U.S. and Global Markets Struggle

Arthi Gupta, Mayank Mehta and Sanjay Barot
17 May, 2010
New York City

U.S. stock futures fall as traders weigh the lingering European debt crisis and the tumble of the euro to a 4-year low. The European markets have recouped their early losses and are moderately higher. Astellas agreed to buy OSI Pharma for $4 billion. Lowe''s, GM first quarter profit rises.

[R]11:30 AM New York – U.S. stock futures fall as traders weigh the lingering European debt crisis and the tumble of the euro to a 4-year low. The European markets have recouped their early losses and are moderately higher. Astellas agreed to buy OSI Pharma for $4 billion. Lowe''s, GM first quarter profit rises.[/R]

U.S. stock seesaw as traders weigh the lingering European debt crisis and the tumble of the euro to a 4-year low. The European markets recouped early losses and are moderately higher. Astellas agreed to buy OSI Pharma for $4 billion. Lowe''s and GM first quarter profit rises.

The euro declined to reach a four-year low relative to the dollar as investors abandoned the currency as well as stocks in favor of gold and other assets seen as offering more safety.

Core euro zone government bond prices fell, with some traders citing central bank debt buying of debt of peripheral nations while others said Bunds had been overbought.

The president of the European Central Bank, Jean-Claude Trichet in an interview published Saturday, warned that Europe was facing “severe tensions” and that the markets were fragile.

On Sunday, German Chancellor Angela Merkel said that a $1 trillion EU/IMF bailout plan had only bought the euro-zone time to tackle its fundamental problem - a yawning gap between its strongest and weakest economies.

The U.S. dollar is trading against the euro and the pound, but is choppy trading against the yen.

Astellas To Buy OSI Pharma For $4 Billion

Japanese drug maker Astellas Pharmaceuticals Inc. said that it has agreed to acquire biotechnology company OSI Pharmaceuticals Inc. for a sweetened bid of $57.50 per share. The all-cash transaction, which adds OSI''s blockbuster lung cancer drug Tarceva to Astellas'' portfolio and enables it to expand its presence in the U.S., is valued at $4 billion on a fully diluted basis.

The offer price represents a premium of 55% to OSI''s closing price of $37.02 on February 26, 2010, the last trading day before the announcement by Astellas of its tender offer. The boards of directors of both companies have unanimously approved the transaction, which has no financing conditions to close.

The offer price is 10.6% higher than Astellas'' earlier bid of $52 per share which was made in early March. Astellas and Melville, New York-based OSI previously came to an agreement in March in which OSI allowed the Japanese drug maker a look at its books in return for a promise that Astellas would not buy OSI shares until a May 15 deadline.

The agreement came as OSI brushed aside overtures from Astellas for more than a year, calling them too low, before Japan''s second-biggest pharmaceutical company by sales made its hostile-takeover proposal earlier in March, which OSI rejected.

Astellas noted that the acquisition would support its targeted growth strategy of becoming a global category leader in Oncology, a high-priority therapeutic area for the company. The company intends to boost its presence in the U.S. even as it copes with lower drug sales due to generic competition for its biggest drugs, Prograf and Flomax.

Commenting on the deal, Masafumi Nogimori, President and Chief Executive Officer of Astellas, said, ""The merger with OSI provides Astellas with a top-tier oncology platform in the U.S. and an expanded product portfolio and pipelines. In addition to Tarceva, we are pleased to add its oncology infrastructure, discovery platform, expanded pipelines and talent base to our existing businesses. We look forward to working together with our OSI colleagues to grow the combined business and realize our shared goal of improving the health of the people around the world every day.""

Citigroup Inc. is acting as exclusive financial advisor to Astellas, while Morrison & Foerster LLP is acting as its legal counsel.

For OSI, Centerview Partners LLC is acting as lead financial advisor, while Lazard also was retained as a financial advisor to OSI. Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates is acting as OSI''s legal counsel.

Home improvement retailer Lowe’s Companies, Inc. reported an increase in first-quarter profit, helped by a 4.7% growth in net sales as consumers started showing signs of re-engagement in home improvement.

General Motors Co. earned $865 million in the first quarter as strengthening sales and savings won through bankruptcy helped drive to auto maker to its first quarterly profit since 2007.

Commodities, Currencies and Yields

Dollar edged higher against euro to $1.2348 and increased against the Japanese yen to 92.49.

Crude oil increased $0.03 to $71.64 a barrel for a front month contract, natural gas edged higher $0.06 cent to $4.38 per mBtu and gasoline increased 0.140 cents to 213.22 cents.

Gold increased $2.30 in New York trading to close at $1,230.10 per ounce, silver closed lower $0.060 to $19.16 per ounce and copper for the front month delivery decreased 5.950 cents to $3.07 per pound.

Yields on 10-year U.S. bonds increased to 3.46% and on 30-year U.S. bonds traded at 4.35%.

Stock Movers

Greenhill & Co., Inc., the independent investment bank fell 1.6%.

Ivanhoe Mines Ltd. fell 1.0% after the mining company said its first quarter loss from continuing operations widened to 47 cents a share from 17 cents a year earlier.

MetroPCS Communications, Inc., the wireless telecommunications provider added 3.4%.

Pfizer Inc., the drugmaker rose 0.3% and Sara Lee Corporation, the maker of Jimmy Dean foods fell 0.6%.

Earnings Review

Lowe’s Companies, Inc. ((LOW)), the home improvement retailer reported first quarter sales rose 4.7% to $12.39 billion from $11.83 billion a year ago. Net income in the quarter rose 2.7% to $489 million or 34 cents per diluted share compared to net income of $476 million or 32 cents per share a year ago. Comparable same-store sales increased 2.4%.

Nordstrom, Inc. ((JWN)), the fashion specialty retailer said first quarter sales rose 16.4% to $1.99 billion from $1.71 billion a year ago. Net income in the quarter rose 43% to $116.0 million or 52 cents per diluted share compared to net income of $81.0 million or 37 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 226.75 or 2.17% to 10,235.76, Hang Seng index in Hong Kong decreased 430.23 or 2.14% to 19,715.20 and CSI 300 index in China lower 153.31 or 5.35% to 2,714.72. ASX 200 index in Australia decreased 143.90 or 3.12% to 4,467.20. The FTSE Bursa KL Composite index in Malaysia closed lower 5.03 or 0.38% to 1,334.27.

The Kospi Index in South Korea decreased 44.12 or 2.60% to close at 1,651.51. SET index in Thailand closed lower 15.53 or 2.02% to 753.26 and JSE Index in Indonesia decreased 38.92 or 1.36% to 2,819.47. The Sensex index in India decreased 159.04 or 0.94% to 16,835.56.

Europe Markets Review

In London FTSE 100 Index closed higher 52.81 or 1.00% to 5,315.66, in Paris CAC 40 Index increased 25.84 or 0.73% to close at 3,586.20, in Frankfurt DAX index higher 84.13 or 1.39% to close at 6,140.84. In Zurich trading SMI increased 55.30 or 0.86% to close at 6,483.98.