Business Blog Posts

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.