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Bank of America strategists see more pain in store before stocks hit low levels

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(Bloomberg) — Stock markets and the U.S. economy will face more pain before the Federal Reserve moves away from aggressive policy tightening, according to Bank of America Corp strategists.

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Strategists led by Michael Harnett wrote in a note that the rally in US stocks on Thursday after high inflation resembled a “bear hug” amid oversold conditions, high liquidity levels and a lack of credit event. The development was the latest in a volatile year marked by recession fears as the Federal Reserve has been unshakeable in its determination to control prices.

The strategists wrote that it was a “good counter-march”, but the lows wouldn’t be reached until 2023. They said further economic and market suffering would be necessary before the Fed backtracked.

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Separately, Barclays Plc strategist Emmanuel Kao said on Friday that a defensive situation and “significant bearish sentiment” could help stocks rebound from oversold levels, but “growth fundamentals and policy continue to defend the continued rally.”

According to strategists at Bank of America, the best contrarian trade once stocks hit next year’s lows would be to sell US dollars and continue to buy a portfolio with 60% of its holdings in stocks and 40% in bonds. The bank’s bull and bear indicator remains at the “maximum downside” level, often seen as a contrarian buy signal.

The bank said in the note, citing EPFR Global data compiled before Thursday’s US inflation report, that global equity funds saw inflows of nearly $300 million in the week to October 12. Cash flows were $100 million, while $9.8 billion were drawn from bonds and gold saw $300 million worth of redemptions.

In the United States, equity funds received $5.2 billion in inflows in the last week, while funds in Europe posted outflows for the 35th consecutive week, Bank of America said.

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Through trading style, investors have funneled money into big US companies, value and growth. Among the sectors, technology had the largest inflows of $1 billion while consumer stocks had the largest recalls of $800 million.

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Microsoft is ready to fight for the $69 billion Activision deal

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(Bloomberg) — Microsoft is ready to fight over its $69 billion acquisition of Activision Blizzard Inc. If sued, the US Federal Trade Commission seeks to block the deal, according to a person familiar with the matter.

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The Xbox maker has not been in talks with the FTC about remedies or waivers intended to approve the deal, said the person, who asked not to be identified discussing a confidential matter. The person added that FTC staff are wrapping up their investigation and are expected to make a recommendation soon. The FTC commissioners will then vote on whether to file a case.

In the event that the FTC attempts to block the case, Microsoft is preparing to challenge that decision in court, said the person, who requested anonymity speaking about the internal strategy. Jennifer Rhee, an antitrust analyst at Bloomberg Intelligence, said it wouldn’t surprise her if the FTC filed a lawsuit seeking to block the deal, but noted that a court battle would be hard for its enforcers to win and Microsoft could prevail — though the legal battle could stretch. after the deal’s expiry date. Microsoft said it expects to close the deal by June 30.

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Another option for Microsoft would be to abandon the deal in the face of a challenge from the Federal Trade Commission. That’s what the company did in 1995 when the US government sued to block its acquisition of Intuit Inc. to manufacture accounting software, as Microsoft said it did not want to face a long legal battle.

Microsoft’s best chance of winning approval to buy Activision is to convince the Biden administration to accept a settlement in which it promises it will not withhold its popular titles from competitors.

But Biden’s antitrust enforcers aren’t fond of such agreements — especially after the Ticketmaster bombing this month brought to light a failed 2010 Justice Department settlement with Live Nation Entertainment Inc.

The FTC takes a tough approach to mergers, especially when it comes to technology and digital markets, but has not indicated whether it plans to sue to block the deal.

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In July, the agency filed a lawsuit to block Meta Platforms Inc. From the purchase of the virtual reality application Fitness Inside, claiming that the deal can eliminate competition in a small number of markets, referred to as “emerging competition”.

Microsoft and the Federal Trade Commission declined to comment. Politico reported last week that the Federal Trade Commission is likely to challenge the deal.

The US is one of at least three jurisdictions in which regulators have raised questions about the mega deal, which would dramatically change the landscape of video games and put Microsoft in third place in the global gaming market behind Tencent Holdings Ltd. and Sony Group Corp.

European and UK antitrust regulators have raised questions about whether the popular Call of Duty game franchise will still be available to gamers on Sony’s PlayStation console and whether the merger will allow Microsoft to take a dominant role in the burgeoning but still small market for cloud gaming services.

Microsoft has offered Sony a deal whereby Call of Duty games will be available on PlayStation for ten years, though the companies will need to put in place financial terms to the agreement, the person said.

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That person said the software giant advised regulators of these discussions, but did not submit a formal remedy proposal because the review process had not progressed to that stage.

It doesn’t make financial or strategic sense for Microsoft to keep the best-selling PlayStation game franchise because more copies of games are sold on PlayStation than on Xbox and because such a move would anger gamers in a way that could have negative implications for Microsoft. In fact, the acquisition wouldn’t be financially viable for Microsoft if it cut Call of Duty to PlayStation, the person said.

Given the various stages of various investigations around the world, Microsoft will likely discuss this move first with the European Commission, which has set March 23 as the deadline for completing its in-depth review of the deal.

The person said Microsoft hopes the remedies it provides to the European Union will be sufficient globally. However, UK regulators will likely want additional steps from the company.

The UK’s Competition and Markets Authority is currently under an in-depth investigation of the deal after an initial investigation found concerns in game consoles, multi-game subscription services and cloud gaming marketplaces.

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The agency said in an October document outlining the scope of its investigation that it was concerned that the deal could allow Microsoft to gain massive market power that would allow it to cut out competitors such as Sony. Although Microsoft promised it would not do so because of reputational damage to Xbox or Call of Duty, the watchdog said it had not identified “convincing evidence” to believe the statements.

Scrutiny of the dominance of big tech companies by the UK agency has intensified since it gained new powers post-Brexit.

Microsoft and the CMA will appear at a key party hearing in mid-December, part of the UK merger process that will allow them to segment and test the parties’ arguments. The agency is expected to make an interim decision by January, and the deadline for a full decision is March.

— With assistance from Emily Birnbaum and Stephanie Bodoni.

(Updates to add the previous acquisition challenge in the fourth paragraph.)

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ABB agrees to pay $315 million to settle coordinated African bribery investigation (NYSE:ABB)

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J2R/iStock Editorial via Getty Images

ABB (New York Stock Exchange:ABB) She agreed to pay more than $315 million The US Department of Justice announced on Friday that it is ending a multinational investigation into the bribery of a high-ranking official of South Africa’s state-owned energy company Ascom.

ABB (ABB) bribed an Eskom official during 2014-2017 “in order to corruptly obtain classified information and win lucrative contracts,” the DOJ said.

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The company’s subsidiaries also pleaded guilty to one count of conspiracy to violate anti-bribery provisions of the US Foreign Corrupt Practices Act.

The Justice Department said its decision was coordinated with prosecutors in South Africa and Switzerland, as well as the US Securities and Exchange Commission.

The company said in September it had set aside $325 million to cover costs related to the investigations surrounding the Kozel power plant in South Africa.

ABB’s (ABBQ3 results included above-average revenue and order growth, as well as the best margins seen in many years, but the next 12-18 months should be more challenging for reported revenue and order growth, Stephen Simpson writes in Post analysis on the search for alpha.

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The Swedish scientist behind the Alzheimer’s drug has big ambitions

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As the Japanese pharmaceutical company Eisai presented data this week confirming that it had developed the first drug to slow cognitive decline in Alzheimer’s patients, the audience applauded at a conference in San Francisco.

Among those present was Lars Lanfelt, a little-known Swedish scientist invented The pioneering drug, known as lecanemab, would make a fortune if approved and successfully marketed.

BioArctic, the company he co-founded in 2003 with Pär Gellerfors, struck a licensing deal on monoclonal antibody therapy with Eisai in 2007, giving it hundreds of millions of dollars in milestone payments and royalties on lecanemab sales.

About 55 million people suffer from dementia worldwide and Alzheimer’s disease accounts for up to 70 percent of these cases, according to the World Health Organization.

Analysts predict that the drug could generate sales of up to $10 billion a year, a prospect that would turn BioArctic, as well as Eisai and its co-owner of the drug, US biotech Biogen.

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“It’s nice to have money but that’s not what motivates me. It was the science and the opportunity to build a Swedish company,” the 73-year-old told the Financial Times.

“We want [BioArctic] To be a complete pharmaceutical company: this is our ambition.

Brain scan for Alzheimer’s disease © BSIP SA / Alamy

Shares in BioArctic, which has just 75 employees, have more than tripled in value since Eisai revealed in September that lecanemab slowed the rate of cognitive decline in early-stage Alzheimer’s patients by 27 percent.

The Stockholm-listed company is now worth nearly $2 billion and hiring quickly, with ambitions to sell the drug in the Nordic countries where it owns the rights to lecanemab in collaboration with Eisai.

Lecanemab could be approved in the US as early as January under the US Food and Drug Administration’s accelerated approval pathway. But significant hurdles remain, including satisfying doctors’ concerns about its safety and whether the clinical benefits justify the risks from side effects.

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Investors also need to be convinced that Eisai will not repeat the mistakes of its partner Biogen, whose shares plunged last year after the failed launch of a similar Alzheimer’s drug called aducanemab that the Japanese group also helped develop.

Biogen initially priced the one-year Aducanemab treatment at $56,000 despite concerns among some health experts who cautioned there was no conclusive evidence of its benefits.

Analysts said this week’s presentation of comprehensive data on licanimab at the Alzheimer’s Clinical Trials Conference in San Francisco, along with the publication of a peer-reviewed article in the New England Journal of Medicine, was a positive development.

“Is it a cure? No. Are we there yet? No, but the data set is clean and shows clear benefit,” said Evan Segerman, an analyst at BMO Capital Markets.

“Based on this data, we are very confident in lecanemab’s approval and eventual reimbursement for the Centers for Medicare and Medicaid Services (CMS),” he said.

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BioArctic’s lab and offices in Stockholm, Sweden, where early research into neurodegenerative diseases such as Alzheimer’s and Parkinson’s is carried out © BioArctic / Gustav Gräll

The decision by CMS, the US federal agency that administers national insurance plans, to limit insurance coverage for aducanemab to people undergoing clinical trials hurt the drug’s commercial prospects.

Despite the euphoria in San Francisco this week, some researchers and investors remain cautious about the prospects for lecanemab, a drug that targets sticky plaques called beta-amyloid that build up in the brain. They say the treatment produces only “moderate” clinical benefits compared to a placebo and can cause serious side effects including brain bleeding.

The Death cases Two of the patients treated on likanimab, who were also taking blood-thinning medications, also raised questions about whether large numbers of patients on anticoagulants could eventually be excluded from taking the treatment.

“I suspect that the lack of clear clinical efficacy will mean that licanimab will not be widely taken up in healthcare systems around the world,” said Robert Howard, professor of geriatric psychiatry at University College London.

Lanvelt disputes that assessment, arguing that a 27 percent reduction in the rate of cognitive decline is clinically significant and sufficient for the drug to be approved and released. He said the results of the experiment also confirmed a controversial theory known as the amyloid hypothesis, which states that Alzheimer’s disease is caused primarily by the buildup of plaques in the brain.

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“It’s been shown that amyloid beta causes Alzheimer’s disease as much as HIV causes AIDS. I think it’s the same level of evidence,” he claims.

Many researchers disagree that amyloid beta is now proven to be the “primary cause” of Alzheimer’s disease, saying that it is a complex disease with many contributing factors.

“Amyloid beta probably contributes about 30 percent to overall disease, but there are many other disease proteins and other conditions that can increase the rate of decline,” said Dr. Keith Fossell, a UCLA professor of neuroscience. Angeles.

It was Lanvelt’s discovery in the early 1990s of a mutation in the gene responsible for beta-amyloid that helped establish a link between sticky plaques and Alzheimer’s disease. Nearly a decade later while working as a researcher at Karolinska Institutet — a Swedish medical body — he discovered another genetic mutation linked to beta-amyloid clusters called profibrils, the rod-like structures that are a key target for lecanemab.

Dubbed the ‘Arctic mutation’, it led to the discovery of the mAb158 monoclonal antibody, which became lecanemab.

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said Lanfelt, who owns 33.5 percent of BioArctic stock but controls 49.3 percent of the biotech’s voting rights. He sold a small portion of his stake in October.

If likanimab turns out to be a commercial success, Lanfelt said, BioArctic will use the proceeds to develop drugs targeting Parkinson’s disease and other disorders of the central nervous system. Despite his age, he said he wants to continue working at BioArctic as long as he can contribute to research.

“You can’t change your lifestyle at this age,” Lanfelt said, adding that he would indulge himself in buying an electric car.


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