Business Blog Posts

Tens of thousands of Irish are expected to march in Dublin on Saturday in a union-organized protest against the government's decision to seek aid from the EU and IMF to help it deal with its crumbling banks and gaping budget deficit.

European officials hope the 85 billion euro ($112.7 billion) aid program will help draw a line under the debt crisis which started in Greece and now threatens to engulf countries like Portugal and Spain, the fourth-largest economy in the euro zone.

But market pressures have shown no signs of easing. The euro stumbled to a two-month low against the dollar on Friday and the risk premiums investors demand to buy Irish, Portuguese and Spanish debt instead of German Bunds hovered near record highs.

"The current market environment is so febrile and illiquid that the differences between Portugal and Ireland (or Greece) are quickly overlooked, as markets focus on the possible next stage of contagion," Barclays Capital economist Laurent Fransolet wrote in a research note.

The conditions of Ireland's rescue deal with the European Union and International Monetary Fund are expected to be unveiled on Sunday.

A report late on Friday from state broadcaster RTE said the interest rate on the bailout funds being negotiated with the EU and IMF would be between 6 and 7 percent, at the high end of expectations.

The main opposition party Fine Gael said such a rate would be unacceptably high, potentially creating a new hurdle for the government as it works to complete the rescue and secure passage of its 2011 austerity budget next month with a razor-thin parliamentary majority.

Even before Ireland had begun talks on a rescue, its fragile government led by Prime Minister Brian Cowen had announced plans for a far-reaching four-year austerity program targeting savings of 15 billion euros.

That means significant new cuts mandated by the EU and IMF are unlikely. For now, Ireland appears to have successfully resisted pressure from some euro zone partners for it to raise its ultra-low 12.5 percent corporate tax.

The rescue deal could force senior bondholders in the country's big banks, which face mounting losses due to reckless property lending in the boom years, to shoulder some of the costs of the bailout.

ANGER BUBBLING

The Irish public has stoically borne two years of recession, a relentless surge in unemployment and a program of tax rises and spending cuts, but anger is bubbling over at the new measures and the decision to seek aid -- a move many believe hands over the country's hard-won sovereignty to Brussels.

Unions have called for a march on Saturday to Dublin's General Post Office building, headquarters of a nationalist uprising against British rule in 1916 and a potent symbol of Irish independence.

The biggest demonstration of the crisis so far was in early 2009 and attracted about 100,000 people.

The added shares vaulted GM past Agricultural Bank of China's (601288.SS) $22.1 billion IPO in July and underscored the strong demand for the taxpayer-rescued automaker's stock.

GM said on Friday that underwriters led by Morgan Stanley (MS.N), JPMorgan Chase & Co (JPM.N), Bank of America Merrill Lynch (BAC.N) and Citigroup Inc (C.N), exercised their full option on an additional 71.7 million common shares worth $2.37 billion.

They also exercised an option to purchase 13 million preferred shares for $650 million.

Underwriters had 30 days from the IPO to exercise the options.

GM last week had raised $20.1 billion in an IPO of common and preferred shares in what was the biggest U.S. IPO ever. Without the preferred shares, GM's IPO would have been smaller than China's AgBank.

On November 18, their first day of trading, the shares rose 3.6 percent. They closed on Friday up 33 cents at $33.81, or 2.5 percent above the $33 IPO price.

The U.S. government bailed out GM for $50 billion after the automaker's 2009 bankruptcy.

The IPO caps the first stage of a turnaround that has taken the 102-year-old automaker from near-death to an unlikely Wall Street flotation favorite in 2010.

A successful stock debut may help the Obama administration argue that the controversial taxpayer bailout of GM was worthwhile.

The White House has said U.S. taxpayers are on track to recoup the full investment made by the administration and that it hopes to make substantial progress toward shedding the government's stake entirely by mid-to-late 2012.

The strong response to the stock sale reflects growing investor confidence that GM is moving beyond its unpopular, taxpayer-funded bankruptcy with sharply lower costs and higher profit potential.

The U.S. Treasury remain GM's largest shareholder after the IPO with a third of the shares outstanding.

Barclays Capital, Deutsche Bank, Goldman Sachs, Credit Suisse and Royal Bank of Canada are GM's other major underwriters. Lazard and Boston Consulting Group served as advisers to the Treasury. Evercore Partners advised GM.

In the days before the IPO, the price range and the number of shares, including preferred, were all increased.

GM last week sold 478 million common shares at $33 each, raising $15.77 billion, as well as $4.35 billion in preferred shares, more than the initially planned $4 billion.

(Reporting by Clare Baldwin and Jonathan Spicer; editing by Carol Bishopric and Tim Dobbyn)

"The deadline for year-end redemptions has elapsed and we have received approximately $3 billion in total redemption requests," FrontPoint co-chief executive officers Dan Waters and Mike Kelly said in a letter sent to investors on Friday.

Reuters obtained a copy of the letter.

A spokesman for FrontPoint declined to comment.

About half of the redemption requests were related to FrontPoint's healthcare portfolios, which executives decided to liquidate. The portfolios were allegedly at the heart of one of the government's probes, people familiar with the matter said.

Investors in those portfolios have already received their money back, the FrontPoint executives said in their letter.

Investor redemptions at other FrontPoint strategies, however, underscore just how nervous pension funds, endowments and wealthy individuals have become about the whiff of trouble. This week the probe picked up speed when federal agents raided three hedge funds, sent subpoenas to other fund managers, and arrested one executive at a so-called expert network company.

FrontPoint, which offers more than a dozen portfolios to investors, expects to start 2011 with roughly $5 billion in assets, down from $11 billion before the financial crisis, the letter said.

FrontPoint's biggest star is Steve Eisman, who made millions by anticipating the housing market collapse long before anyone else did. Eisman became something of a celebrity in the $1.7 trillion hedge fund world after he was featured prominently in journalist Michael Lewis' best-selling book "The Big Short," which chronicles how a savvy group of traders capitalized on the crisis.

Greenwich, Connecticut-based FrontPoint was acquired by investment bank Morgan Stanley in 2006 and is now being spun off. Morgan Stanley spokeswoman Erica Platt declined to comment on the redemptions.

But she said "We remain focused on assessing the impact of the last weeks' events and continue to work toward the restructuring of our ownership of FrontPoint."

Earlier this month, federal authorities arrested Yves Benhamou after charging that he had illegally passed on inside information to a hedge fund manager about Human Genome Sciences Inc in 2008.

Benhamou, a French doctor, was overseeing a clinical trial for the biotechnology company and was also consulting with hedge fund managers who specialized in selecting healthcare stocks.

While neither the hedge fund nor the manager was named in the government's case, people familiar with the matter said it was FrontPoint and Joseph "Chip" Skowron, a co-portfolio manager at its healthcare funds. FrontPoint put Skowron, who earned his medical degree at Yale, on leave the same day the government announced its charges against Benhamou.

The arrest of Benhamou and Don Ching Trang Chu, a former executive at an expert-network firm, suggest that the government is probing exactly how hedge funds interact with these types of industry consultants.

(Additional reporting by Elinor Comlay in New York, editing by Matthew Lewis)

U.S. biotech Genzyme (GENZ.O), the target of an $18.5 billion takeover bid by French drugmaker Sanofi-Aventis (SASY.PA), is open to linking the performance of its Campath drug to the offer, its chief executive Henri Termeer told Le Figaro in an interview.

U.S. shoppers searched for deals on high-definition televisions and popular toys early on Friday, as retailers hoped that "Black Friday" would kick off the best holiday shopping season in three years.

Resource-related stocks will be in focus as key base metals prices fell, pressured by a rise in margin requirements by the Chinese exchange that prompted liquidation of speculative positions by investors with limited funding.

European shares fell on Friday as the euro zone debt crisis intensified, with Portugal under pressure to accept a bailout. Mining companies were hit by weaker commodity prices on Chinese inflation worries.

Japan's Nikkei share average .N225 dipped 0.4 percent on Friday, held back by profit-taking after rallying nearly 10 percent so far this month on a pick-up in overseas investor demand for Japanese equities.

On Wednesday, the Dow Jones industrial average .DJI jumped 150.91 points, or 1.37 percent, to 11,187.28. The Standard & Poor's 500 Index .SPX rose 17.62 points, or 1.49 percent, to 1,198.35. The Nasdaq Composite Index .IXIC gained 48.17 points, or 1.93 percent, to 2,543.12.

(Reporting by Atul Prakash. Editing by Jane Merriman)

While some stores were open on Thursday and many retailers have offered "Black Friday" deals for weeks, shoppers still lined up late Thursday and early Friday for the annual day-after-Thanksgiving bargain hunt.

Black Friday is a term adopted by retailers to refer to the time of year when their businesses move into the black, or turns a profit. This year their aim is expected to be about keeping sales momentum that has picked up modestly this year as the economy recovers.

Shoppers were disappointed in some of the offers they could see, although they were still waiting in line for hours before they could get in the door.

"I'm looking at the TV and it says save $70 and I'm like, come on, you've got to be kidding," said Sanjay Patil, as he waited outside a Best Buy Co Inc in Princeton, New Jersey, along with about 50 other bargain hunters before midnight, even though the electronics retailer said stores open at 5 a.m.

"If it's Black Friday, it has to be 100 or 120 bucks savings minimum."

Others were anticipating the bargains they hoped to get. Nandini Ramkissoon, 19, staked out a spot near the stacks of $69 Blu-ray Disc players and $198 HDTVs set to go on sale at 5 a.m. (1000 GMT) inside a Wal-Mart in Secaucus, N.J.

"Wal-Mart is pretty good because they're letting their customers inside before time, and it's really cool," Ramkissoon said.

She and her parents arrived at 7 p.m. on Thursday, 10 hours early, to make sure they could get the TV they wanted.

Wal-Mart opened many of its U.S. discount stores on Thanksgiving Day and the doors stayed open overnight, a tactic it adopted after an employee was trampled to death two years ago on "Black Friday."

READY TO SHOP

Consumers, whose spending accounts for about 70 percent of the U.S. economy, appeared to be in the mood to shop. On Wednesday, the government reported a 0.3 percent increase in personal spending in October, compared with the previous month.

Other signs that the economy might be gaining steam include a two-year low in a closely watched measure of jobless benefits.

"I'm spending more this year than last year," said George Lum, a 30-year-old hospital worker, as he sat in a lawn chair outside the Target Corp in Princeton, 4-1/2 hours before its 4 a.m. opening. He was hoping to buy a 40-inch Westinghouse flatscreen LCD high-definition television for $298.

The National Retail Federation forecast that as many as 138 million people would go to stores this weekend. The industry trade group also forecast a 2.3 percent increase in sales during November and December, up from a 0.4 percent increase a year earlier. Other forecasts call for even greater increases.

The Financial Times Deutschland, which did not identify its sources, said some euro zone states wanted Portugal to seek aid in order to avoid Spain, the fifth largest EU economy, from having to follow suit.

"If Portugal were to use the fund, it would be good for Spain, because the country is heavily exposed to Portugal," the FT Deutschland quoted a source in Germany's finance ministry as saying.

The German Finance Ministry could not immediately be reached for comment on the FT report which suggested that despite public displays of confidence, euro area leaders were alarmed at the prospect of the debt crisis engulfing ever more of its members.

Lisbon, which is preparing to pass an austere 2011 budget later on Friday that aims to deliver tough spending cuts to ward off a deeper debt crisis, issued an emphatic denial.

"This news article is completely false, it has no foundation," said a government spokesman.

A Reuters poll this week showed 34 out of 50 analysts surveyed believe Portugal will be forced to ask for help.

Spain has already passed its own austerity budget and only four out of 50 economists surveyed by Reuters thought Madrid would seek aid.

"Those who are taking short positions against Spain are going to be mistaken," Spanish Prime Minister Jose Luis Rodriguez Zapatero said on RAC1 radio on Friday.

A rescue aimed at meeting Spain's financing needs for 2-1/2 years would cost 420 billion euros ($557 billion) according to a Capital Economics estimate, the lion's share of the 440 billion euro European Financial Stability Facility (EFSF) reserve set up by the euro zone after the Greece bailout.

But two separate EU funds, augmented with International Monetary Fund backing, could provide loans worth 750 billion euros in total.

German Bundesbank chief Axel Weber, a powerful member of the European Central Bank's governing council, said this week that the EFSF and other EU rescue funds had enough money, if needed, to cover the borrowing needs of stretched euro zone members Greece, Ireland, Portugal and Spain.

A Spanish government source told Reuters that Madrid was not pushing Lisbon to seek help, underscoring splits within the 16-nation group on how to handle the debt and deficit crisis that has seen the euro fall sharply against the dollar since May.

Markets are still acutely worried by the threat of debt crises in Greece and Ireland spreading further and have pushed the borrowing costs of Portugal and Spain to record highs..

"I think Portugal has already crossed the point of no return. Its bond yield has gone beyond a sustainable level. The market is now watching whether Spain will need a rescue," said a Japanese bank foreign exchange trader.