Archive for April, 2009

World markets in grip of swine flu fears (AP)

Tuesday, April 28th, 2009 | Finance News

LONDON – World stock markets fell sharply while the euro dropped below $1.30 Tuesday as investors worried that any swine flu pandemic could derail a global economic recovery after more countries confirmed new cases of the virus.

By early afternoon London time, the FTSE 100 of leading British shares was down 91.29 points, or 2.2 percent, at 4,075.72 while Germany's DAX fell 129.34 points, or 2.8 percent, to 4,564.73. The CAC-40 in France was down 65.15 points, or 2.1 percent, at 3,037.28.

The selling pressure was set to continue at the U.S. open, with Dow futures down 117 points, or 1.5 percent, to 7,885 while the broader Standard & Poor's 500 futures fell 15.3 points, or 1.8 percent, to 841.50.

The disease, which broke out in Mexico just days ago, has spread to other countries and testing of suspected cases was underway around the world.

Governments everywhere have toughened their precautions and the World Health Organization raised its alert level from three to four, which is just two steps short of it declaring a full pandemic and said it was now too late to contain the virus. The WHO also said it suspected that U.S. patients may have transmitted the virus to others in the United States.

Though all 150 suspected deaths and most of the 2,000 or infections have been seen in Mexico, investors around the world have decided to run for cover, abandoning riskier assets such as stocks and diving back into safe haven assets like the dollar and the yen.

"With the alert level for the virus raised by the World Health Organization, traders have had to re-evaluate just how serious this could end up being," said Tim Hughes, head of sales trading at IG Index.

Investors are concerned that, as in the SARS outbreak in 2003, affected areas and global trade could suffer as countries restrict bans of one sort or another.

"Exposed industries such as airlines and hotel operators have borne the brunt of the equity sell-off, but if fears escalate into wider global growth concerns, broad-based declines in global indices are possible," said Geoffrey Yu, an analyst at UBS.

For the second day running, airlines and travel-related companies felt the brunt of the selling pressure. In Europe, Air France-KLM and Deutsche Lufthansa AG fell another 2 percent while British Airways PLC slumped a further 4 percent. Aer Lingus fell 17 percent after issuing a profit warning.

And in a repeat of Monday, pharmaceutical stocks, particularly those with high-profile anti-flu vaccines — Switzerland's Roche Holding AG and GlaxoSmithkline PLC — benefited amid the pandemic fears.

A potential pandemic wasn't the only distraction for investors, already uneasy about the results of the U.S. government's stress tests to gauge the health of the largest 19 banks.

The reports are set for release Monday, though Bank of America Corp. and Citigroup Inc. have been told by regulators the two will likely need to raise more capital, according to a Wall Street Journal report. The report suggested that Bank of America's capital shortfall could run into billions of dollars, which, in the current environment would likely be extremely difficult to raise through the private sector.

Germany's Deutsche Bank AG was the worst-performing stock on the DAX, down over 5 percent, while in London Barclays PLC and HSBC Holding PLC fell around 4 percent. In Asia, Mizuho Financial Group slipped 2.0 percent in Tokyo.

Earlier, Asia's markets took a pummeling with Japan's Nikkei index closing down 232.57 points, or 2.7 percent, to 8,493.77 and Hong Kong's Hang Seng ended 285.31 points, or 1.9 percent, lower at 14,555.11.

Elsewhere in Asia, South Korea's Kospi retreated 3 percent to 1,300.24. Shanghai's main index was down 0.2 percent, Taiwan's stock measure dropped 1.9 percent while Australia's benchmark was down 0.6 percent.

Oil prices also fell foul of the swine flu concerns as investors worried about lower demand, with the June contract on the New York Mercantile Exchange down $1.28 at $48.86 a barrel. Prices shed $1.41 overnight to settle at $50.14.

In currencies, the dollar weakened to 95.59 yen from 96.37. Meanwhile, the euro continued to suffer and fell to $1.2987, having started the week above $1.3250 before investors rushed into the relative safe haven of the dollar.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

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U.S. bank, flu fears chill economy hopes (Reuters)

Tuesday, April 28th, 2009 | Finance News

LONDON/SINGAPORE (Reuters) –
Fears about a possible global flu crisis and renewed worries over the capital health of some U.S. banks combined on Tuesday to rattle economists' hopes the financial system was stabilizing.

The Wall Street Journal reported regulators told Citigroup Inc (C.N) and Bank of America Corp (BAC.N) they needed to raise more capital following "stress tests" of banks' ability to withstand the economic crisis. It said Bank of America needed billions of dollars.

"The flu story and the story on Citi and Bank of America have spooked the whole market," CMC Markets analyst James Hughes said, talking about foreign exchange trading.

"We will have to wait until the results of the stress tests on May 4 and it does raise fears because Citi and Bank of America are not necessarily the worst hit," he added.

The banks report emerged as markets factored in a rise in the World Health Organization's (WHO) pandemic alert to phase 4, pointing to a heightened risk of a global outbreak of Mexican swine flu.

"This can be interpreted as a significant step toward pandemic influenza, but also it is a phase which says that we are not there yet," acting WHO Assistant Director-General Keiji Fukuda told a teleconference on Monday.

The U.S. banks report had the biggest impact on markets, with European stocks falling 2 percent, U.S. stock futures indicating a weak start on Wall Street and the yen rising to a seven-week high against the dollar.

In Tokyo, NTT SmartTrade director Takashi Kudo said: "While most of the 19 banks that have been tested are expected to show less negative results, Citi and BofA seem to be in a shaky situation, prompting investors to pick up the yen on risk aversion as stocks fell."

CITIGROUP SHARES HIT

Neither Citigroup or Bank of America commented on the Wall Street Journal report, but Citigroup shares trading in Frankfurt (TRV.F) were down 10 percent at 1100 GMT.

The U.S. Federal Reserve, which also declined to comment on the report, said last week the tests conducted at major banks were aimed at ensuring they had sufficient capital to continue lending in potentially worsening conditions.

The report had a chilling effect on hopes that recent economic news pointed to tentative signs of stabilization in the global economic crisis.

Other indicators indicated the mood of consumers and business was improving, but European banks were also hit by uncertainty.

UK retail sales jumped unexpectedly in April, figures from the Confederation of British Industry showed, the first positive showing since March last year. [nLS804880]

French consumer confidence improved marginally for the second month in April, while business confidence in Italy recovered more strongly than expected following 10 months of falls.

In Germany, data from some states indicated annual inflation probably accelerated slightly in April -- taken as a sign of firmer price pressures across Germany and the wider euro zone this month.

The broader global recession cast a cloud over Europe's banks as profits at Spain's BBVA (BBVA.MC) slipped and key businesses at Deutsche Bank AG (DBKGn.DE) showed signs of strain.

Spain's second-largest bank unveiled a 14 percent dip in net profit in the first three months of the year as bad loans rose.

Germany's Deutsche Bank announced a loss in its wealth management arm, a dip in profit at its retail bank and 1.5 billion euros ($1.95 billion) of writedowns.

A windfall from debt trading helped the bank swing to a 1.2 billion euro first-quarter profit, however, which masked the erosion in key businesses.

GOVERNMENTS PREPARE FOR FLU

Governments around the world are bracing for a possible flu pandemic, although so far relatively few people have fallen ill outside Mexico where around 150 people have died.

"This won't help sentiment, but for now, we're at the beginning of the outbreak and it's hard to anticipate the impact on the world economy," said Sebastien Barthelemi, analyst at Louis Capital Markets in Paris.

"In the short term, airlines, hotel and oil companies are vulnerable, while drug companies could benefit from the situation."

The World Bank estimated in 2008 that a flu pandemic could cost $3 trillion and cause a 5 percent drop in world gross domestic product.

An outbreak of severe acute respiratory syndrome (SARS), which disrupted travel, trade and workplaces in 2003, killed 775 people and cost the Asia Pacific region an estimated $40 billion.

Antiviral medicine is effective against the swine flu bug if used early enough but no one is naturally immune.

Britain, France, Germany and the United States have issued travel alerts for Mexico, which relies on tourism as its No. 3 source of foreign currency. Japan has advised its citizens in Mexico to consider returning home soon.

(Reporting by Reuters correspondents worldwide; Writing by Malcolm Davidson; Editing by Keiron Henderson)

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Pfizer profit beats forecast (Reuters)

Tuesday, April 28th, 2009 | Finance News

NEW YORK (Reuters) –
Pfizer Inc (PFE.N) reported a better-than-expected first-quarter profit on Tuesday, as cost-cutting helped offset sharply lower sales of its Lipitor cholesterol fighter and its Chantix smoking-cessation drug.

Lipitor sales were hurt by competition from inexpensive generic forms of Merck & Co's (MRK.N) Zocor and AstraZeneca Plc's (AZN.L) potent Crestor.

Sales of Chantix, a relatively new drug that Pfizer had hoped would become an engine of profit growth, crumbled on concerns it causes agitation and suicidal thoughts.

The world's largest drugmaker said net profit fell 2 percent to $2.73 billion, or 40 cents per share. That compared with $2.78 billion, or 41 cents per share, in the year-earlier quarter, when Pfizer took acquisition-related charges.

Excluding special items, Pfizer earned 54 cents per share. Analysts on average expected 49 cents per share, according to Reuters Estimates.

Company global revenue fell 8 percent to $10.87 billion, about $180 million below Wall Street expectations. Revenue would have fallen only 3 percent if not for the strengthening dollar, which lowers the value of overseas sales when converted back into U.S. currency.

Adjusted, selling, informational and administrative expenses and the cost of goods declined significantly, bolstering results. But taxes rose 6 percentage points due to costs of financing Pfizer's planned purchase of smaller U.S. rival Wyeth (WYE.N), crimping overall profit.

Pfizer's operating expenses were $1 billion lower than expected, wrote Sanford Bernstein analyst Tim Anderson in a research note.

Lipitor sales fell 13 percent to $2.72 billion. Chantix sales dropped 36 percent to $177 million.

Sales of oncology drugs fell 13 percent to $552 million, as colon cancer treatment Camptosar began facing generic competition. The drug's sales plunged 43 percent to $109 million. Sutent, which treats kidney and stomach cancer, rose 7 percent to $202 million.

One of the few other important drugs posting higher revenue was Lyrica, a treatment for neuropathic pain which rose 17 percent to $684 million.

Pfizer has been one of the most poorly performing drugmakers over the past decade, its sales and shares ravaged by an inability to develop big-selling new medicines despite costly mergers with U.S. rivals Warner-Lambert and Pharmacia.

The struggling giant is back on the mega-merger trail, with plans later this year to scoop up Wyeth in a deal valued at $68 billion when announced in late January. It is hoping Wyeth's drugs will offset expected plunging sales of Lipitor, when Pfizer's biggest product faces generic competition in 2011.

To complete the Wyeth deal, Pfizer said it would halve its dividend, effective with its second-quarter payout.

Pfizer, confronted with expected sharply lower 2009 earnings, has vowed to cut 15 percent of the combined company's workforce of about 130,000 employees and close some manufacturing sites. As with big past deals, that would provide huge cost savings that will prop up earnings for awhile.

The question is whether Pfizer's laboratories will be able to break out of their long funk, and deliver big-selling new products needed for long-term company growth.

Shares of Pfizer rose 19 cents to $13.69 in premarket activity.

(Reporting by Ransdell Pierson and Lewis Krauskopf; Editing by Derek Caney)

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