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Tech firms race to spot video violence


SINAGPORE Companies from Singapore to Finland are racing to improve artificial intelligence so software can automatically spot and block videos of grisly murders and mayhem before they go viral on social media.

None, so far, claim to have cracked the problem completely.

A Thai man who broadcast himself killing his 11-month-old daughter in a live video on Facebook this week, was the latest in a string of violent crimes shown live on the social media company. The incidents have prompted questions about how Facebook’s reporting system works and how violent content can be flagged faster.

A dozen or more companies are wrestling with the problem, those in the industry say. Google – which faces similar problems with its YouTube service – and Facebook are working on their own solutions.

Most are focusing on deep learning: a type of artificial intelligence that makes use of computerized neural networks. It is an approach that David Lissmyr, founder of Paris-based image and video analysis company Sightengine, says goes back to efforts in the 1950s to mimic the way neurons work and interact in the brain.

Teaching computers to learn with deep layers of artificial neurons has really only taken off in the past few years, said Matt Zeiler, founder and CEO of New York-based Clarifai, another video analysis company.

It’s only been relatively recently that there has been enough computing power and data available for teaching these systems, enabling “exponential leaps in the accuracy and efficacy of machine learning”, Zeiler said.

FEEDING IMAGES

The teaching system begins with images fed through the computer’s neural layers, which then “learn” to identify a street sign, say, or a violent scene in a video.

Violent acts might include hacking actions, or blood, says Abhijit Shanbhag, CEO of Singapore-based Graymatics. If his engineers can’t find a suitable scene, they film it themselves in the office.

Zeiler says Clarifai’s algorithms can also recognize objects in a video that could be precursors to violence — a knife or gun, for instance.

But there are limits.

One is the software is only as good as the examples it is trained on. When someone decides to hang a child from a building, it’s not necessarily something the software has been programmed to watch for.

“As people get more innovative about such gruesome activity, the system needs to be trained on that,” said Shanbhag, whose company filters video and image content on behalf of several social media clients in Asia and elsewhere.

Another limitation is that violence can be subjective. A fast-moving scene with lots of gore should be easy enough to spot, says Junle Wang, head of RD at France-based PicPurify. But the company is still working on identifying violent scenes that don’t involve blood or weapons. Psychological torture, too, is hard to spot, says his colleague, CEO Yann Mareschal.

And then there’s content that could be deemed offensive without being intrinsically violent — an ISIS flag, for example — says Graymatics’s Shanbhag. That could require the system to be tweaked depending on the client.

STILL NEED HUMANS

Yet another limitation is that while automation may help, humans must still be involved to verify the authenticity of content that has been flagged as offensive or dangerous, said Mika Rautiainen, founder and CEO of Valossa, a Finnish company which finds undesirable content for media, entertainment and advertising companies.

Indeed, likely solutions would involve looking beyond the images themselves to incorporate other cues. PicPurify’s Wang says using algorithms to monitor the reaction of viewers — a sharp increase in reposts of a video, for example — might be an indicator.

Michael Pogrebnyak, CEO of Kuznech, said his Russian-U.S. company has added to its arsenal of pornographic image-spotting algorithms – which mostly focus on skin detection and camera motion — to include others that detect the logos of studios and warning text screens.

Facebook says it is using similar techniques to spot nudity, violence or other topics that don’t comply with its policies. A spokesperson didn’t respond to questions about whether the software was used in the Thai and other recent cases.

Some of the companies said industry adoption was slower than it could be, in part because of the added expense. That, they say, will change. Companies that manage user-generated content could increasingly come under regulatory pressure, says Valossa’s Rautiainen.

“Even without tightening regulation, not being able to deliver proper curation will increasingly lead to negative effects in online brand identity,” Rautiainen says.

(Reporting By Jeremy Wagstaff; Editing by Bill Tarrant)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/FZf-7xRxPUE/us-facebook-thailand-technology-idUSKBN17U0J6

Frugal U.S. consumers seen holding back first-quarter GDP


WASHINGTON The U.S. economy likely hit a soft patch in the first quarter as an unseasonably warm winter and rising inflation weighed on consumer spending, in a potential setback to President Donald Trump’s promise to boost growth.

Reduced business investment in inventories and government spending cuts also crimped gross domestic product growth. A Reuters survey of economists conducted last week forecast GDP rising at a 1.2 percent annual rate, but many economists lowered their estimates after the government on Thursday released advance reports on the goods trade deficit and inventories in March.

The Atlanta Federal Reserve is forecasting the economy growing at only a 0.2 percent rate in the first quarter, which would be the weakest performance in three years.

The economy grew at a 2.1 percent pace in the fourth quarter. The government will publish its advance first-quarter GDP estimate on Friday at 8:30 a.m. The expected sluggish first-quarter growth pace, however, is not a true picture of the economy’s health.

The labor market is near full employment and consumer confidence is near multi-year highs, suggesting that the mostly weather-induced slowdown in consumer spending is probably temporary. First-quarter GDP tends to underperform because of difficulties with the calculation of data that the government has acknowledged and is working to rectify.

“The weakness is not a reflection of the underlying health of the economy, part of it is residual seasonality,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “It has become more understood over the past few years, that’s why people often discount first-quarter GDP.”

Even without the seasonal quirk and temporary restraints, economists say it would be difficult for Trump to fulfill his pledge to raise annual GDP growth to 4 percent, without increases in productivity.

Trump is targeting infrastructure spending, tax cuts and deregulation to achieve his goal of faster economic growth.

On Wednesday, the Trump administration proposed a tax plan that includes cutting the corporate income tax rate to 15 percent from 35 percent, but offered no details.

ANEMIC CONSUMER SPENDING

Economists estimate that growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, braked to below a 1.0 percent rate in the first quarter. That would be the slowest pace in nearly four years and follows the fourth quarter’s robust 3.5 percent growth rate.

The expected weakness in consumer spending is blamed on a mild winter, which undermined demand for heating and utilities production. Higher inflation, which saw the consumer price index averaging 2.5 percent in the first quarter, also hurt spending.

Government delays issuing income tax refunds to combat fraud also weighed on consumer spending. Economists said Federal Reserve officials were likely to view both the anemic consumer spending and GDP growth as temporary when they meet next week. The Fed is not expected to raise interest rates.

“The good news is that the Fed in recent years has distanced itself from the GDP numbers,” said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey. “A weak first-quarter GDP print should not affect the policy debate.”

After contributing to GDP growth for two straight quarters, inventory investment was likely a drag in the first quarter. JPMorgan is forecasting inventories chopping off one percentage point from GDP growth. Trade was likely neutral after being a huge drag in the fourth quarter.

But some good news is expected. Business investment likely rose further, with spending on equipment seen accelerating thanks to rising gas and oil well drilling as oil prices continue their recovery from multi-year lows.

Investment in home building is also expected to have gained momentum in the first quarter.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/jTY0J9Q-uH4/us-usa-economy-idUSKBN17U0EL

World stocks pause near record highs


LONDON Concern about global trade and U.S. President Donald Trump’s “America First” policies kept appetite for risky assets in check on Friday, setting world stocks on the path to a sluggish end to what will still be their fifth straight month of gains.

In an interview with Reuters, Trump called the five-year-old trade pact with South Korea “unacceptable” and said it would be targeted for renegotiation after his administration completes a revamp of the North American Free Trade Agreement (NAFTA) with Canada and Mexico.

Trump’s comments stunned South Korean financial markets, sending Seoul stocks and the won into reverse.

Saturday marks Trump’s 100th day in office and his attacks on free trade and scepticism about his administration’s ability to see through tax and spending campaign promises has dented some of the enthusiasm in markets that followed his election win.

“Trump is reaching the 100 day mark with nothing to show for it and these recent comments just coincide with that. They (the U.S. administration) are finding it hard to push through fiscal plans and all this rhetoric is probably related,” Kiran Kowshik, strategist at Unicredit.

The mood on Europe, however, remained relatively upbeat.

Euro zone bond yields rose across the board and the euro strengthened on Friday as economic output data from several countries reaffirmed a picture of economic strength in the bloc.

The single currency also strengthened, rising 0.1 percent against the dollar to $1.0885. while euro zone bond yields rose 1-2 basis points across the board.

Bank of America Merrill Lynch noted that the $21 billion of inflows into European equity funds over the past week were the highest since December 2015.

“The hard data for equities is earnings — and they are powering ahead. Q1 earnings season is very strong and revisions trends are positive and broad based,” said analysts at the U.S. broker.

Banking results dominated early trading with Barclays shares sliding 5 percent after weak investment banking results at the UK bank while UBS jumped 2.6 percent after it handily beat analyst expectations.

The STOXX 600 was little changed on the day and set to post a 1.6 percent gain for the month. It is up 7 percent so far this year.

In commodities, oil prices rose but were still on track for a second straight weekly loss on concerns that an OPEC-led production cut has failed to significantly tighten an oversupplied market.

U.S. West Texas Intermediate (WTI) crude CLc1 was at $49.43 per barrel at 0649 GMT, up 46 cents, or 0.94 percent, from their last close. However, WTI is still set for a small weekly loss and is around 8 percent below its April peak.

Brent crude LCOc1 was at $51.91 per barrel, up 47 cents, or 0.91 percent. Brent is almost around 8.5 percent down from its April peak and is also on track for a second, albeit small, week of declines.

(Additional reporting by Sujata Rao Editing by Jeremy Gaunt)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/yr2Xc7w18mM/us-global-markets-idUSKBN17U050

Trump tells Canada, Mexico, he won’t terminate NAFTA treaty yet: White House


WASHINGTON U.S. President Donald Trump told the leaders of Canada and Mexico on Wednesday that he will not terminate the NAFTA treaty at this stage, but will move quickly to begin renegotiating it with them, a White House statement said.

The announcement came after White House officials disclosed that Trump and his advisers had been considering issuing an executive order to withdraw the United States from the trade pact with Canada and Mexico, one of the world’s biggest trading blocs.

The White House said Trump spoke by telephone with Mexican President Enrique Pena Nieto and Canadian Prime Minister Justin Trudeau and that he would hold back from a speedy termination of NAFTA, in what was described as a “pleasant and productive” conversation.

“President Trump agreed not to terminate NAFTA at this time and the leaders agreed to proceed swiftly, according to their required internal procedures, to enable the renegotiation of the NAFTA deal to the benefit of all three countries,” a White House statement said.

“It is my privilege to bring NAFTA up to date through renegotiation. It is an honor to deal with both President Peña Nieto and Prime Minister Trudeau, and I believe that the end result will make all three countries stronger and better,” Trump was quoted as saying in the statement.

The Mexican and Canadian currencies rebounded in Asian trading after Trump said the U.S. would stay in NAFTA for now. The U.S. dollar dropped 0.6 percent on its Canadian counterpart and 1 percent on the peso.

The White House had been considering an executive order exiting NAFTA as early as Trump’s 100th day in office on Saturday, but there was a split among his top advisers over whether to take the step.

During his election campaign Trump threatened to renegotiate NAFTA and in the past week complained bitterly about Canadian trade practices.

It was under an executive order signed by Trump on Jan. 23 that the United States pulled out of the sweeping Trans-Pacific Partnership trade deal.

News of the potential presidential action to withdraw from NAFTA earlier drove the Mexican and Canadian currencies lower.

NAFTA TRADE HAVOC

“To totally abandon that agreement means that those gains are lost,” said Paul Ferley, an economist at Royal Bank of Canada.

Trump has repeatedly vowed to pull out from the 23-year-old trade pact if he is unable to renegotiate it with better terms for America. He has long accused Mexico of destroying U.S. jobs. The United States went from running a small trade surplus with Mexico in the early 1990s to a $63 billion deficit in 2016.

Details about the draft executive order on NAFTA were not immediately available.

Trump has faced some setbacks since he took office in January, including a move by courts to block parts of his orders to limit immigration.

Withdrawing from NAFTA would enable him to say he delivered on one of his key campaign promises, but it could also hurt him in states that voted for him in the election.

“Mr. President, America’s corn farmers helped elect you,” the National Corn Growers Association said in a statement. “Withdrawing from NAFTA would be disastrous for American agriculture.”

DIVERGING OPINIONS

The first administration source told Reuters that there were diverging opinions within the U.S. government about how to proceed and it was possible that Trump could sign the executive order before the 100-day mark of his presidency.

The source noted that the administration wanted to tread carefully. “There is talk about what steps we can take to start the process of renegotiating or withdrawing from NAFTA,” this source said.

Mexico had expected to start NAFTA renegotiations in August but the possible executive order could add urgency to the timeline.

The Mexican government had no comment on the draft order. The country’s foreign minister said on Tuesday that Mexico would walk away from the negotiating table rather than accept a bad deal.

Trump recently ramped up his criticism of Canada and this week ordered 20 percent tariffs on imports of Canadian softwood lumber, setting a tense tone as the three countries prepared to renegotiate the pact.

Canada said it was ready to come to talks on renewing NAFTA at any time.

“At this moment NAFTA negotiations have not started. Canada is ready to come to the table at any time,” said Alex Lawrence, a spokesman for Canadian Foreign Minister Chrystia Freeland.

(Reporting by Steve Holland; Additional reporting by Fergal Smith in Toronto, David Ljunggren in Ottawa,; Rodrigo Campos in New York and Julie Ingwersen in Chicago; Writing by Jason Lange; Editing by Tom Brown, Bill Rigby and Michael Perry)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/bwVhIfUQCyA/us-usa-trade-nafta-idUSKBN17S2DG

Judge says Exxon owes $19.95 million for Texas refinery pollution


HOUSTON A federal judge ruled on Wednesday that ExxonMobil Corp should pay a $19.95 million penalty for pollution from its Baytown, Texas, refining and chemical plant complex between 2005 and 2013.

U.S. District Court Judge David Hittner issued the ruling in a citizen lawsuit brought under the U.S. Clean Air Act by two environmental groups, Environment Texas and the Sierra Club.

Environment Texas welcomed the decision in the long-running suit, which was first filed in 2010.

“We think it might be the largest citizen suit penalty in U.S. history,” said Luke Metzger, director of Environment Texas. “It definitely means it pays not to pollute.”

Exxon said it would consider its legal options and may appeal the ruling.

“We disagree with the court’s decision and the award of any penalty,” Exxon spokesman Todd Spitler said in an emailed statement. “As the court expressed in its decision, ExxonMobil’s full compliance history and good faith efforts to comply weigh against assessing any penalty.”

The suit was filed under a provision of the Clean Air Act that allows citizens to sue when regulators have failed to stop pollution. The two groups had contended the penalty could run as high as $573 million, but had only sought $41 million.

In a 101-page decision, Hittner ruled there had been 16,386 days of violations and 10 million pounds (4.5 million kg) of pollutants had been released in violation of operating permits issued to Exxon for the Baytown complex.

“The court finds given the number of days of violations and the quantitative amount of emissions released as a result, the seriousness factor weighs in favor of the assessment of a penalty,” he wrote.

The decision comes about a year after the Fifth U.S. Circuit Court of Appeals determined Hittner had errored in a 2014 ruling assessing Exxon’s liability for pollution from the refinery, chemical plant and olefins plant in the Baytown complex in the eastern suburbs of Houston.

The Fifth Circuit Court sent the case back to Hittner to reassess Exxon’s liability.

The Baytown complex, which includes the second largest refinery in the United States, is regulated by the Texas Commission on Environmental Quality (TCEQ), which had fined Exxon $1.4 million for pollution. Hittner deducted that amount in determining the penalty.

The penalty will be paid to the federal government. Hittner said Exxon was liable for legal fees incurred by the two environmental groups.

(Reporting by Erwin Seba; Editing by Richard Pullin)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/5GeqCO79tXY/us-refinery-pollution-exxon-penalty-idUSKBN17T08H

Companies cheer Trump tax cuts, but jobs are less certain to follow


U.S. businesses would reap a windfall if President Donald Trump’s plan to cut corporate tax rates and slash taxes on cash parked overseas becomes law, but it was unclear whether they would stimulate a surge in investment and job creation in return.

Under Trump’s proposals, American companies would move from being the most highly taxed among the Group of 20 countries to among the lowest. Tax rates would fall below those of neighboring Mexico and Canada, which Trump has accused of shortchanging the United States in trade deals.

Corporate leaders and business lobbying groups such as the U.S. Chamber of Commerce on Wednesday cheered the administration’s tax proposals, while allowing that the initial one-page plan left out crucial details.

The tax plan, which includes a cut in taxes on public companies to 15 percent from 35 percent, does not detail cuts in spending that would help keep the budget deficit under control.

ATT Corp (T.N) Chief Executive Randall Stephenson welcomed the tax plan but cautioned “the practical reality of getting to 15 percent is you have to get yourself reconciled to some level of deficits for a period of time as you get the economic stimulation.”

Big U.S. companies have nearly $1.8 trillion in cash stockpiled overseas, according to Moody’s Investors Service. Technology powerhouse Apple Inc (AAPL.O) has more than $200 billion of that total.

Apple did not immediately respond to a request for comment on Wednesday, but Chief Executive Officer Tim Cook has said the company was looking to bring back offshore cash if tax rates for doing so were lower.

“What we would do with it, let’s wait and see exactly what it is, but as I’ve said before we are always looking at acquisitions,” Cook told investors on the company’s first-quarter earnings call in January in response to an analyst’s question about the company’s thinking on acquisitions.

Cook’s comment points to a big unknown for the White House and congressional Republicans, who have said business tax cuts would result in more and better jobs.

Studies of the results of past tax holidays found that most of the offshore cash brought home by U.S. companies was used to buy back shares or make acquisitions, not to fund investments in production capacity or jobs.

Under pressure from shareholders, listed companies have set high targets for return on invested capital. General Motors Co (GM.N), for example, has told investors it is aiming for 20 percent returns on its capital investments.

Many U.S. companies have been tightfisted about investing in new plants and equipment following the last recession, which left them wary of becoming overextended. Since 2014, investment in new equipment has flatlined, according to government data.

A MIXED BAG

The financial impact of the White House tax plan will vary widely by company and business sector. A proposal to cut inheritance taxes, for example, is of high interest to auto dealers, which are often family-controlled enterprises.

Many companies already pay less than the headline 35 percent tax rate. Companies in the SP 500 index paid an average tax rate of 29.06 percent for 2016, Standard and Poors said.

A change of a few percentage points in tax rates can make a big difference. Aircraft maker Boeing Co (BA.N) on Wednesday reported a 19 percent increase in first quarter profits, partly because of a 4 percentage-point drop in its tax rate.

“At the highest level we’re a big supporter of tax reform,” Boeing Chief Financial Officer Greg Smith told analysts and journalists on a call Wednesday. “It’s going to drive jobs, it’s going to drive the U.S. economy broadly speaking and it’s going to allow us to compete.”

Boeing has been cutting jobs in the United States, warning employees last week that it planned another round of cuts that would eliminate hundreds of engineering jobs.

While the tax cuts may produce a short-term boost to the economy and add fuel to a stock market rally, it falls short of the comprehensive tax reform that Trump had pledged earlier.

Regarding other parts of his agenda, his administration has been stymied in its attempts to limit immigration by the courts, while an attempt to repeal and replace Obamacare failed in Congress.

“A cynic would say this is a rushed attempt to have something big to show for President Trump’s first 100 days in office,” said Luke Bartholomew, investment strategist at Aberdeen Asset Management in London.

(Reporting by Ginger Gibson, David Shepardson, Diane Bartz, Steve Nellis and Tim Aeppel; Writing by Joseph White; Editing by David Chance and Bill Trott)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/3SbHv-4vNyw/us-usa-tax-business-idUSKBN17S2WF

Trump tax plan will sharply slash corporate tax rates


WASHINGTON U.S. President Donald Trump is proposing to slash the corporate income tax rate and offer multinational businesses a steep tax break on overseas profits brought into the United States, officials said late on Tuesday.

With financial markets eagerly anticipating a White House tax plan, Trump will also call for a sharp cut in the top rate on pass-through businesses, including many small business partnerships and sole proprietorships, to 15 percent from 39.6 percent, an administration official said.

He will propose cutting the income tax rate paid by public corporations to 15 percent from 35 percent, and allowing multinationals to bring in overseas profits at a tax rate of 10 percent versus 35 percent now, the official said.

Trump’s proposal will not include a controversial “border-adjustment” tax on imports that was in earlier proposals floated by Republicans in the U.S. House of Representatives as a way to offset revenue losses resulting from tax cuts.

Trump’s tax blueprint will fall short of the kind of comprehensive tax reform that Republicans have long discussed, and serve chiefly as a guidepost for lawmakers in the House and Senate.

“We’re driving this a little bit more,” a senior White House official told a group of reporters late on Tuesday.

The plan is not expected by analysts to include any proposals for raising new revenue to offset that lost by the tax cuts, and so, if enacted, it would potentially add billions of dollars to the federal deficit.

Trump sent Treasury Secretary Steve Mnuchin and National Economic Council Director Gary Cohn to Capitol Hill on Tuesday to brief lawmakers on the plan to be unveiled on Wednesday afternoon, likely by Mnuchin.

Mnuchin has been leading the administration’s effort to craft a tax package that can win support in Congress, although the proposals would have a long way to go before becoming law, even with Republicans in control of both the House and Senate.

Mnuchin has said the cuts will pay for themselves by generating more economic growth but fiscal hawks, potentially some in Trump’s own Republican Party, along with Democrats, are certain to question these claims.

Trump also may cap the individual top tax rate at 33 percent, repeal the estate and alternative minimum taxes and cut taxes for the middle class, analysts said.

Whether Trump will include provisions that could attract Democratic votes, such as a proposal to fund infrastructure spending or a child-care tax credit as proposed by his daughter Ivanka, is still the subject of speculation.

CAPITOL HILL MEETING

Mnuchin and Cohn, both veterans of investment bank Goldman Sachs (GS.N), went to Senate Republican Leader Mitch McConnell’s office on Tuesday evening, where they all met with House Speaker Paul Ryan, and the chairmen of the House and Senate tax committees, Orrin Hatch and Kevin Brady, respectively.

Hatch called it a “preliminary” 30-minute meeting and participants described it as positive and productive.

As Mnuchin left the Capitol he told reporters there is “no question” the Trump administration and Republicans in the Senate and House agree on the “fundamental principles of tax reform.”

The senior White House official said Trump would like to see Congress pass tax reform by the middle of autumn.

Trump has struggled to advance his domestic agenda, including taxes. With his 100th day as president approaching on Saturday, he has yet to offer formal legislation to Congress or win passage of a major bill he favors.

Some Washington policy analysts said the White House plan could clash in some ways with a broader tax plan shaped months ago by House Republicans, and complicate the consensus-building needed for full tax reform, a political feat not accomplished since 1986 when President Ronald Reagan pulled it off.

The House Republican plan, championed by Ryan and Brady, proposed a 20 percent corporate tax rate. Many U.S. corporations, especially large multinationals, already pay well below the statutory 35 percent tax rate but have been campaigning for a formal rate cut for many years.

The Ryan-Brady plan did include “pay-fors,” including a proposed “border adjustment” tax that would favor exports and discourage imports.

When asked after Tuesday’s briefing if Republicans had ruled out including a border adjustment tax in a tax overhaul, Hatch said: “I wouldn’t say that. The House hasn’t given up on that but they’ve acknowledged it needs some work.”

Separately cutting the top tax rate for pass-through businesses, which account for most U.S. companies, could benefit Trump himself, said Frank Clemente, executive director of Americans for Tax Fairness, a Democratic activist group.

“In trying to slash taxes for pass-through business entities, Trump is seeking to dramatically reduce his own tax bill,” he said in a statement.

(Additional reporting by Susan Cornwell, Richard Cowan and Ginger Gibson; Editing by Kevin Drawbaugh and Bill Trott)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/SoSj5La4qAU/us-usa-tax-idUSKBN17R2KK

Asian stocks near two-year high on U.S. optimism, euro steady


HONG KONG Asian stocks extended gains for a fifth consecutive day on Wednesday, as renewed optimism about the world’s biggest economy brightened the outlook for risky assets while the euro held on to previous gains as political concerns in France ebbed.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 percent, hovering near their highest since June 2015. Stock markets in Japan and Australia led gainers.

European markets were pointing higher in opening trades with index futures up between 0.05 and 0.1 percent.

“We are carrying on the momentum from the overnight rally in the U.S. markets and financials are in the spotlight on expectations of good earnings,” said Alex Wong, a fund manager at Ample Capital Ltd in Hong Kong, with about $130 million under management.

The outlook for Asian markets is looking favorable with the MSCI Asia ex-Japan index having broken above a technical level, suggesting more room for gains.

A strong finish to U.S. markets was the main driver for Asia. The Nasdaq Composite hit a record high on Tuesday, while the Dow and SP 500 brushed against recent peaks as strong earnings underscored the health of corporate America. [.N]

Fanning the market’s rally were reports that President Donald Trump’s tax reform proposals, due to be announced on Wednesday, would include a slashing of the corporate tax rate and lower taxes on offshore earnings stockpiled by U.S. companies overseas.

The threat of a U.S. government shutdown this weekend also receded after Trump backed away from demanding Congress include funding for his planned border wall with Mexico in a spending bill.

Financials led the Hong Kong stock market higher as fund managers bet on expectations the quality of banks’ balance sheets will likely get better on an improving economic cycle and cheaper valuations.

In Hong Kong, for example, the financial sector trades at a forward price-to-earnings ratio of 8.7 times compared with traditional market darlings of technology stocks at 29 times, according to Thomson Reuters data.

In currency markets, the euro built on strong gains posted this week after business-friendly centrist Emmanuel Macron won the first round of the French vote on Sunday and opinion polls indicated less support for the eurosceptic Marine Le Pen.

While that is not expected to sway the European Central Bank into further action at Thursday’s meeting, policymakers see scope for sending a small signal in June towards reducing monetary stimulus, according to sources, another factor underpinning the single currency.

“In our view, downside risks to growth have actually decreased with the outcome of the first round of the French election…the underlying tone of the press conference should still be positive,” Holger Sandte, a strategist at Nordea markets wrote in a note.

The euro was steady at $1.09480, retaining most of Monday’s 1.3 percent gain. On Monday it posted its strongest one-day performance in 10-1/2 months, which lifted the common currency to a 5-1/2-month high.

Growing appetite for risk meant safe-haven assets fell out of favor, with U.S. 10-year Treasury yields firming to 2.34 percent from 2.23 percent on Friday.

U.S. crude futures slipped after a volatile overnight session following an industry report showing a surprise build-up in inventories. U.S. crude futures were down 0.3 percent at $49.41 a barrel.

(Additional reporting by Masayuki Kitano in SINGAPORE; Editing by Jacqueline Wong)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/5lK8gQUw698/us-global-markets-idUSKBN17S035

Wells Fargo board gets black eye in shareholder vote


PONTE VEDRA BEACH, Fla./BOSTON Wells Fargo Co (WFC.N) shareholders showed displeasure with the scandal-hit bank’s board on Tuesday, offering scant support for a dozen directors, including Chairman Stephen Sanger, in a vote capping a contentious annual meeting.

Only three directors received more than 90 percent support from voting shareholders, a benchmark cited by Sanger as what would be the outcome of a normal vote. He received just 56 percent approval.

“Wells Fargo stockholders today have sent the entire Board a clear message of dissatisfaction,” Sanger said in a statement. “Let me assure you that the Board has heard that message, and we recognize there is still a great deal of work to do to rebuild the trust of stockholders, customers and employees.”

The meeting, which ran nearly three hours, was repeatedly interrupted by angry shareholders seeking answers about how and why thousands of bank employees were able to open 2.1 million fake accounts in customers’ names without their permission.

There was a brief recess after one shareholder made what Sanger called a “physical approach” toward a board member and was removed.

“You’re saying we’re out of order. Wells Fargo has been out of order for years!” said Bruce Marks, chief executive of Neighborhood Assistance Corporation of America, before being ejected.

Others were escorted out after ignoring pleas to simmer down from Sanger and Chief Executive Tim Sloan.

The directors who received weak support had faced negative recommendations from influential proxy adviser Institutional Shareholder Services (ISS), which argued they failed in their oversight duties.

Two directors, Federico Peña and Enrique Hernandez, received even less support than Sanger, at 54 percent and 53 percent, respectively. They chair board committees related to risk, finance or corporate responsibility. All but three directors received support of 80 percent or less.

The other three received 99 percent approval, and were recent additions: Sloan, who was named CEO in October after the scandal erupted, as well as Ronald Sargent and Karen Peetz, who were newly elected to the board this year.

At most SP 500 companies, director support averages around 95 percent of votes cast, according to pay consulting firm Semler Brossy.

Six Wells Fargo directors will reach a mandatory retirement age of 72 in the coming years and are expected to leave when they do, Sanger said. He will hit that mark next year, but would not say when he planned to retire.

The bank’s guidelines require that directors offer to resign if they fail to receive a majority of votes cast. But in practice, directors who receive less than 80 percent support should consider exiting the board, said Charles Elson, a University of Delaware expert on corporate governance.

“It’s a really strong signal from shareholders, and I think they need to immediately consider refreshing that board,” he said of Wells Fargo.

Wells Fargo’s board and management had said the steps taken to fix problems and punish employees responsible for abuses show there is now strong oversight, and that directors nominated deserved to be elected. But the public firestorm that hammered its shares last year and led to the resignation of then-Chairman and Chief Executive John Stumpf was not forgotten.

Sloan and Sanger reiterated those comments and apologized repeatedly to shareholders, customers and employees at the meeting on Tuesday.

“We are deeply sorry for letting you, our shareholders, down and letting down our customers, our team members and the communities that we do business in,” said Sloan. “You expect and deserve much more from us.”

Sanger tried to show patience as he was frequently interrupted, but struggled at times as speakers ignored his requests to follow the usual order of proceedings. “When I say I’m sorry … I think that speaks for all of the board,” he said at one point.

After investors had time to speak, Sloan and Sanger opened the floor to a general audience QA. Two borrowers gave emotional recountings of their ordeal with Wells Fargo’s mortgage operation, both breaking into tears. Management apologized and promised to personally look into their issues.

It was not clear how or whether the board will refashion itself in response to the vote.

Although shareholders sent a clear signal of dissatisfaction, some said it would not be wise to wipe out a nearly full slate of directors at once.

“We do want a core of directors left able to reconstitute the board,” said Anne Simpson, investment director of sustainability at Calpers, which opposed nine directors. “Simply declaring ‘off with their heads’ is not reasonable.”

(Reporting by Ross Kerber in Boston and Dan Freed; Editing by Lauren Tara LaCapra and Meredith Mazzilli)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/MvkBVxvu8EE/us-wells-fargo-accounts-meeting-idUSKBN17R0AM

Not an inside job: How two analysts became SEC whistleblowers


WASHINGTON Four years ago, two analysts who liked to swap notes on numbers they thought looked odd took a fateful step and tipped off U.S. regulators about a company that one of them had watched for months.

Orthofix International NV (OFIX.O) caught one of the analysts’ attention in 2012. The Texas-based medical device maker kept hitting ambitious earnings targets and many analysts had “buy” recommendations for the stock.

But the analyst thought something was off. Its earnings reports showed it was taking longer than usual for the company to get paid by wholesale customers, invoices were piling up and executives struggled to offer a convincing explanation, saying logistical problems at foreign offices were partly to blame.

He spent months tracking quarterly reports and earning calls, and using algorithms to compare Orthofix’s ratios and patterns of sales and inventory turnover with financial data of its peers stored in databases such as Compustat.

“I am always on the lookout for something unusual, either just unusually good and under appreciated, or unusually bad,” the analyst told Reuters. “This one showed up as a company that looked like it had the potential to be unusually bad.”

In the spring of 2013, he e-mailed his spreadsheets to a fellow analyst and a friend of more than a decade, with whom he regularly chatted about companies and sectors.

“The way we work together is one person makes a suggestion and the other person challenges it,” that friend told Reuters.

“It is like a war game.”

Now both men stand to win as much as $2.5 million after Orthofix reached a $8.25 million settlement in January with the Securities and Exchange Commission and several former executives collectively paid $120,000 in penalties to resolve accounting fraud charges.

The award might even be bigger, if the SEC also credits the analysts’ tip for leading to a second civil settlement concerning foreign corrupt practices charges.

The pair declined to be publicly identified, citing concerns that it might jeopardize their current professional relations.

Referring to its January settlement with the SEC, Orthofix spokeswoman Denise Landry said the company had self-reported to the regulator and fully cooperated with the government during the investigation.

“We are pleased these matters are behind us,” she said, declining to comment further.

By entering the SEC whistleblower program the duo showed how outsiders with analytical skills and tools and time to spare can accomplish what is typically done by those with inside access to confidential information.

The program, established in 2011 under the Dodd-Frank financial reform law, aimed to bolster the SEC’s enforcement program by encouraging insiders to report potential fraud.

However, since its inception through Sept. 30, 2016, just over a third of the more than $111 million awarded to whistleblowers went to outsiders such as analysts or short-sellers, according to the SEC.

“Sometimes outsiders have a particular expertise and they are able to independently piece things together that might not be as obvious to those close to the matter,” said Jane Norberg, the head of the SEC’s Office of the Whistleblower.

“CHANNEL STUFFING”

In Orthofix’s case, what the two analysts pieced together suggested that Orthofix was goosing its earnings by “channel stuffing.”

If not disclosed to investors, the practice of flooding distributors with more products than they can use or pay for is illegal. It lets the company smooth earnings by prematurely recognizing revenue, and pushing shortfalls into the future.

As the SEC settlement later showed, Orthofix was sending various implants from its spine division to distributors in Brazil that either lacked regulatory approval, or lacked medical instruments needed to use the implants. It then was recording products that could not be resold as revenue, and also treating some of the price discounts as expenses instead of a revenue reduction, the SEC said.

(Graphic: tmsnrt.rs/2pYNwgY)

Even without such details, the analysts felt they had enough to try the SEC’s program.

Their suspicions turned into near-certainty when in May 2013, Orthofix missed its first quarter earnings targets, reporting a 14 percent year-over-year drop in net sales that sent its share price tumbling 15 percent.

“That was when the light bulb really goes off,” the analyst who first started watching the company said.

By then the two had already contacted Jordan Thomas, an attorney at the law firm Labaton Sucharow, which specializes in class action litigation and also takes on a limited number of whistleblower cases.

The law firm gets paid for its services from a portion of the award, but it does not publicly disclose its share.

A TIP AND A FOLLOW-UP

In June 2013, Thomas submitted a tip to the SEC on his clients’ behalf, promising to follow up with a more detailed submission, records show. To bolster their case the analysts kept picking through the Orthofix’s financial statements, while Labaton’s investigators, led by a former FBI agent, hit the phones and scouted industry message boards looking for former Orthofix employees.

One former employee they found revealed in an interview that in order for them to “make their numbers,” the company sent large orders to distributors, only to have them returned and then reshipped to other customers, according to the updated submission Labaton send to the SEC in August.

The update included the analysts’ estimates by how much Orthofix would need to lower their earnings and sales for 2011 and 2012. Those numbers later turned out to be right in line with what the company ultimately restated in 2014 and 2015.

The SEC still does not know the identities of the two analysts, but it will find out in May, when Thomas submits a claim on their behalf asking the SEC to consider giving them an award for their tip.

The analysts, who live in different cities, said that the day the SEC charged Orthofix, they were just too far apart to get together and celebrate, but that an award would justify the trip.

“If and when the actual award settlement is disclosed, then we can meet up for champagne,” one said.

(Reporting by Sarah N. Lynch in Washington; Editing by Tomasz Janowski)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/Z2dhSo1ImaM/us-sec-fraud-whistleblowers-idUSKBN17R0C8

World stocks rise on French vote relief, Trump tax plan talk


LONDON World stocks hit record highs on Tuesday, with investors’ relief at centrist Emmanuel Macron’s victory in the first round of the French presidential election supported by speculation about U.S. tax reform.

Safe-haven assets such as gold and the Japanese yen retreated as opinion polls suggested Macron would easily beat far-right, anti-EU candidate Marine Le Pen in a May 7 run-off.

The yield gap between French and German short-term government bonds, a closely watched measure of political risk in the euro zone, tightened further after hitting a three-month low on Monday DE2FR2=RR.

“This (the second round) is going to be a non-event for the market,” said Commerzbank currency strategist Thu Lan Nguyen in Frankfurt.

“Markets have pretty much priced out the risk of a Le Pen victory, and rightly so, because the first round of the elections has shown that the polls in France were correct…and this increases the confidence in the polls for the second round…It’s highly likely that (Macron) is going to win.”

European shares measured by the STOXX 600 index edged up by 0.2 percent, after rising 2.1 percent on Monday. French shares .FCHI pulled back 0.1 percent, having risen 4.1 percent on Monday in their biggest daily gain since August 2012.

Euro zone bank shares .SX7E edged higher after big gains on Monday. The European Central Bank said in a quarterly survey of lenders that while banks would tighten access to credit for companies in the second quarter, lending volumes were still expected to rise.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.6 percent, hovering near its highest level since June 2015 hit earlier in the session, on its fourth straight day of gains.

Japan’s Nikkei .N225 rose more than 1 percent to a three-week high. South Korea’s KOSPI .KS11 also advanced 0.7 percent to its highest level since April 2015.

These gains helped push MSCI’s world stocks index, comprising shares from 46 countries .MIWO00000PUS to a fresh all-time high after chalking up its biggest rise since shortly after Britain’s vote last June to leave the European Union.

The euro added to Monday’s gains against the dollar, rising 0.2 percent to $1.0884, albeit off Monday’s high of $1.0940 EUR=.

The yen, however, pulled back 0.6 percent to 110.39 per dollar. Sterling GBP=D3 rose 0.1 percent to $1.2806.

The Canadian dollar CAD= fell 0.5 percent to C$1.3561 per U.S. dollar after the United States announced new duties averaging 20 percent on Canadian softwood lumber imports.

French and German 10-year government bond yields DE10YT=RR FR10YT=RR rose and the spread between them hit its tightest since November at around 41 basis points. The two-year spread was its narrowest since late January.

TRUMP TAX TALK

With one of the year’s major risks to markets seen less acute, markets were also looking ahead to other factors, including U.S. President Donald Trump’s promise to announce on Wednesday “a big tax reform and tax reduction”.

The Wall Street Journal reported Trump wanted to cut the corporate tax rate to 15 percent. The White House budget director told Fox News on Monday Trump’s announcement would focus on principles, ideas and rates.

“I’m becoming little concerned over the President’s big announcements, especially since we haven’t seen any major legislative achievement so far and he will be marking his 100th day in the White House this Saturday,” said FXTM chief market strategist Hussein Sayed in a note.

Gold, sought as a shelter for wealth in turbulent times, fell 0.4 percent to just under $1,270 an ounce.

Copper reversed falls in Asia and headed higher, last trading 0.7 percent higher at $5,695 a tonne CMCU3.

Oil prices steadied after six straight days of losses. Brent crude, the international benchmark LCOc1, was just 4 cents down on the day at $51.59 a barrel.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

(Additional reporting by Nichola Saminather in SINGAPORE, Jemima Kelly, Jamie McGeever, Marc Jones and John Geddie in London)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/MweI8w9kONo/us-global-markets-idUSKBN17R03Y

Trump’s push to fund wall may be delayed as government shutdown looms


WASHINGTON U.S. President Donald Trump indicated an openness on Monday to delaying his push to secure funds for his promised border wall with Mexico, potentially eliminating a sticking point as lawmakers worked to avoid a looming shutdown of the federal government.

Trump, in a private meeting with conservative media outlets, said he may wait until Republicans begin drafting the budget blueprint for the fiscal year that starts on Oct. 1 to seek government funds for building a wall along the U.S.-Mexico border, the White House confirmed.

Trump, whose approval ratings have slid since he took office, is facing a Friday deadline for Congress to pass a spending bill funding the government through September or risk marking his 100th day in office on Saturday with a government shutdown.

“Now the bipartisan and bicameral negotiators can continue working on the outstanding issues,” Senate Democratic leader Chuck Schumer said in a statement on Monday night.

Earlier on Monday, Schumer reiterated an assertion made last week that bipartisan negotiations in Congress were going well until the White House began demanding money for the wall as a condition for accepting a funding bill.

Although Republicans control both chambers of Congress, a funding bill will need 60 votes to clear the 100-member Senate, where Republicans hold 52 seats, meaning at least some Democrats will have to get behind it.

If no spending measure covering April 29 to Sept. 30 is in place before 12:01 a.m. (0401 GMT) on Saturday, government funds will halt and hundreds of thousands of the country’s several million federal employees will be temporarily laid off.

Those in jobs deemed essential such as law enforcement are expected to keep working in the hope they will receive back pay. Non-essential sectors such as national parks are liable to be closed and programs such as federally funded medical research will grind to a halt.

Failure to approve a government funding bill could also throw new doubts over Republicans’ ability to fashion a budget blueprint for the next fiscal year or to succeed in a major effort to cut corporate and individual taxes that Trump has touted.

STICKING POINTS

Congressional leaders will likely have to decide by late on Tuesday whether negotiations are progressing enough to try to pass a spending bill funding the government through September, Senator Roy Blunt, a member of the Republican leadership and Senate Appropriations Committee, told reporters on Monday.

If negotiations have slowed or stalled, Congress could pursue a short-term extension of existing spending levels to avoid a government shutdown, giving lawmakers more time to reach a deal. Leading Democrats have said they would support such a measure only if talks are progressing.

Short-term funding measures, known as continuing resolutions that cover periods of days, have been used to avert government shutdowns in the past. But in 2013, conservative Republicans forced a 17-day shutdown in a failed attempt to repeal former President Barack Obama’s Affordable Care Act, popularly known as Obamacare.

A Republican effort to repeal and replace Obamacare imploded in Congress last month and the White House said on Monday that another vote could not come for weeks.

But Trump has dangled the prospect of funding some elements of the law, which enabled millions more Americans to secure healthcare coverage, in exchange for Democrats’ support in the spending talks.

The White House had offered to include $7 billion in Obamacare subsidies that allow low-income people to pay for healthcare insurance in exchange for Democratic backing of $1.5 billion in funding to begin construction of a barrier on the U.S.-Mexico border.

It was unclear on Monday whether delaying wall funding until later spending negotiations would invalidate the White House pledge to include Obamacare subsidy funding for low-income people in the current proposal funding the government through September.

Trump has argued that a wall along the U.S.-Mexico border is needed to stem the flow of illegal immigrants and drugs into the United States. In a Twitter message on Monday, Trump wrote: “If… the wall is not built, which it will be, the drug situation will NEVER be fixed the way it should be!”

Earlier on Monday, White House spokesman Sean Spicer said Trump’s demand that Congress include funds for the construction of the wall remained a White House priority.

“The president has made very clear that he’s got two priorities in this continuing resolution: No. 1, the increase in funding for the military and No. 2, for our homeland security and the wall,” Spicer told reporters.

The White House is confident in the direction of the talks and an announcement is expected soon, Spicer said, although he declined to say specifically whether Trump would sign a bill that did not contain money for border security and the wall.

Trump has said Mexico will repay the United States for the wall if Congress funds it first. But the Mexican government is adamant it will not provide any financing and Trump has not laid out a plan to compel Mexico to pay. Department of Homeland Security internal estimates have placed the total cost of a border barrier at about $21.6 billion.

Aside from inflaming relations with a major trading partner, the planned wall has angered Democrats. They showed no sign of softening their opposition on Monday and sought to place responsibility for any shutdown squarely on Trump and congressional Republicans.

(Additional reporting by Ayesha Rascoe, Julia Edwards Ainsley, Susan Heavey and Doina Chiacu; Writing by Paul Simao and Amanda Becker; Editing by Frances Kerry and Peter Cooney)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/SGMnpCYzDt0/us-usa-budget-idUSKBN17Q0VG

French election relief sends Europe soaring


LONDON European shares opened sharply higher and the euro briefly vaulted to five-month peaks on Monday after the market’s favored candidate won the first round of the French election, reducing the risk of another Brexit-like shock.

The victory for pro-EU centrist Emmanuel Macron, who is now expected to beat right-wing rival Marine Le Pen in a deciding vote next month, sent the pan-European STOXX 50 index .STOXX50E up 3 percent, France’s CAC40 .FCHI almost 4 percent and bank stocks .SX7E more than 6 percent. [.EU]

Traders top-sliced some of the euro’s overnight gains, but it was still up more than 1 percent on the dollar EUR=EBS, more than 2 percent against the yen EURJPY= and 1.3 percent on the pound EURGBP= as the early flurry of deals subsided. [FRX/]

“It (the first round result) has come out in line with the market’s expectations so you have something of a risk rally as there was a bit of a risk-premium built into all markets,” said James Binny, head of currency at State Street Global Advisors.

There was also an unwinding of safe-haven trades.

Shorter-term German bonds DE2YT=TWEB saw their biggest sell-off since the end of 2015 as investors piled back into French FR10YT=TWEB as well as Italian, Spanish, Portuguese and Greek debt [GVD/EUR].

The Japanese yen’s fall was widespread JPY=EBS, the market’s so-called fear-guage, the VIX volatility index .VIX, plunged the most since November and gold XAU= saw its biggest tumble in more than a month. [GOL/]

E-mini futures for Wall Street’s SP 500 ESc1 climbed 0.9 percent in early trade, while yields on 10-year U.S. Treasury notes US10YT=RR rose almost 8 basis points to 2.31 percent.

RISK RALLY

Asia also saw a risk rally. Japan’s Nikkei .N225 jumped 1.5 percent as the yen retreated, while MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.3 percent.

Shanghai shares .SSEC fell 1.7 percent after state media signaled Beijing would tolerate more market volatility as regulators clamp down on riskier financing.

But Macron’s success set the tone.

The euro jumped in relief, and was last up 1.1 percent at $1.0840 EUR=, having been as far as $1.0940, the highest since early November.

The safe-haven yen slipped across the board with the euro surging as much 2.4 percent to 119.77 yen EURJPY= while the U.S. dollar gained 1 percent to 110.20 yen JPY=.

“The rise of the euro and risk appetite rebounding is understandable and this should also see yields in Europe fall, spreads to Bunds tighten and stocks rally,” said Tim Riddell, an analyst at Westpac.

“However, such gains are likely to be contained when markets reflect upon the marked shift away from the ‘establishment’ and just how effective the new president may be,” he added.

SKEPTICAL ON TAX

Wall Street on Friday had only a modest lift from news President Donald Trump would announce the broad outline of his proposed tax package on Wednesday.

“Markets are skeptical that the real details will be forthcoming,” said analysts at ANZ in a note.

“There is also plenty of conjecture about whether any tax cuts will be able to be revenue neutral, and that could affect their ease of passage through Congress.”

The Dow .DJI ended Friday down a minor 0.15 percent, while the SP 500 .SPX lost 0.30 percent and the Nasdaq .IXIC fell 0.11 percent.

Investors were also keeping a wary eye on tensions in the Korean peninsula.

North Korea said on Sunday it was ready to sink a U.S. aircraft carrier to demonstrate its military might, in the latest sign of rising tension as Trump called the leaders of China and Japan to discuss the situation.

South Korea responded by asking Washington about holding joint drills with the USS Carl Vinson aircraft carrier strike group as it approaches waters off the Korean peninsula.

Oil prices recouped just a little of last week’s hefty losses, still weighed by signs U.S. production and inventory growth were offsetting OPEC’s attempts to reduce the global crude glut.

Brent futures LCOc1 were up 16 cents at $52.12 a barrel, while U.S. crude futures CLc1 added 17 cents to $49.79.

(Additional reporting by Wayne Cole in Sydney; Editing by Andrew Heavens)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/pzXLmmGHjOI/us-global-markets-idUSKBN17P10G

Tesla’s big Model 3 bet rides on risky assembly line strategy


Tesla Inc (TSLA.O) Chief Executive Elon Musk took many risks with the technology in his company’s cars on the way to surpassing Ford Motor Co’s market value. Now Musk is pushing boundaries in the factory that makes them.

Most automakers test a new model’s production line by building vehicles with relatively cheap, prototype tools designed to be scrapped once they deliver doors that fit, body panels with the right shape and dashboards that don’t have gaps or seams.

Tesla, however, is skipping that preliminary step and ordering permanent, more expensive equipment as it races to launch its Model 3 sedan by a self-imposed volume production deadline of September, Musk told investors last month.

Musk’s decision underscores his high-risk tolerance and willingness to forego long-held industry norms that has helped Tesla upend the traditional auto industry. While Tesla is not the first automaker to try to accelerate production on the factory floor, no other rival is putting this much faith in the production strategy succeeding.

Musk expects the Model 3 rollout to help Tesla deliver five times its current annual sales volume, a key target in the automaker’s efforts to stop burning cash.

“He’s pushing the envelope to see how much time and cost he can take out of the process,” said Ron Harbour, a manufacturing consultant at Oliver Wyman.

Investors are already counting on Tesla’s factory floor success, with shares soaring 39 percent since January as it makes the leap from niche producer to mass producer in far less time than rivals.

There are caution signs, however. The production equipment designed to produce millions of cars is expensive to fix or replace if it doesn’t work, industry experts say. Tesla has encountered quality problems on its existing low-volume cars, and the Model 3 is designed to sell in numbers as high as 500,000 vehicles a year, raising the potential cost of recalls or warranty repairs.

“It’s an experiment, certainly,” said Consumer Reports’ Jake Fisher, who has done extensive testing of Tesla’s previous Models S and X. Tesla could possibly fix errors quicker, speeding up the process, “or it could be they have unsuspected problems they’ll have a hard time dealing with.”

Musk discussed the decision to skip what he referred to as “beta” production testing during a call last month with an invited group of investors. Details were published on Reddit by an investor on the call. (here).

He also said that “advanced analytical techniques” – code word for computer simulations – would help Tesla in advancing straight to production tooling.

Tesla declined to confirm details of the call or comment on its production strategy.

The auto industry’s incumbents have not been standing still. Volkswagen AG’s Audi division launched production of a new plant in Mexico using computer simulations of production tools – and indeed the entire assembly line and factory – that Audi said it believed to be an industry first. That process allowed the plant to launch production 30 percent faster than usual, Audi said.

An Audi executive involved in the Mexican plant launch, Peter Hochholdinger, is now Tesla’s vice president of production.

MAKING TOOLS FASTER

Typically, automakers test their design with limited production using lower grade equipment that can be modified slightly to address problems. When most of the kinks are worked out, they order the final equipment.

Tesla’s decision to move directly to the final tools is in part because lower grade, disposable equipment known as “soft tooling” ended up complicating the debut of the problem-plagued Model X SUV in 2015, according to a person familiar with the decision and Tesla’s assembly line planning.

Working on a tight deadline, Tesla had no time to incorporate lessons learned from soft tooling before having to order the permanent production tooling, making the former’s value negligible, the source said.

“Soft tooling did very little for the program and arguably hurt things,” said the person.

In addition, Tesla has learned to better modify final production tools, and its 2015 purchase of a Michigan tooling company means it can make major equipment 30 percent faster than before, and more cheaply as well, the source said.

Financial pressure is partly driving Tesla’s haste. The quicker Tesla can deliver the Model 3 with its estimated $35,000 base price to the 373,000 customers who have put down a $1000 deposit, the closer it can log $13 billion.

Tesla has labored under financial pressure since it was founded in 2003. The company has yet to turn an annual profit, and earlier this year Musk said the company was “close to the edge” as it look toward capital spending of $2-2.5 billion in the first half of 2017.

Tesla has since gotten more breathing room by raising $1.2 billion in fresh capital in March and selling a five per cent stake to Chinese internet company Tencent Holdings Ltd (0700.HK) .

Musk has spoken to investors about his vision of an “alien dreadnought” factory that uses artificial intelligence and robots to build cars at speeds faster than human assembly workers could manage.

But there are limits to what technology can do in the heavily regulated car business. For example, Tesla will still have to use real cars in crash tests required by the U.S. government, because federal rules do not allow simulated crash results to substitute for data from a real car.

(Editing by Peter Henderson and Edward Tobin)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/ZzJJu8qR9KM/us-tesla-assemblyline-idUSKBN17Q0DE

U.S. Chamber of Commerce chief expects basic NAFTA deal by mid-2018


MEXICO CITY The United States, Mexico and Canada are likely to reach a basic accord over reworking the North American Free Trade Agreement (NAFTA) by the middle of next year, the head of the biggest U.S. business lobby group said on Sunday.

The future of the deal binding the three nations has been in doubt since Donald Trump won the U.S. presidency in November pledging to ditch it if he could not rework terms in favor of the United States, clouding the outlook for Mexico in particular.

However, Thomas Donohue, president and chief executive officer of the U.S. Chamber of Commerce, said that he believed business leaders and policymakers were increasingly aware of the need to get a new deal and move on without disrupting business.

“We’re not going to be fooling around with this deal in 2018,” he said in an interview with Reuters on a visit to Mexico City where he will meet policymakers and make the case for free trade.

Trump contends that Mexico’s growth as a manufacturing power since NAFTA took effect in 1994 has cost jobs in the United States. However, defenders of the deal say it has benefited all three nations and helped American firms compete globally.

The U.S. government has yet to send a letter telling Congress that it intends to launch NAFTA negotiations in 90 days – the notification period required under the fast-track process – so the potential start of talks is now drifting into August.

Donohue said that step should follow in the next few weeks, adding neither Trump nor U.S. firms had an interest in dragging out the NAFTA talks because of the economic damage it would do.

“(Trump) is looking at how to get things done,” he added. “And I can tell you that he wants to speed this thing up.”

When asked if he thought a basic agreement on a reworked NAFTA would likely be in place by July 2018, Donohue said:

“Yes. That’s my opinion. That’s my view. The bottom line is we need to move forward on this deal. It is critical to our economic and geopolitical well-being. Period.”

Mexico, which sends 80 percent of its exports to the United States, will hold its next presidential election in July next year. President Enrique Pena Nieto’s government is hoping to wrap up the NAFTA talks before it takes place.

During his own campaign, Trump threatened to slap hefty tariffs on Mexican-made goods, including a 35 percent tax on cars, and he caused dismay in Mexico with a pledge to build a southern border wall to keep out illegal immigrants.

Since taking office, Trump’s tone has softened, though he again railed against NAFTA over the past week and returned to the issue of the wall, saying Mexico would pay for it “eventually.”

Nevertheless, Donohue said understanding was growing over the need for a deal that would accelerate, not reduce trade, and argued the prospect of punitive tariffs was receding.

“In fact, we haven’t heard of that in a long time,” he said. “Because if a country were to put a 35 percent tariff on products moving into their country, the guys you’re trading with are going to do it the next morning.”

(Reporting by Dave Graham; Editing by Simon Cameron-Moore)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/eBrP6WIxYgs/us-usa-mexico-nafta-idUSKBN17Q0DV

IMF members set aside trade split as French vote rattles nerves


WASHINGTON International Monetary Fund members on Saturday dropped a pledge to fight protectionism amid a split over trade policy and turned their attention to another looming threat to global economic integration: the first round of France’s presidential election.

Concerns that far-right leader Marine Le Pen and far-left rival Jean-Luc Mélenchon, both critics of the European Union, could top the field in Sunday’s vote added to nervousness over U.S. trade policy at the IMF and World Bank spring meetings.

“There was a clear recognition in the room that we have probably moved from high financial and economic risks to more geopolitical risks,” IMF Managing Director Christine Lagarde told a news conference.

Lagarde, a former French finance minister who has warned that a Le Pen presidency could lead to political and economic upheaval, added that a policy shift from “growth momentum to more sharing and inclusive growth” was now needed.

A communique from the IMF’s steering committee on Saturday dropped an anti-protectionism pledge, adopting language from the Group of 20 nations that the Trump administration sought last month in Germany as it develops a strategy to slash U.S. trade deficits.

Earlier in the week, the IMF had warned that protectionist policies that restrict trade could choke off improving global growth.

Instead, the International Monetary and Financial Committee (IMFC) statement pledged that members would “work together” to reduce global trade and current account imbalances “through appropriate policies.”

Mexican central bank chief Agustin Carstens, the IMFC chairman, said most countries have some trade restrictions and that protectionism was an “ambiguous” term.

“Instead of dwelling on what that concept means, we managed to put it in a more positive, more constructive framework,” Carstens told a news conference.

Some officials chose to focus on the brightening global economy instead of the risks posed by the French election, new U.S. trade barriers and Britain’s decision to leave the European Union, said James Boughton, a former IMF official.

“There’s an awful lot of forced optimism about what these people are saying,” said Boughton, who is now with the Centre for International Governance Innovation, a Canadian think-tank. “Until the train goes off the tracks, everything looks fine.”

U.S. Treasury Secretary Steven Mnuchin called for the IMF to step up its surveillance of members’ foreign exchange rates.

President Donald Trump “believes in reciprocal trade deals and reciprocal free trade,” Mnuchin told Lagarde in an on-stage interview. “What that means is that if our markets are open there should be a reciprocal nature to other markets which should be open as well.”

CONTINGENCY PLANS

The French election presents free trade advocates with a third potential blow in less than a year after Britain’s EU referendum and Trump’s election on a platform to restrict imports and protect U.S. jobs.

Trump has voiced support for Le Pen, the National Front candidate who has promised a referendum on France’s membership in the EU.

Investors fear that a potential run-off between Le Pen and Mélenchon, who has vowed to end the independence of the European Central Bank, would roil financial markets and drive out capital.

ECB policymaker Ewald Nowotny said on Saturday that the central bank was ready to provide emergency cash to French banks if necessary.

“If there should be problems for specific French banks liquidity-wise, then the ECB has the … ELA, Emergency Liquidity Assistance, but we don’t expect, of course, any special movements,” Nowotny, who heads Austria’s central bank, told reporters at the IMF.

(Reporting by David Lawder, Leika Kihara and Francesco Canepa; Writing by David Lawder; Editing by Paul Simao)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/OpIMlApGwdY/us-imf-g-idUSKBN17O0OD

Trump’s ‘big announcement’ on tax to be broad principles: official


WASHINGTON President Donald Trump’s promised “big announcement” next week on overhauling the U.S. tax code, a top campaign pledge, will consist of “broad principles and priorities,” an administration official said on Saturday.

The president unexpectedly said on Friday at a Treasury Department event that there would be “a big announcement on Wednesday having to do with tax reform.”

In a Twitter message on Saturday, he wrote: “Big TAX REFORM AND TAX REDUCTION will be announced next Wednesday.”

Asked for details, the administration official, who asked not to be identified, said, “We will outline our broad principles and priorities” on Wednesday.

Trump has struggled as president to advance his domestic policy agenda, including on taxes, even though his Republican Party controls both chambers of Congress. With his 100th day in office only a week away, he has yet to offer any formal legislation or win passage of a major bill he favors.

Most recent presidents had legislative wins under their belts by this time in their administrations.

Under U.S. law, only Congress can make significant tax law changes, though the president often drives the tax agenda by offering legislation. The administration official said, “We are moving forward on comprehensive tax reform that cuts tax rates for individuals, simplifies our overly complicated system and creates jobs by making American businesses competitive.”

As a candidate, Trump raised high expectations in financial markets and the business community for changes in the complex, loophole-riddled tax system. In his “Contract with the American Voter,” he vowed to work with Congress on tax legislation “within the first 100 days of my administration.” The action plan promised large tax cuts for the middle class and businesses, a reduction of tax brackets to three from seven, simplified tax forms and an offshore profits repatriation tax holiday.

Since then, no legislation or formal tax plan has been presented by Trump. He has at times expressed support for a plan drawn up by House of Representatives Republicans, but his views are unclear on a section that deals with taxing imports.

In February, Trump promised a “phenomenal” tax plan within a few weeks, without offering details. No plan followed.

Last month when an attempt supported by Trump to repeal the healthcare law known as Obamacare collapsed in Congress, Trump said he would refocus on taxes.

Treasury Secretary Steven Mnuchin said on Thursday he expected Congress to approve a tax plan this year.

(Editing by Kevin Drawbaugh and Andrea Ricci)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/pKboVjqAnj8/us-usa-tax-trump-idUSKBN17O0KY

Trump tax plan may produce some short-term budget issues: Mnuchin


WASHINGTON U.S. Treasury Secretary Steven Mnuchin said on Saturday that the Trump administration’s tax reform plan would produce some “short term issues” when viewed under traditional “static” budget analysis rules.

His comments during an interview by International Monetary Fund Managing Director Christine Lagarde suggested that the plan would not be revenue-neutral and would increase deficits in the short term.

Mnuchin said that the tax plan would pay for itself when viewed through a “dynamic scoring” analysis, which accounts for the increased tax revenues that would be produced by higher growth prompted by the tax changes.

“We’re looking for reforms that will pay for themselves with growth,” Mnuchin said. “Under dynamic scoring, this will pay for itself, under static scoring, there’ll be short term issues.”

Mnuchin also said the tax plan would be aimed at helping the middle class to “get more money in their pockets” and would be much simpler.

“The tax code is way, way, way too complicated. We want to create a system where the average American can file a tax code on a big postcard,” Mnuchin said.

(Reporting by David Lawder; editing by Diane Craft)

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United CEO Munoz will not chair board in 2018 following passenger furor


NEW YORK United Continental Holdings Inc (UAL.N) said on Friday Chief Executive Oscar Munoz will not become chairman in 2018, under an amendment to his employment agreement approved after an uproar over the treatment of a passenger.

In a reversal of his earlier employment agreement, Munoz has opted to leave “future determinations related to the Chairman position to the discretion of the Board,” United said in a U.S. Securities and Exchange Commission filing.

The company also said it would revise its 2017 executive compensation to more directly tie incentives to improvements in customer satisfaction. In 2016, Munoz made $18.72 million.

“United’s management and the Board take recent events extremely seriously, and are in the process of developing targeted compensation program design adjustments to ensure that employees’ incentive opportunities for 2017 are directly and meaningfully tied to progress in improving the customer experience,” the filing said.

Earlier this month, a United passenger, Dr. David Dao, was dragged from his seat off a parked plane at Chicago’s O’Hare International Airport bound for Louisville, Kentucky, to make room for crew members.

The scene was captured on video by fellow passengers and showed Dao bloodied and disheveled in the incident.

Dao’s attorney said his 69-year-old client had incurred a significant concussion, broken his nose and lost two front teeth in the altercation with airport security, and said Dao would likely sue the airline.

Munoz, a former railroad executive who took over United in 2015, had already been pressured by activist investors to improve the airline’s performance, including in customer relations. In April 2016, United agreed with a group of investors to install airline industry veteran Robert Milton as non-executive chairman.

In initial statements following the incident, Munoz and United did not apologize to Dao for the way he had been treated, instead describing him as “disruptive and belligerent.”

Before being hauled from the flight, Dao, who emigrated from Vietnam in the 1970s, repeatedly accused the airline of discriminating against him for being ethnic Chinese, according to fellow passenger Tyler Bridges who was traveling back home from Japan.

The incident, and the company’s response, sparked global outrage. Social media users across the United States, Vietnam and China called for a boycott of the carrier.

United said on Friday it had asked a U.S. Senate panel for an extra week to answer detailed questions about the incident. Munoz wrote that he was “personally committed to putting proof behind our promise” in United’s commitment to reforms.

Committee leaders said in a joint statement that getting answers about what happened and how to prevent a recurrence was a “priority” and any further delay was “unacceptable.”

(Reporting by Alana Wise; Additional reporting by David Shepardson; Editing by Richard Chang)

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Two big California pension systems oppose nine Wells Fargo directors


BOSTON Officials of two large California public retirement systems said Friday they are voting against nine of 15 Wells Fargo Co directors up for election at the bank’s annual meeting next week, citing the bank’s phony-account scandal.

Leaders of the largest U.S. state pension system, known as CalPERS, said in an email it is voting about 13.9 million shares against the bank nominees, including its chairman, Stephen Sanger, ahead of the bank’s April 25 meeting in Ponte Vedra Beach, Florida. Wells Fargo is based in San Francisco.

“We believe these directors failed in their oversight responsibilities during the retail banking controversy at the company,” CalPERS said in a statement posted on its website.

In addition, CalPERS said some Wells Fargo (WFC.N) director nominees have tenures of 12 years or more, “which we believe could compromise director independence.”

Separately, in a statement sent by a spokesman, the California State Teachers’ Retirement System, or CalSTRS, said on Friday it voted its 11.6 million Wells Fargo shares against the same group of nine directors.

According to the statement, “These board members bear responsibility for the failure of oversight of sales practices at Wells Fargo.”

The comments underscore the challenge facing the country’s third-largest bank, which has struggled to move past revelations that thousands of employees created as many as 2 million accounts in customers’ names without permission in order to hit lofty sales targets.

Wells Fargo’s board and management have said steps already taken to fix problems and punish employees responsible for sales abuses show there is now strong oversight and that directors nominated deserve to be elected.

While the board has gained support from its largest investor, Berkshire Hathaway Inc, it also faces a recommendation to vote against 12 directors by leading proxy adviser Institutional Shareholder Services.

CalPERS is the 52nd largest shareholder of Wells Fargo and CalSTRS is the 62nd largest, according to Thomson Reuters data. While they do not command much voting clout, their public comments often can set the tone since larger mutual fund companies rarely make public their votes ahead of corporate annual meetings.

Among its other votes, CalPERS said it is voting “against” the ratification of bank auditor KPMG. Calpers said it has “concerns over a potential lapse of internal controls during the extended period of abusive sales tactics at the company.”

CalPERS also said the company should explore auditor rotation to ensure a fresh perspective.

CalSTRS said that with six directors scheduled to retire in the next four years, “Wells Fargo should expedite the board refreshment process and reach out to their shareholder base for feedback during this process. The board would also benefit from adding directors with greater banking and financial institution experience.”

(Reporting by Ross Kerber; Editing by Bill Trott)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/mgtWKcIz7_8/us-wellsfargo-accounts-calpers-idUSKBN17N2MQ

Wall Street gears up for busiest earnings week in years


NEW YORK Forget about French elections or the flagging Trump trade.

Corporate America is set to unleash its biggest profit-reporting fest in at least a decade next week, with more than 190 members of the SP 500 index .SPX delivering quarterly scorecards, according to SP Dow Jones Indices data.

The lineup accounts for around 40 percent of the benchmark index’s value, or more than $7.7 trillion, and includes big names like Google’s parent Alphabet Inc (GOOGL.O), Amazon.com Inc (AMZN.O), Microsoft Corp (MSFT.O) and Exxon Mobil Corp (XOM.N).

The onslaught could keep U.S. stock investors’ focus largely on earnings next week even as the world’s attention is likely to be drawn elsewhere.

“That would be our hope,” said Joe Zidle, portfolio strategist at Richard Bernstein Advisors in New York.

“A lot of people looked at this market and said it was the result of the Trump bump or the Hillary relief rally,” while earnings have been rebounding, he said. “The faster earnings growth is underappreciated by investors.”

Many strategists have attributed the 10 percent rally in the SP 500 .INX since Donald Trump’s victory over Hillary Clinton in the Nov. 8 U.S. presidential election to optimism Trump would boost the domestic economy through tax cuts and an infrastructure spending binge.

The gains drove market valuations recently to their highest since 2004, even with little progress in Washington on the fiscal policy front. Meanwhile, other anxiety-provoking events have grabbed headlines, including unsettling relations with North Korea and this weekend’s election in France, which has a bearing on the country’s membership in the European Union and its currency, the euro.

Upbeat earnings from Morgan Stanley (MS.N) and other banks so far this reporting period cushioned those geopolitical worries, helping push the SP 500 .SPX up 0.9 percent this week, its best such performance in two months. Shares of smaller companies did even better, with SP’s benchmark indexes for small .SPCY and mid-cap .IDX stocks notching their best weeks of 2017, with gains of between 2 percent and 3 percent.

Expectations for the quarter’s profit growth have risen as well, and the first three months of the year now appear set to mark the strongest quarterly earnings growth in more than five years. In the last week alone, expected SP 500 first-quarter earnings per share growth rose to 11.2 percent from 10.4 percent, a more than 7 percent jump, according to Thomson Reuters data.

“This week definitely has proven that the Street likes earnings – it’s controllable, it’s U.S.,” said Howard Silverblatt, senior index analyst at SP Dow Jones Indices.

The reason for the slew of reports next week is anyone’s guess, Silverblatt said, although recent holidays possibly played a role. Passover, Good Friday and Easter all fell in the previous weeks, which may have prompted some companies that typically report earlier to delay a week.

Just 76 companies reported this week compared with 134 in the comparable week a year ago, Silverblatt said.

Next week’s rush will represent a 15 percent increase from the 166 SP constituents that reported in the comparable week last year.

Thursday will be the busiest day with nearly 70 reports due, including updates after the closing bell from Alphabet, Amazon, Intel Corp (INTC.O), Microsoft and Starbucks Corp (SBUX.O).

That could make for a bang in the market on Friday, Silverblatt said, which is also the final trading day of April.

(Reporting by Caroline Valetkevitch; Editing by Dan Burns and Meredith Mazzilli)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/2eGFJzWGYZM/us-usa-results-idUSKBN17N2HM

High-stakes vote on Wells Fargo board also tests proxy adviser ISS


BOSTON A high-stakes shareholder vote at Wells Fargo Co (WFC.N) next week will determine whether the bank has done enough to retain investor confidence after its phony-account scandal, and whether a leading proxy adviser wields enough clout to help oust most of its board.

In one of its toughest shareholder notes, Institutional Shareholder Services (ISS) recommended earlier this month that investors vote against 12 of the 15 directors on Wells Fargo’s ballot at the company’s annual meeting on April 25, including independent chairman Stephen Sanger. ISS argued they had all failed in their oversight duties.

The recommendation was another blow to the country’s third-largest bank, which has been struggling for months to move past revelations that thousands of employees created as many as 2 million accounts in customers’ names without permission to hit lofty sales targets. ISS’s recommendation followed one by Glass Lewis, its closest competitor, which recommended votes against six directors for similar reasons. The ball is now in the shareholders’ court. A sampling of investors who spoke to Reuters were split on how to vote.

It would be extremely unusual for most directors at a company the size of Wells Fargo to turn over suddenly, without pressure from an activist investor, but ISS’s scathing review was also rare.

According to Proxy Insight, among the 2,780 meetings held by SP 500 companies since 2012, ISS has recommended votes against 80 percent or more of directors in just seven cases besides Wells Fargo. Each involved a special circumstance, like only a few directors being up for re-election.

ISS’s Wells Fargo recommendation was “among the harshest that I can recall,” said Bruce Goldfarb, president of proxy solicitation firm Okapi Partners.

An ISS spokesman declined to comment. Wells Fargo representatives cited an April 7 statement calling the ISS recommendation “extreme and unprecedented.”

ISS is the largest proxy adviser, with about 1,700 clients versus Glass Lewis’s 1,200, and has faced concerns it wields undue influence over corporate elections. On average, directors who ISS recommends “against” receive 17 percent to 18 percent less support, according to consulting firm Semler Brossy.

Activists have criticized big fund managers for blindly following ISS. Institutional investors have built up large corporate governance departments in recent years and say they make their own judgments.

But breaking with ISS and supporting the whole Wells Fargo board could be difficult for fund firms, said Michael Goldstein, a Babson College finance professor.

“This may be one of those cases where you don’t want to have to answer a lot of questions about why did you support these people,” Goldstein said.

DONE ENOUGH?

If shareholders do vote against some of Wells Fargo’s directors, it does not mean they will immediately leave. The bank’s guidelines require directors offer to resign if they fail to receive a majority of votes cast, but leaves the board wiggle room in deciding whether to accept a resignation.

In other cases with fewer directors at risk, shareholder sentiment mattered. Some of JPMorgan Chase Co’s (JPM.N) directors resigned in 2013 when they won only narrow majorities after the “London Whale” trading scandal.

Directors who fail to win majorities are in an even weaker position buy may not leave right away. For instance, two Chesapeake Energy Corp (CHK.N) directors received less than 30 percent support at its annual meeting in mid-2012 and offered to resign. The board accepted the resignation of one director two weeks later and did not accept the resignation of the other until the following March.

Wells Fargo’s board and management have said the steps taken to fix problems and punish employees responsible for sales abuses show there is now strong oversight, and that directors nominated deserve to be elected. In an interview with Bloomberg TV on Wednesday, Wells Fargo Chief Executive Tim Sloan said ousting most of the board would be “crazy.”

The San Francisco-based bank paid $190 million in a September regulatory settlement for the unauthorized accounts, igniting a public firestorm that hammered its shares and led to the resignation of then-Chairman and CEO John Stumpf.

Since then, Sloan replaced Stumpf, and Sanger became the independent chairman. The board took steps like eliminating sales goals, revamping its compensation structure and withholding or clawing back tens of millions of dollars of bonuses.

Shareholders interviewed in recent days voiced a range of views about whether Wells Fargo’s board needs an overhaul. Top investor Berkshire Hathaway Inc (BRKa.N) has already voted in favor of the board. Other big shareholders, including State Street Corp (STT.N) and Vanguard Group declined to comment or did not respond to questions.

Rhode Island Treasurer Seth Magaziner, who oversees funds that own Wells Fargo shares, said they will vote against directors flagged by ISS.

“Directors are meant to be agents for the shareholders, and watchdogs for the investors,” he said. “Clearly that level of oversight was lacking at Wells Fargo.”

Others were supportive. Gideon Bernstein, partner at wealth management firm Leisure Capital, said he plans to back the board. He was impressed with the bank’s April 10 report describing what went wrong, and actions taken in response.

“The board has done a really good job drilling down,” he said.

Thomas Russo, managing member at Gardner, Russo Gardner, said he has not yet decided how to vote. He wants to see a smaller board with more banking experience.

“There’s an elevated sense of urgency in a smaller board and a board that has more specific knowledge,” he said.

Executives at American Century Investments also have not yet decided. Senior investment analyst Adam Krenn said the bank’s oversight and initial response was lacking. But portfolio manager Michael Liss praised the eventual response.

“Even though they were late in reacting, they certainly came down strong,” he said.

(Reporting by Ross Kerber in Boston and Dan Freed in New York; Editing by Lauren Tara LaCapra and Meredith Mazzilli)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/00kqauMjaF8/us-wells-fargo-accounts-proxies-idUSKBN17N0DV

Trump targets cheap Chinese steel in probe, rallying U.S. steel stocks


WASHINGTON President Donald Trump on Thursday launched a trade probe against China and other exporters of cheap steel into the U.S. market, raising the possibility of new tariffs and sending shares of some U.S. steel makers up over 8 percent.

Citing concerns about national security, Trump made the announcement at a White House ceremony with U.S. steel executives from Nucor Corp (NUE.N), United States Steel Corp (X.N) and TimkenSteel Corp (TMST.N) alongside Commerce Secretary Wilbur Ross, a billionaire businessman who made part of his fortune investing in the steel business.

“Steel is critical to both our economy and our military,” said Trump, a Republican. “This is not an area where we can afford to become dependent on foreign countries.”

Trump won many votes in industrial states like Michigan and Pennsylvania with a pledge to boost manufacturing and crack down on Chinese trade practices.

China is the largest national producer and makes far more steel than it consumes, selling the excess output overseas, often undercutting domestic producers.

The unusual step of launching an investigation comes as Trump is pressuring China to do more to rein in an increasingly belligerent North Korea. When Chinese President Xi Jinping visited Trump in Florida earlier this month, Trump raised the possibility of using trade as a lever to coax China to do more.

“Everything they export is dumping,” said Derek Scissors, Asia economist at the American Enterprise Institute, a Washington think tank.

Ross cast the decision to initiate the probe as a response to Chinese exports of steel into the United States reaching the point where they now account for 26 percent of the U.S. market.

Chinese exports have risen “despite repeated Chinese claims that they were going to reduce their steel capacity,” said Ross, whom The Economist, a business magazine that champions free trade, in 2004 labeled “Mr. Protectionism” for his history of owning businesses protected from foreign competition.

Ross said that if the Commerce inquiry finds the U.S. steel industry is suffering from too much steel imports, he will recommend retaliatory steps that could include tariffs.

Diverging from the Obama administration’s approach to the issue, which relied largely on filing complaints to the World Trade Organization (WTO), Trump ordered a probe under Section 232 of the Trade Expansion Act of 1962, which lets the president impose restrictions on imports for reasons of national security.

In October 2001, a Commerce Department investigation found “no probative evidence” that imports of iron ore and semi-finished steel threaten to impair U.S. national security.

Steel shares had rallied after Trump won the November election amid promises for increased infrastructure spending. On Thursday shares of Steel Dynamics Inc (STLD.O), AK Steel Holding Corp (AKS.N), Cliffs Natural Resources Inc (CLF.N), Allegheny Technologies Inc (ATI.N) and other steel makers closed between 4 percent and 8.5 percent higher.

PROFITS CITED

The United States has nearly 100 plants that make millions of tons of steel annually. The U.S. government has attempted to shield them from cheap foreign steel chiefly through the WTO, but the Trump administration said this has had little impact.

“The artificially low prices caused by excess capacity and unfairly traded imports suppress profits in the American steel industry,” the administration said in a statement.

Nucor Chairman John Ferriola said in a statement that the steelmaker welcomed the president’s move. “We look forward to continuing to work with the president and Secretary Ross to ensure our trade laws are enforced so that U.S. manufacturers can compete on a level-playing field,” he said.

Experts were skeptical about the administration’s argument that cheap Chinese steel threatened U.S. national security.

The Defense Department’s annual steel requirements comprise less than 0.3 percent of the industry’s output by weight.

“There is no doubt that steel plays a role in our national security and the manufacturing of U.S. weapons systems,” said Jeff Bialos, a partner at law firm Eversheds Sutherland, who has worked on steel trade cases in the past.

“But the Department of Defense only consumes a small portion of domestic steel output, and this has decreased over the past decade as composites technology has advanced,” Bialos said.

Some of the military’s largest consumers of steel are U.S. Navy shipbuilders Huntington Ingalls Industries Inc (HII.N) and Lockheed Martin Corp (LMT.N).

Scissors said the United States has other ways to take on China over steel trade issues, other than invoking national security.

“Talking about it as a national security issue – I don’t think it’s necessary and I don’t think it’s justified,” he said.

(Additional reporting by Jeff Mason in Washington; and Luciana Lopez and Caroline Valetkevitch in New York; editing by Kevin Drawbaugh and Nick Zieminski)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/yj-CclPMIOs/us-usa-trump-steel-idUSKBN17M237

Asian stocks rise as steelmakers dismiss U.S. probe, euro fretful before French vote


SINGAPORE Asian stocks were set to end the week on a positive note, unscathed by a U.S. trade probe on Chinese steel exports, while the euro remained on edge ahead of Sunday’s first round in a tight French presidential election after a shooting overnight in Paris that was claimed by Islamic State.

European stocks were headed for a more muted start, with financial spreadbetters expecting Britain’s FTSE 100 .FTSE to open flat and Germany’s DAX .GDAXI to start the day up 0.1 percent. France’s CAC 40 .FCHI is also expected to be steady at the open, retaining most of Thursday’s 1.5 percent gain, its biggest in more than seven weeks.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.5 percent on Friday, taking its cue from Wall Street’s solid performance overnight on expectations of strong first-quarter earnings growth. It is still poised for a 0.4 percent weekly loss.

Asian steelmakers were mostly steady or higher, as investors dismissed for now any negative impact from the launch of a U.S. trade probe against Chinese steel exporters, although Chinese companies shed some of their earlier gains. The move sent their U.S. counterparts surging over 8 percent overnight.

China’s Angang Steel (000898.SZ) added 0.4 percent, while Baoshan Iron and Steel Co. (600019.SS), Beijing Shougang (000959.SZ) and Hesteel Co. (000709.SZ) inched down between 0.1 percent and 0.2 percent.

The region’s other major steel producers posted strong gains, with Nippon Steel Sumitomo Metal Corp. (5401.T) jumping 1 percent, and South Korea’s Posco (005490.KS) surging 2.5 percent, its biggest daily gain in more than three weeks.

“The U.S. accounts for a small proportion of China’s steel exports,” said Yang Kunhe, steel analyst at Northeast Securities in Beijing, adding Northeast Asia and Africa have been growing markets for Chinese steel over the past few years.  

“But if Trump’s probe translates into actions, it would increase the chance of trade friction, and hurt market sentiment.” 

Only 0.8 percent of Chinese steel exports go to the U.S., according to a U.S. Commerce Department report from December.

Markets also mostly shrugged off White House comments that the U.S. may consider tit-for-tat tariffs on imports, and concerns raised by the International Monetary Fund that U.S. tax cuts could fuel financial risk-taking and increase public debt.

Japan’s Nikkei .N225 advanced 0.8 percent, on track for a weekly gain of 1.4 percent.

Chinese shares in Shanghai .SSEC added 0.1 percent, set for a 2.2 percent weekly drop, their worst since mid-December. Hong Kong stocks .HSI were little changed, heading for a 0.8 percent loss for the week.

The first round of the French presidential election on Sunday kept the euro EUR=EBS on edge though it traded largely flat on Friday, holding at $1.0717.

The common currency had hit a three-week high of $1.0778 on Thursday, but fell back after a policeman was shot dead in Paris and two others in an attack that was claimed by Islamic State.

Analysts feared the latest outrage could sway French voters in what is expected to be a tight election, by working against more moderate, centrist candidates.

The euro had made the earlier high thanks to opinion polls that showed French centrist Emmanuel Macron would easily beat far-right, anti-European Union candidate Marine Le Pen in the second round on May 7.

“Let’s hope (Macron) doesn’t get squeezed out, particularly in light of last night’s terrorist attack in Paris, which given the tightness of the polls, could influence events,” Michael Hewson, chief market anaylst at CMC Markets in London, wrote in a note.

French 10-year Treasury yields FR10YT=RR slumped to a near-three-month low of 0.856 percent on Thursday, while safe-haven German bund yields DE10YT=RR jumped to 0.244 percent, their highest close in nearly two weeks.

Markets are awaiting several economic indicators from Europe later in the session, including Eurozone manufacturing and services data for April and British retail sales for March. U.S. manufacturing and services data for April and existing home sales for March were due to be released later in the global day.

Wall Street indexes closed between 0.75 percent and 0.9 percent higher on rising expectations for first-quarter corporate profits. SP 500 stock index company earnings now are expected to have gained 11.1 percent in the first quarter.

The dollar was 0.1 percent lower at 109.19 yen JPY=. It is up 0.6 percent for the week.

The dollar index .DXY, which tracks the greenback against a basket of trade-weighted peers, was little changed at 99.806, on track to lose 0.75 percent this week.

In commodities, oil drifted on Friday following Thursday’s choppy session as the tussle continued between worries over rising U.S. production and optimism over comments from leading Gulf oil producers that an extension to OPEC-led supply cuts was likely.

U.S. oil CLc1 was up 0.1 percent at $50.74 a barrel, set for a weekly loss of 4.6 percent, the most since the week ended March 10.

Global benchmark Brent LCOc1 was steady at $53.00, heading for a 5.2 percent weekly loss, also its worst performance since March 10.

Gold XAU= slipped 0.1 percent to $1,279.87 an ounce, poised for a weekly loss of 0.4 percent.

(Reporting by Nichola Saminather; Additional reporting by John Ruwitch, Samuel Shen and Sadiq Iqbal Ahmed; Editing by Simon Cameron-Moore)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/EbAusD5um_s/us-global-markets-idUSKBN17N03H

Exclusive: Buffett likely voted shares to back Wells Fargo board


NEW YORK Wells Fargo Co’s (WFC.N) largest investor, Warren Buffett, has likely already voted his shares to support the bank’s recommendations at its contentious annual shareholder meeting next week, a representative told Reuters on Wednesday, which include reinstating most of the board’s directors.

The prominent billionaire’s conglomerate, Berkshire Hathaway Inc (BRKa.N), owns nearly 10 percent of Wells Fargo and Buffett personally owns shares as well. Many investors follow Buffett’s lead because of his decades-long track record of profitable investments.

Wells Fargo, the fourth-largest U.S. bank, has for months been embroiled in a scandal that involves thousands of former employees creating as many as 2 million accounts in customers’ names without their permission.

The matter has already subsumed former Chief Executive John Stumpf, who resigned in October. Now the board, whose members include new CEO Tim Sloan, is facing opposition in the shareholder vote next week after proxy advisers recommended rejecting many of them.

Buffett’s assistant, Debbie Bosanek, told Reuters that Buffett supports management and the board, and that he has likely voted shares held by him and Berkshire to reflect that view. Berkshire held nearly 10 percent of Wells Fargo’s outstanding shares as of year-end, but has decided to sell some to avoid breaching the 10 percent threshold that would require special regulatory permission.

Wells Fargo Chief Executive Tim Sloan recently told The Wall Street Journal that Buffett would support the board, but Buffett had not confirmed Sloan’s statement until now.

(This story corrects Reuters Instrument Code to tag story to Wells Fargo Co instead of Wayfair Inc)

(Reporting by Dan Freed; Writing by Lauren Tara LaCapra; Editing by Simon Cameron-Moore and Sam Holmes)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/qRJUgyyUeV0/us-wells-fargo-accounts-buffett-idUSKBN17M0BS

General Motors says Venezuela illegally seizes auto plant


CARACAS General Motors (GM.N) said on Wednesday that Venezuelan authorities had illegally seized its plant in the industrial hub of Valencia and vowed to “take all legal actions” to defend its rights.

The seizure comes amid a deepening economic crisis in leftist-led Venezuela that has already roiled many U.S. companies.

“Yesterday, GMV’s (General Motors Venezolana) plant was unexpectedly taken by the public authorities, preventing normal operations. In addition, other assets of the company, such as vehicles, have been illegally taken from its facilities,” the company said in a statement.

It said the seizure would cause irreparable damage to the company, its 2,678 workers, its 79 dealers and to its suppliers.

Venezuela’s Information Ministry did not immediately respond to a request for information.

Venezuela’s car industry has been in freefall, hit by a lack of raw materials stemming from complex currency controls and stagnant local production, and many plants are barely producing at all.

In early 2015, Ford Motor Co (F.N) wrote off its investment in Venezuela when it took an $800 million pre-tax writedown.

The country’s economic crisis has hurt many other U.S. companies, including food makers and pharmaceutical firms. A growing number are taking their Venezuelan operations out off their consolidated accounts.

Venezuela’s government has taken over factories in the past. In 2014 the government announced the “temporary” takeover of two plants belonging to U.S. cleaning products maker Clorox Co which had left the country.

Venezuela faces around 20 arbitration cases over nationalizations under late leader Hugo Chavez.

(Reporting by Joe White and Alexandra Ulmer; Writing by Alexandra Ulmer; Editing by Edwina Gibbs)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/liAMegaaYv8/us-gm-venezuela-idUSKBN17M08I

Asian stocks recoup losses in cautious trade; oil supports


HONG KONG Asian stocks erased early losses and edged higher on Thursday as steadying commodity prices, especially crude oil, prompted some bargain hunting by investors.

But markets cautiously stuck to well-worn trading ranges ahead of global risk events such as the first-round of French presidential elections at the weekend and continued tensions over North Korea.

Stock index futures in Europe were set to follow the broadly cautious undertone, with markets set to open flat to slightly lower. FFIc1 FDXc1

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.3 percent after declining 0.5 percent in early trades. Gains in Chinese and Japanese stocks pulled the broader market higher.

“Given the binary risk of the French presidential elections and geopolitical concerns over North Korea, investors are staying on the sidelines,” said Fan Cheuk Wan, head of investment strategy and advisory, Asia, HSBC Private Banking.

“We are looking at the opportunities in Asia, particularly. ..equities in China and India where corporate earnings are expected to be strong this year.”

Centrist Emmanuel Macron clung on to his status as favorite to win France’s presidential election in a four-way race that is too close to call, as the camp of far-right challenger Marine Le Pen ramped up its euroskeptic rhetoric in a row with Brussels.

Japanese stocks .N225 rose 0.2 percent, buoyed by data showing exports rose a stronger-than-expected 12.0 percent in March from a year earlier and a Reuters survey that showed confidence among Japanese manufacturers has risen to levels not seen since before the 2008 global financial crisis.

“Even though a technical rebound in the Tokyo market lifts stocks, the basic trend to avoid risks hasn’t changed,” said Hiroyuki Nakai, chief strategist at Tokai Tokyo Research Center. “There is still so much uncertainty from global events.” Caution remained the overarching theme as cash levels among investors remained above the 10-year average in a monthly poll conducted by Bank of America Merrill Lynch.

Weak results from index heavyweight IBM (IBM.N) pulled the SP 500 and Dow lower with falls in energy sector stocks .SPNY also weighing on the broader market. [.N]

Bonds also came in for some profit-taking after a recent rally, with yields on benchmark 10-year U.S. Treasury notes US10YT=RR firming to 2.21 percent from a five-month low of 2.165 percent hit on Tuesday.

A run of disappointing U.S. economic data and worries that the Trump administration will struggle to push through tax cuts have quelled expectations of faster inflation.

The dollar failed to capitalize on higher U.S. yields with the greenback hugging the 200-day moving average of around 108.85 against the Japanese yen JPY= as traders preferred to trade on market technicals rather than take fresh bets.

Oil languished near a two-week low after a surprising build in U.S. gasoline inventories and a rise in domestic crude output partially offseting cutbacks by other countries trying to reduce a global glut. [O/R]

U.S. crude futures CLc1 climbed 0.22 percent to $50.55 a barrel, after posting a near 4 percent drop overnight, the biggest one-day decline since March 8.

Gold XAU= was trading at $1279.20 per ounce, below Monday’s peak of $1,295.42.

(Additional reporting by Ayai Tomisawa; Editing by Eric Meijer and Kim Coghill)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/BCAbFIMHc3I/us-global-markets-idUSKBN17M02M

Trump ‘absolutely not’ trying to talk down dollar: Mnuchin


LONDON U.S. President Donald Trump is “absolutely not” trying to talk down the strength of the U.S. dollar, Treasury Secretary Steven Mnuchin was quoted as saying in Wednesday’s edition of the Financial Times.

Mnuchin’s remarks build on those first published in an interview with the FT late on Monday, in which he played down remarks by Trump in a Wall Street Journal interview last week when he said the dollar was “getting too strong”.


Asked if Trump’s remarks to the WSJ were an attempt to talk down the dollar, Mnuchin was quoted in Wednesday’s FT as saying “absolutely not, absolutely not”.

(Reporting by David Milliken; Editing by Louise Ireland)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/iXUjxi6-MW8/us-usa-trump-mnuchin-idUSKBN17L0PF

Trump ‘absolutely not’ trying to talk down dollar: Mnuchin


LONDON U.S. President Donald Trump is “absolutely not” trying to talk down the strength of the U.S. dollar, Treasury Secretary Steven Mnuchin was quoted as saying in Wednesday’s edition of the Financial Times.

Mnuchin’s remarks build on those first published in an interview with the FT late on Monday, in which he played down remarks by Trump in a Wall Street Journal interview last week when he said the dollar was “getting too strong”.


Asked if Trump’s remarks to the WSJ were an attempt to talk down the dollar, Mnuchin was quoted in Wednesday’s FT as saying “absolutely not, absolutely not”.

(Reporting by David Milliken; Editing by Louise Ireland)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/iXUjxi6-MW8/us-usa-trump-mnuchin-idUSKBN17L0PF

Sterling gets market’s vote, stocks cold-shouldered


SYDNEY Sterling stole center stage in Asia on Wednesday amid speculation Britain’s surprise decision to call a snap election could ultimately deliver a more market-friendly outcome in its divorce from the European Union.

Safe-haven bonds also held onto most of their recent gains ahead of presidential elections in France and on escalating tensions between the United States and North Korea.

Equities were largely sidelined with futures pointing to opening losses for German and UK bourses, while E-mini futures for the SP 500 ESc1 were all but flat.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.6 percent to the lowest since mid-March.

Japan’s Nikkei .N225 managed to steady for the moment, but Shanghai .SSEC extended its recent retreat with a drop of 1 percent. The Chinese market has fallen for four straight sessions on concerns over tighter regulations. [.SS]

Sterling was just off a six-month top against the dollar having surged when British Prime Minister Theresa May called an early general election for June 8, seeking to strengthen her party’s majority ahead of Brexit negotiations.

“We expect that the PM’s gamble is likely to buy her more time as well as room for maneuver in the Brexit negotiations as she will depend less on fringe groups in her own party,” said Citi’s chief global political strategist, Tina Fordham.

“That may reduce the risk of a negotiation failure and thus ‘chaotic Brexit’, but also of the UK remaining in the Single Market in the long-term or even reversing the decision to leave the EU.”

The pound was lording it at $1.2824 GBP= on Wednesday having shattered a months’ old trading range with a jump of 2.2 percent overnight. It also cleared the 200-day moving average for the first time since June, putting the squeeze on a raft of speculative short positions.

REFLATION TRADE DEFLATES

The dollar recouped just a little of its broader losses in the Asian session, rising 0.15 percent against a basket of currencies .DXY. The euro stood at $1.0718 EUR= after touching a three-week top of $1.0736.

Against the yen, the dollar was hovering at 108.65 JPY= having been as low as 108.39 earlier.

The dollar was undermined in part by an eroding interest rate advantage as U.S. bond yields dived to five-month lows. Yields on 10-year Treasury paper sank to 2.17 percent US10YT=RR, a world away from the 2.629 peak seen in March.

A run of disappointing U.S. economic data and doubts the Trump administration will progress with tax cuts have quelled expectations of faster inflation and boosted fixed-income debt.

That, in turn, has taken the steam out of Wall Street. The Dow .DJI fell 0.55 percent on Tuesday, while the SP 500 .SPX lost 0.29 percent and the Nasdaq .IXIC 0.12 percent.

Goldman Sachs (GS.N) lost 4.7 percent in the largest daily drop since June after its earnings missed expectations as trading revenue dropped.

In commodity markets, profit taking nudged gold down 0.4 percent to XAU= $1,287.10 an ounce, and away from Monday’s peak of $1,295.42.

Oil prices slipped as U.S. crude stockpiles fell by less than expected and a U.S. government report said shale oil output in May was likely to post the biggest monthly increase in more than two years.

Brent crude LCOcv1 was last down 16 cents at $54.73 a barrel, while U.S. crude CLcv1 fell 12 cents to $52.29. [O/R]

(Editing by Sam Holmes)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/qhT4O7tHx1M/us-global-markets-idUSKBN17L01W

Sterling gets market’s vote, stocks cold-shouldered


SYDNEY Sterling stole center stage in Asia on Wednesday amid speculation Britain’s surprise decision to call a snap election could ultimately deliver a more market-friendly outcome in its divorce from the European Union.

Safe-haven bonds also held onto most of their recent gains ahead of presidential elections in France and on escalating tensions between the United States and North Korea.

Equities were largely sidelined with futures pointing to opening losses for German and UK bourses, while E-mini futures for the SP 500 ESc1 were all but flat.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.6 percent to the lowest since mid-March.

Japan’s Nikkei .N225 managed to steady for the moment, but Shanghai .SSEC extended its recent retreat with a drop of 1 percent. The Chinese market has fallen for four straight sessions on concerns over tighter regulations. [.SS]

Sterling was just off a six-month top against the dollar having surged when British Prime Minister Theresa May called an early general election for June 8, seeking to strengthen her party’s majority ahead of Brexit negotiations.

“We expect that the PM’s gamble is likely to buy her more time as well as room for maneuver in the Brexit negotiations as she will depend less on fringe groups in her own party,” said Citi’s chief global political strategist, Tina Fordham.

“That may reduce the risk of a negotiation failure and thus ‘chaotic Brexit’, but also of the UK remaining in the Single Market in the long-term or even reversing the decision to leave the EU.”

The pound was lording it at $1.2824 GBP= on Wednesday having shattered a months’ old trading range with a jump of 2.2 percent overnight. It also cleared the 200-day moving average for the first time since June, putting the squeeze on a raft of speculative short positions.

REFLATION TRADE DEFLATES

The dollar recouped just a little of its broader losses in the Asian session, rising 0.15 percent against a basket of currencies .DXY. The euro stood at $1.0718 EUR= after touching a three-week top of $1.0736.

Against the yen, the dollar was hovering at 108.65 JPY= having been as low as 108.39 earlier.

The dollar was undermined in part by an eroding interest rate advantage as U.S. bond yields dived to five-month lows. Yields on 10-year Treasury paper sank to 2.17 percent US10YT=RR, a world away from the 2.629 peak seen in March.

A run of disappointing U.S. economic data and doubts the Trump administration will progress with tax cuts have quelled expectations of faster inflation and boosted fixed-income debt.

That, in turn, has taken the steam out of Wall Street. The Dow .DJI fell 0.55 percent on Tuesday, while the SP 500 .SPX lost 0.29 percent and the Nasdaq .IXIC 0.12 percent.

Goldman Sachs (GS.N) lost 4.7 percent in the largest daily drop since June after its earnings missed expectations as trading revenue dropped.

In commodity markets, profit taking nudged gold down 0.4 percent to XAU= $1,287.10 an ounce, and away from Monday’s peak of $1,295.42.

Oil prices slipped as U.S. crude stockpiles fell by less than expected and a U.S. government report said shale oil output in May was likely to post the biggest monthly increase in more than two years.

Brent crude LCOcv1 was last down 16 cents at $54.73 a barrel, while U.S. crude CLcv1 fell 12 cents to $52.29. [O/R]

(Editing by Sam Holmes)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/qhT4O7tHx1M/us-global-markets-idUSKBN17L01W

Yahoo’s first-quarter revenue jumps 22 percent


Yahoo Inc (YHOO.O) reported a 22.1 percent increase in quarterly revenue on Tuesday, ahead of the sale of its core internet business to Verizon Communications Inc (VZ.N).

Yahoo said revenue from Mavens – the mobile, video, native and social advertising units that it has touted as key emerging businesses – rose 35.6 percent to $529 million in the first quarter ended March 31.

Net income attributable to Yahoo was $99.4 million, or 10 cents per share in the quarter, compared with a net loss of $99.2 million, or 10 cents per share, a year earlier.

Revenue rose to $1.33 billion from $1.09 billion.

Verizon in February agreed to buy Yahoo’s core business —which includes its internet search and email assets — for $4.48 billion, lowering its original offer by $350 million, in the wake of two massive cyber attacks at the internet company.

Yahoo said on Tuesday it expects the deal to close in June.

(Reporting by Laharee Chatterjee in Bengaluru; Editing by Sai Sachin Ravikumar)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/M6ylV3st2HM/us-yahoo-results-idUSKBN17K2EE

Yahoo’s first-quarter revenue jumps 22 percent


Yahoo Inc (YHOO.O) reported a 22.1 percent increase in quarterly revenue on Tuesday, ahead of the sale of its core internet business to Verizon Communications Inc (VZ.N).

Yahoo said revenue from Mavens – the mobile, video, native and social advertising units that it has touted as key emerging businesses – rose 35.6 percent to $529 million in the first quarter ended March 31.

Net income attributable to Yahoo was $99.4 million, or 10 cents per share in the quarter, compared with a net loss of $99.2 million, or 10 cents per share, a year earlier.

Revenue rose to $1.33 billion from $1.09 billion.

Verizon in February agreed to buy Yahoo’s core business —which includes its internet search and email assets — for $4.48 billion, lowering its original offer by $350 million, in the wake of two massive cyber attacks at the internet company.

Yahoo said on Tuesday it expects the deal to close in June.

(Reporting by Laharee Chatterjee in Bengaluru; Editing by Sai Sachin Ravikumar)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/M6ylV3st2HM/us-yahoo-results-idUSKBN17K2EE

Asia stocks mixed, dollar subdued amid North Korea concerns


SINGAPORE Asian stocks were mixed on Tuesday and the dollar gave up the gains it had made when the U.S. Treasury Secretary spoke in support of a stronger currency as escalating tensions around North Korea dragged sentiment lower.

Financial spreadbetters predict a mixed start for European stocks, with Britain’s FTSE 100 .FTSE set to open 0.2 percent lower, and Germany’s DAX .GDAXI and France’s CAC 40 .FCHI to start the day up 0.2 percent and 0.3 percent respectively.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dropped 0.5 percent.

Japan’s Nikkei .N225 added 0.4 percent, shrinking earlier gains.

South Korea’s KOSPI .KS11 advanced 0.2 percent.

U.S. Vice President Mike Pence told business leaders in Seoul that the U.S. will review and reform the five-year-old free trade agreement between the two countries, in part because South Korea imposes too many barriers on U.S. business.

The United States and South Korea pledged at the close of Pence’s visit to forge a stronger alliance. They agreed to cooperate with China to rein in North Korea, which has vowed to conduct more tests following Sunday’s failed missile launch.

Pence warned North Korea on Monday that recent American military strikes in Syria and Afghanistan showed President Donald Trump’s resolve should not be questioned.

Pence and South Korea’s acting president, Hwang Kyo-ahn, said they would proceed with the early deployment to South Korea of the U.S. THAAD missile-defense system, in spite of China’s objections.

The Korean won KRW= weakened about 0.8 percent, with the dollar at 1,141.40 won.

“It seems the focus is now firmly on future missile tests from North Korea and whether any future tests will actually be successful,” Chris Weston, chief market strategist at IG in Melbourne, wrote in a note. “One suspects the concerns in North Korea have further to play out.”

Despite the tensions, Wall Street posted its first session of gains in four as investors turned their attention to first-quarter corporate earnings. All three major indexes .DJI .SPX .IXIC advanced about 0.9 percent overnight.

U.S. housing starts and building permits for March, as well as industrial production, are due later in the session.

The dollar was weighed down by worries over North Korea, Mnuchin’s comments that Trump’s promised tax reform will be delayed, and the first round of talks between Japan’s leaders and Pence on Tuesday.

The dollar index .DXY, which tracks the greenback against a basket of trade-weighted peers, was little changed at 100.34, after rising earlier.

The dollar inched up 0.1 percent to 109.05 yen JPY=. It hit its lowest level since Nov. 15 on Monday, before closing higher on Mnuchin’s remark that a strong currency would be positive over the long term, while agreeing with Trump that it hurts exports in the short term.

Pence’s visit to Japan, the next stop on his Asia trip, is key for the currency. His talks with Prime Minister Shinzo Abe are expected to focus on security issues, while his meeting Deputy Prime Minister Taro Aso will deal with economics.

“For dollar/yen, the main focus will be on what kind of pressure the United States could apply on Japan as basically U.S. trade policy is linked with a policy for a weaker dollar,” said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.

“The yen cannot simply continue weakening along with higher stocks under such conditions,” he said.

China’s CSI300 index .CSI300 was up about 0.2 percent after new home prices across China jumped 11.3 percent from a year earlier, with prices across many major cities soaring.

The Australian dollar AUD=D4 lost 0.4 percent to trade at $0.7559, and Australian shares slipped 1 percent, after minutes of the central bank’s April meeting, in which it left rates unchanged, highlighted the balancing act it faced between a subdued labor market and escalating household debt.

The euro EUR=EBS was steady at $1.06425, holding Monday’s 0.25 percent gain.

In commodities, oil prices were little changed following Monday’s losses, amid concerns over rising U.S. production.

U.S. crude CLc1 was at $52.62 a barrel, after falling 1 percent on Monday, its biggest decline in almost a month.

Global benchmark Brent crude LCOc1 was at $55.38.

(Reporting by Nichola Saminather; Additional reporting by Shinichi Saoshiro; Editing by Eric Meijer and Jacqueline Wong)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/hEUo6pmK3bI/us-global-markets-idUSKBN17K02Q

Netflix shares head for new high after strong subscriber outlook


Netflix Inc made a bullish forecast for subscriber additions by mid-year, a positive sign for its push to expand around the world that sent its shares toward an all-time high.

The streaming video company pushed back the next season of its smash-hit “House of Cards,” and other programing to the second quarter, meaning it lured in fewer new subscribers in the first quarter than expected, but will likely make it up from April through June.

Subscriber rolls, the most closely watched measure of Netflix’s growth, rose by just under 5 million globally in the first quarter, behind analysts’ projection of 5.18 million, according to FactSet StreetAccount.

However, Netflix forecast 3.2 million more in the seasonally slow second quarter, well ahead of analysts’ estimate of nearly 2.4 million.

Its shares dropped as much as 3 percent in after-hours trading before rebounding to gain 1.3 percent. The late rise put Netflix stock on track to open at a record high on Tuesday.

A decade after shaking up Hollywood by delivering TV shows and movies over the internet, the company said it expects to top 100 million global subscribers this weekend.

Netflix has expanded around the world over the last few years, betting that its U.S. formula would pay off in other countries. Opening in new markets and creating shows in additional languages was an expensive proposition.

Chief Executive Reed Hastings urged investors to look at its growth over time rather than quarter-by-quarter fluctuations.

“We definitely see a big opportunity around the world,” Hastings said in an interview with analysts that was posted on YouTube.

NEW YARDSTICKS

In its quarterly letter to shareholders, Netflix asked investors to judge its future success by looking primarily at revenue growth and global operating margins.

That would be a shift for Wall Street, which has focused on subscriber numbers, said Needham Co analyst Laura Martin.

“The minute you actually pivot (investors) to an income statement, you’re talking to a completely different kind of investor,” Martin said. “And that investor demands profitability. So it’s a risky business.”

The Los Gatos, California-based company said net income rose to $178 million, or 40 cents per share, compared with $28 million, or 6 cents per share, in the year-ago period. Wall Street had expected 37 cents per share.

Revenue rose 35 percent to $2.64 billion in the quarter.

The earnings beat was due to the change in timing of “House of Cards,” which helped push costs into the second quarter, boosting operating margins from January through March and reducing them in the second quarter.

For the quarter that ended March 31, Netflix added 3.53 million subscribers outside the United States. (bit.ly/2puJ1Yt) Analysts on average had estimated 3.68 million additions, according to research firm FactSet.

In the United States, the company added 1.42 million subscribers, compared with analysts’ average estimate of 1.50 million.

Up to Monday’s close, Netflix’s stock had risen nearly 19 percent in 2017, outperforming the roughly 5 percent gain in the broader SP 500 index.

(Reporting by Narottam Medhora in Bengaluru; Editing by Savio D’Souza, Peter Henderson and Bill Rigby)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/N8eaaTwjiFI/us-netflix-results-idUSKBN17J1MC

U.S. business group urges Washington to ‘use every arrow’ against China


BEIJING The United States should “use every arrow” in its quiver to ensure a level commercial playing field in China, a U.S. business lobby said on Tuesday, warning that 2017 could be the toughest year in decades for American firms in the country.

China’s policies designed to support domestic companies and create national champions have narrowed the space for foreign companies, the American Chamber of Commerce in China said in its annual business climate report.

The White House has said U.S and Chinese officials are fleshing out a pledge by leaders Donald Trump and Xi Jinping for a 100-day plan to cut the U.S. trade deficit with China, which reached $347 billion last year.

But the chamber said it hoped more attention would be paid to market access for American firms in China.

“Right now basically we are recommending everything you have in your quiver – please use every arrow possible, with the understanding that some of these points of leverage could be counterproductive to us,” chamber chairman William Zarit said, referring to possible backlash from Beijing.

He was speaking at a briefing on the report.

U.S. business groups want U.S. officials to take measures against Beijing on market imbalances, but not push the world’s two largest economies toward a trade war.

Nonetheless, more vociferous complaints from the American business community mark a shift from years past, when many companies eschewed the idea of forceful action by Washington for fear of retribution by China.

Foreign technology companies, in particular, fear what they see as Beijing’s plans to pump billions of dollars in subsidies into domestic competitors and push regulations that could force the surrender of key technology or hit competitiveness.

“With uncertainty stemming from political and economic transitions in both the U.S. and China, perceptions of a deteriorating investment environment for foreign companies in China, and a slowing economy, 2017 will likely be one of the most challenging years in decades for U.S. companies in China,” the chamber said in its report.

U.S. business leaders also worry that Trump’s focus on curtailing North Korea’s nuclear and missile programs could undercut U.S. commercial interests in China. Last week, Trump tweeted that Beijing would get a better trade deal if it helped resolve the U.S. problem with Pyongyang.

“I’m sorry to see there is a possibility we may lose some momentum on helping to level the playing field with China in our economic relationship, due to the situation in North Korea, if there is some kind of trade-off,” Zarit said.

(Reporting by Michael Martina; Editing by Clarence Fernandez)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/mrGJK0t_fPA/us-china-usa-business-idUSKBN17K0G8

Exclusive: Saudi to shelve, reform billions of dollars of unfinished projects


RIYADH Saudi Arabia’s government is ordering its ministries and agencies to review billions of dollars’ worth of unfinished infrastructure and economic development projects with a view to shelving or restructuring them, government sources said.

Riyadh’s Bureau of Capital and Operational Spending Rationalization, set up last year to make the government more efficient, is compiling a list of projects that are under 25 percent complete, the sources told Reuters.

Many of these projects are relics of a decade-long boom of high oil prices and lavish state spending, which ended when oil began sliding in mid-2014, making it increasingly difficult for Riyadh to find the money needed to complete their construction.

Officials will study the feasibility of the projects in light of the government’s reform drive, which aims to diversify the economy beyond oil exports, and decide whether to suspend them indefinitely or try to improve how they are conducted.

“Some projects could be retendered so they can be executed in partnership with the private sector, possibly through build-operate-transfer (BOT) contracts,” said one source familiar with the plan, declining to be named as the matter is not yet public.

Under BOT contracts, private investors finance and build projects and operate them for a period of time to earn a profit before eventually transferring ownership to the government. Riyadh has said it is keen to begin bringing the private sector into projects to ease pressure on state finances.

“Other projects could be suspended if they do not meet the current economic objectives,” the source said. Recommendations for some projects may be made within days, he added.

Seeking to close a huge budget deficit caused by low oil prices, the government clamped down on infrastructure spending last year. Finance Minister Mohammed al-Jadaan said in February this year that the efficiency bureau had so far saved the kingdom 80 billion riyals ($21.33 billion).

The plan to review unfinished projects suggests the government is looking for large additional savings this year. In a report at the end of last year, it estimated the cost of completing all capital spending projects currently underway at about 1.4 trillion riyals.

In a January report, consultants Faithful+Gould estimated at least $13.3 billion of government projects were at risk of being canceled in Saudi Arabia this year because of fiscal pressures and changing government priorities.

The government is likely to prioritize projects with strong social welfare and business justifications such as power and water generation, while less essential “vanity projects” such as sports infrastructure, some transport systems and perhaps nuclear energy could be cut back, it said.

(Writing by Andrew Torchia; editing by Anna Willard)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/PgF_2ZFtWlI/us-saudi-projects-idUSKBN17I0GM

Ant Financial hikes MoneyGram offer by 36 percent to outbid Euronet


BEIJING China’s Ant Financial has sweetened its bid for MoneyGram International Inc by 36 percent, beating a rival offer to gain approval from the U.S. electronic payment firm’s board, although it still faces regulatory hurdles.

Ant [ANTFIN.UL], the finance affiliate of Alibaba Group Holding Ltd, increased its bid to $18 per share in cash from $13.25 to value MoneyGram at around $1.2 billion.

That compares with an offer of $15.20 per share from Euronet Worldwide Inc last month.

A successful deal would be Ant’s first major acquisition in a developed market. But first it needs to clear regulatory reviews, including one by the Committee on Foreign Investment (CFIUS), a U.S. inter-agency panel that looks at acquisitions for national security risks.

CFIUS has been a stumbling block for several Chinese deals in the United States and a deal with Euronet is likely to be more agreeable to U.S. policymakers amid rising tensions between China and the United States over trade and foreign policy.

Euronet has said that Chinese ownership could compromise the relationship between law enforcement and MoneyGram when investigating money laundering and “terrorist financing”.

Ant has sought to allay concerns and on Monday reiterated that any data collected on MoneyGram users in the U.S. will continue to reside on U.S.-based servers and that MoneyGram will operate as an independent unit. Euronet has previously countered that the location of the servers is irrelevant.

Ant and Moneygram said in a joint statement that they have made progress toward obtaining the regulatory approvals necessary to complete the transaction, including winning U.S. antitrust clearance. They are confident the deal will close this year, they added.

The news comes one day after sources said China’s Anbang Insurance Group will let its agreement to acquire U.S. annuities and life insurer Fidelity Guaranty Life. for $1.6 billion lapse, after failing to secure all the necessary regulatory approvals.

While Anbang’s acquisition had received clearance from CFIUS it could not get past some U.S. state regulators.

Dallas-based MoneyGram is one of the biggest firms in the global remittance market, offering services in around 350,000 stores across 200 countries and offers Ant a major leg-up in its plans to build a cross-border commerce network, centered in Asia.

“The promotion of global digital financial inclusion requires global infrastructure. MoneyGram offers that connectivity between developed and developing markets,” said James Lloyd, Asia Pacific Fintech leader at EY.

Last Wednesday, Ant and Indonesia’s Elang Mahkota Teknologi (Emtek) agreed to launch a joint venture to roll out mobile payments in Indonesia. The tie-up follows recent investments in payment firms in India, Thailand, South Korea and the Philippines.

Ant, which is planning an IPO, was valued at around $60 billion in mid-2016, according to a source familiar with the matter. It has since had another financing round which raised $3 billion, a separate sources has said, although latest valuations were not immediately available.

(Reporting by Cate Cadell and Miyoung Kim; Editing by Edwina Gibbs)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/Ulr3lU8AUrI/us-moneygram-intl-m-a-ant-financial-idUSKBN17J02P

Undaunted by oil bust, financiers pour billions into U.S. shale


HOUSTON Investors who took a hit last year when dozens of U.S. shale producers filed for bankruptcy are already making big new bets on the industry’s resurgence.

In the first quarter, private equity funds raised $19.8 billion for energy ventures – nearly three times the total in the same period last year, according to financial data provider Preqin.

The quickening pace of investments from private equity, along with hedge funds and investment banks, comes even as the recovery in oil prices CLc1 from an 8-year low has stalled at just over $50 per barrel amid a stubborn global supply glut.

The shale sector has become increasingly attractive to investors not because of rising oil prices, but rather because producers have achieved startling cost reductions – slashing up to half the cost of pumping a barrel in the past two years. Investors also believe the glut will dissipate as demand for oil steadily rises.

That gives financiers confidence that they can squeeze increasing returns from shale fields – without price gains – as technology continues to cut costs. So they are backing shale-oil veterans and assembling companies that can quickly start pumping.

“Shale funders look at the economics today and see a lot of projects that work in the $40 to $55 range” per barrel of oil, said Howard Newman, head of private equity fund Pine Brook Road Partners, which last month committed to invest $300 million in startup Admiral Permian Resources LLC to drill in West Texas.

Data on investments by hedge funds and other nonpublic investment firms is scant, but the rush of new private equity money indicates broader enthusiasm in shale plays.

“Demand for oil has been more robust than anyone imagined three years ago,” said Mark Papa, chief executive of Centennial Resource Development Inc (CDEV.O).

Papa referred to the beginning of an international oil price crash in 2014, which took many firms in the shale sector to the brink of bankruptcy.

Centennial is a Permian oil producer backed by private equity fund Riverstone. Papa, a well-known shale industry entrepreneur, built EOG Resources Inc (EOG.N) into one of the most profitable U.S. shale producers before he retired in 2013.

The chance to further develop the Permian, he said, was enough for him to come out of retirement to deliver one of its bigger recent successes. The value of Riverstone’s original $500 million investment has grown nearly four times since Centennial’s initial public offering last fall.

‘A TON OF PRIVATE CAPITAL’

Riverstone this year copied the Centennial model, putting experienced managers atop a startup charged with acquiring operations or assets. The equity fund hired Jim Hackett – the former head of shale producer Anadarko Petroleum Corp (APC.N) – to run the newly created Silver Run Acquisition Corp II (SRUNU.O).

Hedge funds Highfields Capital Management LP and Adage Capital Management have taken stakes in the new company, which has a valuation of about $1 billion after going public last month.

Private equity fund NGP Natural Resources XI LP invested $524 million last fall in Luxe Energy LLC, a shale producer formed in 2015 by former Statoil (STL.OL) executives.

NGP’s investment was effectively a bet that Luxe could repeat its success of early 2016.

Then, NGP contributed about $250 million to Luxe, which used the money to acquire land in the Permian – and sold it seven months later for a double-digit profit.

This year’s drilling rush could be tested if global supplies grow too fast or if demand cools. The U.S. drilling rig count is rising at its fastest pace in six years and U.S. crude stockpile are close to 533 million barrels – near an all-time high and enough to supply the United States for 25 days.

But some investors say even a decline of $10 in the oil price would not dissuade them.

“There is a ton of private capital to invest in the U.S. oil industry,” said Gerrit Nicholas, co-founder of private equity fund Orion Energy Partners.

Nicholas said he is comfortable lending even if oil prices fall to $40 per barrel.

Orion this month helped finance the expansion of a Florida oil-storage terminal, a move predicated in part on growth in U.S. oil exports. Since the U.S. lifted its oil export ban last year, crude exports have climbed to about 746,000 barrels per day, according to U.S. Energy Information Administration data.

BETTING ON OPEC’S SELF-INTEREST

The oil industry has seen boom-and-bust cycles since the first well was drilled about 160 years ago, and industry and government have sought to tame the volatility for just as long.

Texas regulators set output quotas from the 1920s through the 1970s, a practice that served as a model for the creation of the Organization of the Petroleum Exporting Countries (OPEC).

The U.S. boom has caused concern among OPEC member nations ahead of its meeting next month in Vienna, where they will consider extending oil production cuts that first took effect in January. Investors believe the cartel’s members will extend the cuts because it is in OPEC’s financial interest to prevent a steep drop in oil prices.

That likely will keep money flowing to nimble U.S. oil producers and the companies that provide them with services and equipment. Investors see the United States as the new swing producer, having the ability to quickly increase supply in response to any sudden increase in demand.

“The U.S., with its substantial inventory capacity and swing oil producer status, should see strong onshore activity for the next few years,” said Charlie Leykum, founder of private equity fund CSL Capital Management LLC, in an interview.

CSL has invested in several oilfield service business in the past year. It partnered with Goldman Sachs (GS.N) and Baker Hughes Inc (BHI.N), for instance, to create a shale services company.

Centennial’s Papa expects the flood of fresh capital to push U.S. production up 23 percent to 11.3 million barrels a day (bpd) by 2020, based on strong demand for oil.

“We’re still in a hydrocarbon-based economy,” said Papa.

For a graphic on private equity investment in U.S. energy, click here

(Reporting by Ernest Scheyder; Editing by Gary McWilliams, Simon Webb and Brian Thevenot)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/faa3INtdOms/us-usa-shale-funders-analysis-idUSKBN17J0BK

Exclusive: Anbang’s Fidelity & Guaranty acquisition set to fall through


China’s Anbang Insurance Group will let its agreement to acquire U.S. annuities and life insurer Fidelity Guaranty Life (FGL) (FGL.N) for $1.6 billion lapse, after failing to secure all the necessary regulatory approvals, people familiar with the matter said on Sunday.

The development casts new doubt on Anbang’s commitment to U.S. deals, following its abandoned attempt last year to acquire Starwood Hotels Resorts Worldwide Inc for $14 billion.

Marriott International Inc (MAR.O) ended up buying Starwood.

While Anbang’s FGL acquisition had received clearance from the Committee on Foreign Investment in the United States (CFIUS), a U.S. government panel that scrutinizes deals for potential national security concerns, it could not get past some U.S. state regulators.

FGL had extended its merger agreement with Anbang, which was signed in November 2015, to April 17 after it was set to expire on Feb. 8. Had Anbang secured a public hearing with Iowa’s financial regulator by April 17, it could have extended the expiration date to May 31.

However, Anbang has failed to meet the conditions for any further extension, the sources said. Anbang also needed approval from New York financial regulators, but it has abandoned efforts to secure it, the sources added.

The sources asked not to be identified because the recent developments are confidential.

The sources did not say why Anbang could not secure approvals from U.S. state regulators after clearing CFIUS, but noted that the Beijing-based group had pushed back against making some of the disclosures required.

FGL said in February it would solicit other acquisition offers as part of its merger agreement extension with Anbang. Negotiations between FGL and other suitors, including Bermuda-based reinsurance company Athene Holding Ltd (ATH.N), are continuing, the sources said.

FGL declined to comment, while Anbang and Athene did not immediately respond to requests for comment.

Established in 2004, Anbang burst onto the global scene from near obscurity by signing more than $30 billion worth of corporate deals in the last 2-1/2 years. Its high-profile investments included a $1.95 billion purchase of the Waldorf Astoria Hotel in New York.

Little is known about Anbang’s funding and shareholding structure, partly because it is a private company. Corporate records in China show Anbang is owned by 39 privately held and little-known companies scattered across China.

Last month, Kushner Companies, the real estate firm headed by U.S. President Donald Trump’s son-in-law until recently, said it ended talks to redevelop its flagship New York office tower with Anbang.

(Reporting by Koh Gui Qing and Greg Roumeliotis in New York; Additional reporting by Karen Freifeld and Suzanne Barlyn in New York; Editing by Richard Chang)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/WyKXkMD3HdY/us-fidelityguarantylife-m-a-anbang-idUSKBN17I0QG

Steel, stimulus drive China’s strongest economic growth since 2015


BEIJING China’s economy expanded faster than expected in the first quarter as higher government infrastructure spending and a gravity-defying property boom helped boost industrial output by the most in over two years.

Growth of 6.9 percent was the fastest in six quarters, with forecast-beating March investment, retail sales and exports all suggesting the economy may carry solid momentum into spring.

But most analysts say the first quarter may be as good as it gets for China this year, and worry Beijing is still relying too heavily on stimulus and “old economy” growth drivers, primarily the steel industry and a property market that is showing signs of overheating.

“The Chinese government has a tendency to rely on infrastructure development to sustain growth in the long term,” economists at ANZ said in a note.

“The question we need to ask is whether this investment-led model is sustainable as the authorities have trouble taming credit. We need to watch closely whether China’s top leadership will send a stronger signal to tighten monetary policy shortly.”

Even as top officials vowed to crack down on debt risks, China’s total social financing, a broad measure of credit and liquidity in the economy, reached a record 6.93 trillion yuan ($1 trillion) in the first quarter — roughly equivalent to the size of Mexico’s economy.

At the same time, spending by the central and local governments rose 21 percent from a year earlier.

That helped goose the pace of growth in the first quarter well above the government’s 2017 target of around 6.5 percent, and pipped economists’ forecasts of 6.8 percent year-on-year.

Such a strong bolt from the gate could see Beijing once again meet its annual growth target, even if activity starts to fade later in the year, as many analysts widely expect.

“Main indicators were better than expected…which laid a good foundation for achieving the full-year growth goals,” statistics spokesman Mao Shengyong said at a news conference.

SAME OLD GROWTH DRIVERS?

Once again, China’s policymakers leaned on infrastructure and real estate investment to drive expansion in the first quarter. Growth in both areas has accelerated from last year and helped offset slightly weaker growth in the services sector.

“Faster growth in industrial output is the primary factor in the first quarter surprise, and due mostly to higher value-added growth related to supply-side consolidation in heavy industry,” said Brian Jackson, China economist at IHS Global Insight.

Real estate investment also remained robust in the first quarter, expanding by 9.1 percent on-year, and the pace of new construction quickened despite intensifying government measures to cool soaring prices.

Most analysts agree the heated property market poses the single biggest risk to China’s economic growth, but predict the cumulative weight of property curbs will eventually temper activity, not produce an outright crash.

“Sales have started falling, which means tightening measures are starting to take effect,” said Shen Jianguang, an analyst at Mizuho Securities in Hong Kong, noting that will start to drag on both the services and construction sectors.

More than two dozen cities announced new or additional property cooling measures in March and early April, after curbs late last year appeared to have little lasting effect.

Buoyed by a near 12 percent increase in housing starts, China produced a record amount of steel in March, Reuters data showed, though analysts say warning signs are flashing.

Rising inventory levels and recent falls in steel prices suggest output has been growing faster than China’s actual demand, raising worries of a glut later in the year, which could heighten trade tensions with the U.S. and its other major trading partners.

INCOME GROWTH PICKS UP

There were also positive signs on the consumer front in Monday’s data dump.

After slowing for five quarters, disposable income growth picked up to 7.0 percent in the first quarter, the fastest since the end of 2015.

March retail sales rebounded 10.9 percent on-year as consumers shelled out more for home appliances, furniture and decorations for new homes.

Auto sales also showed signs of recovering after weakening in the first two months of the year after the government reduced subsidies on small cars.

Analysts are closely watching for signs that consumption is accounting for a greater share of China’s economy, which would

not only make growth more resilient and broader based but also reduce the need for more debt-fueled stimulus and reliance on “smokestack” industries.

FOCUS ON STABILITY, THEN REFORMS

Though policymakers have pledged repeatedly to push reforms to head off financial risks and asset bubbles, the government is seeking to keep the economy on an even keel ahead of a major leadership transition in later this year.

China’s central bank has gingerly shifted to a tightening policy bias in recent months, and is using more targeted measures to contain risks in the financial system, after years of ultra-loose settings.

It has bumped up interest rates on money market instruments and special short- and medium-term loans several times already this year and further modest increases are expected, especially if U.S. rates continue to rise.

“I think China should be directing the economy to slow down its growth in the long term…but on the contrary, growth is accelerating,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute in Tokyo.

“This is good for now but it makes it difficult to see how China’s economic slowdown will land in the future. Uncertainties remain high.”

(Reporting by Kevin Yao and Yawen Chen; Writing by Elias Glenn; Editing by Kim Coghill)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/6Ua_14T5zPE/us-china-economy-gdp-idUSKBN17J04E

Stocks, dollar under pressure after soft U.S. data


TOKYO Shares and the U.S. dollar dipped on Monday while U.S. bond yields slumped to five-month lows after soft U.S. economic data hurt investor sentiment already frayed by worries over North Korea and coming French elections.

That dwarfed any relief for market players after the U.S. Treasury department did not name China as a currency manipulator, avoiding an all-out confrontation on currencies between the world’s two largest economies.

SP 500 mini futures declined 0.15 percent to 2,324, edging near a six-week low of 2,317.75 touched in late March following U.S. President Donald Trump’s defeat on healthcare reform.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.1 percent in holiday-thinned trade, while Japan’s Nikkei fell as much as 0.6 pct to hit a five-month low before ending up 0.1 percent.

Most European share markets will be closed for Easter holidays.

A raft of Chinese economic data beat market expectations but did not produce notable market reactions as investors had been already optimistic following a recent string of positive China numbers.

China’s economy grew 6.9 percent in the first quarter from a year earlier, a tad above economists’ forecast of 6.8 percent.

However, mainland Chinese shares fell, with Shanghai Composite Index down 1.0 percent at 3,212, risking a close below its 60-day average at 3,216, seen as an important support by investors and weighed by warning from top securities regulator to combat market misbehavior.

U.S. retail sales dropped more than expected in March while annual core inflation slowed to 2.0 percent, the smallest advance since November 2015, from 2.2 percent in February, data showed on Friday.

That helped to drive down the 10-year U.S. Treasuries yield to 2.200 percent, its lowest level since mid-November from around 2.228 percent on Thursday before a market holiday on Friday.

The yield had risen above 2.6 percent in December and again in March, from around 1.85 percent before the U.S. presidential election, on expectations of Trump’s stimulus.

But growing perception that Trump will struggle to push any tax cuts and fiscal spending programs through the Congress has prompted unwinding of the “Trump” trade.

“At the moment, it is hard to see any factors that could drive up bond yields,” said Hiroko Iwaki, senior strategist at Mizuho Securities.

“And compared to U.S. bond yields, which have given up much of their gains after the election, U.S. share prices, having gone through a limited correction, look vulnerable given potential developments in North Korea or the French election,” she said.

Fed fund futures 0#FF: rose in price, now pricing less than a 50 percent chance of a rate hike in its June 13-14 meeting for the first time in about a month.

NO MANIPULATION

Trump’s administration declined to name any major trading partner as a currency manipulator in a highly anticipated report on Friday, backing away from a key Trump campaign promise to slap such a label on China.

“Concerns about U.S.-Sino trade frictions have eased for the time being,” said Naoki Tashiro, the president of TS China Research.

“But this is also thought to be a part of a barter, namely the U.S. wants China to take tougher actions against North Korea in exchange,” he said.

There is no sign of easing in tensions over North Korea’s nuclear and missile program after the reclusive country’s failed missile test on Sunday.

Trump’s national security adviser said on Sunday that the United States, its allies and China are working together on a range of responses to North Korea.

“In essence, North Korea made a provocation that would not transcend the U.S. ‘red line’. But depending on how China will react, Trump could lose his patience,” said Makoto Noji, senior strategist at SMBC Nikko Securities.

Safe-haven gold gained as much as 0.8 percent to hit a five-month high of $1,295.5 per ounce on continued concerns on tensions over North Korea.

The dollar slipped to as low as 108.13 yen, a five-month low and 0.4 percent below its late U.S. levels.

The semi-annual U.S. Treasury currency report maintained the six countries on a “monitoring list” — China, Japan, Germany, South Korea, Taiwan and Switzerland — suggesting Washington could put more pressure on those countries to take steps to reduce their trade surplus with the United States in future.

The euro stood at $1.0622, little moved so far, and not far from a one-month low of $1.0570 touched last Monday, with focus on the French presidential election.

Ahead of the first round of voting on April 23, the race looked tighter. Two polls put any of the four frontrunners, including far-right candidate Marine Le Pen and hard-left challenger Jean-Luc Melenchon, within reach of a two-person run-off vote.

The Turkish lira jumped about 2.5 percent to 3.6300 per dollar versus 3.7220 on Friday after President Tayyip Erdogan snatched a victory in a referendum to grant him sweeping powers in the biggest overhaul of modern Turkish politics.

It last traded at 3.677.

Oil prices slipped on signs the United States is continuing to add output, undermining OPEC efforts to support prices. [O/R]

Benchmark Brent crude futures were down 1.0 percent at $55.34 a barrel.

(Editing by Kim Coghill and Richard Borsuk)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/pMn8N14vGuM/us-global-markets-idUSKBN17J00X

Asian economies escape ‘manipulator’ tag, but expect more pressure on trade


BEIJING Asian countries escaped the currency manipulator label in the latest U.S. Treasury report, but remain wary of possible trade friction as President Donald Trump maintains his administration will seek to address trade imbalances.

Trump has said some U.S. trading partners, particularly China, manipulated their currency, but has since backed off that claim and acknowledged that China had not weakened the yuan to make its exports cheaper.

China, Japan, South Korea and Taiwan remained on a list for special monitoring of currency practices, China by virtue of a massive trade surplus with the United States.

“Fixing trade imbalances will be an issue for the U.S. in its dialogues with China and Japan, while the manipulator threat has been put on the backburner,” a Japanese government official told Reuters.

The semi-annual U.S. Treasury currency report released on Friday did not name any major trading partner as a currency manipulator, although it seemed to leave open the option for action in the future.

Trump has softened his rhetoric against China’s trade practices as Beijing has intervened in foreign exchange markets to prop up the value of its yuan, and as he looks to China for help dealing with rising tension on the Korean peninsula.

“I think the United States decided to forego (labeling China a currency manipulator) this time because it wants China’s cooperation on North Korea,” said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo.

“Depending on how the North Korean situation develops, we don’t know what will happen in half a year (when the next currency report is due to be published).”

NEW LANGUAGE

New language in the Treasury report citing a history of currency intervention in China, South Korea and Taiwan is in line with what experts say could be eventual changes to the criteria aimed at deterring future manipulation.

With Washington pushing a trade agenda aimed at reducing deficits, experts say the most logical option is to lengthen the time period for reviewing currency market interventions from 12 months to several years.

“One thing we noticed was the report touched on the previous history of (currency manipulation). They’re telling us not to do so in the future and we have no intention of doing so,” a senior South Korean finance official said.

“SCRUTINIZING” CHINA

The report showed the high priority the administration puts on addressing trade imbalances and said it would be “scrutinizing China’s trade and currency practices very closely”.

The report came after China data showed its surplus with the United States was nearly unchanged in the first quarter compared to a year earlier at $49.6 billion, and cited China’s market protection as an impediment to a balanced trade relationship.

While Trump and Chinese President Xi Jinping last week agreed to 100-day trade talks, U.S. business leaders in China have expressed concern about a lack of progress in gaining further access to the Chinese market despite years of negotiations.

JAPAN

The Treasury report’s language on Japan was similar to past reports, and focused on the need for structural reforms to improve domestic demand, analysts said.

“The basic message is that Japan needs to expand its domestic demand and one can read this as them telling Japan to import more American goods,” said Minami of the Norinchukin Research Institute.

U.S. Vice President Mike Pence will visit Japan next week for a bilateral economic dialogue, with U.S. officials signaling they would press Japan to remove non-tarrif trade barriers and buy more U.S. products.

“The report won’t have an impact on the upcoming Japan-U.S. economic dialogue next week. But the U.S. administration’s focus on the trade deficit is something to keep an eye on,” said Nobuyasu Atago, chief economist at Okasan Securities in Tokyo.

(Reporting by Tetsushi Kajimoto, Minami Funakoshi and Kaori Kaneko in Tokyo, and Christine Kim in Seoul; Writing by Elias Glenn; Editing by Stephen Coates)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/VTWtSOkplE8/us-usa-currency-asiapac-idUSKBN17H04O

Brazil’s Odebrecht paid $3.3 billion in bribes over a decade: reports


RIO DE JANEIRO Odebrecht SA [ODBES.UL], the Brazilian engineering company at the center of a historic corruption scandal, paid out a total of about $3.3 billion in bribes in the nine years through 2014, according to testimony cited by local media on Saturday.

Through a department specifically established to pay politicians and other recipients for public works contracts, Odebrecht paid as much as $730 million annually in both 2012 and 2013, the years when bribe payments peaked, according to a spreadsheet that a former executive reportedly gave investigators as part of a plea deal.

The $3.3 billion figure, and related annual tallies as laid out in the spreadsheet, were reported on Saturday by the G1 news site of the Globo media group and the Estado de S. Paulo, a leading newspaper.

Officials at Odebrecht could not immediately be reached for comment.

A trove of plea deal testimony unsealed this week by a Supreme Court justice is shedding light on the extent and manner in which Odebrecht, once Latin America’s most successful engineering firm, routinely paid officials in Brazil and other countries in exchange for winning contracts.

The testimony was unsealed as the justice, Edson Fachin, authorized investigations of eight government ministers, 12 governors and dozens of federal lawmakers implicated in the scandal, uncovered three years ago because of a kickback investigation at the state-run oil company Petroleo Brasileiro SA, or Petrobras (PETR4.SA).

Odebrecht, whose former chief executive has been jailed since 2015 because of the probe, negotiated a far-reaching plea agreement with Brazilian investigators last year, leading to testimony by about 80 company executives and employees.

Along with an affiliate, Odebrecht also agreed last year to pay at least $3.5 billion to U.S. and Swiss investigators for international charges related to the scandal.

Earlier on Saturday, Estado de S. Paulo also reported that Brazilian authorities were investigating if any of the foreign kickbacks the company has already admitted to violated Brazilian law. The company made those payments in countries including Mexico, Ecuador, Peru and Angola.

(Reporting by Paulo Prada; Editing by Sandra Maler)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/YTLYtTNi9RY/us-brazil-corruption-odebrecht-idUSKBN17H0MW

Most oil producers want extension of output cuts: Iran minister


DUBAI Most oil producers support an extension of output cuts by OPEC and non-OPEC countries, and Iran would also back such a move, Iranian Oil Minister Bijan Zanganeh was quoted as saying.

“(Zanganeh) stressed that most countries want OPEC’s decision to be extended,” the Iranian Students’ News Agency (ISNA) reported.

“Iran also supports such a decision and if others comply, so would Iran,” Zanganeh told reporters late on Saturday, according to ISNA.

The market has been oversupplied since mid-2014, prompting members of the Organization of the Petroleum Exporting Countries and some non-OPEC producers to agree to cut output in the first six months of 2017.

OPEC meets on May 25 to consider extending the cuts beyond June. Saudi Arabia, Kuwait and most other OPEC members are leaning towards this if agreement is reached with other producers, OPEC sources told Reuters last month.

(Reporting by Dubai newsroom; Editing by Sandra Maler)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/Hfn11MvIHqg/us-oil-opec-iran-idUSKBN17H0NF

Uber’s revenue hits $6.5 billion in 2016, still has large loss


Ride-hailing service Uber Technologies Inc [UBER.UL] generated $6.5 billion in revenue last year and its gross bookings doubled to $20 billion, the company said on Friday.

Its adjusted net loss was $2.8 billion, excluding the operation in China it sold last year, Uber said.

As a private company, now worth $68 billion, Uber does not report its financial results publicly. It confirmed the figures in an emailed statement after Bloomberg reported the results.

Uber did not provide first quarter figures, but a spokeswoman said they “seem to be in line with expectations.”

For the final quarter of 2016, gross bookings increased 28 percent from the previous quarter, to $6.9 billion. But Uber’s losses grew to $991 million in the period, as revenues grew 74 percent to $2.9 billion from the third quarter.

In a separate emailed statement, Rachel Holt, Uber’s regional general manager for the United States and Canada, said: “We’re fortunate to have a healthy and growing business, giving us the room to make the changes we know are needed on management and accountability, our culture and organization, and our relationship with drivers.”

Uber has been rocked by a number of setbacks lately, including detailed accusations of sexual harassment from a former female employee and a video showing Chief Executive Travis Kalanick harshly berating an Uber driver.

The company is in the process of hiring a chief operating officer to help Kalanick manage it, repair its tarnished image and improve its culture.

Two of Uber’s high-level executives recently said they intended to leave, and last week the company’s communications head announced her departure.

(Reporting by Sangameswaran S in Bengaluru; Editing by Bill Rigby and Dan Grebler)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/_5RqOLQTPkI/us-uber-tech-results-idUSKBN17G1IB

U.S. retail sales, inflation data highlight weak first quarter growth


WASHINGTON U.S. retail sales fell for a second straight month in March and consumer prices dropped for the first time in just over a year, underscoring the magnitude of the loss of economic growth momentum in the first quarter.

But with the labor market near full employment, Friday’s weak reports failed to change views that the Federal Reserve will raise interest rates again in June. Economists expect a rebound in both retail sales and monthly inflation.

“For the Fed, the underlying momentum is more important in terms of policy decisions, and that looks to be strong, supported by a tightening labor market, rising incomes and high consumer confidence,” said Gregory Daco, head of U.S. macroeconomics at Oxford Economics in New York.

The Commerce Department said retail sales dropped 0.2 percent last month after a 0.3 percent decrease in February, which was the first and biggest decline in nearly a year. Compared to March last year retail sales increased 5.2 percent.

Economists had forecast retail sales slipping 0.1 percent. Excluding automobiles, gasoline, building materials and food services, retail sales rebounded 0.5 percent last month after falling 0.2 percent in February.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Despite last month’s rebound in core retail sales, consumer spending likely braked sharply in the first quarter after growing at a brisk 3.5 percent annualized rate in the final three months of 2016. The apparent slowdown in consumption is partly blamed on the late disbursement of income tax refunds by the government as it sought to combat fraud.

The Atlanta Fed lowered its first-quarter GDP estimate by one-tenth of a percentage point to a 0.5 percent rate, which would be the weakest performance in three years. The economy grew at a 2.1 percent pace in the fourth quarter.

With job growth averaging 178,000 per month in the first quarter, the anticipated slowdown in GDP likely understates the health of the economy. First-quarter GDP tends to be weaker because of calculation problems that the government has acknowledged and is working to resolve.

Retail sales last month were undercut by a 1.2 percent tumble in receipts at auto dealerships. It was the third straight monthly drop in auto sales. Lower gasoline prices also undermined retail through a 1.0 percent drop in receipts at service stations.

POCKETS OF STRENGTH

A 1.5 percent plunge in sales at building material stores was also a drag. But electronics and appliances store sales recorded their biggest rise since June 2015.

Receipts at clothing stores increased by the most in a year, despite declining mall traffic and increased competition from online retailers, led by Amazon.com.

Retailers like J.C. Penney Co Inc, Abercrombie Fitch and Macy’s Inc are scaling back on brick-and-mortar operations.

U.S. financial markets were closed for the Good Friday holiday.

In a separate report, the Labor Department said its Consumer Price Index dropped 0.3 percent in March, the first decline in 13 months and biggest decrease since January 2015 amid falling prices for gasoline and mobile phone services, which offset rising rents and food costs.

The CPI nudged up 0.1 percent in February. In the 12 months through March, the CPI rose 2.4 percent, slowing from February’s 2.7 percent increase.

The so-called core CPI, which strips out food and energy costs, fell 0.1 percent, the first and biggest drop since January 2010, after rising 0.2 percent in February. The year-on-year increase in the core CPI slowed to 2.0 percent, the smallest advance since November 2015, from 2.2 percent in February.

“We don’t think this is enough to cause the Fed to swerve from their stated desire to continue gradually increasing the funds rate, though it may embolden the doves’ rhetoric,” said Michael Feroli, an economist at JPMorgan in New York

The Fed has a 2 percent inflation target and tracks an inflation measure which is at 1.8 percent. The U.S. central bank lifted its overnight interest rate by a quarter of a percentage point in March and has forecast two more hikes this year.

A 6.2 percent drop in gasoline prices was the biggest factor in the monthly decline in the CPI, which was also weighed down by a record 7.0 percent plunge in the cost of wireless telephone services.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/D_5IE36Ccp8/us-usa-economy-idUSKBN17G0ZW

Apple receives permit in California to test self-driving cars: DMV


Apple Inc (AAPL.O) has secured a permit to test autonomous vehicles in California, fuelling speculation that it is working on self-driving car technology in a crowded arena of companies hoping to offer those cars to the masses.

The permit allows it to conduct test drives in three vehicles with six drivers, the state Department of Motor Vehicles said on Friday. The vehicles are all 2015 Lexus RX450h, according to the DMV.

Although it has never openly acknowledged it is looking into building an electric car, Apple has recruited dozens of auto experts in recent years, and the permit pulls the curtain back a bit on any possible plan.

“This does confirm what’s long been rumored: that Apple is at least toying with the idea of getting into the autonomous game in some capacity,” said Chris Theodore, president of consultancy Theodore Associates, and a former vice president at Ford Motor Co (F.N) and Chrysler.

The permit does not mean Apple is definitely building a car. “This is not necessarily automobiles as initially rumored, but software or possibly hardware associated with autonomous technology,” Theodore said.

An Apple spokesman declined to comment directly on the filing, pointing back to a statement the company made in November when it wrote to the U.S. National Highway Traffic Safety Administration (NHTSA) on the subject of regulating self-driving vehicles.

“The company is investing heavily in the study of machine learning and automation, and is excited about the potential of automated systems in many areas, including transportation,” Apple’s director of product integrity, Steve Kenner, wrote in that five-page letter.

Apple executives have been coy about their interest in cars. Chief Executive Tim Cook has suggested that Apple wants to move beyond integration of Apple smartphones into vehicle infotainment systems.

Apple joins a growing list of traditional carmakers, technology companies, and small start ups to test drive cars in California – all vying to be the first to have commercially viable vehicles on the roads.

Companies that have been issued permits also include Alphabet Inc’s (GOOGL.O) Google unit, Ford Motor Co (F.N), Volkswagen AG (VOWG_p.DE), Daimler AG (DAIGn.DE), Tesla Motors Inc (TSLA.O) and General Motors Co (GM.N).

Many companies have said the first cars will launch in 2020 but some experts believe it may take much longer due to regulatory challenges.

Shares of Apple closed down 0.5 percent at $141.05 on Thursday. 

(Reporting by Shalini Nagarajan in Bengaluru and Jessica Resnick-Ault in New York; Editing by Bernard Orr)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/xIN_Qkvawtg/us-apple-car-idUSKBN17G1CJ

Netflix scorecard to test mettle of tech rally


SAN FRANCISCO The longevity of the technology stocks rally is on the line next week as Netflix Inc (NFLX.O) kicks off the earnings season for a sector that has mushroomed to account for more than a fifth of the U.S. stock market’s value.

Surges in Apple (AAPL.O), Facebook (FB.O) and other Silicon Valley heavyweights have pushed the SP 500 technology index 10 percent higher this year, more than double the broader SP 500 index’s 4 percent gain. The tech sector’s aggregate value now tops $4.4 trillion, 30 percent higher than No. 2 financials, and even rivals the size of the Federal Reserve’s massive balance sheet.

The next test for these companies is whether their profit growth is sufficient to justify their outsized share price gains.

Enter Netflix, which reports after the bell on Monday. The video streaming pioneer is expected by analysts to quintuple its earnings per share. But with its stock surging 43 percent in the past six months and now trading at 109 times expected earnings, Netflix’s valuation is based more on sentiment than on fundamentals, many investors believe.

“The market’s reaction to whatever the news is from Netflix will be telling,” said Stephen Massocca, Senior Vice President at Wedbush Securities in San Francisco. “If the slightest little negative leads to a 15-point decline, that tells you things are elevated and the market is only going to reward the most excellent of news.”

Momentum in many tech stocks has been driven by ambitious expectations for earnings. Tech profits are seen climbing 14.7 percent for the first quarter, according to Thomson Reuters I/B/E/S. That would account for nearly a third of the 10.4 percent earnings growth predicted across the SP 500.

“It’s great for everybody to feel good, but if nobody is buying stuff and the companies are reporting disappointing sales and that affects their margins, then you’ll be starting to say – wait a second,” said Thomas Martin, a portfolio manager at GLOBALT Investments.

Along with the SP 500, tech shares have flatlined for weeks as Wall Street reassesses whether President Donald Trump will be able to push corporate tax cuts through Congress.

Still, so far in April investors have poured $122 million into the U.S.-listed Technology Select Sector SPDR Fund (XLK.P), bringing total flows into the fund this year to $1.4 billion, according to ETF.com, which tracks fund flows.

Inside the tech rally, chip makers have been notable outperformers, with the Philadelphia Semiconductor index up 40 percent in the past year. Semiconductor companies are expected to boost EPS by 46 percent in the first quarter, helped by the growing use of chips in cars and mobile gadgets. One of the biggest – Qualcomm Inc (QCOM.O) – reports on Wednesday.

While shares of the mobile chipmaker have been bogged down by a legal battle with Apple, its sales are seen rising by 6 percent and EPS by 14 percent.

(Reporting by Noel Randewich; Editing by James Dalgleish)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/r4-ZrVdsDN4/us-usa-stocks-weekahead-idUSKBN17F2ML

Uber may face $1 million fine over California drunken-driving complaints


LOS ANGELES Uber’s popular ride-sharing network has repeatedly failed to promptly suspend and investigate its California drivers when passengers report them driving drunk, state regulators charged in an enforcement action, recommending $1.13 million in fines.

The consumer protection arm of the California Public Utility Commission found Uber Technologies Inc [UBER.UL] has violated “zero-tolerance” rules governing drunken-driving complaints on 151 occasions over the course of a year, out of 154 complaints reviewed.

In only 21 of those cases did the company conduct any follow-up driver investigation, the commission inquiry found.

The recommended fine for alleged violations is believed to mark the first such citation issued against the San Francisco-based ride-hailing network or its competitors since the rules were adopted in 2013.

The enforcement action follows a recent consumer backlash against the company and its senior management over a series of revelations about its corporate culture and business tactics, including complaints of sexual harassment.

The drunken-driving findings, which stem from a review of passenger complaints lodged between August 2014 and August 2015, were contained in a nine-page investigative order issued by the commission’s Consumer Protection and Enforcement Division on Tuesday.

Those charges and the proposed penalty are now subject to examination by an administrative law judge who will conduct further proceedings before recommending to the five-member commission itself what action, if any, should be taken against the company.

Uber spokeswoman Eva Behrend, noting that the report relates to complaints dating back two or three years, said, “We’ve significantly improved our processes since then.”

“We have zero tolerance for any impaired driving,” she said, citing Uber’s “community guidelines,” which state that any driver found to be under the influence of drugs or alcohol while on the job will be “permanently deactivated” from the network.

“Uber may also deactivate the account of any driver who receives several unconfirmed complaints of drug or alcohol use,” it says.

According to the commission’s own findings, the company received 2,047 zero-tolerance complaints statewide against its UberX and UberPool drivers during the year in question, and the company dismissed drivers in 574 of those cases.

The company, which operates in 74 countries, says it currently has 147,000 drivers on the Uber platform in California, accounting for nearly one-fourth of its U.S. total.

(Reporting by Steve Gorman; Editing by Lisa Shumaker)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/is7CsU7sWcc/us-uber-drunken-idUSKBN17G06D