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Selloff in Bonds, Emerging-Market Assets Deepens as Dollar Gains


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Routs in bonds and emerging-market assets intensified, while the dollar continued to strengthen as investors positioned for the wave of U.S. fiscal stimulus that President-elect Donald Trump has pledged to unleash.

Yields on 30-year Treasuries rose to the highest level since January, with last weeks record debt selloff bleeding into Monday amid losses from Asia to Europe. The Bloomberg Dollar Spot Index climbed to a nine-month high, with the greenback gaining against most major peers. U.S. stocks took a breather as a gauge of shares in developing nations sank to a four-month low. Copper climbed with nickel, while crude oil fell with gold.

Trumps election as leader of the worlds biggest economy is sending shock waves through global markets amid speculation his promise to bolster infrastructure spending will fuel growth and spur inflation, triggering a faster pace of U.S. policy tightening. More than $1 trillion was erased from the value of bonds last week, while equities added that amount and industrial metals soared by the most in four years. Emerging markets are being hit by an exodus of capital amid concern Trump will implement more protectionist trade policies.

Trump has introduced so much uncertainty, around the fiscal outlook, the outlook for foreign demand for Treasuries given his protectionism and his views on China, uncertainty around the outlook for the Fed, said John Davies, a rates strategist at Standard Chartered Plc in London, which lifted its forecast for Treasury yields on the election. Theres an uncertainty premium, rather than just expectations of much more Fed tightening, being priced into Treasuries, he said. We think theres room for this to continue.

Bonds

Ten-year U.S. Treasury yields jumped 11 basis points, or 0.11 percentage point, to 2.26 percent as of 5 p.m. New York time, their highest close since early January. Yields surged by 37 basis points last week, the most in three years, amid speculation Trumps plans to boost spending and cut U.S. taxes will swell the budget deficit and fuel price growth. The 30-year yield increased as much as 13 basis points Monday, to 3.06 percent.

Fed Vice Chairman Stanley Fischer said Friday that the central bank was close to achieving its goals of maximum employment and price stability, strengthening the case for a rate hike. Pacific Investment Management Co. says long-term yields may have bottomed out and is predicting three rate hikes by the end of next year. Futures prices indicate a 92 percent chance of a rate hike at the Feds December policy meeting.

Yields will continue to rise over the next year, said Hiroki Shimazu, an economist and strategist at the Japanese unit of MCP Asset Management in Tokyo. The fundamentals are very strong, particularly in the U.S. There are some signs of higher inflation pressures. Trump is pushing this phenomenon.

Benchmark 10-year German bunds capped their longest losing streak since May, while yields on similar-maturity Italian debt climbed to the highest level since July 2015. U.K. 10-year gilts extended their slide to a sixth day.

The selloff in Asia-Pacific bonds looked set to extend into Tuesday, with yields on 10-year Australian and New Zealand government debt up at least six basis points in early trading in their fourth rising day.

Currencies

Bloombergs dollar index, which tracks the greenback against 10 major peers, rose 0.7 percent Monday, rising for a fourth-straight day. The euro fell versus the greenback for a sixth session, its longest run of declines in six months, dropping 1.1 percent to $1.0737.

The yen sank 1.7 percent to its weakest level since early June. Japans economy expanded by an annualized 2.2 percent in the last quarter, data Monday showed, exceeding the forecast for 0.8 percent growth in a Bloomberg survey of economists and easing pressure on the Bank of Japan to further boost stimulus.

The dollar is strengthening along with the rise in U.S. yields, reflecting expectations for economic expansion from fiscal spending, said Yunosuke Ikeda, Nomura Holdings Inc.s head of Japan foreign-exchange research in Tokyo. Japans 2 percent growth can be used as a reason for the BOJ not lowering interest rates for a while.

New Zealands dollar dropped to a one-month low after an earthquake rocked the country early Monday. South Koreas won slipped to its weakest level since June amid growing calls for President Park Geun-hye to be impeached over an influence-peddling scandal. Chinas yuan slid to a more than six-year low in onshore trading, beyond a level at which it was pegged by regulators following the 2008 financial crisis.

The MSCI Emerging Markets Currency Index extended last weeks losses, falling 0.2 percent. Mexicos peso attempted a rebound after a Trump adviser hinted in a Financial Times opinion piece that the president-elect is open to negotiations before imposing import barriers. Trump also pledged during the campaign to make Mexico pay for a wall between the two countries to deter illegal immigration.

Commodities

Copper rallied as much as 3.4 percent in London before ending the day up 0.2 percent. The metal surged 11 percent last week as Trump vowed to spend more than $500 billion rebuilding American infrastructure, and as Chinese investors stepped up their purchases.

Iron ore climbed to a two-year high on the Dalian Commodity Exchange as data showed rising steel output in China, the worlds largest steelmaker. Goldman Sachs Group Inc. said the initial reaction of iron ore and copper prices to the infrastructure spending proposed by Trump has been excessive and analysts reiterated their view for sequentially lower prices.

Gold touched a five-month low, after sliding last week by the most in three years as the prospect of Fed rate increases under Trump strengthened the dollar.

Oil closed at an eight-week low in New York, slipping 0.2 percent to $43.32 a barrel, as Iranian output rose and the dollar surged.

Stocks

The S&P 500 Index was little changed at 2,164.20, after slipping 0.1 percent on Friday, snapping a four-day gain that left it up 3.8 percent in the week.

Some of the worlds biggest technology companies including Apple Inc. and Microsoft Corp. dragged the Nasdaq Composite Index down 1.1 percent amid concern over what Trump has said about international trade. Meanwhile, the Russell 2000 Index of smaller companies rallied to a record.

Stocks have outperformed bonds since Trumps presidential election win, on speculation his pledge to spend more will trigger interest-rate hikes amid a pickup in growth and inflation. Equities had their biggest inflows in 17 weeks as bonds saw redemptions, for their largest gap in 12 months, a Bank of America Corp. report on Thursday showed.

Theres a lot of re-positioning going on in the market rather than the whole market rolling over, with the sectors expected to do well under Trump outshining those which should fare worse, said Jasper Lawler, a London-based analyst at CMC Markets Plc. We are starting to see a reallocation according to the fiscal policy.

Banks and miners again provided the main support to European shares amid continued investor optimism about the benefits of a Trump presidency. The Stoxx Europe 600 Index rose 0.2 percent, paring earlier gains. The MSCI Emerging Markets Index fell 1.1 percent

In Asia, index futures diverged, with the yens selloff buoying contracts on Japans Nikkei 225 Stock Average, while futures on other equity benchmarks retreated. New Zealands S&P/NZX 50 Index, the first major gauge to start trading each day, fell 0.1 percent at the start of Tuesday trade.

Read more: http://www.bloomberg.com//news/articles/2016-11-13/asian-futures-outside-japan-tip-stock-losses-as-quake-hits-kiwi


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Bonds Rise With Emerging Markets After Trump Selloff; Oil Surges


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The fallout from Donald Trumps election to the U.S. presidency eased off in financial markets with Treasuries and emerging markets halting their slide. Stocks jumped with crude.

Treasury 10-year note yields fell from this years high and Italys bonds outperformed German bunds, which investors tend to favor in times of turmoil. The Dow Jones Industrial Average climbed to a record and shares in developing nations rallied after a four-day slump. The dollar advanced to a five-month high against the yen, and Mexicos peso led gains among major currencies. Oil surged the most in seven months as OPEC members were said to be making a final diplomatic push toward securing a deal to cut output.

Trumps election victory, which came with pledges to cut taxes, spend more than $500 billion on infrastructure and restrict imports, triggered a record selloff in global bonds as traders assessed the implication for inflation and interest rates. Some, including Fidelity Investments Ford ONeil, have already expressed skepticism that Trumps proposals will be fully backed by Congress, while Goldman Sachs Group Inc. last week said the rally in iron and copper was too much, too fast.

Many people were surprised by the market reaction to the election, but now portfolio managers are starting to focus more on where potential investment opportunities may be with a Trump administration, said Ross Yarrow, director of U.S. Equities at Robert W. Baird & Co. in London. There has been lots of chatter of fiscal stimulus and tax reform, but there are still a lot of moving parts and no firm details.

Bonds

The yield on benchmark Treasury 10-year notes dropped three basis points, or 0.03 percentage point, to 2.23 percent as of 4 p.m. New York time. The 41 basis-point jump over the last three trading sessions marked the steepest climb in more than seven years and the 14-day relative strength index for the securities indicated they were the most oversold since 1990, a potential signal that they may be set for a reversal.

ONeil, who oversees about $100 billion in bonds for Fidelity Investments, said the sharp run-up in yields following the election may not be justified given that Trump will face resistance from Congress in getting his fiscal stimulus plans approved.

Federal Reserve Bank of Richmond President Jeffrey Lacker said Monday that easier fiscal policy may require higher rates, but its too early for the central bank to react to potential policy changes by the incoming administration.

Italys 10-year yield slid 12 basis points to 1.96 percent, after rising for five consecutive days, and that on Spanish securities with a similar due date dropped to 1.45 percent, from as high as 1.66 percent on Monday. German bund yields were little changed at 0.31 percent, as a report showed growth in Europes biggest economy slowed to the weakest pace in a year last quarter.

Indian bonds rallied on expectations liquidity will improve in the wake of Prime Minister Narendra Modis surprise Nov. 8 crackdown on unaccounted wealth through the withdrawal of high denomination bills. Japans 10-year bond yield increased to zero, having been negative for almost eight weeks, as a gauge of demand weakened at a sale of five-year securities on Tuesday.

Currencies

A broad index of the greenback fluctuated after a four-day rally, its longest in a month, as U.S. retail sales figures were stronger than forecast, while Federal Reserve Bank of Boston President Eric Rosengren said the central bank would tighten monetary policy faster with more fiscal stimulus. The president-elects proposals to increase spending and cut taxes are fueling bets economic growth will accelerate and push the Fed to raise interest rates.

The dollar is potentially going to go a lot higher still, if we do go down the route of extra fiscal stimulus, which would also result in higher interest rates, Jeremy Hale, head of global macro strategy and asset allocation at Citigroup Inc., said in a Bloomberg Television interview. That mixture of growth stimulus through the fiscal side and tighter monetary policy can be very powerful for the currency.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, lost 0.1 percent. It surged 2.8 percent last week, the most since 2011, and on Monday erased its losses for this year. The greenback rose 0.8 percent to 109.23 yen.

The pound fell for a second day versus the dollar as a report showed U.K. inflation unexpectedly slowed in October. Bank of England Governor Mark Carney told lawmakers that sterling weakness was due to the outlook for slower growth.

The MSCI Emerging Markets Currency Index rose 0.4 percent as Mexicos peso and South Africas rand rallied more than 1.8 percent. Chinas yuan slipped to its weakest level since 2008.

Commodities

Iron ore slid 9 percent in Singapore, extending the last sessions retreat from a two-year high. The price soared by a record 27 percent last week, driven by speculative interest in China and optimism Trumps policies will boost steel demand. Goldman Sachs said Friday that iron ores reaction to the Trump win was excessive, while Capital Economics Ltd. warned prices will face growing pressure from rising supply.

Copper pulled back from near a one-year high, while gold rebounded from a five-month low. It slid 4.4 percent over the last three days as the dollar strengthened.

Crude oil rose 5.8 percent to $45.81 a barrel in New York. Qatar, Algeria and Venezuela are leading the effort to finalize a deal, a delegate familiar with the talks said.

Stocks

The S&P 500 Index rose 0.8 percent to 2,180.39, after edging lower Monday for a second straight decline. The Dow Average advanced for a seventh straight day, while the Nasdaq Composite Index rallied 1.1 percent.

As central bankers look for signs of stronger growth, a report today showed sales at retailers rose more than forecast last month in a broad advance after an even stronger September than initially estimated, marking the biggest back-to-back increase since 2014. A separate reading on November manufacturing in the New York region unexpectedly rose.

The retail sales data showed broad-based gains rather than just narrowly focused on home improvement and autos. Thats heartening, said Brian Jacobsen, the chief portfolio strategist at Wells Fargo Funds Management LLC, which oversees $242 billion. This is another data release that if the Fed had in hand when it met at the beginning of November, it probably would have hiked. The economic data isnt likely going to derail this Trump-bump in the market. It could be handed off to a Santa Claus Rally.

The Stoxx Europe 600 Index rose 0.3 percent. It has swung between intraday gains and losses for six sessions, matching a streak last seen in August, and has struggled to break out of a trading range of about 20 points since July.

Read more: http://www.bloomberg.com//news/articles/2016-11-14/futures-outside-japan-tip-more-stock-losses-as-bond-rout-endures


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From Nightmare Drug to Celgene Blockbuster, Thalidomide Is Back


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The modern drug-regulation system traces back to a once-popular morning-sickness pill whose linkage to babies born with flipper-like limbs in the 1960s led the U.S. to tighten oversight for approving medications.

That makes it all the more amazing that Celgene Corp. has built itself into a biotech powerhouse, rebranding the drug thalidomide using a slightly different name: Thalomid. Recently unsealed documents in a lawsuit by a company saleswoman-turned-whistleblower allege that its success is due to an aggressive campaign to encourage doctors to prescribe it and successor drugs to treat maladies beyond those the FDA authorized.

After some studies suggested thalidomide could treat blood cancer but long before it was authorized for it, Celgene created a thriving market by hiring doctors to tout uses beyond what the product was approved for and ghostwriters to promote the drug in medical journals, according to the suit. Though doctors have broad latitude in prescribing drugs, even for uses that arent approved, drugmakers cant push off-label uses. Manufacturers including Pfizer Inc. and Johnson & Johnson have paid billions of dollars to settle such claims.

Even after the Food and Drug Administration approved Thalomid for multiple myeloma, a blood cancer, in the mid-2000s, Celgene continued to promote it for other forms of cancer, including cervix, thyroid and brain, whistleblower Beverly Brown alleges in the suit, filed in 2010. 

Celgene vigorously disputes the allegations.

Although the U.S. Justice Department declined to join Browns suit, which claims Celgene defrauded government insurance programs by marketing its drugs for off-label uses, a California judge cleared her case for trial.

These allegations, which date as far back as 15 years, are baseless, Celgene spokesman Brian Gill said in a statement. Celgene is committed to patient safety, and its products have improved and extended the lives of many thousands of cancer patients.

First sold as a sedative in West Germany in the 1950s, thalidomide became an over-the-counter sensation in Europe. The FDA rejected the treatment as a morning-sickness pill in 1960, over concerns about separate side effects. In the wake of the controversy over birth defects, U.S. rules on reviewing drugs were tightened.

Revolutionary

In the 1990s, Celgene was a small biotech firm that had never brought a drug to market. A study showed thalidomide, then being used to treat leprosy overseas, might help against HIV-related weight loss. Researchers found the compound tied to birth defects might also fight blood cancers such as multiple myeloma. Federal regulators knew many oncologists regarded Thalomid and Revlimid, its chief successor, as revolutionary, Celgene said, according to the court documents.

It wasnt until 1998 that the FDA approved Thalomid for a form of leprosy. The regulator, however, insisted on measures to ensure pregnant women wouldnt take it. In 2005, Revlimid was approved for one type of blood cancer and the next year, both drugs were approved for multiple myeloma.

There arent a lot of lepers in the United States, but there are a lot of people who wanted to use it for other uses, said Robert DAmato, a surgery director at Boston Childrens Hospital, whose research in the 1990s pointed to thalidomides potential.

Last year, Thalomid and its successors, Revlimid and Pomalyst, accounted for $6.97 billion, or more than 75 percent, of Celgenes revenue. The company has pledged to double total sales to more than $21 billion by 2020. The stock has soared 310 percent, more than fourfold, in the past five years, outperforming the Nasdaq Biotechnology Index.

Brown, 59, joined Celgene in 2001 as the company was rolling out a campaign to promote Thalomid to treat other diseases, her suit says. Around that time, she said Celgene hired almost 100 salespeople and trained them to peddle the drug to cancer doctors, an allegation the company called baseless. Brown left after a decade. She declined to comment beyond the suit.

Off-Label Prescriptions

Some studies found no overall survival benefits for cancer patients on thalidomide. But in a study published this year looking at multiple trials, Revlimid helped patients with multiple myeloma live about 2.5 years longer after a stem cell transplant than those on placebo.

From the beginning, off-label prescriptions drove Thalomids sales. In the first 12 months after its U.S. debut for leprosy, about 70 percent of the prescriptions were for oncology patients, Celgene said in an annual filing. In 2000, six years before Thalomid was approved as a cancer treatment, oncological cases accounted for 92 percent of prescriptions, according to the filing. In 2004, then-CFO Robert Hugin told investors the drug was the companys financial engine.

Executives were aware then of concerns the drug might increase the risk of blood clots in cancer patients, Brown alleges in court filings. Drugmakers are required to alert regulators of possible side effects. The former sales rep says that Celgene failed to do so, and points to an October 2000 e-mail from Todd Clark, a drug-safety official at the company. He told an employee who had sent messages about cases that linked Thalomid to clots and hadnt been reported to the FDA that putting such statements in writing in an internal Celgene document is potentially a glaring red flag to the FDA, according to the filings.

Non-Erasable Message

Clark in turn got his own warning in a February 2001 e-mail from Celgenes chief medical officer, Jerry Zeldis, saying, this is a non-erasable message that can be audited by the FDA. A few months later, Zeldis said in another e-mail filed in court that Celgene had heard of seven deaths due to clots by cancer patients taking Thalomid off label. In a deposition, he said the reports were turned over to the FDA. The regulator declined to comment on Celgenes reporting.

Zeldis declined to comment on the e-mails, and Clark couldnt be reached. Celgene disputed Browns interpretation, saying in court documents that the messages reminded employees to keep the FDA informed of possible risks. Brown also said in a deposition that Celgene had instructed salespeople to report any issues.

Celgene took other steps to rehabilitate thalidomide in the medical community, paying doctors who prescribed the drugs off label to tout them to colleagues through a speakers program, Brown said in court filings. Celgene paid 159 physicians $2.1 million in 2015 for services such as speaking about Revlimid, Thalomid and Pomalyst, according to government records.

Promotional Speaker

Among the recipients was William Bensinger, a Seattle oncologist, who received $260,000 over seven years from Celgene as a promotional speaker, according to court documents. While he was getting as much as $4,000 per talk, Bensinger also served as head of a national oncologist committee that reviews the effectiveness of cancer drugs for physicians and federal insurance programs, court records show. He declined to comment on whether that constituted a conflict of interest.

Its left to the audience to decide whether or not to use the drug, Bensinger said in a deposition, denying he pressured others to prescribe Celgene products.

Working with drugmakers can be tricky, according to David Steensma, an oncologist at the Dana-Farber Cancer Institute in Boston. Celgene paid him $26,262 to help track patients with certain blood cancers, according to government records. Steensma said he wasnt part of the speakers program.

It is a relationship you need to be very careful with, because their motivations and their goals are not the same as yours, Steensma said. I have to sleep well at night.

Watch Next: Why Do Drug Prices Keep Going Up?

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Read more: http://www.bloomberg.com//news/articles/2016-08-22/from-nightmare-drug-to-celgene-blockbuster-thalidomide-is-back