Top Stories of the Week

U.S. Unemployment at a 26-Year High

Joblessness jumped to 9.7%, higher than expectations and the highest rate since June, 1983. The Labor Dept. announced that the country lost 216,000 jobs in August, down from a revised 276,000 in July. Losses in manufacturing accelerated to 63,000 from 43,000.

Part of the reason the jobless rate jumped is that some people who had stopped looking for work reentered the labor force. The number of people who have been out of work for half a year or more rose to nearly 5 million. Wall Street seemed unfazed by the report, with the Dow up more than 60 points around 2:30 p.m.

Source: BusinessWeek

Airbus Got Illegal Help, Says the WTO

The international trade body issued a preliminary ruling that the European aerospace consortium received billions in illegal subsidies from European governments. The U.S., which has been involved in a lengthy dispute with Airbus, said it was reviewing the report. Washington filed its complaint with the WTO in 2004.

Source: Wall Street Journal

Google Loses China Chief

Kai Fu Lee, Google’s China chief, is leaving the company to join a new Chinese venture capital fund, four years after a very public departure from Microsoft to Google. Google credited Lee with the growth of Google.cn and other “innovations”, but Google had long lagged behind local search engine Baidu.

Source: New York Times.

Not So Fast, Oracle

European Union regulators announced on Thursday that they are launching an antitrust probe into Oracle’s $7.4 billion takeover of Sun Microsystems. EU competition commissioner Neelie Kroes said that regulators needed to examine the possible consequences of a deal in which “the world’s biggest proprietary database company proposes to take over the world’s leading open-source database company.” At issue is Sun’s open source database software MySQL, which competes with Oracle offerings in certain markets. The European Commission has 90 days before it must make a final decision to approve the deal or block it. U.S. authorities have already greenlighted the transaction. The EU’s move seems likely to delay, rather than derail, the acquisition. MySQL represents a relatively small piece of Sun’s overall business, accounting for less than 5% of its $11.4 billion in revenues for the fiscal year that ended June 30. Experts believe that Oracle could spin off or sell the business to satisfy regulators if necessary.

Source: Associated Press, BusinessWeek

No Back-to-School Relief for Retailers

The all-important back-to-school shopping season is shaping up to be a disappointing one for U.S. retailers, especially for chains that specialize in clothing for children and teens. The industry as a whole saw sales dip 2.9% in August , marking the 12th consecutive month of declines. Chains such as Abercrombie & Fitch, American Apparel and Wet Seal all logged double-digit drops in same-store sales. One relative bright spot was Gap, where The Gap and Old Navy divisions registered sales declines that were smaller than for the same month last year.

Source: New York Times

Pfizer Pays Up

Announcing the details of an agreement it first revealed in January, Pfizer will pay $2.3 billion to settle a U.S. investigation into illegal marketing of medicines, and a subsidiary will plead guilty to criminal charges. The amount includes $1.3 billion to end the criminal part of the inquiry. Pharmacia & Upjohn, which Pfizer aquired in 2003, will admit to a felony charge of misbranding a pharmaceutical. The settlement is the largest ever in the U.S. involving off-label marketing practices. The criminal case involves the off-label promotion of Bextra, a painkiller that Pfizer withdrew in 2005 because of its connection to a rare skin condition. Federal investigators examined marketing practices involving various other Pfizer drugs, and while the company denied almost all of the civil charges, its $1 billion payment to settle the civil cases includes $503 million involving Bextra, $301 million for the schizophrenia drug Geodon, and $98 million for the antibiotic Zyvox.

Source: Bloomberg

BP’s “Giant” Strike

The British energy giant says it has discovered an enormous field in the Gulf of Mexico. While the company wouldn’t formally estimate the size of the find, BP’s chief of exploration called the exploratory Tiber well “very significant” and said it was even “better” than the Kaskida field nearby, which is thought to contain 4 billion to 6 billion barrels.

Source: BusinessWeek

The Cash-for-Clunkers Effect

Car companies said on Sept. 1 that their August sales soared to an annualized selling rate of about 14 million, thanks to the government’s clunkers program, which gave $3,500 to $4,500 to consumers trading in an old gas guzzler for something more efficient. The accelerated sales rate was a boon for carmakers, especially Ford (F), Toyota (TM), Honda (HMC), and Hyundai. But the industry appears to be giving those gains back as the annualized rate has fallen to 8 million vehicles since Aug. 25, when the program stopped. “August was the best month of the year, but it’s possible that it could be followed by the worst month this year,” predicts Jeremy Anwyl, chief executive officer of Edmunds.com.

Source: BusinessWeek

EBay’s Skype Sale Looks Like a Win-Win

In a deal announced Sept. 1, eBay will sell a controlling share of the Internet-calling service to a group of investors led by private equity firm Silver Lake for $1.9 billion in cash and $125 million in short-term debt. The sale values Skype at $2.75 billion, not far below the price eBay paid for the business in 2005, and higher than the value recently placed on Skype by some Wall Street analysts. At the same time, eBay retains a 35% stake in the high-growth business.

Source: BusinessWeek

Brazil’s New Oil Policy

Declaring today an “independence day” for Brazil, President Luiz Inacio Lula da Silva proposed changes that would give the government-owned oil company, Petrobras, a dominant role in developing enormous newly discovered offshore fields. The proposals, if passed by Congress, would relegate foreign oil companies to supporting roles and could reap vast financial returns for Brazil. But they risk alienating the foreign outfits that Brazil may need to develop the technologically challenging fields.

Source: Wall Street Journal

Disney Snares Spidey

Look out, Green Goblin. Spiderman will have some new money behind him now that Walt Disney is buying Marvel Entertainment for $4 billion in cash and stock. It’s Disney’s biggest takeover since it bought Pixar in 2006, and besides Spiderman, it adds such iconic characters as the X-men, Captain America, and the Fantastic Four to the Disney stable. The deal also marks the first major transaction in the media industry since the financial crisis began, and one analyst called it a sign that “confidence is returning to the marketplace.” The price amounts to a 29% premium over Marvel’s Friday closing price. Disney shares were down about 3% on the news.

Source: CNNMoney.com

A Milestone Election in Japan

Japanese voters tossed out the Liberal Democratic Party government, breaking 54 years of almost unbroken one-party rule. In yesterday’s elections, the opposition Democratic Party of Japan won 308 of the 480 seats in the Lower House of the Diet, Japan’s parliament. The LDP won just 119 and for the first time since the party’s founding in 1955 will not be the largest party. Turnout set a record high, with 69% of eligible voters participating. The decisive victory gives the new DPJ government a far stronger mandate than had been previously expected. In addition to a huge majority in the Lower House, the party already controls the Upper House. In practice, the DPJ should therefore be able to enact legislation with relative ease. For years, “Parliament was gridlocked,” says Jesper Koll, president and CEO of Tantallon Research Japan. “[Today’s result] tells you people are ready for big change.”

Source: Nikkei, BusinessWeek