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Nokia (NYSE:NOK) Strikes Deal with Samsung

By
Carol Harper
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Nokia Corporation (ADR) (NYSE:NOK)

Nokia Corporation (NYSE:NOK) struck a deal with Samsung resolving their lengthy patent dispute. However, investors appeared unsatisfied with the financial terms of the agreement. Their anger was evident as the stock price was down more than 11% in premarket trading this morning. The deal increases sales revenue from the patent unit to approximately $1.1 billion or €1.02 billion, up from €578 million. This included catch-up payments.

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As far as Nokia was concerned, the patent business was a small part of its strategy following the planned takeover of Alcatel Lucent SA (NYSE:ALU). The takeover deal was worth about €15.6 billion.

As a result of the latest deal with Samsung, the patent unit’s run-rate is currently pegged around €800 million on an annualized basis. This was lower than the average analysts’ expectations of €900 million. Some believe that the agreement does not reflect the expectations that Nokia would be able to make more money from its patent portfolio. This is in comparison with its rival Ericsson (NASDAQ:ERIC), which has a run-rate of approximately €1.2 billion with Apple.

Cash Infusion

Nokia indicated that it expects to get a minimum of €1.3 billion in cash between 2016 and 2018 due to the settlement ad ongoing arbitration. The company has a similar dispute with another Korean firm, LG Electronics. Nokia is also said to be ready to commence negotiations with Apple in upcoming years.

A few years ago, Nokia divested its phone making business to Microsoft Corporation (NASDAQ:MSFT). As a result, the company is now focused on network equipment and retained a big handset patents portfolio.

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Factory Data Drags China Stocks Lower

By
Carol Harper
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bluebird

Chinese shares witnessed another drop today as Shanghai shed 1.78% on Monday after the manufacturing PMI fell to 49.4 in January. This was lower than the previous month’s 49.7, as well as missing expectations of 49.6. Though the miss owas only minor, the disappointment came from PMI for services, which eased to 53.5. Official data indicated that it slipped to its weakest since 2012.

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Investors were hoping that consumption would take over from industry in China. However, the data has challenged such hopes at least in the near-term. For the eleventh consecutive month, a privately-conducted survey, the Caixin/Markit manufacturing PMI of China indicated shrinking factory activity. Today’s market reversed gains witnessed on Friday in China following Japan’s central bank putting interest rates into negative territory.

According to ANZ’s Chief Economist for China, Li-Gang Liu, the manufacturing sector would not likely to see a turnaround this year. He said that there was already overcapacity and weakening global demand. The Chinese government was also currently focused on tackling pollution, which could further hurt economic growth. The Australian Bank expects that China will cut key reserve requirements in the next few months in response, though recent leaked memos from the People’s Bank of China have suggested no lowering of reserve requirements would be made in the near future.

In 2015, the Chinese government had propped up the stock market. However, so far this year, there are few natural buyers. Investors have been taking every rise in stock prices as an opportunity to lock in profit and exit positions.

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HSBC (NYSE:HSBC) Freezes Hiring, Pay In 2016

By
Andy Parker
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HSBC Holdings PLC (NYSE:HSBC) has instituted a global freeze on hiring and pay in 2016. The bank made the announcement to its employees on Friday through email.

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According to the email, the bank is planning to use the strategy to make major cost reductions by 2017 as also indicated in the investor update where it stated its plans to bring down costs by $5 billion. HSBC intends to lay off 8,000 employees out of the 48,000 workers in the UK, and a total of 25,000 employees globally.

HSBC, the biggest bank in the UK, claims that the cost-slashing measures are in response to tighter global restrictions and slow economic growth. The bank is also planning to relocate its headquarters that are currently in London. Its board met last week to discuss whether it would be beneficial for the firm to shift its headquarters to Hong Kong. The shift is also in line with the objectives of bringing down costs. HSBC is expected to reveal the decision next week though the actual date of the announcement has not been set. There is also a chance that the bank will settle with Japan as its new headquarters.

These are not the first efforts that the bank has employed to reduce its expenditure. The investment banking division slashed pay to contractors by 10% in October. The bank has also announced that its mobile banking and internet banking services have recovered after recent cyber-attacks.

HSBC is just one of the major global banks that are employing cost-slashing measures to boost investor returns and profitability. More steps like these have been reported in recent years as banks aim to reach their annual costs and profitability targets. There has therefore been a lot of uncertainty in the banking industry especially for those working for these firms as they live in fear of finding themselves out of jobs.

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Barclays (NYSE:BCS) and Credit Suisse (NYSE:CS) to Settle on Charges Against Dark Pools

By
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oversold

Credit Suisse Group AG (NYSE:CS) and Barclays PLC (NYSE:BCS) have agreed to settle on charges brought against them for misleading investors into their dark pools, or securities exchanges where outside parties cannot view the size or content of the orders involved.

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The two companies have agreed to settle federal and state claims brought against them after they admitted to breaking the law. Both firms have received the largest fines in history for dark pool cases. The fine charged to Barclays amounts to $70 million while Credit Suisse was charged $60 million, divided between the State of New York and the SEC.

Credit Suisse will also be fined an additional $24.3 million charged for carrying out illegal sub-penny orders from its dark pool. In total, the two firms will pay a fine amounting to $154.3 million. Officials from both firms have not made any comments regarding the settlements. Allegations brought against the banks for their dark pools indicate that both companies had promised to protect investors from dangerous high-frequency trading strategies.

Dark pools are different from regular public trades because they hide orders from other traders until execution. This allows institutional investors to trade shares in large volumes with the market responding in their favor. According to the settlement agreements, Credit Suisse has the right to withhold the answer as to whether they accept or deny the charges brought against them. The bank’s spokesperson was happy to announce that the bank has resolved the differences with the New York Attorney General and the SEC.

A representative from Barclays also stated that the bank has successfully resolved the issues and can now get back to serving its customers. The New York Attorney General had filed the lawsuit against Barclays in 2004 over grounds of liquidity profiling that allowed exceptions in favor of high-speed traders. He also announced that the settlements mark a major success over fraudulent dark pool trading that started when his office first sued the bank.

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Aetna (NYSE:AET) Beats By $0.15, Reports Revenues In-Line

By
Carol Harper
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Aetna Inc (NYSE:AET)

Aetna Inc (NYSE:AET) reported a 38% jump in net income in the fourth quarter. Its operating earnings increased 11% driven by higher underwriting margins, as well as increased fees and other revenue in its Health Care division, partly offset by higher general and administrative costs. Its revenue advanced 2% in the fourth quarter as both earningsand revenue came in above analysts’ expectations.

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Gloomy Outlook For The Year 2016

Despite topping predictions last year, Aetna preferred to be cautious and offered a downbeat outlook for 2016. The company is looking to achieve operating earnings of a minimum of $7.75 a share. That was 31 cents a share lower than the Capital IQ consensus estimate of $8.06 a share. Chairman and CEO Mark Bertolini said that it was projecting its earnings for the current year based on last year’s performance and disciplined pricing and execution.

The company indicated that it was working closely with the Justice Department and State regulators in getting the final approval of its planned acquisition of Humana Inc (NYSE:HUM). Bertolini said that the company would continue to advance its integration readiness plans. For that purpose, Aetna has already gotten seven necessary State approvals. He was confident that the transaction would be closed in the second half of the year.

Operating Earnings Grow

Aetna reported net income of $320.8 million, up 38% from $232.0 million last year. Its earnings surged 40% to 91 cents a share from 65 cents a share. Its operating earnings increased 11% to $482.1 million from $434.0 million while operating earnings per share advanced 13% to $1.37 from $1.22 in the prior year quarter.

Aetna’s total revenue was $15.05 billion, up 2% from $14.77 billion in the previous year quarter. The company attributed it to the growth in its government business and higher health care premium yields due to underwriting margins growth. This was partly offset by losses of membership in its group commercial insured products.

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Manufacturing Activity In China Disappoints Markets Again

By
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biotech

During the opening of the first week of the month, Asian markets showed mixed trading directions with Shanghai SE Composite and Hang Seng in red while Nikkei 225 and TSEC 50 Index finishing the day on a positive note.

Asian hours

The major development impacting the Asian trade came from China, where the manufacturing purchasing managers’ index (PMI) slipped further to 49.4 in January from 49.7 in December. The reading came below the estimates of 49.6, reconfirming fears that the world’s second-largest economy is under more than expected pressure.

Services PMI too fell to 53.5 for the month, brushing off expectations that consumption would become the driving factor of the economy. Meanwhile, another private survey, Caixin/Markit China Manufacturing PMI noted that the factory activity contracted for the 11th month in a row. The report triggered a fall in Shanghai SE Composite Index by 1.80% to 2,688.85. Hang Seng also shed 87.61 points or 0.45% to 19,595.50. However, both Nikkei 225 and TSEC 50 rose by 2% and 0.14% respectively today. Mumbai Sensex was marginally down ahead of the Reserve Bank of India’s monetary policy meet tomorrow.

Oil tanks again

On the other hand, European markets were choppy as they pared early day gains following the release of China’s PMI. The downward movement of oil prices also added to the concerns in the European markets. FTSE 100 was trading 0.64% or 38.68 lower at 6,045.11 while Dax shed 59.26 points or 0.60% to 9,738.85. France CAC 40 and Euronext 100 too were down by 0.37% and o.33% respectively. Only Switzerland’s Swiss Market Index gained marginally by 0.16% and was seen trading around 8,333.

The Bank of Japan’s surprise interest cut kept last week left the U.S. markets rejoicing. However, concerns about the economic growth hovered after GDP growth in the fourth quarter was reported at 0.7% versus the forecast of 0.8%. Both Dow Jones Industrial Average and S&P 500 Index closed the last trading session nearly 2.50% higher at 16,466.30 and 1,940.24 respectively.

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OPEC’s Reluctance to Cut Production Hurts Oil

By
-

Oil prices have shed most last week’s gains after weak Chinese Purchasing Managers’ Index (PMI) data fell for another month, adding to fears that the region as a whole slowing down. At the same time, lack of any clear indication about holding an emergency meeting to contain the oil price decline by OPEC has been weighing on the market.

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More Chinese weakness

China’s manufacturing activity dipped at its fastest pace in January since 2012. The preponderance of evidence pointing the contractions of the world’s second-largest economy has added to bearishness around crude oil. Brent crude, a global benchmark, is now trading at $35.90. U.S. West Texas International Crude is down over 3.5% to 32.39. The current trading level is critical to set a tone for the upcoming days as it can either sink back into sub-$30 level or march ahead from here.

No emergency meeting

Last week was full of developments that hinted at a near-term oil rally. Reports in Russia added to the speculative fever that OPEC’s key member Saudi Arabia had called for cooperation from Russia over the oil glut and that Russia had responded affirmatively. However, these speculations were put to an end by a statement from a senior OPEC representative, who ruled out any possibility of emergency talks in the near future. Beyond this, Iran has refused to cooperate in an output cut.

All these reversals have frustrated the global oil market, which is now flooded with close to $1 million barrels per day in excess supply. BMI Research has trimmed its oil price target to $40 per barrel from $42.5 per barrel for 2016. The research firm has outlined weakness in the Chinese Yuan, an oversupply of oil and continuing concerns over global economic growth as factors that will weigh over oil throughout 2016.

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U.S. Stock Futures Drop Ahead Of The Opening

By
Andy Parker
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Insiders

Judging from the direction of the U.S. stock futures, Wall Street could be set for a lower opening today. Moreover, U.S. market is likely to mirror the sentiment that gripped its mixed or rather weak European and Asian counterparts.

Stock Futures Hint to lower opening

Ahead of the opening, S&P 500 Futures were down by 0.34% or 6.50 points to 1,923.75 while Nasdaq Futures slipped 0.34% or 14.50 points to 4,248.75. The U.S. markets had closed the last session of the previous month steeply higher after the Bank of Japan had announced a negative interest rate cut.

The sentiment around the globe was hit by the weak Chinese factory activity and slide in oil prices. The official data in China showed that its manufacturing activity declined to a record low of 49.4 in January compared to 49.7 in December. This led Britain’s FTSE to shed nearly 0.40% to 6,060.49 while both France and Germany’s CAC 40 and DAX too have lost close to 0.55% respectively. Shanghai SE Composite Index dropped by 1.78% to 2,688.85 following the release of the data.

Oil And Alphabet

Apart from this, a statement from OPEC has nearly erased hopes of any near-term action on oil glut, sending the oil prices back into negative territory. Later in the day, the market participants will be looking forward to Manufacturing Activity report for January to be published by the U.S. Institute of Supply Management. As per the market estimates, the numbers could drop by 0.2 points to 48 in January, reflecting the lowest levels since July 2009. Also, U.S. inflation numbers alongside the Federal Reserve Speech will be among key updates to release today.

Additionally, Alphabet Inc (NASDAQ:GOOGL)’s fourth-quarter earnings to be reported as Alphabet for the first time will come after the closing bell and will be a major development for the markets today.

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U.S. Dollar Strong Against Global Currencies After BoJ’s Negative Rate Cut

By
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US-Dollar pro Packung

The Japanese Yen is trading slightly lower against the U.S. Dollar by 0.04% to 121.26 this morning. Yen weakness came after the Bank of Japan unveiled negative interest rates on Friday, which could further push the European Central Bank to expand its own monetary easing policy.

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The yen traded broadly weaker against major currencies after the Bank of Japan’s statement to slash rates to a negative 0.1% took the markets by surprise. The BoJ’s move is seen as a part of its efforts to curb deflationary pressure and prompt commercial lenders to extend more loans, essentially penalizing them for not loaning out excess funds.

On the other hand, the U.S. dollar remains buoyant against major currencies, supported by a slew of data. The much-awaited update on the U.S. economy showed that growth in the fourth quarter was at 0.7%, slightly below the estimates of 0.8% growth.

The Commerce Department reported that the U.S. economy rose 2.4% in 2015. The BoJ’s unexpected move alongside monetary easing measures undertaken by the European Central Bank shows the diverging monetary policy stance between the U.S. and the rest of the world. Manufacturing activity reported from the Institute of Supply Management in the U.S. will be a significant update to watch for later in the day.

China PMI dipped

The Chinese Yuan fell against the greenback and other currencies after the Chinese manufacturing purchasing managers’ index fell below a level of 50 to 49.4 from a reading of 49.7 in December. The PMI highlights that growth in China is still contracting, even by official government estimates. Apart from this, another report indicated that China’s Caixin factory PMI inched up marginally to 48.4 from 48.2, pointing that the region began 2016 on a weak note. USD/CNY was seen trading up by 0.05% at 6.5791.

The British Pound was strong against the U.S. Dollar, up by 0.31% to 1.4287. A reading on U.K. manufacturing activity is due to be released today.

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Here are Two Companies with Upcoming Catalysts in Biotech

By
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GALT
GALT

January was a volatile month in the biotech space, with a host of data releases and FDA decisions dominating sentiment. Things aren’t about to slow down, however. We’ve got plenty of potential catalysts to loo forward to during February – here are two dates to keep an eye on, and why.

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Telesta Therapeutics Inc. (OTCMKTS:BNHLF)

Telesta shareholders have had a rough time as late. The company has developed a treatment for non-muscle invasive bladder cancer (NMIBC) called MCNA. It’s a space that desperately needs updating – no new therapies have been approved since the late 80s – and the current SOC (for patients that are not responsive to first line) is an invasive, painful surgery that removes the bladder.

The drug is a nucleic acid complex formed by breaking down a type of bacteria called Mycobacterium phlei. When broken down, and introduced to the bloodstream, it stimulates the immune system into forming a resistance to bladder cancer cells, both in terms of destroying the already present cells and – concurrently – inhibiting proliferation (at least, Telesta hypothesizes).

The company submitted a Biologics License Application (BLA) back in June last year, and the FDA subsequently approved the BLA for a six-month priority review, giving a PDUFA date of February 27, 2016.

Things aren’t straightforward, however. In the trial on which the BLA is based the drug achieved overall disease-free survival (DFS) rate at 1 year and 2 years of 25% and 19%, respectively – not a great response. To compound this, the FDA set up an advisory panel, and the panel slammed MCNA in its report. Only six of the 24 members of the panel voted for approval, and all the others voted against it (no abstainees), when asked:

Does MCNA have an overall favorable benefit-risk profile for the treatment of non-muscle invasive bladder cancer at high risk of recurrence or progression in adult patients who failed prior BCG immunotherapy, e.g., in patients who are BCG-refractory or BCG-relapsing?

Of course, the FDA doesn’t have to take the same stance as the panel, but it doesn’t bode well for Telesta. Chances of approval look slim, and if the FDA doesn’t outright decline the drug, it will likely at best require further trials, which will add cost to an already inflated development bill. The company had a little over $40 million cash and equivalents at last count (September 30, 2015) on its balance sheet, so near term it should be able to bear these costs, but it may need a capital raise going forward to fund further development.

For the speculative, risk tolerant trader, a short position in Telesta could be a nice short term allocation.

MediWound Ltd. (NASDAQ:MDWD)

At the end of January, MediWound announced its intentions to report data from its ongoing phase II in its lead development program – EscharEx. The treatment is targeting the removal of what’s called eschar in burn victims. Eschar is the dead skin that farms and flakes at the site of a burn in humans. It’s already approved in Europe, and, is currently in a host of trials across the US for a range of indications – burns, insect bites, hard to heal wounds etc. This latter indication has just wrapped up a phase II, and MediWound has promised us the topline data from the trial in – and to quote the company’s CEO – very early February.

We take this to mean sometime over the next few days, and with the treatment already approved in Europe, chances are we will get a positive release. Nothing is confirmed, of course, but it’s as close to a sure thing as we get in the biotech space. That said, it’s still a risky allocation. The company generated very little revenues from its current approvals (circa $200,000 a quarter) and last quarter netted a loss of $7.8 million. There’s not a huge market for its product, it will likely have to expand into other areas if it is to operate profitably going forward. This isn’t unusual in biotech – expanded indications can quickly double or triple a treatments potential – but it’s something to keep in mind if considering an exposure.

So there we go. Two small caps with upcoming catalysts on the opposite ends of the prospect-scale. Keep an eye on the filings page at the SEDAR for Telesta here and MediWound at the SEC here to stay updated.

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