PFE To Pay Hefty Fine…Company States It is Calculated Into Current Cash Flows
WASHINGTON (Reuters) – Pharmaceutical giant Pfizer Inc will pay a record $2.3 billion to settle civil and criminal charges about how it marketed some of its drugs under a settlement to be unveiled on Wednesday, a source said.
The company, which is acquiring rival Wyeth, had warned in January that it had taken a $2.3 billion charge late last year to resolve investigations involving Bextra and other drugs, but did not provide details at the time.
The agreement will be unveiled later by the U.S. Department of Justice and Health and Human Services Department, the source said. Government spokespeople declined to comment. Pfizer officials could not immediately be reached for a comment.
It would be the largest settlement to date for improper marketing of prescription drugs, topping the $1.42 billion Eli Lilly and Co agreed to pay earlier this year for off-label sales of its Zyprexa schizophrenia drug.
Bextra, an arthritis drug, was withdrawn from the market in 2005 over safety concerns.
Pfizer had pleaded guilty in 2004 to an unrelated criminal charge of improper sales tactics related to its Neurontin seizure drug and its marketing practices have been under federal supervision since then.
In the earlier case, Pfizer’s Warner Lambert subsidiary had been accused of marketing Neurontin for unapproved uses. Pfizer acquired Neurontin through its merger in 2000 with Warner Lambert.
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As the threat of regulation bears down on certain ETF’s, some have already begun to wind down out of fear.
For example, Deutsche just announced they would shut down their ProShares Crude Oil Double Long ETF (DXO).
Yet as ETF’s such as DXO come to an end, their unwinding could offer profitable opportunities for astute traders.
FT: The WTI positions held by the DXO are in July 2010, therefore they will have to sell about 11’000 July WTI contracts (a third of the July2010 Open Interest). While this will have a flat price impact next Wednesday we think it is too early to already pre-emptily sell in front of it. We would rather buy the WTI spreads to July 2010 as we would imagine that Deutsche will buy the spreads to bring the flat price length closer to the front to find enough liquidity for the liquidation of the Fund.
One would imagine that many winding-down ETF’s might present similar opportunities.
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More on This Morning’s Economic Data
By Timothy R. Homan
Sept. 2 (Bloomberg) — Companies eliminated more jobs than forecast in August, a private survey indicated today, signaling that employers have yet to gain confidence about a recovery from the deepest recession since the 1930s.
The 298,000 drop followed a revised 360,000 decline the prior month that was smaller than previously estimated, according to figures from ADP Employer Services.
Today’s figures underscore the danger that consumer spending, which accounts for 70 percent of the economy, may be slow to gain traction in coming months. The report comes two days before a Labor Department release forecast to show the U.S. unemployment rate rose to 9.5 percent in August.
“Considering the severity of the recession and uncertainty over the strength and sustainability of the recovery, the labor market’s recuperation will be slow and painful,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, which forecast a drop of 290,000.
Stock-index futures dropped and Treasuries erased losses after the ADP report. Contracts on the Standard & Poor’s 500 Index lost 0.4 percent to 992.90 at 8:49 a.m. in New York. Yields on benchmark 10-year notes were little changed at 3.36 percent.
Labor Productivity
Meanwhile, U.S. worker productivity rose in the second quarter at the fastest pace in almost six years as companies squeezed more out of remaining staff to boost profits. Productivity, a measure of employee output per hour, rose at a 6.6 percent annual rate, the most since the third quarter of 2003, revised figures from the Labor Department showed today in Washington. Labor costs fell by the most in nine years.
The Labor Department’s payrolls report, due in two days, may show employers cut another 225,000 jobs in August and unemployment climbed from 9.4 percent in July, according to the median forecast in a Bloomberg News survey.
The economy already has lost 6.7 million jobs since the recession began in December 2007, the most of any economic slump since the Great Depression.
The ADP report was forecast to show a decline of 250,000 jobs, according to the median estimate of 32 economists in a Bloomberg survey. Projections ranged from decreases of 396,000 to 160,000.
Challenger Report
ADP includes only private employment and does not take into account hiring by government agencies. Macroeconomic Advisers LLC in St. Louis produces the report jointly with ADP.
Employers announced 14 percent fewer job cuts in August than the year-earlier month, and 21 percent fewer on a month- to-month basis, according to a report today by Chicago-based placement firm Challenger, Gray & Christmas Inc.
Today’s ADP report showed a decrease of 152,000 workers in goods-producing industries including manufacturers and construction companies. Service providers cut 146,000 workers.
Employment in construction fell by 73,000, while financial firms trimmed jobs by 19,000, ADP said, the 21st consecutive monthly drop for the industry.
Companies employing more than 499 workers shrank their workforce by 60,000 jobs. Medium-sized businesses, with 50 to 499 employees, cut 116,000 jobs and small companies decreased payrolls by 122,000, ADP said.
Announcements of staff reductions continued last week. Whirlpool Corp., the world’s largest appliance maker, said Aug. 28 that it will close its Evansville, Indiana, manufacturing plant, resulting in the elimination of 1,100 jobs, or 1.6 percent of the company’s workforce.
Meanwhile, General Motors Co. last month called back 1,350 union workers, its biggest one-time increase in jobs since 2006, as it boosted second-half production in part because of the government’s “cash for clunkers” trade-in program.
The clunkers program, which ended Aug. 24, offered auto buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles.
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The end of the Geneva Free Port: a boon for Asia [ 31 Aug ]The tightening of Swiss legislation concerning the Geneva Free Ports represents a windfall for the Asian market. And for the French market…? |
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Art market barometer [ 25 Aug ]After five consecutive quarters of contraction, the art market is at last producing some positive signals. Artprice’s index (the Art Price Global Index) progressed 4.97% in the second quarter of 2009 after a fall of more than 30% since the beginning of 2008. Gradual economic recovery during 2009 (very modest economic growth in Germany and France for example) has boosted the morale of art market players and has added 20 points to our AMCI since the end of the first quarter. |
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The Durand-Ruel Impressionists [ 17 Aug ]As the art market slumbers during the summer months, preparations are underway for the major autumn sales, the dates of which have already been announced. The first big events are located in New York during September with sales of Indian, Chinese, Japanese and Korean art on the 16th at Christie’s and the 17th at Sotheby’s, and then Contemporary Art sales on the 23rd at Christie’s and the 24th at Sotheby’s. |
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Focus on the photography market [ 10 Aug ]The list of this summer’s photography exhibitions has three big names: Diane ARBUS at the National Museum in Cardiff until 31 August, Richard AVEDON with a retrospective at the International Center of Photography in New York until 6 September and Henri CARTIER-BRESSON, (who was born 100 years ago) at the European House of Photography in Paris (Henri Cartier-Bresson à vue d’œil) until 30 August. |
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Old Masters: a stable and reliable market [ 03 Aug ]Old Masters overtaking Contemporary Art sales? That’s how it looks after Sotheby’s and Christie’s London sales of combined Old Masters & 19th century art on 7 & 8 July. The total revenue from the two houses’ Old Masters works amounted to nearly £39m, i.e. a million more than they both earned from Contemporary Art sales the previous month. |
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Marc Newson confirms his star designer status [ 27 Jul ]At just 46, Marc NEWSON already has pieces in prestigious public collections such as the Vitra Design Museum, the Museum of Modern Art in New York, the Carnegie Museum of Art in Pittsburg and the Centre Georges Pompidou in Paris. Among the 30 or so awards he has received since the 1980s, he won the famous Compasso d’oro in 2000, and over the last decade his price index has literally exploded making him the most expensive living designer on the international auction circuit. |
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AMCI – Art market confidence at the end of the first half of 2009 [ 17 Jul ]At the start of 2008 Artprice launched a powerful new tool, the Art Market Confidence Index (AMCI) in order to give clients a “real time” appreciation of trends and sentiment on the art market. |
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Paris resists crisis [ 13 Jul ]Although the global art is in the midst of a crisis, Paris appears to be showing remarkable resistance: the number of auction sales and the volume of lots proposed has remained stable compared with 2008. Moreover, for the first quarter of 2009, the French capital posted a better overall revenue figure than either London or New York on the back of the Pierre Bergé-Yves Saint-Laurent sale at the Grand Palais in February. |
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Contemporary Art in convalescence [ 06 Jul ]While London’s auctioneers congratulate themselves on the healthy sold rates at their June Contemporary Art sales (92.5% at Sotheby’s, 88% at Christie’s and 75% at Phillips de Pury & Company), bidders are continuing on a path of caution and sobriety. |
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No surprise in London [ 29 Jun ]The results of the Impressionist & Modern sales in London last week were without surprise (except for the withdrawal of Camille PISSARRO’s, Le Quai Malaquais) and made the era of 8-figure auction results an even more distant memory. Both auction houses generated eight sales above the $1m line. The bought-in rate was not identical however: 15% at Sotheby’s (out of 27 lots presented) and 32% at Christie’s (out of 45 lots offered). |
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Asian Markets Fall on Earnings Announcements
By Jonathan Burgos
Sept. 2 (Bloomberg) — Asian stocks fell, giving the MSCI Asia Pacific Index its biggest drop in two weeks, as Seven & I Holdings Co. and Sekisui House Ltd. cut their profit forecasts.
Seven & I, the world’s largest convenience-store owner, and Sekisui House, Japan’s biggest home builder, dropped more than 2 percent in Tokyo. Westpac Banking Corp., Australia’s largest bank by market value, sank 2.3 percent as concern lenders will report more losses dragged U.S. financial shares lower yesterday. Elpida Memory Inc., Japan’s No. 1 memory-chip maker, tumbled 16 percent on plans to sell shares.
The MSCI Asia Pacific Index dropped 1.5 percent to 112.31 as of 7:47 p.m. in Tokyo, the most since Aug. 17. The gauge has risen 59 percent from a more than five-year low on March 9 on speculation the global economy is recovering. That’s taken the average price of stocks on the index to 1.5 times book value, close to an 11-month high.
“We remain cautious on the market,” said Pearlyn Wong, Singapore-based investment analyst at Bank Julius Baer Co., which manages $350 billion. “Much of the recovery story has been priced in. Investors are probably wondering what is going to happen once the stimulus measures end.”
Japan’s Nikkei 225 Stock Average declined 2.4 percent. Hong Kong’s Hang Seng Index lost 1.8 percent. Air China Ltd., which is listed on the city’s stock exchange, slumped 4.6 percent after the Chinese government said it will raise fuel prices.
Australia’s S&P/ASX 200 Index sank 1.7 percent even as a government report showed the country’s economy grew faster in the second quarter. Rio Tinto Group Ltd., the world’s third- largest mining company, fell 2.2 percent in Sydney after oil and copper prices slumped in New York.
Banks Decline…..
European Markets Follow Asia’s Lead
By Adria Cimino
Sept. 2 (Bloomberg) — European stocks fell for a third straight day on speculation a six-month rally has outpaced the prospects for earnings and the economy after valuations for the Dow Jones Stoxx 600 Index climbed to the most expensive level in six years. Asian shares declined.
Alcatel-Lucent SA slid 9.2 percent as the world’s largest supplier of fixed-line phone networks said it plans to sell as much as 1 billion euros ($1.42 billion) of convertible bonds. Old Mutual Plc and Aviva Plc led U.K. insurers lower. Seven & I Holdings Co., Japan’s largest retailer, and Sekisui House Ltd., the country’s biggest homebuilder, dropped more than 2 percent in Tokyo after cutting their profit forecasts.
Europe’s Stoxx 600 fell 1 percent to 229.40 at 11:12 a.m. in London, extending this week’s slump to 3.5 percent. The regional gauge is valued at 48.6 times profit, the highest level since June 2003, according to weekly data compiled by Bloomberg.
“We’re not yet out of the woods,” said Lothar Mentel, chief investment officer at Octopus Investments Ltd. in London, which oversees about $2.3 billion. “With the economy, there’s still a recession out there,” he told Bloomberg Television.
The MSCI Asia Pacific Index lost 1.5 percent today. Futures on the Standard & Poor’s 500 Index retreated 0.1 percent after the benchmark gauge for U.S. equities slid for a third straight day yesterday, the longest streak since June. Financial shares led the drop as concern banks will post more losses overshadowed manufacturing and housing data that topped estimates.
Alcatel, Maersk…..
By CARLO PIOVANO p {margin:12px 0px 0px 0px;}
Benchmark crude for October delivery was up 60 cents to $68.29 a barrel by midday European time in electronic trading on the New York Mercantile Exchange. The contract Tuesday lost $1.91 to settle at $68.05.
Oil sank almost $5 a barrel in the first two days of the week as investors worried that a global economic recovery this year would be slow and may not justify the big rallies in stocks and commodities since March.
U.S. stock indexes fell about 2 percent Tuesday.
Investors were cheered somewhat when the American Petroleum Institute said late Tuesday that U.S. inventories plunged 3.2 million barrels last week. Analysts had expected the API numbers to drop 1.9 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
The Energy Department reports mandatory supply figures later on Wednesday, while refiners voluntarily report the API numbers.
There were also signs Tuesday that the U.S. economy – the biggest consumer of oil – is improving.
The Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index rose in August, indicating an expansion for the first time since January 2008. And the National Association of Realtors said pending U.S. home sales rose to the highest level in more than two years.
In other Nymex trading, gasoline for October delivery rose 1.81 cents to $1.80 a gallon and heating oil gained 2.41 cents to $1.78 a gallon. Natural gas jumped 3.6 cents to $2.86 per 1,000 cubic feet.
In London, Brent crude was up 67 cents at $68.40.
By Jacob GreberSept. 2 (Bloomberg) — Australia’s economic growth unexpectedly accelerated in the second quarter, driving the nation’s currency higher on expectations the central bank will raise borrowing costs from a half-century low.
Gross domestic product rose 0.6 percent, the biggest gain in more than a year, from the previous three months when it grew 0.4 percent, the Bureau of Statistics said in Sydney today. The median estimate of 20 economists surveyed by Bloomberg News was for a 0.2 percent expansion.
Today’s report confirms central bank Governor Glenn Stevens’ view that the economy has been “stronger than expected” as A$20 billion ($16.6 billion) of government cash handouts boosted spending at retailers such as Woolworths Ltd. and Harvey Norman Holdings Ltd. Australia joins other developed nations, including France and Germany, that are rebounding from the deepest global recession since the Great Depression.
“Australia clearly is in a sweet spot, one that we expect to extend through to year end,” said Glenn Maguire, chief Asia- Pacific economist at Societe Generale in Hong Kong. The Reserve Bank will raise interest rates by a quarter-percentage point in November, he added.
The Australian dollar rose to 83.04 U.S. cents at 12:38 p.m. in Sydney from 82.73 cents just before the report was released. The two-year government bond yield gained 7 basis points to 4.39 percent. A basis point is 0.01 percentage point. The benchmark S&P/ASX 200 index has climbed 41 percent since March 6.
Government Stimulus…..
Fitch Raises Outllook on South Korea
By Heejin Koo
Sept. 2 (Bloomberg) — South Korea’s credit-rating outlook was raised to “stable” from “negative” by Fitch Ratings, citing the resilience of the nation’s economy and banks.
The country’s investment grade A+ is the same the company applies to Taiwan and China. Fitch lowered the outlook to negative in November on concern South Korea’s foreign-exchange reserves may decline due to its unstable financial system and widening current deficits.
“The term structure of banks’ debt has improved,” Fitch said in an e-mailed statement today. “On the public-finances front, Korea is likely to have avoided large fiscal costs associated with the deleveraging of the banking sector.”
Asia’s fourth-largest economy expanded 2.3 percent last quarter, the fastest pace in almost six years, as exports and household spending jumped. South Korea’s foreign-exchange reserves rose for a sixth month in August and it posted a current-account surplus in July, boosted by exports.
Fitch’s outlook “appears to reflect increased confidence on the Korean economy,” said Kim Seung Hyun, head of research at Taurus Investment Securities Co. in Seoul.
The Bank of Korea will probably report tomorrow the economy grew at a faster pace in the second quarter than initially estimated, Finance Minister Yoon Jeung Hyun said. Yonhap News cited Yoon as saying today second-quarter growth was probably between 2.6 percent and 2.7 percent.
Exports Improve……
BP Announces A Big Discovery Stock Trades up Pre Market
By Eduard Gismatullin
Sept. 2 (Bloomberg) — BP Plc, Europe’s second-largest oil company, reported a “giant” discovery at the Tiber Prospect in the U.S. Gulf of Mexico that may contain more than 3 billion barrels, sending its shares higher.
The well is located in Keathley Canyon block 102, about 250 miles (400 kilometers) south east of Houston, the London-based company said today in a statement. The Tiber well was drilled to a total depth of approximately 35,055 feet (10,685 meters), greater than the height of Mount Everest.
The latest discovery will help BP, already the biggest producer in the Gulf of Mexico, boost output in the region by 50 percent to 600,000 barrels of oil equivalent a day beyond 2020. It will also allay concerns over BP’s reluctance to invest heavily in unconventional projects, such as oil sands in Canada, to replenish reserves as maturing fields age.
“It will take a while to develop, the second half of next decade, but it’s very important,” Jonathan Rigby, an analyst at UBS AG, said in a telephone interview.
BP is developing nine projects in the Gulf of Mexico and in 2007 overtook Royal Dutch Shell Plc’s output in the region.
Kaskida Find
“It will be bigger than the 3 billion barrels” of oil equivalent discovered at the nearby Kaskida field, said Robert Wine, a London-based spokesman at BP. “This is a whole new geological play we’ve got here.”
BP gained as much as 20.4 pence, or 3.9 percent, to 539.9 pence in London after the announcement and traded 17.5 pence higher at 537 pence at 11:41 a.m. local time.
“Tiber represents BP’s second material discovery in the emerging Lower Tertiary play in the Gulf of Mexico, following our earlier Kaskida discovery,” Andy Inglis, chief executive for exploration and production at BP, said in the statement.
BP is operator of the project with a stake of 62 percent, while Petroleo Brasileiro SA, Brazil’s state-controlled oil company, holds 20 percent and ConocoPhillips 18 percent.
FNM & FRE Are Expected to be Overhauled
By NICK TIMIRAOS
A mortgage-industry trade group is calling for Congress to transform Fannie Mae and Freddie Mac into several smaller privately held companies that would issue mortgage securities carrying an explicit government guarantee.
The proposed framework, to be released Wednesday by the Mortgage Bankers Association, would give successor entities to Fannie and Freddie the authority to create securities backed by certain types of mortgages. The new companies would guarantee the securities against defaults on the underlying mortgages.
![[Courson photo]](http://ibankcoin.com/cronkite/wp-content/imagescaler/555935ef6b7083f071937f63f5349844.jpg)
John Courson, CEO of the Mortgage Bankers Association, said restoring and maintaining investor confidence requires an explicit guarantee.
The new companies would also pay fees into a federal insurance fund, which would guarantee interest and principal payments to bondholders if the companies were unable to make them.
Such an insurance fund, designed to kick in only if the companies were to suffer catastrophic losses, would provide explicit federal backing. That would replace the current system, in which investors have long assumed that the government would stand behind Fannie and Freddie.
Some foreign investors in China and elsewhere lost confidence in that fuzzy implied guarantee last year and reduced their holdings of the companies’ debt, though the U.S. government has propped up Fannie and Freddie with capital infusions.
“If we’re going to restore and maintain investor confidence and…consistent liquidity, that is going to require an explicit backstop,” said John Courson, chief executive and president of the MBA……
EU Agrees on Extending Financial Stimulus
European Union finance ministers were set to agree on Wednesday that the EU should not be too hasty in withdrawing fiscal stimuli and other extraordinary measures introduced in response to the worst economic crisis in Europe’s post-1945 history.
“The time has not yet come to withdraw from the fiscal stimulus,” said Jean-Claude Juncker, chairman of the 16-member group of eurozone finance ministers. “We have to continue this effort in the course of this year and next year. Then we have to agree on an exit strategy.”…..
What a wild begining to September.Not only was Cerberus forced to come out and make a formal statement denying rumors of an impending default of one of its funds, Wells Fargo also came out to deny rumors that it was preparing a secondary offering to raise money to repay the Tarp.
Wells Fargo’s chief executive, John Stumpf, told Bloomberg Television shortly before yesterday’s market close that the bank planned to pay back $25 billion from the Tarp but it would do so out of organic earnings without an additional stock offering.
“We will pay it back, but we’re going to pay it back in a shareholder-friendly way,” he said. “We are now earning capital so quickly, organically, we don’t want to dilute our existing shareholders.”
If you are keeping score, the rumors yesterday were actually half-right: Wells Fargo is looking to pay back the Tarp. It just isn’t going to do it in the way people were whispering about yesterday. And that repayment will be costly to shareholders, at least in the short term. Any earnings redirected toward the government will deprive shareholders of that money.
Wells has been one of the Gang of Three megabanks–in addition to Citi and Bank of America–that hasn’t yet repaid the Tarp after the stress tests. Wells was one of the companies that arguably failed the stress tests, although officially no banks “failed.” It was just told that it “passed” as long as it could raise $13.7 billion to fill the capital hole in its balance sheet.
Can Wells really spin off enough profit to fill the capital hole and pay back $25 billion out of earnings? And can it really do this “shortly?”
The bank has already raised at least $7.5 billion by selling equity. And it says it generated more than enough revenue to fill that $13.7 billion capital hole. In addition to the $25 billion of Tarp equity, the Tarp warrants held by the government are worth around $1.33 billion according to Linus Wilson. So Wells needs something like $26 billion to meet its capital requirements and pay back the Tarp in full. (These estimates are very rough.)
In April the bank said it earned $3 billion in quarterly profits, its best results in 157 years. Wells also cut its dividend drastically, allowing the bank to conserve cash. In July it said it made $2.75 billion and kept the dividend low. If Wells were to continue that kind of outstanding performance–low dividends plus big earnings, something shareholders will hate–Wells might be able to pay off the Tarp somewhere in the middle of next year. But many analysts are skeptical of those results and predict Wells will stumble in the near future.
At the heart of the debate over earnings at Wells is whether the bank is being reckless by not provisioning for enough losses. If losses outpace the bank’s estimates, it could find that the capital hole is even bigger than expected. One analyst back in April estimated that the bank might actually face a capital hole twice the size of that estimated in the stress tests, meaning Wells would need something like $45 billion to repay the Tarp. That’s more than than three more years of profits with tiny dividends to shareholders.
What’s more, the cheap money from the Federal Reserve and lack of competition in several lending categories that have given the large banks license to mint money may not last. As the economy recovers, the Fed will curtail aid programs and raise interest rates. Competition in lending will return. Those giant earnings from this year may become a thing of the past.
Then again, Wells has surprised critics all through this year. Those betting against its stock since the rally began in March have suffered painfully. (Although the stock is still down year-to-date by around 11%.) So maybe the current quarter is looking like the best one yet. Is this what Stumpf was signalling in his talk with Bloomberg yesterday?
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