Business Blog Posts

The euro edged up from a two-week low plumbed after surprising weak German industrial orders data, but fading expectations of a near-term eurozone interest rate rise stopped the single currency from pushing too much higher.

U.S. S&P 500 futures were flat. Merger activity drove U.S. stocks to two-and-half year highs on Monday, when the Dow Jones industrial average .DJI and broader S&P 500 .SPX both rose 0.6 percent. .N

Market players in Tokyo said better-than-expected earnings reports from U.S. and Japanese companies have accelerated a shift of money out of inflation-dogged emerging markets and into developed markets with loose monetary policies and more subdued price pressures. .T

"The performance of all emerging markets, including Brazil, India, Indonesia and China, has been very weak this year and the shift of market focus to developed economies with lower inflationary risk is helping Tokyo stocks," said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Data from Lipper last week showed a record $4.1 billion outflow from emerging market equity funds in the week to February 2.

Despite sluggish economic growth and persistent deflation, Japan has been the best performing Asian market so far in 2011, with year-to-date gains of around 4 percent.

The Nikkei .N225 rose 0.4 percent, but MSCI's index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.2 percent, led by a 1 percent decline for the tech sector, with markets in Hong Kong, Singapore, South Korea and India in negative territory.

Australian shares .AXJO rose 0.5 percent as positive earnings from National Australia Bank (NAB.AX) lifted the top four lenders, but shares in investment bank Macquarie (MQG.AX) fell 0.3 percent after it lowered its full-year profit guidance.

Shares in National Australia Bank, the country's top lender, gained 1.9 percent on the back of a forecast-beating 18 percent rise in first-quarter cash profit.

"Every time they come out with a result that says basic operations have done reasonably well and conditions are all tracking in the right direction, you get a steady decrease in the perceptions of risk that go with NAB," said Angus Gluskie, chief investment officer at White Funds Management.

CENTRAL BANK BUYING

The euro rose to around $1.3625, having fallen to $1.3508 on Monday. Some traders were wary of more buying by Asian central banks, which had helped push the single currency higher in the previous session.

"I think that's the train of thought market players have, because they have been intervening constantly," said a trader at a major Japanese bank in Singapore.

The euro has retreated from a 12-week high of $1.3862 since European Central Bank President Jean-Claude Trichet last week doused expectations of an imminent interest rate rise, saying inflation in the eurozone would remain contained.

While the proposals pale in comparison to similar restrictions in Europe, the talk of keeping a keen eye on loopholes indicates regulators want to get tough on banks that make symbolic pay changes while finding ways to gut the intent of reforms.

The Federal Deposit Insurance Corp endorsed on Monday a proposal that executives at the largest financial institutions, such as Bank of America and Goldman Sachs, have half of their bonuses deferred for at least three years.

The bank regulators said they may go further to ensure the bonuses properly align executives' interests with investors, and are considering toughening the proposal to restrict executives from hedging deferred bonuses in the form of stock.

The concern is executives could use hedging techniques to make up for losses if their company's stock goes down during the deferral period, which could put executives' interests at odds with those of shareholders.

"Whether we should be prohibiting hedging in this, that is an issue that is left open," FDIC Chairman Sheila Bair said.

Despite the tough talk, the U.S. plan is markedly softer than the European Union, which in December set guidelines that top bankers be limited to receiving 20 percent of their annual bonuses upfront in cash, with some exceptions.

Massive cash payouts that reward bank executives and traders for short-term returns, without regard to long-term risk, have been cited by international regulators as a factor

in the recent financial crisis.

The U.S. plan responds to both the Dodd-Frank financial overhaul law of 2010, that directed regulators to curb pay plans that encourage excessive risk-taking, and principles agreed in 2009 by the world's group of 20 leading economies (G20).

The FDIC vote on Monday is just a first step and the proposal must still be approved by other U.S. financial regulators, such as the Federal Reserve and Securities and Exchange Commission, before being put out for comment for 45 days.

It is unclear when the other regulators will act, although FDIC staff said it should be within weeks.

PAYCHECK BOUNCEBACK

The U.S. proposal tackles pay for top executives at financial companies with $50 billion or more in assets, including JPMorgan Chase & Co and Morgan Stanley.

How much of the deferred pay an executive could receive would be tied to the performance of the company based on decisions made by the executive during the period covered.

Buying accelerated after the S&P 500 broke through the 1,313 mark, taking it further into levels that prevailed before the financial crisis. Two stocks rose for every one that fell on the New York Stock Exchange, even though the day's rise was on lighter-than-average volume.

Diversified industrial company Danaher Corp (DHR.N) agreed to buy medical diagnostics company Beckman Coulter Inc (BEC.N) for about $6.8 billion. Oil driller EnsCo Plc (ESV.N) said it would buy Pride International Inc (PDE.N) for about $7.3 billion.

Based on the latest available data, the Dow Jones industrial average .DJI was up 69.25 points, or 0.57 percent, at 12,161.40. The Standard & Poor's 500 Index .SPX was up 8.14 points, or 0.62 percent, at 1,319.01. The Nasdaq Composite Index .IXIC was up 14.69 points, or 0.53 percent, at 2,783.99.

(Reporting by Caroline Valetkevitch; Editing by Andrew Hay)

The Federal Deposit Insurance Corp proposed that executives at the largest financial institutions have half of their bonuses deferred for at least three years.

Yet the U.S. plan is markedly softer than the European Union, which in December set guidelines that top bankers be limited to receiving 20 percent of their annual bonuses upfront in cash, with some exceptions.

Massive cash payouts that reward bank executives and traders for short-term returns, without regard to long-term risk, have been blamed by international regulators as a factor in the recent financial crisis.

The FDIC plan responds to both the Dodd-Frank financial overhaul law of 2010 that directed regulators to curb pay plans that encourage excessive risk-taking and principles agreed in 2009 by the world's group of 20 leading economies (G20).

Many Wall Street firms have already spread out their bonus payments in response to the impending rules.

"This has all been kind of baked into people's plans and thinking today," said Alan Johnson of the compensation consulting firm Johnson Associates, about the FDIC's proposal.

But there are signs that in both the United States and Europe that there is upward creep in total compensation figures that offsets the curbs.

Goldman Sachs Group revealed last month that it tripled Chief Executive Lloyd Blankfein's base salary and awarded him $12.6 million of stock, even after the bank's net income plunged last year.

And earlier this month, Citigroup's board approved a base salary of $1.75 million for CEO Vikram Pandit. Pandit had vowed in 2009 to receive an annual salary of $1 until Citigroup returned to sustained profitability.

In Britain, banks such as HSBC and Barclays have raised the fixed part of bank pay in what they say is an essential move to retain staff.

GLOBAL VARIATIONS

The FDIC's proposal would tackle pay for top executives at financial companies with $50 billion or more in assets such as Bank of America Corp, JPMorgan Chase & Co, Goldman Sachs and Morgan Stanley.

How much of the deferred pay an executive could receive would be tied to the performance of the company based on decisions made by the executive during the period covered.

The FDIC's proposal is just a first step that must be approved by other U.S. financial regulators, such as the Federal Reserve and Securities and Exchange Commission, before being finalized. It is unclear when the other regulators will act.

The deal announced on Monday sets the purchase price for Pride's shares at $41.60 each, a premium of 21 percent to Friday's closing price, and would give Ensco more cash flow to to buy new, high-tech rigs needed to meet oil companies' demand for equipment capable of drilling in increasingly tough waters.

"Pride and Ensco combined are going to be in all the major oil-producing regions now," said Kurt Hallead, co-head of energy research at RBC Capital Markets in Austin, Texas.

The industry has been hit hard by the deepwater drilling moratorium in the Gulf of Mexico and stringent shallow-water regulations following last year's BP Plc (BP.L) well blowout, which led to the worst-ever U.S. maritime oil spill.

But major energy companies such as Chevron Corp (CVX.N) and Royal Dutch Shell Plc (RDSa.L) expect to continue spending billions of dollars offshore, encouraged by strong oil prices.

With a total of 74 rigs, including six being built, the deal would lift the combined company past Noble Corp (NE.N) to be second only to Transocean Ltd (RIGN.VX), which has 136 rigs.

GLOBAL SCALE

London-based Ensco's fleet is deployed in the Gulf of Mexico, Europe, the Middle East and Asia, and the deal would add Pride's five rigs off the west coast of Africa and nine rigs off Brazil.

Ensco did not even have any rigs in South America before it agreed to move an out-of-work Gulf of Mexico rig to French Guiana in December. Then just last week, it struck a deal to move a rig to Brazil from Australia.

Brazilian state oil company Petrobras (PETR4.SA) plans to invest $224 billion between 2010 and 2014 as part of efforts to tap into billions of barrels of oil from ultra-deep water fields off its coast, with $119 billion of that going toward exploration and production.

That will require dozens of deepwater drilling rigs that can operate in water depths of 10,000 feet; and although Petrobras has said it plans to build many of its own rigs, drilling contractors are hoping they will win a substantial share of that market.

The new company would have 21 deepwater rigs working or being built, equal to Noble but behind Transocean's 44, giving it a strong position in the most lucrative market segment, which often pays rig owners more than $500,000 per day.

Ensco said rig construction would absorb much of the new company's cash flow in the next few years. Combined, they have added 12 new vessels in the past few years, and now would have the second-youngest deepwater fleet, after Seadrill Ltd (SDRL.OL).

Seadrill, an acquisitive Norway-listed company, had long been seen as Pride's natural buyer, given that it owns nearly 10 percent of Pride's shares. Seadrill Chief Financial Officer Esa Ikaheimonen told Reuters the Ensco offer looked like a "decent number" and said the deal would be positive for the sector.

Offshore drillers are likely to see plenty of acquisitions in the coming months and years as they scramble to increase their size and market share and challenge Transocean, which itself bought GlobalSanteFe in 2007 for about $15 billion.

Buying accelerated after the S&P 500 broke through the high end of its recent range, suggesting Wall Street has the strength to move the market higher. Almost three stocks rose for every one that fell on the New York Stock Exchange.

"A lot of analysts are saying that we need a correction before we can move higher, but I think there's still room to grow," said Ron Kiddoo, chief investment officer at Cozad Asset Management in Champaign, Illinois, which has $700 million in assets under management.

Diversified industrial company Danaher Corp (DHR.N) agreed to buy medical diagnostics company Beckman Coulter Inc (BEC.N) for about $6.8 billion. Oil driller EnsCo Plc (ESV.N) said it would buy Pride International Inc (PDE.N) for about $7.3 billion.

Danaher Corp rose 2.9 percent to $49.38 while Beckman Coulter gained 9.8 percent to $82.50. EnsCo fell 4.6 percent to $51.92 while Pride International rose 16 percent to $39.91.

The Dow Jones industrial average .DJI was up 77.99 points, or 0.64 percent, at 12,170.14. The Standard & Poor's 500 Index .SPX was up 9.88 points, or 0.75 percent, at 1,320.75. The Nasdaq Composite Index .IXIC was up 21.26 points, or 0.77 percent, at 2,790.56.

Loews Corp (L.N) reported its best quarter of the year, posting a better-than-expected 16 percent jump in profit. The conglomerate's stock gained 4.1 percent to $43.10.

About 72 percent of S&P 500 companies that have reported results so far posted stronger-than-expected earnings, according to Thomson Reuters data. Investors expect aggregate earnings rose 37 percent in the last quarter, the highest estimate for that period in more than 10 months.

"People thought the number of companies beating on both the top and bottom line might slow, but it doesn't appear to be," Kiddoo said. "With the earnings and the M&A, which is a sign companies are undervalued, there's really no bad news today."

UBS raised its 2011 target for the S&P 500 index by 7.5 percent to 1,425 from 1,325, citing an improving outlook for the economy and earnings.

Struggling U.S. Internet company AOL Inc (AOL.N) has agreed to buy The Huffington Post, the rapidly growing news, analysis and lifestyle website, for $315 million. AOL shares fell 2.6 percent to $21.38.

Adding to Wall Street's image problem, Nasdaq OMX Group (NDAQ.O) said on Saturday that computer hackers had infiltrated the operator of the Nasdaq Stock Exchange.

"Hacking is going to be a global problem and like a war breaking out, it is hard to hedge against it. There will be concerns, but it's not going to have an impact on how investors see opportunities for the stock market," said Joe Battipaglia, market strategist at a private client group for Stifel Nicolaus in Philadelphia.

(Reporting by Ryan Vlastelica; Editing by Kenneth Barry)

The Federal Deposit Insurance Corp proposed that executives at the largest financial institutions have half of their bonuses deferred for at least three years.

Yet the U.S. plan is markedly softer than the European Union, which in December set guidelines that top bankers be limited to receiving 20 percent of their annual bonuses upfront in cash, with some exceptions.

Massive cash payouts that reward bank executives and traders for short-term returns, without regard to long-term risk, have been blamed by international regulators as a factor in the recent financial crisis.

The FDIC plan responds to both the Dodd-Frank financial overhaul law of 2010 that directed regulators to curb pay plans that encourage excessive risk-taking and principles agreed in 2009 by the world's group of 20 leading economies (G20).

Many Wall Street firms have already spread out their bonus payments in response to the impending rules.

"This has all been kind of baked into people's plans and thinking today," said Alan Johnson of the compensation consulting firm Johnson Associates, about the FDIC's proposal.

But there are signs that in both the United States and Europe that there is upward creep in total compensation figures that offsets the curbs.

Goldman Sachs Group revealed last month that it tripled Chief Executive Lloyd Blankfein's base salary and awarded him $12.6 million of stock, even after the bank's net income plunged last year.

And earlier this month, Citigroup's board approved a base salary of $1.75 million for CEO Vikram Pandit. Pandit had vowed in 2009 to receive an annual salary of $1 until Citigroup returned to sustained profitability.

In Britain, banks such as HSBC and Barclays have raised the fixed part of bank pay in what they say is an essential move to retain staff.

GLOBAL VARIATIONS

The FDIC's proposal would tackle pay for top executives at financial companies with $50 billion or more in assets such as Bank of America Corp, JPMorgan Chase & Co, Goldman Sachs and Morgan Stanley.

How much of the deferred pay an executive could receive would be tied to the performance of the company based on decisions made by the executive during the period covered.

The FDIC's proposal is just a first step that must be approved by other U.S. financial regulators, such as the Federal Reserve and Securities and Exchange Commission, before being finalized. It is unclear when the other regulators will act.

The deal announced on Monday sets the purchase price for Pride's shares at $41.60 each, a premium of 21 percent to Friday's closing price, and would give Ensco a major presence in the growing deepwater markets off Brazil and west Africa.

Apart from giving it more pricing clout, the deal deepens Ensco's pockets for funding new rig-building as contractors scramble to offer the most capable equipment to oil companies drilling in increasingly tough waters.

"Pride and Ensco combined are going to be in all the major oil-producing regions now," said Kurt Hallead, co-head of energy research at RBC Capital Markets in Austin, Texas.

The industry has been hit hard by the deepwater drilling moratorium in the Gulf of Mexico and stringent shallow-water regulations following last year's BP Plc (BP.L) well blowout, which led to the worst-ever U.S. maritime oil spill.

But major energy companies such as Chevron Corp (CVX.N) and Royal Dutch Shell Plc (RDSa.L) expect to continue spending billions of dollars offshore, encouraged by strong oil prices.

With a total of 74 rigs, including six being built, the deal would lift the combined company past Noble Corp (NE.N) to be second only to Transocean Ltd (RIGN.VX), which has 136 rigs.

London-based Ensco's fleet is deployed in the Gulf of Mexico, Europe, the Middle East and Asia, and the deal would add Pride's five rigs off the west coast of Africa and nine rigs off Brazil.

Ensco did not even have any rigs in South America before it agreed to move a permit-less Gulf of Mexico rig to work off French Guiana in December. Then just last week, it struck a deal to move a rig to Brazil from Australia.

Hallead said companies tend to view four rigs in one particular area as efficient. "When you're talking about shore bases, it's always better to have critical mass," he added.

The new company would have 21 deepwater rigs working or being built, equal to Noble but behind Transocean's 44, giving it a strong position in the most lucrative market segment, which often pays rig owners more than $500,000 per day.

Ensco said rig construction would absorb much of the new company's cash flow in the next few years. Combined, they have added 12 new vessels in the past few years, and now would have the second-youngest deepwater fleet, after Seadrill Ltd(SDRL.OL).

Seadrill, an acquisitive Norway-listed company, had long been seen as Pride's natural buyer, given that it owns nearly 10 percent of Pride's shares. Seadrill Chief Financial Officer Esa Ikaheimonen told Reuters the Ensco offer looked like a "decent number" and said the deal would be positive for the sector.

Offshore drillers are likely to see plenty of acquisitions in the coming months and years as they scramble to increase their size and market share and challenge Transocean, which itself bought GlobalSanteFe in 2007 for about $15 billion.

SAVINGS EXPECTED

Buying accelerated after the S&P 500 broke through the high end of its recent range, suggesting Wall Street has the strength to move the market higher.

"What's helping us today are the fundamentals. M&A activities are a good sign for the stock market, and it's a 'feel good' momentum," said Ryan Detrick, senior technical analyst at Schaeffer's Investment Research in Cincinnati, Ohio.

The Dow Jones industrial average .DJI was up 82.50 points, or 0.68 percent, at 12,174.65. The Standard & Poor's 500 Index .SPX was up 10.19 points, or 0.78 percent, at 1,321.06. The Nasdaq Composite Index .IXIC was up 23.67 points, or 0.85 percent, at 2,792.97.

Diversified industrial company Danaher Corp (DHR.N) agreed to buy medical diagnostics company Beckman Coulter Inc (BEC.N) for about $6.8 billion and oil drilling company EnsCo Plc (ESV.N) will buy rival Pride International Inc (PDE.N) for about $7.3 billion.

The deals suggested stock valuations are viewed as attractive. Danaher Corp rose 3.4 percent to $49.59 and Beckman Coulter rose 9.7 percent to $82.49.

EnsCo fell 4.5 percent to $51.91 while Pride International rose 15.8 percent to $39.84.

Loews Corp (L.N) reported its best quarter of the year, posting a better-than-expected 16 percent jump in profit. The conglomerate's stock gained 4.8 percent to $43.40.

About 72 percent of S&P 500 companies that have reported results so far posted stronger-than-expected earnings, according to Thomson Reuters data. Investors expect aggregate earnings rose 37 percent in the last quarter, the highest estimate for that period in more than 10 months.

Adding to Wall Street's image problem, Nasdaq OMX Group (NDAQ.O) said on Saturday that computer hackers had infiltrated the operator of the Nasdaq Stock Exchange.

"Hacking is going to be a global problem and like a war breaking out, it is hard to hedge against it. There will be concerns, but it's not going to have an impact on how investors see opportunities for the stock market," said Joe Battipaglia, market strategist at a private client group for Stifel Nicolaus in Philadelphia.

Struggling U.S. Internet company AOL Inc (AOL.N) has agreed to buy The Huffington Post, the rapidly growing news, analysis and lifestyle website, for $315 million. AOL shares fell 1.1 percent to $21.70.

UBS raised its 2011 target for the S&P 500 index by 7.5 percent to 1,425 from 1,325, citing an improving outlook for the economy and earnings.

(Reporting by Angela Moon, Editing by Kenneth Barry)

The deal, announced by the companies on Monday, sets the purchase price for Pride's shares at $41.60 apiece, a premium of 21 percent to Friday's closing price, and will give Ensco new access to lucrative deepwater markets off Brazil and west Africa.

"Pride and Ensco combined are going to be in all the major oil-producing regions now," said Kurt Hallead, co-head of global energy research at RBC Capital Markets in Austin, Texas.

Offshore drillers were hurt by last year's moratorium on deepwater drilling in the Gulf of Mexico and more stringent regulation on shallow water operations following the BP Plc (BP.L) well blowout, which led to the nation's worst-ever maritime oil spill.

But major energy companies, such as Chevron Corp (CVX.N) and Exxon Mobil (XOM.N), are expected to continue spending billions of dollars on new offshore fields, encouraged by the strong oil prices.

With a total of 74 rigs, the deal would lift the combined company past Noble Corp (NE.N) to be the global No. 2 offshore driller behind Transocean Ltd (RIGN.VX), which owns 136 rigs.

Ensco's fleet is deployed in the Gulf, Europe, the Middle East and Asia, and the deal will add Pride's nine rigs in Brazil and five rigs off the west coast of Africa.

The new company would have 21 deepwater drilling rigs, equal to Noble's fleet and behind Transocean's 44, but would still have a strong position in the most lucrative segment of the offshore market, which often pays rig owners more than $500,000 per day.

Ensco said it has six rigs under construction, which will absorb much of the new company's cash flow over the next few years. It has taken delivery of 12 new vessels over the past few years.

The industry is expected to see aggressive merger and acquisition activity in the coming months and years as companies scramble to increase their size and market share and challenge Transocean, which itself bought GlobalSanteFe in 2007 for about $15 billion.

SAVINGS EXPECTED

The combined company, which would be headquartered in Britain, would likely realize annual cost savings of $50 million from 2012. The deal is expected to add to Ensco's earnings per share in 2011 and 2012.

Houston-based Pride, which is 9.5 percent owned by Norwegian Seadrill Ltd (SDRL.OL), has been searching for a buyer since last year, according to reports.

Pride stockholders will receive 0.4778 newly issued Ensco shares plus $15.60 cash for each share of Pride common stock.

The deal will be financed through a combination of existing cash on the balance sheet and newly issued Ensco shares and debt. Total cash paid to Pride shareholders will be about $2.8 billion.

"Another barrier government can remove is a burdensome corporate tax code with one of the highest rates in the world," Obama said in a speech to the U.S. Chamber of Commerce.

Obama's visit to the powerful business lobby group is his latest effort to improve relations with the corporate world and shift to the political center, following big losses for his Democrats in November elections.

He is promoting policies to bring down an unemployment rate of 9.0 percent, and repeated his call from Saturday for business to step up investment and hiring to mobilize "nearly $2 trillion sitting on their balance sheets."

"Many of your own economists and salespeople are now forecasting a healthy increase in demand. So I want to encourage you to get in the game," Obama said.

Republicans gained seats in Congress in November by connected with voters worried about the huge federal budget deficit and rising debt, and are now in control of the House of Representatives.

A chastened Obama subsequently declared he needed to do a better job of communicating with the business community, dialing down a sometimes acrimonious debate between the White house and corporate world during his first two years in office.

Business had fought Obama's massive overhaul of Wall Street regulation and reform of the healthcare system, and resented the president's sharp rhetoric on executive pay during the height of the financial crisis.

The White House, while irritated by the Chamber's opposition to policies it says will help the economy, has sought to mend relations with softer presidential rhetoric and staffing choices that appeal to the business community.

Obama picked Bill Daley, formerly of JPMorgan Chase, to be his chief of staff and recently brought on General Electric Co. Chief Executive Jeffrey Immelt as his new top outside economic adviser. He also agreed on a tax deal with Republicans last year and has promoted initiatives to boost U.S. exports.

(Reporting by Caren Bohan, Alister Bull and Jeff Mason, Editing by Sandra Maler and Philip Barbara)

The S&P 500 moved above a key short-term resistance level to its highest since June 2008 after the index ended the week with its best gain in nine weeks.

"It's the absence of headline risks that is pushing the market higher. We clearly know that the Egyptian turmoil doesn't necessarily mean oil scarcity ... so momentum is moving the market higher," said Joe Battipaglia, market strategist at a private client group for Stifel Nicolaus in Philadelphia.

Dow Jones industrial average .DJI was up 82.88 points, or 0.69 percent, at 12,175.03. The Standard & Poor's 500 Index .SPX was up 10.15 points, or 0.77 percent, at 1,321.02. The Nasdaq Composite Index .IXIC was up 20.40 points, or 0.74 percent, at 2,789.70.

Diversified industrial company Danaher Corp (DHR.N) agreed to buy medical diagnostics company Beckman Coulter Inc (BEC.N) for about $6.8 billion and oil drilling company EnsCo Plc (ESV.N) will buy rival Pride International Inc (PDE.N) for about $7.3 billion.

The deals provided the latest indication stock valuations are considered attractive. Danaher Corp rose 3.8 percent to $49.79 and Beckman Coulter rose 9.8 percent to $82.53.

EnsCo fell 2.8 percent to $52.95 while Pride International rose 16.9 percent to $40.19.

Loews Corp (L.N) reported its best quarter of the year, posting a better-than-expected 16 percent jump in profit. The stock gained 5.7 percent to $43.78.

More than 70 percent of S&P 500 companies that have reported results so far posted better-than-expected earnings, according to Thomson Reuters data. Investors expect aggregate earnings rose 37 percent in the last quarter, the highest estimate for that period in more than 10 months.

Adding to Wall Street's image problem, Nasdaq OMX Group (NDAQ.O) said on Saturday that computer hackers had infiltrated the operator of the Nasdaq Stock Exchange.

"Hacking is going to be a global problem and like a war breaking out, it is hard to hedge against it. There will be concerns, but it's not going to have an impact on how investors see opportunities for the stock market," Battipaglia said.

Basic materials stocks rose as the price of copper hit a record on concerns about supply and as economic data recently boosted the outlook for demand. Freeport McMoRan Copper & Gold Inc (FCX.N) shares rose 1.1 percent to $57.42 and the S&P materials sector .GSPM led gains with a 1 percent rise.

Struggling U.S. Internet company AOL Inc (AOL.N) has agreed to buy The Huffington Post, the rapidly growing news, analysis and lifestyle website, for $315 million. AOL shares fell 1.3 percent to $21.59.

UBS raised its 2011 target for the S&P 500 index by 7.5 percent to 1,425 from 1,325, citing an improving outlook for the economy and earnings.

(Reporting by Angela Moon, Editing by Kenneth Barry)

The deal announced on Monday sets the purchase price for Pride's shares at $41.60 apiece, a premium of 21 percent to Friday's closing price.

Offshore drillers had been hurt by last year's moratorium on deepwater drilling in the Gulf of Mexico and more stringent regulation on shallow water operations following the BP Plc (BP.L) well blowout that led to the nation's worst-ever maritime oil spill.

But major energy companies, such as Chevron Corp (CVX.N) and Exxon Mobil (XOM.N), are expected to continue spending billions of dollars on new offshore fields, encouraged by the strong U.S. oil prices, which are hovering near $90 per barrel.

The deal would lift the combined company past Noble Corp (NE.N) to be the global No. 2 offshore driller behind Transocean Ltd (RIGN.VX).

James West, an analyst with Barclays Capital, said in a note to investors the deal was "a good strategic transaction" for Ensco because it increased its hold in the lucrative deepwater drilling market.

It also gives Ensco greater leverage to the Brazilian market, one of the fastest growing basins in the world, he said.

The combined company, which would be headquartered in Britain, would likely see annual expense savings of $50 million from 2012. The deal is expected to be accretive to Ensco's earnings per share in 2011 and 2012.

Houston-based Pride, which is 9.5 percent owned by Norwegian Seadrill Ltd (SDRL.OL), has been searching for a buyer since last year, according to reports.

Pride stockholders will receive 0.4778 newly issued shares of Ensco plus $15.60 in cash for each share of Pride common stock.

The deal will be financed through a combination of existing cash on the balance sheet and newly issued Ensco shares and debt. Total cash paid to Pride shareholders will be about $2.8 billion.

London-based Ensco has received commitments from Deutsche Bank Securities, Inc and Citibank N.A. to finance the incremental debt required for the transaction.

Ensco's lead adviser for the transaction was Deutsche Bank Securities Inc, and Citi also served as financial adviser, while Baker & McKenzie LLP acted as its legal adviser.

Pride was advised by Goldman, Sachs & Co. and its legal advisers are Baker Botts L.L.P. and Wachtell, Lipton, Rosen & Katz.

Pride's shares soared 17.1 percent, or $5.89, to $40.28 in early trading, while Ensco's shares fell 3.5 percent, or $1.92, to $52.53.

(Reporting by Matt Daily, editing by Maureen Bavdek)

"Another barrier government can remove is a burdensome corporate tax code with one of the highest rates in the world," Obama said in a speech to the U.S. Chamber of Commerce.

Obama's visit to the powerful business lobby group is his latest effort to improve relations with the corporate world and shift to the political center, following big losses for his Democrats in November elections.

He is promoting policies to bring down an unemployment rate of 9.0 percent, and repeated his call from Saturday for business to step up investment and hiring to mobilize "nearly $2 trillion sitting on their balance sheets."

"Many of your own economists and salespeople are now forecasting a healthy increase in demand. So I want to encourage you to get in the game," Obama said.

Republicans gained seats in Congress in November by connected with voters worried about the huge federal budget deficit and rising debt, and are now in control of the House of Representatives.

A chastened Obama subsequently declared he needed to do a better job of communicating with the business community, dialing down a sometimes acrimonious debate between the White house and corporate world during his first two years in office.

Business had fought Obama's massive overhaul of Wall Street regulation and reform of the healthcare system, and resented the president's sharp rhetoric on executive pay during the height of the financial crisis.

The White House, while irritated by the Chamber's opposition to policies it says will help the economy, has sought to mend relations with softer presidential rhetoric and staffing choices that appeal to the business community.

Obama picked Bill Daley, formerly of JPMorgan Chase, to be his chief of staff and recently brought on General Electric Co. Chief Executive Jeffrey Immelt as his new top outside economic adviser. He also agreed on a tax deal with Republicans last year and has promoted initiatives to boost U.S. exports.

(Reporting by Caren Bohan, Alister Bull and Jeff Mason, Editing by Sandra Maler and Philip Barbara)

The $83.50-per-share deal represents an 11 percent premium to Beckman's closing price on Friday, and a roughly 45 percent premium over its price in December before rumors of a deal entered the marketplace, according to Beckman.

Beckman shares jumped 9.8 percent to $82.55 in premarket trading, while Danaher rose to $49.56.

The transaction is valued at about $6.8 billion, including assumed debt, the companies said. The deal is expected to close in the first half of 2011.

About a quarter of the funding comes from cash on hand, 15 percent from equity and 60 percent from new assumed debt, Danaher said on a conference call with analysts. Beckman is growing at 25 percent a year in China, Danaher said.

An aging population and more emphasis on preventive medical care, along with growth of medical technology, make clinical diagnostics an attractive $25 billion market, Danaher CEO Larry Culp said.

Danaher could cut costs by about $250 million over several years. The deal will add 5 cents to 10 cents to earnings this year and 25 cents to 30 cents a share in 2012.

Beckman Coulter, which has annual revenue of about $3.7 billion, would become part of Danaher's Life Sciences and Diagnostics segment, which includes its imaging and testing businesses.

Morgan Stanley was the sole financial adviser to Danaher, while Goldman Sachs advised Beckman Coulter.

Last December, Beckman hired Goldman to help with the possible sale of the company, which makes diagnostic instruments used in medical testing systems.

Prior to that, Beckman had experienced a volatile year in which Chief Executive Officer Scott Garrett suddenly resigned after a product recall.

Washington-based Danaher, whose products include environmental testing equipment and dental tools, said in December it could spend about $4 billion on acquisitions within the next year-and-a-half.

The company has remade its portfolio in recent years through both acquisitions and asset sales, to focus on aster-growing, more profitable businesses that are less dependent on cyclical demand.

Recent deals in the medical devices sector include orthopedic device maker Stryker Corp's $1.5 billion acquisition of a Boston Scientific Corp St Jude Medical Inc's $1 billion acquisition of AGA Medical Holdings Inc, whose devices treat structural heart defects.

In December, Thermo Fisher Scientific Inc, the world's largest maker of scientific instruments, said it would buy Dionex Corp for $2.1 billion to broaden its lab equipment and environmental safety offerings.

(Reporting by Nick Zieminski, Lewis Krauskopf, Soyoung Kim;

Editing by Derek Caney and Lisa Von Ahn)

The move, which pushed AOL shares up 5 percent in premarket trade before falling 2.5 percent in opening trade on Monday, will create a media group that will have a combined base of 117 million visitors a month in the United States, and reach 270 million people globally, AOL said in a statement.

Arianna Huffington, co-founder of The Huffington Post, will lead a newly formed The Huffington Post Media Group, which will integrate all Huffington Post and AOL content, as its president and editor-in-chief.

"I want to stay forever," Huffington told analysts on a conference call. "I want this to be my last act."

The deal is the latest move by AOL's chief executive Tim Armstrong to rescue the dial-up Internet access business by turning it into a media and entertainment destination.

AOL suffered sharp declines in advertising sales and dial-up subscriptions in the fourth quarter of 2010, driving overall revenue down 26 percent.

About $300 million will be paid in cash in the purchase, which has been approved by the boards of directors of both companies and shareholders of The Huffington Post, though it still needs government approvals, AOL said.

The Huffington Post is expected to generate over $50 million in revenue for 2011 and at a $100 million run-rate for the next 12 months, with margins at around 30 percent, according to prepared remarks by AOL Chief Financial Officer Arthur Minson.

AOL is expected to incur abut $30 million in cash restructuring charges from the deal, which is expected to be closed in the late first, or early second quarter of 2011.

AOL executives said they forecast operating profit growth by 2013 in part because of the acquisition.

"It offers us an ability to accelerate our core strategy, accelerate the advertising strategy, and put a different brand ability in content media space," Armstrong said during a conference call.

HUFFPOST EXPANSION

The Huffington Post, started in 2005, has grown into one of the most heavily visited news websites in the United States.

"The Huffington Post has already been growing at a prodigious rate. But my New Year's resolution for 2011 was to take HuffPost to the next level -- not just incrementally, but exponentially," Huffington said in her blog.

She said the Huffington Post decided early this year to expand into more local news coverage, launch international sections (starting with HuffPost Brazil) and increase original video content.

In addition, news of mergers and acquisitions indicated attractive stock valuations. In the latest deal, diversified industrial company Danaher Corp (DHR.N) agreed to buy medical diagnostics company Beckman Coulter Inc (BEC.N) in a transaction valued at about $6.8 billion. Beckman shares jumped 10 percent before the market's open.

Basic materials stocks will be in focus as the price of copper hit a record on concerns about supply and as economic data recently boosted the outlook for demand. Mining stocks led European shares higher.

"Copper continues to make new highs, which is a good indication the global economy is strengthening," said Peter Cardillo, chief market economist at Avalon Partners in New York. "Earnings continue to beat expectations and M&A continues. There's enthusiasm for equities in the U.S."

More than 70 percent of the S&P 500 companies have reported earnings above estimates so far, according to Thomson Reuters data. Investors expect aggregate earnings rose 37 percent in the last quarter, the highest estimate for that period in more than 10 months.

S&P 500 futures rose 4 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 30 points and Nasdaq 100 futures added 5.25 points.

In a sign of a more stable debt market in Europe, demand for Portugal's five-year syndicated bond is around 6 billion euros, double the minimum placement announced earlier, Treasury Secretary Carlos Pina said on Monday.

Health insurer Humana Inc (HUM.N) posted a lower quarterly net profit, hurt by expenses, but raised its 2011 profit forecast.

News that computer hackers had infiltrated the operator of the Nasdaq Stock Exchange could be another blow to investor confidence, as Wall Street works to repair an image with investors and traders dented by last year's "flash crash.

Struggling U.S. Internet company AOL Inc (AOL.N) has agreed to buy The Huffington Post, the influential and rapidly growing news, analysis and lifestyle website, for $315 million, AOL said on Monday.

Ford Motor Co (F.N) will increase production for deliveries to its U.S. dealers by 13 percent in the first quarter of 2011 and may add third shifts to some of its plants, Ford sales executives said on Sunday. The carmaker's shares gained 1 percent to $15.87 premarket.

Egyptian President Hosni Mubarak's new cabinet holds its first full meeting Monday since a civil uprising started nearly two weeks ago, with no concrete progress in talks with an opposition which demands his immediate exit.

Unrest in Egypt propelled North Sea Brent crude oil futures back above $100 a barrel on worries it could spread to other parts of the Middle East and north Africa, disrupting energy supplies.

Some investors have noted a spike in oil prices might become a headwind for the global economy and hurt equity markets.

The S&P 500 .SPX posted its best week in nine on Friday as investors rotated into defensive and lagging sectors, with both the Dow Jones .DJI and the S&P 500 making new 2 1/2-year highs. Analysts see further gains in store for equity markets as economic growth accelerates.

(Reporting by Rodrigo Campos; Editing by Kenneth Barry)

The deal represents an 11 percent premium to Beckman's closing price on Friday, and a roughly 45 percent premium over its price in December before rumors of a deal entered the marketplace, according to Beckman.

Beckman shares jumped 10 percent to $82.70 in premarket trading, while Danaher fell 10 cents to $47.88.

The transaction is valued at about $6.8 billion, including assumed debt, the companies said. The deal is expected to close in the first half of 2011.

Beckman Coulter, which has annual revenue of about $3.7 billion, would become part of Danaher's Life Sciences and Diagnostics segment.

Last December, sources told Reuters that Beckman had hired Goldman Sachs (GS.N) to weigh strategic options. The company makes diagnostic instruments used in medical testing systems.

Prior to that, Beckman had experienced a volatile year in which Chief Executive Officer Scott Garrett suddenly resigned after a high-profile recall of its troponin test and quality-control issues.

(Reporting by Lewis Krauskopf; Editing by Derek Caney and Lisa Von Ahn)

The move will create a media group that will have a combined base of 117 million visitors a month in the United States, and reach 270 million people globally, AOL said in a statement.

The deal follows efforts by AOL's chief executive Tim Armstrong to turn around the dial-up Internet access business by trying to turn it into a media and entertainment powerhouse, despite difficulties in attracting investors.

AOL suffered sharp declines in advertising sales and dial-up subscriptions in the fourth quarter of 2010, driving overall revenue down 26 percent.

Arianna Huffington, co-founder of The Huffington Post, said on her blog that she would lead a newly formed The Huffington Post Media Group, which will integrate all Huffington Post and AOL content, as its president and editor-in-chief.

"By combining HuffPost with AOL's network of sites, thriving video initiative, local focus and international reach, we know we'll be creating a company that can have an enormous impact, reaching a global audience on every imaginable platform," she said.

Approximately $300 million will be paid in cash in the purchase, which has been approved by the boards of directors of both companies and shareholders of The Huffington Post, though it still needs government approvals, AOL said.

The deal, expected to be closed in the late first, or early second quarter of 2011, will combine AOL's infrastructure and scale with The Huffington Post's pioneering approach to news and innovative community building, AOL said.

"The acquisition of The Huffington Post will create a next-generation American media company with global reach that combines content, community and social experiences for consumers," Armstrong said in the statement.

HUFFPOST EXPANSION

AOL said the acquisition would accelerate its strategy to deliver an array of premium news, analysis and entertainment.

The Huffington Post, started in 2005, has grown into one of the most heavily visited news websites in the United States.

"The Huffington Post has already been growing at a prodigious rate. But my New Year's resolution for 2011 was to take HuffPost to the next level -- not just incrementally, but exponentially," Huffington said in her blog.

She said the Huffington Post decided early this year to expand into more local news coverage, launch international sections (starting with HuffPost Brazil) and increase original video content.

Purchase by AOL, with its network of blogs such as AutoBlog, Music, AOL Latino, Black Voices, its local news operation Patch.com and new video-production studios, will allow these goals to be met, she said

Oil prices were also higher, while the euro fell to a two-week low against the dollar after a bigger than expected fall in German industrial orders.

World equities as measured by the MSCI All-Country World Index advanced 0.2 percent after gaining 2.2 percent last week. The index is up 3.4 percent so far this year, while MSCI emerging markets index is down 2 percent.

"At the moment, clients are feeling that any dips can be bought into and the trend is an upwards one, and I can't see that being thrown off course in the short term," said Giles Watts, head of equities at City Index in London.

Concerns over higher inflation in booming emerging markets, further indications of economic recovery gathering pace in the United States, modest valuations and tentative signs of stability in the euro zone sovereign debt crisis have fueled the outperformance of shares in developed markets.

Data from fund tracker EPFR Global showed investors pulled out $7 billion from emerging markets equity funds in the week of Feb 4, their biggest outflow in three years.

The U.S. S&P 500 and Dow Jones industrial average hit new 2-1/2-year highs on Friday as a fall in U.S. unemployment raised optimism of a labor market recovery.

U.S. stock index futures put on 0.3 percent, indicating a firm open on Wall Street. The pan-European FTSEurofirst 300 rose 0.9 percent on Monday, while Germany's DAX added 0.9 percent, shrugging off the news that German industrial orders fell by 3.4 percent on the month in December. Japan's Nikkei average put on 0.5 percent, hitting a nine-month high.

In terms of valuations, the S&P 500 carries a 12-month forward price-to-earnings ratio of 13.3 times, compared with a 10-year average of 15.5 though more expensive than the emerging markets index's 11.3 times, Thomson Reuters Datastream shows.

TREASURY YIELDS UP

As optimism over the U.S. economic recovery grew, investors were also shifting away from government bonds.

Yields on benchmark 10-year Treasuries rose 3 basis points to 3.6701 percent, their highest level since early May and up about 28 basis points since the start of the month.

"Investors are now reflecting that an ever-improving outlook for the U.S. is a new factor in the equation, which is weighing quite heavily on U.S. Treasuries," said Kornelius Purps, strategist at Unicredit in Munich.

"We have not only the (non-farm) labor report -- which was a mixed bag but seen as a positive -- we have the ISM, which were extremely positive and indicate the U.S. economy is recovering at quite a healthy clip."

Spreads on 10-year Portugese government bonds over benchmark German Bunds rose 5 bps to 386 bps, though still down about 8 bps since the beginning of the month, after Portugal, one of the weakest euro zone economies, planned a five-year syndicated bond.

The S&P 500 .SPX posted its best week in nine on Friday as investors rotated into defensive and lagging sectors, with both the Dow Jones .DJI and the S&P 500 making new 2 1/2-year highs. Analysts see further gains in store for equity markets as economic growth accelerates.

Some confidence in the recovery in the labor market was fueled by data on Friday that showed U.S. unemployment fell to 9 percent, its lowest level since April 2009, though the economy only added a weaker-than-expected 36,000 jobs.

In company news, France's Sanofi-Aventis (SASY.PA) and U.S. biotech Genzyme (GENZ.O) kept investors in suspense about their $20 billion transatlantic pharmaceuticals merger on Monday, as sources predicted a deal within days.

Nasdaq OMX Group (NDAQ.O) said on Saturday that it found "suspicious files" on its U.S. computer servers, but said there was no evidence hackers had accessed or acquired customer information or that its trading platforms were compromised.

Struggling U.S. Internet company AOL Inc (AOL.N) has agreed to buy The Huffington Post, the influential and rapidly growing news, analysis and lifestyle website, for $315 million, it said on Monday.

U.S. regulators will propose on Monday that executives at the largest financial institutions have half of their bonuses deferred for at least three years as part of efforts to curb excessive risk taking, according to two people familiar with the proposal.

Google Inc (GOOG.O) wants to avoid a lengthy legal battle with European Union regulators investigating its market dominance, the Sunday Telegraph quoted its chief executive as saying.

Time Warner Cable Inc (TWC.N) is considering selling part of its IPC Media magazine unit, British newspaper The Telegraph reported on its website on Sunday.

Ford Motor Co (F.N) will increase production for deliveries to its U.S. dealers by 13 percent in the first quarter of 2011 and may add third shifts to some of its plants, Ford sales executives said on Sunday.

In European equity markets, the FTSEurofirst 300 .FTEU3 rose 1 percent in early trade, with oil majors among the gainers.

North Sea Brent crude oil futures jumped back above $100 a barrel on lingering worries that political unrest in Egypt could spread to other markets of the Middle East and disrupt energy supplies.

(Reporting by Harpreet Bhal; Editing by Will Waterman)

Talks about a possible takeover by the world's sixth-largest drugmaker continued into the week despite earlier expectations that the two sides would hammer out a reconciliation at the weekend, following a testy courtship drawn out over months.

Shares in Sanofi rose at the opening of Paris trading, indicating investors remained confident a deal would go ahead.

"We should not over-interpret what's happening," said Justin Smith, analyst at UK brokerage MF Global. "In the end this is a complicated negotiation; it's a large transaction and they should take their time and be thoughtful about it."

Sanofi rose about 1 percent in early trading, outperforming a slightly firmer market. At 0840 GMT the French company's shares were up 0.9 percent at 50.73 euros.

Genzyme shares closed at $73.40 a share on Friday.

Buying Genzyme would add rare diseases as a new growth area for Sanofi, which under Chief Executive Chris Viehbacher has been diversifying to reduce exposure to cheaper generic drugs.

Until recently Cambridge, Massachusetts-based Genzyme -- founded in 1981 and one of the first entrants into the young biotechnology sector, which develops drugs from living cells -- had been unwilling to enter negotiations with Sanofi, which responded by launching a hostile $69-a-share bid in October.

Sources familiar with the situation said on Sunday that Sanofi could raise its cash offer to roughly $74 per share or $19.2 billion based on 258.99 million shares outstanding and add a fee tied to the performance of a drug Genzyme is developing.

The fee, called a "contingent value right," or CVR, would have an effective value of $5 to $6 a share.

The CVR would be a tradable security that offers a payout to shareholders over time and in this case would be based on the future performance of Lemtrada, designed to treat multiple sclerosis. If the drug fails, the option would be worth nothing.

Sanofi is due to report its annual results on Wednesday.

Buying Genzyme would be Viehbacher's biggest deal since he took office in December 2008 and Sanofi's biggest since it bought Aventis in 2004. That merger created a powerhouse with blockbusters such as anti-clotting drug Plavix, the world's second best-selling prescribed medicine. But with drugs losing patent protection, Sanofi is being forced to expand.

"It is not illogical that they should be able to reach an agreement around the price levels which are being indicated," said Jean-Jacques Le Fur, analyst at Oddo Securities.

"I have always estimated the transaction would happen between $69 and $75 a share in cash. The CVR should be worth $6 to $8 a share. The operation could be announced the day of Sanofi's results."

The euro recovered after hitting a two-week low on Friday, while oil prices slipped.

World equities as measured by the MSCI All-Country World Index .MIWD00000PUS advanced 0.4 percent after gaining 2.2 percent last week. The index is up 3.6 percent so far this year, while MSCI emerging markets index .MSCIEF is down 1.8 percent.

"At the moment, clients are feeling that any dips can be bought into and the trend is an upwards one, and I can't see that being thrown off course in the short term," said Giles Watts, head of equities at City Index in London.

Concerns over higher inflation in booming emerging markets, further indications of economic recovery gathering pace in the United States, modest valuations and tentative signs of stability in the euro zone sovereign debt crisis have fueled the outperformance of shares in developed markets.

Data from fund tracker EPFR Global showed investors pulled out $7 billion from emerging markets equity funds in the week of Feb 4, their biggest outflow in three years.

The U.S. S&P 500 .SPX and Dow Jones industrial average .DJI hit new 2-1/2-year highs on Friday as a fall in U.S. unemployment raised optimism of a labor market recovery. The pan-European FTSEurofirst 300 .FTEU3 rose 0.9 percent on Monday, while Japan's Nikkei average .N225 put on 0.5 percent, hitting a nine-month high.

In terms of valuations, the S&P 500 carries a 12-month forward price-to-earnings ratio of 13.3 times, compared with a 10-year average of 15.5 though more expensive than the emerging markets index's 11.3 times, Thomson Reuters Datastream shows.

As optimism over the U.S. economic recovery grew, investors were also shifting away from government bonds.

Yields on benchmark 10-year Treasuries rose 5 basis points to 3.6904 percent, their highest level since early May and up about 30 basis points since the start of the month.

"Investors are now reflecting that an ever-improving outlook for the U.S. is a new factor in the equation, which is weighing quite heavily on U.S. Treasuries," said Kornelius Purps, strategist at Unicredit in Munich.

"We have not only the (non-farm) labor report -- which was a mixed bag but seen as a positive -- we have the ISM, which were extremely positive and indicate the U.S. economy is recovering at quite a healthy clip."

The euro was up 0.3 percent at $1.3621 and 0.4 percent at 112.04 yen, while the dollar .DXY eased 0.2 percent against a basket of major currencies.

Copper put on 0.8 percent to a record high of $10,130 a tonne, while oil eased 0.2 percent to below $89 a barrel.

(Additional reporting by Simon Jessop, William James and Neal Armstrong; Editing by Hugh Lawson)

Talks about a possible takeover by the world's sixth-largest drugmaker continued into the week despite earlier expectations that the two sides would hammer out a reconciliation at the weekend, following a testy courtship drawn out over months.

Shares in Sanofi rose at the opening of Paris trading, indicating investors remained confident a deal would go ahead.

"We should not over-interpret what's happening," said Justin Smith, analyst at UK brokerage MF Global. "In the end this is a complicated negotiation; it's a large transaction and they should take their time and be thoughtful about it."

Sanofi rose about 1 percent in early trading, outperforming a slightly firmer market. At 0840 GMT the French company's shares were up 0.9 percent at 50.73 euros.

Genzyme shares closed at $73.40 a share on Friday.

Buying Genzyme would add rare diseases as a new growth area for Sanofi, which under Chief Executive Chris Viehbacher has been diversifying to reduce exposure to cheaper generic drugs.

Until recently Cambridge, Massachusetts-based Genzyme -- founded in 1981 and one of the first entrants into the young biotechnology sector, which develops drugs from living cells -- had been unwilling to enter negotiations with Sanofi, which responded by launching a hostile $69-a-share bid in October.

Sources familiar with the situation said on Sunday that Sanofi could raise its cash offer to roughly $74 per share or $19.2 billion based on 258.99 million shares outstanding and add a fee tied to the performance of a drug Genzyme is developing.

The fee, called a "contingent value right," or CVR, would have an effective value of $5 to $6 a share.

The CVR would be a tradable security that offers a payout to shareholders over time and in this case would be based on the future performance of Lemtrada, designed to treat multiple sclerosis. If the drug fails, the option would be worth nothing.

Sanofi is due to report its annual results on Wednesday.

Buying Genzyme would be Viehbacher's biggest deal since he took office in December 2008 and Sanofi's biggest since it bought Aventis in 2004. That merger created a powerhouse with blockbusters such as anti-clotting drug Plavix, the world's second best-selling prescribed medicine. But with drugs losing patent protection, Sanofi is being forced to expand.

"It is not illogical that they should be able to reach an agreement around the price levels which are being indicated," said Jean-Jacques Le Fur, analyst at Oddo Securities.

"I have always estimated the transaction would happen between $69 and $75 a share in cash. The CVR should be worth $6 to $8 a share. The operation could be announced the day of Sanofi's results."

Nasdaq OMX Group said on Saturday that it found "suspicious files" on its U.S. computer servers, but said there was no evidence hackers had accessed or acquired customer information or that its trading platforms were compromised.

The news comes as flows into U.S. equity mutual funds show signs of recovering after years of outflows following the financial crisis and the debilitating experience of the "flash crash" last May that sent U.S. indexes plunging.

"There have been a number of events over the last few years that have damaged investor confidence and this could certainly be another one," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.

Just last week, an unexplained hour-long glitch locked the prices of two key indexes -- the widely followed Nasdaq Composite and the Nasdaq 100.

Given that about 21 percent of all U.S. cash equity trading was matched on one of Nasdaq OMX's exchanges last year -- second only to Big Board parent NYSE Euronext -- the integrity of its marketplace is closely aligned with the smooth functioning of U.S. markets in general.

The timing is poor as a stocks rally from last year has started to draw retail investors back into equities and away from bond funds.

The last three weeks of January saw back-to-back inflows into domestic equity mutual funds amounting to $10.3 billion, the longest streak of inflows in 1-1/2 years, according to data from the Investment Company Institute.

Individual traders also returned in force to U.S. equity markets in January, helping drive volumes to their highest levels since the "flash crash" last May.

Daily trading among retailers, including active "day traders" who drive much of the volume, jumped some 25 percent from December to January, Sandler O'Neill analyst Richard Repetto wrote in a note estimating market activity.

Although this event in itself is unlikely to have an impact on that trend, maintaining confidence is key at a time when regulators are concerned about the stability of the electronic marketplace and many retail investors believe the odds are against them.

"In general, investors have become increasingly concerned about some of the movements in the market ... and things like this just serve to undermine confidence," said Rick Meckler, president of investment firm LibertyView Capital Management in New York.

Meckler said Nasdaq needed to release more information about the security breach.

"Just entering a system is a lot different from using a system to profit from it," he said. "That distinction is yet to be made."

Jim Awad, Managing Director at Zephyr Management New York, said investors were reserving judgment until Nasdaq released more information.