German and French leaders meet this week to map out a revised plan for the euro as the Group of Eight exposed disagreement on a rescue strategy, Greece lurched toward a possible exit and Spain
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Illumina urged its shareholders Monday to reject a sweetened buyout offer from the Swiss drugmaker Roche, saying that the $6.5 billion deal still undervalues the California maker of genetic analysis instruments.
Roche raised its proposed price for Illumina last week, but Illumina CEO Jay Flatley says the offer is still not good enough. He calls the deal “opportunistic” and says his San Diego-based company is poised to deliver better returns through higher sales and profits.
Roche Holding AG did not immediately provide comment on Illumina’s statement.
Illumina shares fell 88 cents, or 1.7 percent, to $51.73 after word of the latest rejection.
Swiss drug company Roche Holding AG proposed to buy Illumina in January for $44.50 per share, or about $5.7 billion. Roche said the deal would strengthen Roche’s position in life sciences diagnostics because its technologies are complementary with Illumina’s.
Illumina’s board unanimously turned down Roche’s offer, saying it was “grossly inadequate” and that shareholders should not tender their stock to Roche.
Last week, Roche raised its offer to $51 per share, or about $6.5 billion, an increase of almost 15 percent.
Earlier Monday, Illumina said that its first-quarter revenue will be about $270 million on strong demand for its research instruments. The estimate tops current Wall Street expectations.
The company also said that it expects its adjusted earnings for the quarter will match of beat current Wall Street expectations. Analysts expect earnings of 31 cents per share on revenue of $258 million, according to a survey by FactSet.
Illumina said the numbers could change by the time it reports its final earnings results later this month.
Illumina makes equipment that biotechnology researchers can use to sequence genes or do other tasks.
Flatley said that during the first quarter, the company’s “book-to-bill” ratio showed that customer orders were outpacing deliveries for the third consecutive quarter. He said more customers are “getting back to work,” and boosting demand.
Illumina’s shares rose sharply after Roche made its initial offer for the company, and the stock is up about 65 percent for the year.
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The bailouts of Bear Stearns and AIG were "distasteful" but still necessary, Federal Reserve Chairman Ben Bernanke told students at George Washington University on Tuesday.
Meanwhile, the Fed was "helpless" when it came to saving Lehman Brothers, he said.
"Lehman Brothers was in itself probably too big to fail, in the sense that its failure had enormous negative impacts on the global financial system," Bernanke said. "But there we were helpless, because it was essentially an insolvent firm."
In a lecture about the Fed’s emergency efforts during the financial crisis, Bernanke explained that the central bank was willing to bail out AIG (, Fortune 500) and Bear Stearns because it expected both firms would eventually be able to pay back their loans. Bear Stearns was ultimately acquired by JPMorgan Chase (, Fortune 500).
Lehman Brothers, on the other hand, had no collateral to put up in exchange for the Fed’s assistance.
"It was very difficult and in many ways distasteful intervention that we had to do on the grounds that we needed to do that to prevent the system from collapsing," Bernanke said. " But clearly, it is something fundamentally wrong with a system in which some companies are ‘too big to fail.’"
Bernanke also told students that without the Fed’s emergency efforts, the U.S. economy could have tanked even deeper.
"I think the view is increasingly gaining acceptance that without the forceful policy response that stabilized the financial system in 2008 and early 2009, we could have had a much worse outcome in the economy," he said.
The lecture was the third section of a four-part series at George Washington University, to be continued on Thursday. The Federal Reserve posts Bernanke’s slides and full videos online.
President Barack Obama countered Republican attacks on his trade record with China by filing a complaint seeking to stop Beijing
The global economy faces
After three days of delays, Greek coalition leaders began crucial debt talks Wednesday with the prime minister to review a draft deal on steep cutbacks demanded by creditors in return for a euro130 billion ($170 billion) bailout.
Leaders of three parties backing the three-month-old coalition are under intense pressure to accept the new austerity demands and shield the country from a looming bankruptcy.
Their decisions will be announced at a meeting with Prime Minister Lucas Papademos, after the parties were handed a 50-page English-language draft agreement, drawn up with international debt inspectors late Tuesday.
Athens has already accepted a demand to fire up to 15,000 workers in the public sector in 2012, but is under pressure to impose deeper cuts, including reductions in pension payments and the minimum wage.
A disorderly bankruptcy by Greece would likely lead to its exit from the eurozone, a situation that European officials have insisted is impossible because it would hurt other weak countries like Portugal, Ireland and Italy.
It was still not clear whether the parties _ the majority Socialists, main rival conservatives, and small right-wing LAOS _ would accept the austerity demands, particularly ahead of national elections provisionally set for late April.
“Austerity measures are like shoes that are too tight. Sooner or later, you want to kick them off,” LAOS leader George Karatzaferis was quoted as saying by state TV.
The coalition talks have been repeatedly postponed this week to make time for exhaustive negotiations with representatives of the European Union, the European Central Bank and the International Monetary Fund, on whose approval the continued flow of Greece’s vital rescue loans depends.
Without the bailout, Greece would not have enough money to pay off a big bond redemption payment due on March. 20, triggering a default that risks sending shockwaves throughout financial markets and the global economy.
As anger mounts in Greece at the prospect of further economic pain, patience is running out abroad.
German Chancellor Angela Merkel’s spokesman said Greece must swiftly return to a sustainable, viable path.
“This is not a question one can take a lot of time to tackle,” Steffen Seibert said. “It is important that the negotiations now come to an end.”
Late Tuesday, Greece’s private creditors signaled progress on a separate, linked agreement that would cut the country’s privately held debt load by 50 percent, or some euro100 billion ($131 billion).
The intention is to ensure that Greece’s long-term debts are sustainable. Banks, pension and hedge funds and other private sector holders of Greek debt are expected to swap their current bonds for new ones worth 50 percent less than the original face value, with longer repayment terms and a lower interest rate. They are also expected to get a euro30 billion payment as part of the bond swap deal.
“We face crucial decisions … that will determine the country’s course in coming years,” Deputy Finance Minister Philippos Sachinidis told Parliament. “These days are among the most crucial of our post-World War II history.”
The EU, ECB and IMF, known collectively as the “troika”, have demanded the additional measures which they say will improve Greece’s competitiveness and economic stability, as well as cuts in health, welfare and defense spending cash advance no fax.
Labor Minister Giorgos Koutroumanis warned Parliament last week that a demanded reduction in the euro751 ($985) minimum monthly wage would quicken the Greek economy’s contraction and hit the revenues of struggling pension funds that have already lost euro20 billion ($26 billion) since 2009.
But Athens has minimal ground for maneuver. Without the rescue loans, the country will default on its massive debts in March, when it faces a euro14.5 billion ($19 billion) bond redemption.
Greece has been kept solvent since May 2010 by payments from a euro110 billion ($145 billion) international rescue loan package. When it became clear the money would not be enough, a second bailout was decided last October.
Stocks advanced Wednesday, while the euro was trading near two-month highs, as global markets were hopeful a deal would be struck in Athens. Greek shares closed 0.9 percent higher.
“We are finally approaching the endgame of the Greek talks,” said Gary Jenkins, managing director at Swordfish Research. “Ultimately it is difficult to see how they can do anything other than agree a deal. After all, the alternative is a disorderly default which could lead to a much deeper economic depression and potential civil unrest.”
If a deal is struck, Papademos and Finance Minister Evangelos Venizelos will brief the rest of the 17-nation eurozone. That meeting of European finance ministers could happen as soon as Thursday in Brussels, according to officials.
Provided political leaders accept the demanded austerity, Greek officials say a cabinet meeting will approve the deal, likely later Wednesday. Parliament will then have to vote on the agreement over the weekend.
Ratification should prove simple provided all three coalition partners back the deal, as they control a combined 252 of Parliament’s 300 seats _ enough to carry the vote even if there is a limited backbencher rebellion.
Coalition parties remain at odds over when to call a general election _ initially planned for this month when the coalition was formed _ as they face an increasingly hostile public suffering from a fifth year of recession.
The Socialists say Papademos should govern for two more years, while the conservatives want elections in April.
Some 91 percent of Greeks believe the coalition government is taking the country in the “wrong direction,” according to a February tracking poll published Wednesday in Greek daily Kathimerini.
Support for the Socialists, who won a landslide election victory in 2009, has dropped to 8 percent, while the neo-Nazi Golden Dawn group has attracted 3 percent support _ enough to achieve representation in parliament, according to Public Issue survey. Conservative New Democracy led with 31 percent, which is not enough to form a government on its own. Sampling data was not available.
Taiwan President Ma Ying-jeou named Sean Chen as premier, choosing an official who oversaw the island
U.K. retail sales rose in December as stores cut prices to lure consumers during the year-end holiday shopping season.
Sales including fuel rose 0.6 percent from November, when they fell a revised 0.5 percent, the Office for National Statistics said today in London. The December increase matched the median forecast of 21 economists in a Bloomberg News survey. From a year earlier, sales were up 2.6 percent.
The gain may not be maintained as U.K. unemployment rises, inflation outpaces wage increases and consumer confidence falls. With global growth cooling and the euro-area crisis damping export demand, concerns are growing that Britain is heading for another recession. A report today indicated Chinese manufacturing shrank for a third month in January.
The financial world initial rejoiced Friday when word came of a deal by most European countries _ including all 17 that use the euro _ to allow the European Commission to oversee national budgets and impose penalties if a country’s debt grows too much.
Since then questions have emerged about the willingness of each individual country to ratify the agreement, the lack of a short-term solution to high debt in Greece, Italy and Spain, and what the future monetary policy of the European Central Bank will be.
The Associated Press spoke with four experts Sunday about the deal and what implications it will have for the markets. Here are their thoughts, edited for clarity.
Peter Tchir, founder of TF Market Advisors: It has to go and be ratified. They’re talking about doing balanced budget amendments in each of the countries. It seems like this was done very last minute. I’m highly suspicious that there’s really a full buy in. I think some of these balanced budget acts are going to take a while to implement. There was also more document space talking about being able to waive penalties than what the penalties would be.
How serious are those punishments going to be and will they ever be enforced? If you look at monetary punishments, where there’s a fine, the country already believes it’s necessary to run a deficit in the current year because their economy is stagnating, are they going to get afraid because of the fine or just lump that into part of the cost? Will they get kicked out of the euro? Clearly at this point the EU has shown anything but a willingness to kick somebody out. They became so scared of that, that they cobbled out bailout after bailout.
On Monday and Tuesday the stock market is going to be looking for the ECB to come in and say, “We can buy as much sovereign debt as we want now.” I don’t think we are going to get that statement and that’s going to put downward pressure on the stock market. It’s going to finally hit home in the U.S. that the ECB does not believe in quantitative easing in the same way that the U.S. does and they’re not going to view this pact as a reason to change their view. That is going to disappoint the market.
Brian Gendreau, market strategist at Cetera Financial Group: There’s a long-term solution in place but there’s no solution to the current crisis. There’s still the prospect of default on Greek bonds and there’s still problems faced by Italy meeting the financing obligations moving forward. It is a welcome first step. I think there’s widespread recognition that it’s going to be a long process one way or another. There were compromises in the agreement.
There are a lot of questions that still remain. One of them is the role of the European Central Bank as a lender of last resort. The ECB has made it clear that they are willing to undertake the role of lender of last resort to banks but there’s a question of to what extent will the ECB be lender of last resort to countries.
This is going to set a better tone for the market going forward. There is a lot of repressed demand for stocks. There are a lot of people who have moved into CDs and Treasurys. People are going to be looking for the green light to move out of those funds. When they do, they’re going to move into stocks. Ultimately, the big beneficiary might be stock markets, including the U.S. stock market.
Paul Zemsky, chief investment officer for multi-asset strategies for ING Investment Management: Overall, it was a very positive step in the right direction but it wasn’t this grand bargain that I was hoping for and others were hoping for earlier last week. But some very good things did happen. The member states did agree to some legislation that would be more binding in terms of the deficits and debt. It would be overseen by the European courts.
I see two problems. One is that overall growth is slowing throughout the region. Germany is the bright spot. Most economists, including ourselves, have (forecast) a mild recession for next year. With slowing growth, it’s hard to get good budget numbers. Second, the agreement has been made but the laws haven’t been passed and signed.
There’s going to need to be pressure kept on these peripheral countries to go through with this. That means you are going to have to keep walking close to the edge in terms of the markets and the threat of the euro region breaking up if these guys don’t come through. We’re still not done with this dance with death. Until these laws are passed, there are going to be scares. There’s going to continue to be volatility coming from this region.
Marc Chandler, global head of currency strategy at Brown Brothers Harriman: On the eve of the European summit, the ECB provided an incredible amount of liquidity to the market. I don’t know if the market fully appreciates that yet. They were willing to loan money to banks for three years. We’re not talking about a short-term, one-week loan. This is a three-year loan essentially. As much as they want, provided they have the collateral, which they also liberalized the definition of.
The take-away point is that the euro and eurozone survives without the ECB being a backstop for the sovereigns and without European bonds being issued. They live to fight another day. But it doesn’t change things. They’re still heading toward a recession. The ECB is still going to have to ease policy. They still have something on the magnitude of 1.8 trillion euros ($2.41 trillion) of bonds maturing, concentrated in the first half of next year.
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Scott Mayerowitz can be reached at http://twitter.com/GlobeTrotScott.
Anticipating a strong presence in the new Egyptian parliament, ultraconservative Islamists outlined plans Friday for a strict brand of religious law, a move that could limit personal freedoms and steer a key U.S. ally toward an Islamic state.
Egypt’s election commission announced only a trickle of results from the first round of parliamentary elections and said 62 percent of eligible voters cast ballots in the highest turnout in modern history.
However, leaked counts point to a clear majority for Islamist parties at the expense of liberal activist groups that led the uprising against Hosni Mubarak, toppling a regime long seen as a secular bulwark in the Middle East.
The more pragmatic Muslim Brotherhood is poised to take the largest share of votes, as much as 45 percent. But the Nour Party, which espouses a strict interpretation of Islam in which democracy is subordinate to the Quran, could win a quarter of the house, giving it much power to affect debate.
A spokesman, Yousseri Hamad, said his party considers God’s law the only law.
“In the land of Islam, I can’t let people decide what is permissible or what is prohibited,” Hamad told The Associated Press. “It is God who gives the answers as to what is right and what is wrong.”
The Nour Party is the main political arm of the hard-line Salafist Muslim movement, which espouses a strict form of Islam similar to that practiced in Saudi Arabia. Salafis, who often wear long beards and seek to imitate the life of the Prophet Muhammad, speak openly about their aim of turning Egypt into a state where personal freedoms, including freedom of speech, women’s dress and art, are constrained by Islamic law _ goals that make many Egyptians nervous.
Salafis object to women in leadership roles, citing Muhammad as saying that “no people succeed if led by women.” However, when election regulations forced all parties to include women, Salafi cleric Yasser el-Bourhami relented, saying that “committing small sins” is better than “committing bigger ones” _ by which he meant letting secular people run the government.
In the end, the party put women at the bottom of its lists, represented by flowers since women’s photos were deemed inappropriate.
This week, Salafi cleric and parliamentary candidate Abdel-Monem Shahat caused a stir by saying the novels of Egypt’s Nobel laureate Naguib Mahfouz, read widely in Egyptian schools, are “all prostitution.”
Salafis are newcomers on Egypt’s political scene. They long shunned the concept of democracy, saying it allows man’s law to override God’s. But they formed parties and entered politics after Mubarak’s ouster, seeking to enshrine Islamic law in Egypt’s new constitution.
By contrast, the Muslim Brotherhood, Egypt’s largest and best organized political group, was officially banned under Mubarak but established a nationwide network of activists who built a reputation for offering services to the poor. After Mubarak’s fall, the group’s Freedom and Justice Party campaigned fiercely, their organization and name-recognition giving them a big advantage over newly formed liberal parties.
Stakes are particularly high since the new parliament is supposed to oversee writing Egypt’s new constitution. The Supreme Council of the Armed Forces, which took control of the country when Mubarak fell, has tried to impose restrictions on membership in the 100-member drafting committee. The Muslim Brotherhood has said it will challenge the move, and a strong showing by Islamists in the elections could boost its popular mandate to do so.
Hamed, the Nour Party spokesman, said democracy can’t pass laws that contradict religion.
“We endorse Egyptian democracy,” he said. “However, I don’t give absolute freedom to people to legislate to themselves and decide on what is right or wrong.
“We have God’s laws that tell us that.”
He suggested, for example, that alcohol should be banned and that a state agency could penalize Muslims for eating during the day during the holy month of Ramadan, when the devout fast from dawn to dusk.
The Muslim Brotherhood and Salafis have both cooperated and disagreed in the past.
They tried to form an electoral alliance, which broke down over disagreements about including Christians and women in their electoral lists. However, the two parties campaigned together in some areas and declined to contest certain seats so as not to split the Islamist vote and allow liberal candidates to win.
The strong Islamist showing worries liberal parties who fear the two groups will work to push a religious agenda. It has also caused many youth activists who launched the anti-Mubarak uprising to feel that their revolution has been hijacked. Still, the liberal Egyptian Bloc coalition, which is competing with the Salafis to be the second-largest parliamentary bloc, could counterbalance hard-line elements.
Cooperation between the Brotherhood and Salafis in parliament isn’t guaranteed, said Shadi Hamid, Middle East expert with the Brookings Doha Center. The Brotherhood is a pragmatic organization that will work with other parties to achieve its goals, while the Salafis shun compromise.
Once the parliament is seated, Hamid expects the Brotherhood to focus on establishing a strong parliamentary system, reforming state institutions and boosting the economy _ goals they share with liberal groups.
“Banning alcohol or passing laws on women’s dress are not on their priority list, and they see these issues as a distraction from the issues at hand,” he said.
Still, a strong Salafist bloc in parliament will have a “massive effect,” he said, by giving the group a larger platform for its views.
“The Salafis are going to insert religion into the public debate in a way that would not have happened otherwise,” he said.
Many in Egypt’s Coptic Christian population, which makes up 10 percent of the country, fear the Salafis will push for laws that will make them second-class citizens.
Even some religious Egyptians see the Salafi as too extreme.
“I am religious and don’t want laws that go against my beliefs, but there shouldn’t be religious law,” said Ahmed Abdel-Rahman, a geography teacher. “I don’t want anyone imposing his religious views on me.”
The election commission said Friday that more than 8 million eligible voters _ 62 percent _ participated in the first round. But it announced final results in only a few races. It remains unclear when complete final results will be released.
This week’s vote, held in nine provinces, will determine about 30 percent of the 498 seats in the People’s Assembly, parliament’s lower house. Two more rounds, ending in January, will cover Egypt’s other 18 provinces.
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