent slump in profit over the same duration. The contrasting fortunes will probably widen further this half should steelmakers fail to pass on rising iron ore and coal costs, forecast to peak in the second quarter, according to Bank of America Merrill Lynch. The steel producers have struggled to adapt to changes in raw-material pricing introduced last year as mining companies ended a decades old system of annual contract talks in favor of quarterly accords. "It was a dramatic impact," said Charles Kernot, director of metals and mining at Evolution Securities Ltd. in London. Mining companies are going to see "very significant earnings growth," he said.
7. Fed Spending 40% on Benchmark Treasuries as Newest Bonds Proving Cheapest
The Federal Reserve´s Treasury purchases already have succeeded in driving investors to junk bonds and stocks. Now, policy makers are focusing on benchmark government securities, helping contain rising yields that set rates on everything from corporate debt to mortgages. More than 40 percent of the government bonds the Fed bought in January for its so-called quantitative easing were auctioned in the previous 90 days, up from 20 percent in December and 15 percent in November, according to Bank of America Merrill Lynch. The central bank is concentrating on newer securities as its $600 billion program depletes primary dealers´ holdings of Treasuries to the lowest since November 2009. "They´re getting all the bang for their buck that they can" by purchasing so-called on-the-run bonds, said Mitchell Stapley, the Grand Rapids, Michigan-based chief fixed-income officer for Fifth Third Asset Management, which oversees $22 billion. "When you´re the largest buyer out there, when you replace China in terms of the size of your holdings of Treasury securities, that will happen." The Fed purchases are helping keep a lid on borrowing costs for companies and homebuyers as the economy recovers. Yields on corporate bonds have averaged about 4.84 percent since the buying began in November, below the 5.48 percent for all of 2010, according to Bank of America Merrill Lynch indexes. The average rate on a 30-year fixed mortgage has been 4.61 percent, in line with 2010´s 4.69 percent and lower than the 5.93 percent of the past decade, according to Freddie Mac in McLean, Virginia.
8. Euro Buying Time for Merkel as Bund Yields Hit Two-Year High to Treasuries
The highest yields on German short- term bonds in two years relative to Treasuries are boosting the euro, easing pressure on Chancellor Angela Merkel as Europe´s leaders consider expanding a rescue program to end the region´s debt crisis. Yields on German two-year notes rose last week to 87 basis points more than Treasuries of similar maturity, the most since January 2009, luring investors to higher returns on euro- denominated assets. Europe´s common currency is up 2.7 percent from an eight-year low reached on Jan. 10 against a basket of nine developed-nation peers, Bloomberg Correlation-Weighted Indexes show. While a Bloomberg survey last month showed investors predict at least one nation will leave the currency within five years and that Greece and Ireland will default, traders are trimming bets the bloc will splinter. Speculators increased wagers the euro will rise to the highest since October as Merkel said Feb. 4 there was "broad consensus" on reaching an accord to boost competitiveness, including debt-limitation rules. "Merkel is totally on top of this situation, she understands how much of a benefit the euro has been for Germany," said Pierre Lequeux, London-based head of currency management at Aviva Investors, which oversees about $370 billion. "The only way they can fend off inflation is by engineering a stronger euro. As we´re going through the first quarter the euro will get stronger."
9. Gillard Sees Budget Cuts, Levy to Meet Cost of Australian Floods, Cyclone
Australia won´t increase a proposed levy to help pay a damage bill from floods and a cyclone that economists say may reach $20 billion, with Prime Minister Julia Gillard instead preparing budget cuts. "We will go through the budget and we will make some choices," Gillard told Channel Ten´s "Meet The Press" program yesterday. "There are no easy choices left now, so in making further budget cuts, there is going to be some pain." Gillard, whose Labor Party forms a minority government, needs to convince independent lawmakers to support her proposed A$1.8 billion ($1.8 billion) flood levy laws through Parliament when it resumes in Canberra tomorrow. The government won´t increase the tax, Gillard said yesterday, even as the aftermath of Tropical Cyclone Yasi triggered flood alerts in four states. Yasi tore through Queensland´s sugar- and banana-producing areas last week, adding to the rain and flooding that left 35 people dead and disrupted coal mining over the past two months.
10.Japan Bankruptcies May Climb for First Time Since 2009: Chart of the Day
Japan´s bankruptcies may start rising this year, ending 17 months of declines through December, as government efforts to ease corporate financing wane, according to Tokyo Shoko Research Ltd. The CHART OF THE DAY shows bankruptcies fell 3 percent in December from a year earlier, the slowest pace since August 2009, when the stretch of declines started. It also shows bank lending dropping even before the scheduled end this quarter of government measures to aid companies by giving loan guarantees and encouraging lenders to soften terms and conditions. "Without new support measures, bankruptcies could surge and top the annual record" of 20,841 in 1984, said Nobuo Tomoda, assistant general manager at Tokyo Shoko, a credit reporting company. More bankruptcies "would worsen the employment environment and have a negative psychological effect on consumption" and as a result, may slow Japan´s economic recovery, Tomoda said. This could undermine expectations that recovering exports along with the Bank of Japan´s asset buying and the recent 5.1 trillion yen ($62.5 billion) of stimulus spending are pushing Japan toward a sustainable economic expansion.
11.Facebook May Never Surpass Mixi in Japan, `FarmVille' Developer Zynga Says
Facebook Inc. may never overtake Mixi Inc. in Japan as the lure of connecting with friends overseas isn´t enough for users to switch services, according to the U.S. social-networking site´s biggest games developer. Japan "is one place where Facebook may not end up being dominant," Robert Goldberg, head of Zynga Game Network Inc.´s operations in the country, said in an interview in Tokyo last week. "Networks are kind of funny, they get an imprint on them when they get designed and it´s pretty hard to change." Facebook, boasting more than 500 million users and a valuation above $80 billion, is focusing on expanding in Japan and Russia, Chief Executive Officer Mark Zuckerberg said in July. Mixi, which began social network operations in 2004, has about 22 million customers in the country, 10 times the number of Japanese Facebook users. Concerns over privacy issues and early problems with site design and translation have also set back Facebook´s popularity in the country, Goldberg said.
12.Gruebel's Rebuilt UBS Trailing Credit Suisse Competing for Money From Rich
UBS AG, rebuilding after a government bailout and a U.S. tax investigation that forced it to hand over names of rich clients, probably attracted fresh funds to its private bank for a second straight quarter. The reversal, after 27 months of outflows, is a sign that Chief Executive Officer Oswald Gruebel has patched up Switzerland´s largest bank following its near collapse in 2008 and the U.S. probe. The Zurich-based company may report 2010 earnings of 7.2 billion francs ($7.5 billion) tomorrow, its first annual profit since 2006, according to 21 analysts surveyed by Bloomberg News. The challenge now: Generate fatter profits from the $1.7 trillion UBS oversees for wealthy clients while elbowing aside Credit Suisse Group AG, which raked in more assets than any Swiss bank since the financial crisis began. As both face an erosion of profitability from an assault on banking secrecy, UBS has to fight that much harder to attract rich clients, who removed 251.6 billion francs in the nine quarters through June. "UBS has been reinvesting in wealth management in terms of hiring people and restructuring business quite dramatically," said Christopher Wheeler, a London-based analyst with Mediobanca SpA who rates the bank "neutral." "They´re trying to bring confidence back and to get four quarters of net new money inflows this year. That´s the big thing Gruebel wants to see."
-0- Feb/07/2011 00:35 GMT