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Italy bank deal lifts Europe shares, dollar on back foot

LONDON Shares rose in Europe on Monday, with Italian banks gaining after a deal to wind up two failed regional lenders, while the dollar and U.S. bond yields held close to recent lows as subdued inflation raised questions over the outlook for monetary policy.

The-pan-European STOXX 600 share index rose 0.6 percent, led higher by banks .SX7P, after the agreement under which Italy’s largest retail bank, Intesa Sanpaolo will take on the remaining good assets of collapsed Popolare di Vicenza and Veneto Banca.

Intesa shares (ISP.MI) rose 3.2 percent. The Italian government will pay it 5.2 billion euros and give it guarantees of up to a further 12 billion euros.

Investors have long viewed the Italian banking sector as a major cause of fragility within the euro zone.

In index of Italian banks .FTIT8000 was up 2 percent and the broader Milan market .FTMIB rose 1.1 percent.

Italian 10-year government bond yields IT10YT=TWEB rose 0.2 basis point to 1.91 percent, widening the gap over benchmark German equivalents DE10YT=TWEB by 2 bps to 165.

“There is the danger that other banks need state support, but I think there’s more clarity now that there is a solution for the banking sector,” said ING fixed income strategist Martin van Vliet.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS ticked up 0.6 percent as tech led gains.

Trading was slow with many markets in the region closed for holidays to celebrate the end of Ramadan.

Japan’s Nikkei .N225 rose 0.1 percent.

Mainland Chinese shares rallied, with the CSI300 index .CSI300 rising 1.2 percent to hit its highest level in almost 18 months, after MSCI said the index provider could raise its weighting of China’s mainland-listed ‘A’ shares.

The euro rose 0.1 percent to $1.1204 EUR=, with the dollar steady .DXY as the gap between short- and longer-dated U.S. government bond yields held close to recent 10-year lows hit on signs inflation is likely to remain subdued.

Investors greeted the election last year of U.S. Donald Trump as likely to lift inflation, and with it U.S. interest rates but price rises have remained stubbornly subdued.

The Federal Reserve raised rates this month for the second time this year and has said it expects to raise again later this year. Futures imply only a 50 percent chance of a further hike by December.

Fed Chair Janet Yellen speaks on London on Tuesday and investors will be on alert for any clues to the rate outlook, after mixed views from other Fed officials in recent days.

“The market continues to call the Fed’s bluff on its intentions to change rates. I don’t think anything (Fed chair) Janet Yellen can say this week will change that,” said Stephen Gallo, head of European FX strategy with Bank of Montreal.

European Central Bank President Mario Draghi speaks on Monday, ahead of a meeting of central bankers in Portugal later in the week.

The yen dipped 0.2 percent to 111.43 per dollar JPY= while sterling GBP=D3, on the up since more Bank of England policymakers have either called or said they are likely to call for higher interest rates, rose 0,1 percent to $1.2741.

A major cause of lower inflation globally has been a fall in oil prices in recent weeks on signs an agreement by producers in the Organization of the Petroleum Exporting Countries is failing to curb a global glut of crude.

Brent crude LCOc1, the international benchmark, rose 59 cents or 1.3 percent to $46.13, buoyed by the weaker dollar. Oil prices are down around 13 percent since late May.

Dollar weakness also lifted copper. The industrial metal CMCU3 rose 0.4 percent to $5,823 a tonne, just shy of its highest since early April.

Gold, however, fell sharply, with traders citing anxiety ahead of U.S. economic data duiker later this week ECONUS.

Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh

(Additional reporting by Hideyuki Sano in Tokyo, Abhinav Ramnnarayan and Patrick Graham in London; Editing by Raissa Kasolowsky)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/5B57yZGeDZ8/us-global-markets-idUSKBN19H03R

Loeb’s Third Point targets ‘staid’ Nestle for change

Activist investor Daniel Loeb’s Third Point LLC on Sunday unveiled a stake of more than 1 percent in Switzerland’s Nestle SA (NESN.S) and urged the world’s largest packaged foods maker to improve margins, buy back stock and shed non-core businesses.

The 3.28 billion Swiss francs ($3.4 billion) stake is the largest ever taken by the hedge fund, which pressed for change in recent years at U.S. internet firm Yahoo and Japan’s Sony Corp (6758.T). It said in a letter posted on its website that it had already had productive conversations with Nestle management.

Nestle shares jumped as much as 4.7 percent on Monday morning, touching a record high as investors hoped for change.

“Nestle has arguably been lackadaisical and complacent and underperformed its potential,” Bernstein analysts said. “It might now be stirred into action by an external force.”

Third Point disclosed the Nestle position in a letter to the hedge fund’s investors, in which it argued the maker of Nescafe coffee and Perrier water should sell its 23 percent stake in French cosmetics firm L’Oreal SA (OREP.PA), which was worth about $27 billion on Friday.

L’Oreal shares rose 2.8 percent.

Nestle did not immediately respond to a request for comment. L’Oreal had no comment.

Nestle is the biggest player in a packaged food industry struggling with a slowdown in emerging markets, falling prices in developed markets and consumers demanding fresher, healthier products.

Mark Schneider, the company’s new chief executive, has been trying to reignite growth since joining Nestle in January from German healthcare group Fresenius (FREG.DE).

He is the first CEO from outside the company in nearly a century, and his appointment was seen as an acknowledgement that Nestle needed new thinking.

In February, Schneider scrapped Nestle’s long-standing sales target, which it had missed for four straight years.


“We feel strongly that in order to succeed, Dr. Schneider will need to articulate a decisive and bold action plan that addresses the staid culture and tendency towards incrementalism that has typified the company’s prior leadership and resulted in its long-term underperformance,” Third Point wrote in the letter.

The hedge fund said Nestle should set a formal profit margin target of 18 percent to 20 percent by 2020 in order to help improve productivity. Nestle’s current margin is just above 15 percent, whereas rival Unilever’s (ULVR.L) is over 16 percent.

It also recommended Nestle more than double its debt load, as well as sell the L’Oreal stake, in order to generate the capital to buy back stock.

Vontobel analyst Jean-Philippe Bertschy said Third Point’s suggestions echoed proposals made by other shareholders for years.

“Previous management was not too open to listen to critics,” he said. “Now with Mr. Schneider, one of his top priorities was to improve shareholder communication and investor relations. I think he’s listening carefully to what investors are saying.”

Bertschy added that much of what Third Point said was probably part of Schneider’s plan going forward.

Third Point’s roughly 40 million shares in Nestle would make it the company’s eighth-largest shareholder behind the likes of BlackRock, Norges Bank and Capital World Investors, according to Thomson Reuters data. Third Point’s stake was first reported by Bloomberg.

Dutch food industry veteran Jan Bennink is advising Third Point on its Nestle investment and has also invested personally alongside the fund, Third Point said. Bennink ran baby food maker Royal Numico when Danone (DANO.PA) bought it for $16.8 billion in 2007, oversaw the break-up of Sara Lee and ran its coffee business, which is now owned by JAB Holding.

Nestle said this month it might sell its $900 million-a-year U.S. confectionery business in its latest effort to improve the health profile of its sprawling portfolio. Analysts also speculate it could sell its U.S. frozen food business.

Nestle shares were up 4.3 percent at 85.6 Swiss francs at 0820 GMT.

($1 = 0.8928 euros)

(Additional reporting by Parikshit Mishra in Bengaluru; Editing by Andrew Hay, Bill Rigby and Mark Potter)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/mYUjVeoCKYY/us-loeb-nestle-idUSKBN19G0W5

Japanese airbag maker Takata files for bankruptcy, gets U.S. sponsor

TOKYO Japan’s Takata Corp (7312.T), the firm at the centre of the auto industry’s biggest ever product recall, filed for bankruptcy protection in the United States and Japan, and said it would be bought for $1.6 billion by U.S.-based Key Safety Systems.

In the biggest bankruptcy of a Japanese manufacturer, Takata faces tens of billions of dollars in costs and liabilities resulting from almost a decade of recalls and lawsuits.

Its airbags have been linked to at least 17 deaths around the world.

TK Holdings, its U.S. operations, filed Chapter 11 bankruptcy in Delaware on Sunday with liabilities of $10 billion to $50 billion, while the Japanese parent filed for protection with the Tokyo District Court early on Monday.

Takata’s total liabilities stand at 1.7 trillion yen ($15 billion), Tokyo Shoko Research Ltd estimated.

Final liabilities would depend on the outcome of discussions with carmaker customers who have borne the bulk of the replacement costs, a lawyer for the company said.

The filings open the door to the financial rescue by Key Safety Systems (KSS), a Michigan-based parts supplier owned by China’s Ningbo Joyson Electronic Corp (600699.SS).

In a deal that took 16 months to hammer out, KSS agreed to take over Takata’s viable operations, while the remaining operations will be reorganised to continue churning out millions of replacement airbag inflators, the two firms said.

The U.S. company would keep “substantially all” of Takata’s 60,000 employees in 23 countries and maintain its factories in Japan. The agreement is meant to allow Takata to continue operating without interruptions and with minimal disruptions to its supply chain.

“We believe taking these actions in Japan and the U.S. is the best way to address the ongoing costs and liabilities of the

airbag inflator issues with certainty and in an organised manner,” Takata CEO Shigehisa Takada said in a statement.

Takada said he and top management would resign “when the timing of the restructuring is set.”

His family – which still has control of the 84-year-old company – likely would cease to be shareholders.

Jason Luo, president and CEO of KSS, said in a statement the “underlying strength” of Takata’s business had not diminished

despite the airbag recall, citing its skilled employee base, geographic reach and other safety products such as seat belts.

The companies expect to seal definitive agreements for the sale in coming weeks and complete the twin bankruptcy processes in the first quarter of 2018.

The filings have, however, not resolved all issues.

Honda Motor Co (7267.T), Takata’s biggest customer, said it had reached no final agreement with Takata on responsibilities for the recall.

Honda said it would continue talks with the supplier but anticipated difficulties in recovering the bulk of its claims.


Takata faces billions in lawsuits and recall-related costs to its clients, including Honda, BMW (BMWG.DE), Toyota Motor Corp (7203.T) and others which have been paying recall costs to date.

It also faces potential liabilities stemming from class action lawsuits in the United States, Canada and other countries.

Global transport authorities have ordered about 100 million inflators to be recalled.

Industry sources have said that recall costs could climb to about $10 billion.

The ammonium nitrate compound used in the airbags was found to become volatile with age and prolonged exposure to heat,causing the devices to explode.

Costs so far have pushed the company into the red for three years, and it has been forced to sell subsidiaries topay fines and other liabilities.

Founded as a textiles company in 1933, Takata beganproducing airbags in 1987 and at its peak became the world’s No.2 producer of the safety products.

It also produces one-third ofall seatbelts used in vehicles sold globally, along withother components.

The Tokyo Stock Exchange said its shares would be delisted on July 27. The stock has collapsed 95 percent since January 2014 as the recalls mounted.

(Reporting by Naomi Tajitsu; Additional reporting by David Shepardson on Washington D.C., Tom Hals in Wilmington, Delaware and Maki Shiraki in Tokyo; Editing by William Mallard, Stephen Coates and Edwina Gibbs)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/r3eVM3mDUI8/us-takata-bankruptcy-japan-idUSKBN19G0ZG

CEO of Raytheon’s Forcepoint eyes IPO: Boersen-Zeitung

FRANKFURT U.S. missile maker Raytheon’s (RTN.N) cybersecurity unit could thrive were it to be listed separately, the head of the unit, Forcepoint, told German business daily Boersenzeitung in an interview published on Saturday.

“Raytheon has undertaken that Forcepoint will achieve for civilian cyber defense what Raytheon does for the defense of nation states, and we think that we could unleash enormous potential in our company via a stock exchange listing,” Matthew Moynahan said.

He said it was a little early to contemplate such a move, though, according to the newspaper.

Raytheon bought an 80 percent stake in Forcepoint, then known as Websense, from private equity firm Vista in 2015 for $1.9 billion and combined it with its own cybersecurity operations. Vista owns the other 20 percent.

Vista retains the right to exit the joint venture, including by requiring Raytheon to buy its 20 percent stake or by Forcepoint’s pursuing an IPO.

Forcepoint made sales of $566 million and operating income of $51 million in 2016.

(Reporting by Georgina Prodhan; editing by John Stonestreet)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/MizYijIO_Sg/us-raytheon-forcepoint-ipo-idUSKBN19F0N0

Anthem to pay record $115 million to settle U.S. lawsuits over data breach

Anthem Inc (ANTM.N), the largest U.S. health insurance company, has agreed to settle litigation over hacking in 2015 that compromised about 79 million people’s personal information for $115 million, which lawyers said would be the largest settlement ever for a data breach.

The deal, announced Friday by lawyers for people whose information was compromised, must still be approved by U.S. District Judge Lucy Koh in San Jose, California, who is presiding over the case.

The money will be used to pay for two years of credit monitoring for people affected by the hack, the lawyers said. Victims are believed to include current and former customers of Anthem and of other insurers affiliated with Anthem through the national Blue Cross Blue Shield Association.

People who are already enrolled in credit monitoring may choose to receive cash instead, which may be up to $50 per person, according to a motion filed in California federal court Friday.

“We are very satisfied that the settlement is a great result for those affected and look forward to working through the settlement approval process,” Andrew Friedman, a lawyer for the victims, said in a statement.

The credit monitoring in the settlement is in addition to the two years of credit monitoring Anthem offered victims when it announced the breach in February 2015, according to Anthem spokeswoman Jill Becher, who said the company was pleased to be resolving the litigation.

The Indianapolis-based company did not admit wrongdoing, and there was no evidence any compromised information was sold or used to commit fraud, Becher said.

Anthem said in February 2015 that an unknown hacker had accessed a database containing personal information, including names, birthdays, social security numbers, addresses, email addresses and employment and income information. The attack did not compromise credit card information or medical information, the company said.

More than 100 lawsuits filed against Anthem over the breach were consolidated before Judge Koh.

The breach is one of a series of high-profile data breaches that resulted in losses of hundreds of millions of dollars to U.S. companies in recent years, including Target Corp (TGT.N), which agreed to pay $18.5 million to settle claims by 47 states in May, and Home Depot Inc (HD.N), which agreed to pay at least $19.5 million to consumers last year.

(Reporting by Brendan Pierson in New York; Editing by Lisa Shumaker)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/GZknP-2RYY4/us-anthem-cyber-settlement-idUSKBN19E2ML

Even with Whole Foods, Amazon would need many more warehouses to reshape grocery delivery

If Amazon.com Inc (AMZN.O) hopes to revolutionize grocery delivery, then its bid to buy Whole Foods Market Inc (WFM.O) for $13.7 billion will be just the start of a long and costly process.

The e-commerce giant would need to add a large network of specialized grocery distribution warehouses, former AmazonFresh employees and logistics experts said. This is something Wal-Mart Stores Inc (WMT.N) and other competitors have already done. Whole Foods, with a relatively small distribution footprint of its own, does little to change the picture for Amazon, they said.

Amazon has a little more than 3 million square feet of U.S. warehousing dedicated to its existing AmazonFresh and Prime Pantry grocery programs – a tenth of the warehouse space Wal-Mart has for specialized food distribution, according to logistics consulting firm MWPVL International Inc.

“AmazonFresh really was for lack of a better word an after-thought,” said Brittain Ladd, who until March was a senior manager for the grocery delivery program, which launched in 2007.

One key to Amazon’s success in general retail sales has been its speed in delivering products to consumers, facilitated by warehouses located strategically throughout the United States. As of 2016, the company had about 100 million square feet of space in its fulfillment and data centers, some of it outfitted with state-of-the-art robotics to boost efficiency.

Facilities for distributing fresh food are far more complicated than ordinary warehouses. A single facility can need a half dozen or more temperature settings to house products from Popsicles to berries. Some require certification from the U.S. Food and Drug Administration, and extra care must be taken to keep shelves clean and prevent pests from contaminating food.

Whole Foods has over 1 million square feet of warehouse space for distribution to its markets, and a chunk of its inventory goes straight from suppliers to stores, MWPVL said.

“It’s a peanut. It’s nothing,” MWPVL President Marc Wulfraat said of Whole Foods’ distribution. “If Amazon wants to become a dominant grocery company in a short period of time, then there would be an investment required, and it would be big.”

Amazon, which did not return requests for comment, has not detailed its plans for Whole Foods.


Amazon’s fulfillment expenses jumped 31 percent in 2016 – a bit faster than in prior years and faster than its retail sales growth – to $17.6 billion, according to its annual regulatory filing.

Industry experts estimate the company would have to add a dozen or more grocery warehouses, particularly if it wanted to supply Whole Food stores in addition to homes. The cost to do that is unclear.

They said Amazon would likely continue to rely on United Natural Foods Inc (UNFI.O) to supply Whole Foods with hard-to-source products, but would probably aim to cut costs and handle more of the distribution for conventional items.

Even using Whole Foods stores to provide food for delivering to nearby urban shoppers would have hard limits, since many outlets lack the floor space to handle thousands of online orders.

“It’s a space issue for stuff coming through. It’s a labor issue for people tripping over each other,” said Tom Furphy, former vice president of consumables and AmazonFresh, and now chief executive of Consumer Equity Partners. There would also be a risk that “the quality starts to go down because the e-commerce orders are getting better product.”

(Reporting By Jeffrey Dastin in San Francisco; Editing by Sue Horton and Cynthia Osterman)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/3AsShSyx2Ts/us-whole-foods-m-a-amazon-com-logistics-idUSKBN19E2OK

Oil’s drop could leave a stain on earnings

NEW YORK Heading into second-quarter earnings season, investors are looking for a continuation of strong U.S. company results to justify high stock valuations, now trading near their loftiest levels since 2004.

However, drilling a hole into that hopeful scenario is the current bear market in oil prices and an economy showing signs of growth below the pace expected earlier in the year.

“A lot of the expectation for a recovery in earnings is predicated on oil prices being around $47-$50 a barrel,” said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York. “So if you don’t get those numbers, you don’t get the strong earnings the stock market needs. This is not trivial stuff. It creates a lot of uncertainty and volatility in forecasts.”

U.S. crude futures CLc1 have been pressured lower by a supply glut. They’ve averaged over $48 per barrel so far this quarter, but traded around $43 on Friday and are down more than 20 percent from February, when they hit an 18-month high.

U.S. stocks are in the ninth year of a bull run which has been fueled of late by bets on pro-growth policies from U.S. President Donald Trump. However, with the timetable for reforms stretching further into the future, earnings are seen as a critical support for stock prices.

With indexes near record highs, there is speculation among Wall Street analysts about whether a correction is due.

Earnings expectations have dropped for 10 of 11 industry groups since early April, with only industrials looking better than they did then.

The benchmark SP 500 stock index as a whole is expected to deliver 7.9 percent profit growth, down from 15.3 percent in the first quarter, and below the 10.2 percent forecast in April, Thomson Reuters data shows.

On Thursday, Nike (NKE.N) will be the first Dow component to report earnings for the most recent quarter. The season heats up in the second week of July.

Technology earnings are seen posting double-digit growth, helped by gains in semiconductor companies, and financials are close behind with estimated 8.1-percent profit growth.

While lower energy prices can help some sectors such as industrials and transports, as well as boosting consumer sentiment, high expectations for energy earnings growth mean any stumble will be felt broadly.

Energy sector profits are seen up a whopping 683 percent from a year ago, when many companies posted losses, according to Thomson Reuters data. Without energy, profit growth estimates drop to 4.8 percent for the quarter.

Expectations for the sector will probably have to come down for the second half of the year if low oil prices persist, said David Joy, chief market strategist at Ameriprise Financial in Boston.

“The one wild card right now is the price of oil. Expectations that are baked into full-year forecasts assume a higher price for oil certainly than we have now,” he said.

Energy has been the weakest performing sector so far this year, with the SP energy index .SPNY down near 15 percent.


The drop in oil prices notwithstanding, some analysts have cautioned that Wall Street has been too optimistic about overall earnings.

Michael Purves, chief global strategist at Weeden Co, cut his 2017 SP 500 earnings estimates from $127 to $116, below the $131.51 consensus, as economic growth and inflation are not as high as expected.

“I’m looking for CEOs to start taking down their forecasts for the year,” Purves said.

In fact, the Citigroup U.S. economic surprise index .CESIUSD, a gauge of economic data compared to expectations, this month fell near a six-year low.

An Atlanta Federal Reserve model recently forecast second-quarter economic growth coming in at a 2.9-percent annualized pace, down from a previous 3.2 percent.

Another hurdle for earnings growth: declining corporate buybacks.

“Over the past two years, more than 20 percent of SP 500 issues have given at least a 4 percent tailwind for (earnings per share) via reduced share counts,” Howard Silverblatt, senior index analyst at SP Dow Jones Indices, said in a note.

For the first quarter of 2017, that rate fell to 14.8 percent of companies, and there are indications of “even less support” in the second quarter, he said.

(Additional reporting and editing by Megan Davies; Editing by Daniel Bases and Nick Zieminski)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/z25ole7C_r8/us-usa-stocks-weekahead-idUSKBN19E219

Exclusive: Wal-Mart not considering a bid for Whole Foods

Wal-Mart Stores Inc is not actively considering making an offer for Whole Foods Market Inc, a source familiar with the matter told Reuters on Friday.

Whole Foods, which accepted a $13.7 billion offer from Amazon.com Inc last week, has not received any rival bids as of Friday, a second source said. Both sources spoke on condition of anonymity because the matter is confidential.

Wal-Mart spokesman Greg Hitt declined to comment on whether the company is considering a bid for Whole Foods. Whole Foods and Amazon did not immediately respond to requests for comment.

Whole Foods shares have been trading above Amazon’s deal price of $42 per share since the deal was announced last Friday, as stock market investors speculate about the possibility of a higher offer.

Whole Foods shares reached a high of $43.84 earlier on Friday, but dropped after Reuters reported that no rival bids have so far emerged. Its shares were last trading after hours at $42.85.

Wal-Mart had been tipped as a potential bidder for Whole Foods by retail analysts, although Hitt previously called reports that Wal-Mart might put in a rival offer “false and baseless.”

Wal-Mart, the world’s largest retailer, has been investing heavily in building its e-commerce business and has been acquiring smaller online companies such as Jet.com, ModCloth, Moosejaw and Bonobos.

“Bidding for Whole Foods would be a 180-degree turn from what Wal-Mart’s strategy has been for the past two to three years,” said Edwards Jones analyst Brian Yarbrough.

Amazon’s proposed purchase of Whole Foods brings disruption to the $700 billion U.S. grocery sector, a traditional area of retailing that is in the middle of an intense price war.

In preparation for that price war, Wal-Mart in recent months has cut grocery prices, improved its fresh food and meat offerings, modernized shelving and lighting in its grocery department and expanded its online pick-up service.

Whole Foods’ peer Kroger Co, as well as Target Corp and Costco Wholesale Corp, have also been identified by analysts as potential bidders for Whole Foods.

Both Amazon and Whole Foods cater to younger consumers, including millennials, as well as more affluent shoppers.

Whole Foods has said it will continue to operate stores under the Whole Foods Market brand, and that John Mackey will remain chief executive.

(Reporting by Nandita Bose in Chicago and Greg Roumeliotis in New York; Editing by Bill Rigby)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/Et6jakkJ_kA/us-whole-foods-m-a-exclusive-idUSKBN19E2DE

GM settles hundreds of ignition switch lawsuits

NEW YORK General Motors Co (GM.N) has agreed to settle federal lawsuits by as many as 203 plaintiffs over defective ignition switches in its vehicles, a Friday court filing shows.

Settlement terms are confidential, but the accord could also resolve hundreds of state court claims, as well, lawyers for the automaker said in the filing in Manhattan federal court.

Lawyers for the settling plaintiffs could not immediately be reached for comment. A GM spokesman did not immediately respond to a request for comment.

GM has been defending against hundreds of lawsuits over faulty ignition switches that could cause engines to stall and prevent airbags from deploying in crashes.

The defect has been linked to 124 deaths and 275 injuries, and prompted a recall that began in February 2014.

GM has paid about $2.5 billion in penalties and settlements related to the defect.

In April, the U.S. Supreme Court let stand a lower court ruling that blocked GM’s effort to scuttle many private lawsuits.

The Detroit-based automaker had argued that its 2009 bankruptcy reorganization excused it from addressing earlier defects.

GM’s lawyers said they are working with the plaintiffs’ lawyers to complete documentation within the next month for the settlement, whose terms “will take some time” to implement.

The case is In re: General Motors LLC Ignition Switch Litigation, U.S. District Court, Southern District of New York, No. 14-md-02543.

(Reporting by Jonathan Stempel in New York; Editing by Jeffrey Benkoe and Nick Zieminski)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/9plemPfYkkg/us-gm-recall-settlement-idUSKBN19E25A

U.S. regulators, lawmakers support Volcker rule revamp at hearing

WASHINGTON U.S. financial regulators and lawmakers who appeared at a congressional hearing on Thursday generally agreed that the Volcker rule, which restricts banks’ ability to make bets with their own money, needs to be reconsidered.

The rule should focus only on banks that do a lot of trading, said Federal Reserve Governor Jerome Powell, who leads banking regulation for the central bank.

“We believe we have the authority to draw a line between those with the big trading books (and other banks),” he told the Senate Banking Committee. “We could have that group regulated one way and have everyone else regulated less, a lot less.”

Powell was one of five regulators testifying before the committee, days after the U.S. Treasury Department unveiled a plan to revamp or undo many rules enacted after the 2007-2009 financial crisis. Wall Street banks have fought Volcker vigorously, saying it is overly complicated and hurts market liquidity.

The Treasury plan is part of a broader effort by Republican President Donald Trump to cut regulations that he says are holding back economic growth. Democrats and consumer advocates largely oppose the plan, saying it would lead to more reckless behavior by the banking industry.

At the hearing, Democratic Sen. Elizabeth Warren, a fierce critic of Wall Street, described the Treasury’s recommendations as “basically cut-and-paste” from bank lobbyists.

But Sen. Heidi Heitkamp, a moderate Democrat from North Dakota, indicated clear support for re-examining Volcker.

“What I’m hearing today,” she said, “is no one wants to go back, but everybody wants to tailor a rule or find a rule that can in fact accomplish the goal without overly burdening all banks.”

Powell was joined by Keith Noreika, the acting comptroller of the currency, in calling for changes. Even Federal Deposit Insurance Corporation Chairman Martin Gruenberg, the sole holdover from Trump’s Democratic predecessor, Barack Obama, said he was open to some small revisions.

(Reporting by Pete Schroeder; Editing by Lauren Tara LaCapra and Lisa Von Ahn)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/n8ZaZCfH9bI/us-usa-banks-regulation-idUSKBN19D2FO

Biggest U.S. banks clear first hurdle in Fed’s annual stress tests

WASHINGTON/NEW YORK The 34 largest U.S. banks have all cleared the first stage of an annual stress test, showing they would be able to maintain enough capital in an extreme recession to meet regulatory requirements, the Federal Reserve said on Thursday.

Although the banks, including household names like JPMorgan Chase Co and Bank of America Corp, would suffer $383 billion in loan losses in the Fed’s most severe scenario, their level of high-quality capital would be substantially higher than the threshold that regulators demand, and an improvement over last year’s level.

“This year’s results show that, even during a severe recession, our large banks would remain well capitalized,” said Fed Governor Jerome Powell, who leads banking regulation for the central bank. “This would allow them to lend throughout the economic cycle, and support households and businesses when times are tough.”

The Fed introduced the stress tests in the wake of the financial crisis to ensure the health of the banking industry, whose ability to lend is considered crucial to the health of the economy.

Since the first test was conducted in 2009, big banks have seen losses abate, loan portfolios improve and profits grow. The banks that now undergo the exam have also strengthened their balance sheets by adding more than $750 billion in top-notch capital, the Fed said.

Banks and their investors have been hoping the improvements would prompt the Fed to allow them to use more capital for stock buybacks and dividends, especially as the Trump administration is seeking to relax financial regulations.

Wall Street analysts and trade groups quickly cheered the results on Thursday, saying regulators should feel comfortable easing tough rules put in place since the financial crisis.

“We see today’s…stress test results as a positive for Trump administration efforts to deregulate the banks,” said Jaret Seiberg, a policy analyst with Cowen Co.

Rob Nichols, president and chief executive officer of the American Bankers Association, said the Fed should consider a number of recommendations recently laid out by the Treasury Department, including making the stress tests more transparent and less frequent.

“From this solid foundation, the focus should now turn to what can be done to help U.S. banks promote economic growth even further,” he said.


Thursday’s results are the first of a two-part exam. It showed whether the banks would meet minimum requirements under the Fed’s methodology, using materials they submitted.

The second portion of the test, to be released on Wednesday, will show whether the Fed approves or denies banks’ capital plans. Banks now have an opportunity to resubmit those plans if they find their own projections were much sunnier than the Fed’s.

Under the Fed’s worst-case stress-test scenario, the U.S. unemployment rate more than doubles to 10 percent.

However, even with the losses in that scenario, the banks’ aggregate level of high-quality capital would still cover 9.2 percent of their risk-weighted assets, according to the Fed. That is much better than the 4.5 percent threshold that regulators demand, and an improvement on the 8.4 percent common equity tier 1 (CET1) capital ratio assessed last year.

Analysts say Citigroup Inc has the most to gain or lose in the stress tests. Shareholders of the fourth-largest U.S. bank have been clamoring for management to buy back more of its stock, which is trading below what its assets are worth. But the bank cannot do so without the Fed’s approval.

Under the Fed’s examination, Citi’s minimum CET1 ratio in the most stressful scenario was the highest among big Wall Street banks, at 9.7 percent. Citi’s own analysis showed that metric at 10 percent.

The Fed’s assessment showed the other five largest banks – JPMorgan, Bank of America, Wells Fargo Co, Goldman Sachs Group Inc and Morgan Stanley – having minimum CET1 ratios between 8.4 and 9.4 percent.

Of those, Goldman Sachs had the biggest optimism gap compared with the Fed when it came to the worst-case scenario. Its model produced a 9.8 percent minimum CET1 ratio, 1.4 points better than the Fed’s. Wells Fargo’s metric also fared better in its own test than under the Fed’s, by 0.8 of a point.

Conversely, JPMorgan’s analysis appeared to be more dour, with its CET1 ratio coming in 1.3 percentage points below the Fed’s. Bank of America’s was 0.7 of a point worse.

Banks that decide to resubmit their plans can only make downward revisions to the amount of capital they plan to use, meaning management teams that were too conservative may regret their submissions even if they pass.

“If there is disappointment next week,” said Seiberg, “it is likely because the banks failed to ask for big enough distributions more than it is because the Federal Reserve was too tough.”

(Reporting by Pete Schroeder in Washington and David Henry in New York; Additional reporting by Patrick Rucker; Writing by Lauren Tara LaCapra; Editing by Leslie Adler)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/oTgdgc5-fKc/us-usa-banks-stress-idUSKBN19D2OC

Asian shares flat, stay on track for a winning week

TOKYO Asian shares flatlined on Friday but remained on track for a weekly gain, while crude oil prices pulled away from this week’s 10-month lows.

Financial spreadbetter CMC Markets sees European markets opening modestly weaker, with Britain’s FTSE 100 .FTSE, Germany’s DAX .GDAXI and France’s CAC 40 .FCHI all seen shedding points in early trade.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was nearly unchanged on the day, and was up 0.4 percent for the week.

The Shanghai Composite .SSEC slipped 0.7 percent while China’s blue-chip CSI300 index .CSI300 was down 0.3 percent. The latter earlier this week hit an 18-month high on excitement over MSCI’s decision to include mainland shares in a key index.

“Investors have no incentives today to take new positions ahead of the weekend,” said Mitsuo Shimizu, equity strategist at Japan Asia Securities in Tokyo.

Japan’s Nikkei stock index .N225 was slightly higher in afternoon trade, on track to log a rise of 0.9 percent for a week in which it touched its highest levels since August 2015.

“The actual macro situation in Japan is pretty good,” said Ed Rogers, head of Rogers Investment Advisors in Tokyo, who noted the country’s streak of five quarters of positive gross domestic product numbers.

He said the dollar remained bolstered against the yen by the Federal Reserve’s move to hike interest rates last week and leave the door open for further monetary tightening later in the year.

“We’re not seeing global inflation, but we think the Fed will continue to move. That stone’s rolling down the hill,” Rogers said.

Longer-term, that will support the dollar and underpin Japanese shares, he added.

The dollar index .DXY, which tracks the greenback against a basket of six major rivals, was down 0.2 percent at 97.449, though up 0.3 percent for the week.

The euro was up 0.1 percent on the day at $1.1163 EUR= but was down 0.3 percent for the week, while the dollar was steady against the yen at 111.29 JPY=, up 0.4 percent for the week.

“We’re getting close to the end of the month, and fundamentals aside, there will be people selling dollars, so it will be easy for the yen to strengthen next week,” said Mitsuo Imaizumi, Tokyo-based chief foreign exchange strategist for Daiwa Securities.

“We also need to keep an eye on the healthcare debate in Washington, because political turmoil tends to undermine the dollar,” he said.

U.S. Senate Republicans offered a bill on Thursday to overhaul Obamacare, the next phase in the party’s long war against the 2010 law enacted by then-President Barack Obama, though it remained unclear if the bill has enough support to pass the Senate.

On Wall Street overnight, U.S. shares put in a mixed performance, though the SP healthcare index .SPXHC rose 1 percent and hit its fifth consecutive record close following the release of the Senate Republicans’ bill.

U.S. economic data on Thursday showed the number of Americans filing for unemployment benefits rose slightly last week, but remained at levels consistent with a tight labor market. Home prices also increased in April more than expected.

The Mexican peso MXN=D2 added 0.1 percent after soaring 1 percent on Thursday as Mexico’s central bank board raised interest rates, saying it wanted to anchor inflation expectations and take into account last week’s move by the U.S. Federal Reserve to hike borrowing costs.

Crude oil futures pulled further away from this week’s lows, though market sentiment remained fragile amid a global crude glut that has persisted despite OPEC-led output cuts.

Brent crude LCOc1 was up 0.4 percent at $45.40 a barrel. U.S. crude futures CLc1 also rose 0.4 percent to $42.91 a barrel.

Spot gold XAU= added 0.2 percent to $1,252.51 an ounce, moving away from a five-week low touched earlier this week.

(Reporting by Lisa Twaronite; Editing by Eric Meijer and Richard Borsuk)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/40sQGb0l6no/us-global-markets-idUSKBN19E028

Fed raises rates, unveils balance sheet cuts in sign of confidence

WASHINGTON The Federal Reserve raised interest rates on Wednesday for the second time in three months and said it would begin cutting its holdings of bonds and other securities this year, signaling its confidence in a growing U.S. economy and strengthening job market.

In lifting its benchmark lending rate by a quarter percentage point to a target range of 1.00 percent to 1.25 percent and forecasting one more hike this year, the Fed seemed to largely brush off a recent run of mixed economic data.

The U.S. central bank’s rate-setting committee said the economy had continued to strengthen, job gains remained solid and indicated it viewed a recent softness in inflation as largely transitory.

The Fed also gave a first clear outline on its plan to reduce its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities, most of which were purchased in the wake of the 2007-2009 financial crisis and recession.

It expects to begin the normalization of its balance sheet this year, gradually ramping up the pace. The plan, which would feature halting reinvestments of ever-larger amounts of maturing securities, did not specify the overall size of the reduction.

“What I can tell you is that we anticipate reducing reserve balances and our overall balance sheet to levels appreciably below those seen in recent years but larger than before the financial crisis,” Fed Chair Janet Yellen said in a press conference following the release of the Fed’s policy statement.

She added that the balance sheet normalization could be put into effect “relatively soon.”

The initial cap for the reduction of the Fed’s Treasuries holdings would be set at $6 billion per month, increasing by $6 billion increments every three months over a 12-month period until it reached $30 billion per month.

For agency debt and mortgage-backed securities, the cap will be $4 billion per month initially, rising by $4 billion at quarterly intervals over a year until it reached $20 billion per month.

U.S. stocks edged lower and prices of U.S. Treasuries pared gains after the Fed’s policy statement. The dollar .DXY was largely flat against a basket of currencies after reversing earlier losses, while the price of gold fell.

“The Fed announcing an update to their reinvestment principles leaves September open (for) the start of balance sheet runoff, and the fact that they haven’t slowed their projected path of rate hikes suggest they can do both balance sheet and rate hikes at the same time,” said Gennadiy Goldberg, interest rate strategist at TD Securities.


The Fed has now raised rates four times as part of a normalization of monetary policy that began in December 2015. The central bank had pushed rates to near zero in response to the financial crisis.

Fed policymakers also released their latest set of quarterly economic forecasts, which showed only temporary concern about inflation and continued confidence about economic growth in the coming years.

They forecast U.S. economic growth of 2.2 percent in 2017, an increase from the previous projection in March. Inflation was expected to be at 1.7 percent by the end of this year, down from the 1.9 percent previously forecast.

A retreat in inflation over the past two months has caused jitters that the shortfall, if sustained, could alter the pace of future rate hikes. But the Fed maintained its forecast for three rate hikes next year.

The Fed’s preferred measure of underlying inflation has retreated to 1.5 percent, from 1.8 percent earlier this year, and has run below the central bank’s 2 percent target for more than five years.

Earlier on Wednesday, the Labor Department reported consumer prices unexpectedly fell in May, the second drop in three months.

Yellen indicated the Fed still remained confident inflation would rise to its target over the medium term, bolstered by what she described as a robust labor market that is continuing to strengthen.

The Fed’s estimates for the unemployment rate by the end of this year moved down to 4.3 percent, the current level, and to 4.2 percent in 2018, indicating the Fed believes the labor market will continue to tighten.

The median estimate of the long-run neutral rate, which is seen as the level of monetary policy that neither boosts nor slows the economy, was unchanged at 3.0 percent.

Minneapolis Fed President Neel Kashkari dissented in Wednesday’s decision.

(Reporting by Lindsay Dunsmuir and Howard Schneider; Editing by Paul Simao)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/LfLs4Cy_gd8/us-usa-fed-idUSKBN1952NA

Wall St. dips after Fed rate hike; tech slumps again

NEW YORK A slide in technology stocks pulled down the Nasdaq Composite on Wednesday and the SP 500 ended slightly lower, as investors worried about the pace of economic growth after weaker-than-expected inflation numbers and an interest rate hike from the Federal Reserve.

The Nasdaq cut its loss in more than half in a late rebound, having earlier fallen 1 percent, while financials buoyed the Dow industrials.

The U.S. central bank cited continued U.S. economic growth and job market strength, proceeding with its first tightening cycle in more than a decade.

But some investors worried about the Fed’s hawkish tone and that concerns about rate hikes were being reflected in the tech sector, which has led the SP 500’s nearly 9-percent rally this year.

The tech sector fell 0.5 percent, recovering from steeper losses in the session and coming on the heels of its biggest two-day swoon in nearly a year. Tech remains up 18 percent in 2017.

“I think it’s more of what we saw starting last week, where you have a very crowded trade … If they are going to get more nervous about the stock market, that’s where you are going to see the selling,” said William Delwiche, Investment Strategist at Robert W. Baird Co in Milwaukee.

The Dow Jones Industrial Average rose 46.09 points, or 0.22 percent, to 21,374.56, the SP 500 lost 2.43 points, or 0.10 percent, to 2,437.92 and the Nasdaq Composite dropped 25.48 points, or 0.41 percent, to 6,194.89.

Earlier on Wednesday, data showed U.S. consumer prices unexpectedly fell in May and retail sales recorded their biggest drop in 16 months.

“The kiss of death for tech stocks is negative GDP or a slowdown in the software and equipment component,” said Daniel Morgan, portfolio manager at Synovus Trust in Atlanta. “Hence, the tech sector is selling off on concerns that today’s Fed hike will slow GDP, retarding future tech profit growth.”

Financials, which have underperformed this year and tend to benefit in a rising rate environment, rallied late to close up 0.2 percent. The group had fallen as much as 1.3 percent during the session.

The energy sector dropped 1.8 percent as oil prices weakened. U.S. data showed an unexpectedly large weekly build in U.S. gasoline inventories and International Energy Agency (IEA) data projected a big increase in non-OPEC output in 2018.

The Dow Jones Transport Average index, seen by some as a barometer of economic activity, ended down 0.7 percent.

The Fed clearly outlined a plan to reduce its $4.2-trillion portfolio of Treasury bonds and mortgage-backed securities, most of which were purchased in the wake of the 2007-2009 financial crisis and recession.

“The market should take confidence in the fact that they’re being very transparent in setting clear policy steps in terms of how they normalize the balance sheet,” said Heidi Learner, chief economist for Savills Studley, a unit of Savills Plc, in New York. “Certainly more transparency is a good thing.”

In corporate news, Alexion shares jumped 9.3 percent and were the biggest percentage gainers on the SP 500 after the biotechnology company named Biogen’s chief financial officer as its CFO. Biogen’s stock fell 3.1 percent.

H R Block rose 7.9 percent after the tax preparation service’s quarterly revenue and profit beat analysts’ expectations.

Declining issues outnumbered advancing ones on the NYSE by a 1.13-to-1 ratio; on Nasdaq, a 1.41-to-1 ratio favored decliners.

About 7.1 billion shares changed hands in U.S. exchanges, above the 6.8 billion daily average over the last 20 sessions.

(Additional reporting by Rodrigo Campos and Herb Lash in New York and Yashaswini Swamynathan in Bengaluru; Editing by Nick Zieminski and Jeffrey Benkoe)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/9ob-9gZ8kwE/us-usa-stocks-idUSKBN1951J2

GE merges power units as executive who lost out on GE CEO job retires

SEATTLE General Electric Co (GE.N) said on Wednesday it will combine its power and energy distribution businesses to create its largest unit by revenue as the top executive at GE Power announced his retirement after failing to win the conglomerate’s CEO job.

The changes were expected after Steve Bolze, a 24-year GE veteran who heads the power unit, lost out to John Flannery, chief of GE’s Healthcare division, as successor to CEO Jeff Immelt.

Bolze, 54, said he would retire on July 3.

GE said it will add its energy connections business – which provides power distribution and conversion equipment – to GE Power in order to create a unit with $41.9 billion in revenue, making it GE’s largest, accounting for 30 percent of its industrial revenue.

The company named connections chief Russell Stokes, 20-year GE veteran, to lead the combined business, which will keep the name GE Power. Stokes is 45.

GE changes CEOs rarely and the naming of a new leader typically prompts the departure of leaders passed up for the top job. When Immelt took the title in 2001 from retiring CEO Jack Welch, prominent executives including Jim McNerney and Bob Nardelli left. McNerney went on to lead Boeing Co (BA.N) while Nardelli subsequently headed Home Depot Inc (HD.N) and Chrysler.

“The brain drain is more muted this time,” said Deane Dray, an analyst at RBC Capital Markets.

Bolze said in a letter to employees that he had told Immelt he would retire if he was not chosen to lead the company.

GE did not make the list of candidates it was considering for CEO public. Alongside Flannery and Bolze, Dray said it likely included GE Oil and Gas unit head Lorenzo Simonelli and Chief Financial Officer Jeff Bornstein.

Given that Simonelli heads the oil and gas operations, which are soon to be merged with Baker Hughes Inc (BHI.N) to create a new company, and Bornstein was recently named a vice chairman of GE, neither is likely to leave, Dray said. GE declined comment.

Merging the energy connections unit into GE Power is not likely to significantly alter earnings or cash flow, so was not a major concern to investors, Dray added.

GE stock was up 0.9 percent at $28.71 in afternoon trading on the New York Stock Exchange.

GE plans to sell the lighting business that is part of the energy connections unit, reducing revenue. It will report results for the combined GE Power unit in the third quarter.

Flannery, who takes over as CEO on Aug. 1, said on Monday after his appointment was announced that he will conduct a swift review of GE’s businesses and will report the results in “the fall.”

The review will look at GE’s businesses with “no constraint,” but GE’s strategy of making software-related products central its businesses will not change, he said.

(Reporting by Alwyn Scott; Editing by Chizu Nomiyama and Bill Rigby)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/IFP1LnNLiKA/us-ge-power-idUSKBN19524Z

Tech recovery sends Wall St. to records with Fed next

Wall Street gained on Tuesday, with the SP 500, Dow industrials and Russell 2000 setting record closing highs, as technology stocks bounced back and investors positioned for an expected Federal Reserve interest rate hike.

The SP 500 technology sector .SPLRCT rose 0.9 percent, recovering from its biggest two-day decline in nearly a year that also weighed on the broader market. Big tech names, such as Microsoft (MSFT.O) and Facebook (FB.O), pushed the SP 500 higher.

“I think the fall the last two days has been due to psychology not to any fundamentals, and today you’re seeing some people step back in and buy again,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “Fundamentals look good.”

Tech has led the benchmark SP 500’s 9-percent rally this year, and its recent swoon has sparked speculation that investors may be rotating into other swaths of the market that have lagged in 2017, such as financials and energy.

Financials .SPSY gained 0.4 percent on Tuesday, while energy .SPSY gained 0.7 percent. Materials .SPLRCM were the top gaining sector, rising 1.3 percent.

Tuesday’s market action reflected “a continuation of running up some of the areas that have not participated over the course of the last few months, in combination with some speculation that the Fed is going to be more resolute about raising rates than investors had begun to anticipate in the bond market,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.

The Dow Jones Industrial Average .DJI rose 92.8 points, or 0.44 percent, to 21,328.47, the SP 500 .SPX gained 10.96 points, or 0.45 percent, to 2,440.35 and the Nasdaq Composite .IXIC added 44.90 points, or 0.73 percent, to 6,220.37.

Traders are overwhelmingly expecting an interest rate increase when the Fed concludes its two-day meeting on Wednesday.

The central bank is scheduled to release its decision at 2 p.m EDT (1800 GMT) on Wednesday with a news conference to follow from Fed Chair Janet Yellen.

Financials, which tend to benefit when rates are rising, also climbed after the U.S. Treasury Department announced a plan to upend the country’s financial regulatory framework, which would grant many items on Wall Street’s wishlist.

In corporate news, Cheesecake Factory (CAKE.O) shares fell 9.9 percent after the restaurant chain warned of a decline in comparable store sales.

Advancing issues outnumbered declining ones on the NYSE by a 2.39-to-1 ratio; on Nasdaq, a 1.89-to-1 ratio favored advancers.

About 6.4 billion shares changed hands in U.S. exchanges, below with the 6.8 billion daily average over the last 20 sessions.

(Additional reporting by Sruthi Shankar and Yashaswini Swamynathan in Bengaluru; Editing by Anil D’Silva and Nick Zieminski)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/irjQXZ_352I/us-usa-stocks-idUSKBN1941FD

Fed set to raise interest rates, give more detail on balance sheet wind-down

WASHINGTON The U.S. Federal Reserve is widely expected to raise its benchmark interest rate this week due to a tightening labor market and may also provide more detail on its plans to shrink the mammoth bond portfolio it amassed to nurse the economic recovery.

The central bank is scheduled to release its decision at 2 p.m EDT (1800 GMT) on Wednesday at the conclusion of its two-day policy meeting. Fed Chair Janet Yellen is due to hold a press conference at 2:30 pm EDT (1830 GMT).

“The expectation of a rate hike…is widely held, and has been reinforced by the most recent round of Fed communications,” said Michael Feroli, an economist with J.P. Morgan.

Economists polled by Reuters overwhelmingly see the Fed raising its benchmark rate to a target range of 1.00 to 1.25 percent this week.

The Fed embarked on its first tightening cycle in more than a decade in December 2015. A quarter percentage point interest rate rise on Wednesday would be the second nudge upwards this year following a similar move in March.

Since then, the unemployment rate has fallen to a 16-year low of 4.3 percent and economic growth appears to have reaccelerated following a lackluster first quarter.

However, other indicators of the economy’s health have been more mixed. The Fed’s preferred measure of underlying inflation has retreated to 1.5 percent from 1.8 percent earlier in 2017 and investors are growing increasingly doubtful policymakers will be able to stick to their anticipated pace of tightening of three interest rate rises this year and next.

There are also growing doubts on the size and scope of fiscal stimulus the Trump administration may inject into the U.S. economy with campaign promises on tax reform, financial regulation rollbacks and infrastructure spending either still on the drawing board or facing hurdles in Congress.


Fed policymakers’ confidence in their outlook will be on show on Wednesday when they release their latest set of quarterly projections on growth, unemployment and inflation as well as their expected rate hike path.

Few economists expect major changes in the Fed’s overall forecasts this time around, although the extent of jitters on inflation moving away from the Fed’s 2 percent goal will likely be reflected at an individual level.

Markets are, however, increasingly anxious for the Fed to give a clearer steer on the timing and details of its previously announced plan to reduce this year its $4.2 trillion portfolio of Treasury debt and mortgage-backed securities, most of which were purchased in the wake of the financial crisis to help keep rates low and bolster the economy.

“If the Fed is serious about reducing the size of its balance sheet this year and wishes to communicate those plans well in advance, it is running out of time to do so,” said Michael Pearce, an economist with Capital Economics.

More detail could come as part of the policy statement or during Yellen’s press conference. The central bank used the minutes of its last policy meeting to flag up a plan that would feature halting reinvestments of ever-larger amounts of maturing securities.

Under the proposal, a limit would be set on the amount of securities allowed to fall off the balance sheet every month. Initially, the cap would be set at a low level, but every three months the Fed would raise it, allowing deeper cuts to its holdings.

The Fed has yet to indicate the size of the monthly caps or their quarterly increases. After this week’s meeting, policymakers meet four more times this year, with the Fed seen actually reducing its holdings either in September or December.

(Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/bFn1rh-Jt1o/us-usa-fed-idUSKBN1940E4

Verizon closes Yahoo deal, Mayer steps down

Verizon Communications Inc (VZ.N) said on Tuesday it closed its $4.48 billion acquisition of Yahoo Inc’s (YHOO.O) core business and that Marissa Mayer, chief executive of the internet company, had resigned.

The completion of the acquisition marks the end of the line for Yahoo as a standalone internet company, a storied tech pioneer once valued at more than $100 billion.

Verizon, the No. 1 U.S. wireless operator, is combining Yahoo with AOL, which it bought two years ago, to form a new venture called Oath, led by AOL CEO Tim Armstrong. Oath’s more than 50 brands include HuffPost, TechCrunch and Tumblr.

“Given the inherent changes to my role, I’ll be leaving the company,” Mayer wrote in an email to employees on Tuesday that she also posted on Tumblr. “However, I want all of you to know that I’m brimming with nostalgia, gratitude, and optimism.”

The closing of the deal, announced in July, had been delayed as the companies assessed the fallout from two data breaches that Yahoo disclosed last year.

Reuters reported last week that Verizon plans to cut about 2,000 jobs, or 15 percent, of the 14,000 employees at its Yahoo and AOL units. Verizon is expected to make cuts as early as Wednesday. Yahoo cut 15 percent of its workforce last year and AOL cut 500 jobs.

On June 16, the remainder of Yahoo not acquired by Verizon will be renamed Altaba Inc, a holding company whose primary assets will be its 15.5 percent stake in Alibaba Group Holding Ltd (BABA.N) and a 35.5 percent holding in Yahoo Japan Corp (4689.T).

Thomas McInerney, a Yahoo board member, will become Altaba’s chief executive officer.

(Reporting by Anya George Tharakan in Bengaluru and David Shepardson in Washington; Editing by Saumyadeb Chakrabarty and Bill Rigby)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/EIpnMtPhYtg/us-yahoo-m-a-verizon-idUSKBN194220

Uber CEO Kalanick likely to take leave, SVP Michael out: source

SAN FRANCISCO Uber Technologies Inc [UBER.UL] Chief Executive Travis Kalanick is likely to take a leave of absence from the troubled ride-hailing company, but no final decision has yet been made, according to a source familiar with the outcome of a Sunday board meeting.

Emil Michael, senior vice president and a close Kalanick ally, has left the company, the source said.

At the Sunday meeting, the company’s board adopted a series of recommendations from the law firm of former U.S Attorney General Eric Holder following a sprawling, multi-month investigation into Uber’s culture and practices, according to a board representative.

Uber will tell employees about the recommendations on Tuesday, said the representative, who declined to be identified.

The company is also adding a new independent director, Nestle executive and Alibaba board member Wan Ling Martello, a company spokesman said.

Holder and his law firm were retained by Uber in February to investigate company practices after former Uber engineer Susan Fowler published a blog post detailing what she described as sexual harassment and a lack of a suitable response by senior managers.

The recommendations in Holder’s firm’s report place greater controls on spending, human resources and other areas where executives led by Kalanick have had a surprising amount of autonomy for a company with more than 12,000 employees, sources familiar with the matter said.

Kalanick and two allies on the board have voting control of the company. Kalanick’s forceful personality and enormous success with Uber to date, as well as his super-voting shares, have won him broad deference in the boardroom, according to the people familiar with the deliberations.

Any decision to take a leave of absence will ultimately be Kalanick’s, one source said.

The world’s most valuable venture-backed private company has found itself at a crossroads as its rough-and-tumble approach to local regulations and handling employees and drivers has led to a series of problems.

It is facing a criminal probe by the U.S. Department of Justice over its use of a software tool that helped its drivers evade local transportation regulators, sources have told Reuters.

Last week, Uber said it fired 20 staff after another law firm looked into 215 cases encompassing complaints of sexual harassment, discrimination, unprofessional behavior, bullying and other employee claims.


Even a temporary departure by Kalanick would be a shock for the Silicon Valley startup world, where company founders in recent years have enjoyed more autonomy and often become synonymous with their firms.

Uber’s image, culture and practices have been largely defined by Kalanick’s brash approach, company insiders and investors previously told Reuters.

Uber board member Arianna Huffington said in March that Kalanick needed to change his leadership style from that of a “scrappy entrepreneur” to be more like a “leader of a major global company.” The board has been looking for a chief operating officer to help Kalanick run the company since March.

The debate over Kalanick’s future comes as he is also facing a personal trauma: His mother died last month in a boating accident, in which his father was also badly injured.

Michael, described by employees as Kalanick’s closest deputy, has been a recurring flashpoint for controversy at the company.

He once discussed hiring private investigators to probe the personal lives of reporters writing stories faulting the company. Kalanick disavowed and publicly criticized the comments.

Michael will be replaced as the company’s top business development executive by David Richter, currently an Uber vice president, the company spokesman said.

Alongside Uber’s management crisis, its self-driving car program is in jeopardy after a lawsuit from Alphabet Inc alleging trade secrets theft, and the company has suffered an exodus of top executives.

One Uber investor called the board’s decisions on Sunday a step in the right direction, giving Uber an “opportunity to reboot.”

(Reporting by Heather Somerville and Joseph Menn; Editing by Bill Rigby and Meredith Mazzilli)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/wsKHAXtk-GQ/us-uber-board-vote-idUSKBN1930AA

Tech pulls Wall Street lower; Apple slides

NEW YORK Apple shares added to last week’s drop on Monday to lead a stock market decline as technology, still the best performing SP 500 sector this year, succumbed under its own weight.

The Dow Jones Industrial Average .DJI fell 36.16 points, or 0.17 percent, to 21,235.81, the SP 500 .SPX lost 2.36 points, or 0.10 percent, to 2,429.41 and the Nasdaq Composite .IXIC dropped 32.45 points, or 0.52 percent, to 6,175.47.

(Reporting by Rodrigo Campos; Editing by Nick Zieminski)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/D95wLakKZck/us-usa-stocks-idUSKBN193194

GE wins U.S. antitrust approval for Baker Hughes purchase

WASHINGTON General Electric Co (GE.N) won U.S. antitrust approval to merge its oil and gas business with Baker Hughes Inc (BHI.N), the Justice Department said on Monday.

GE and Baker Hughes announced the deal in October, months after Halliburton’s effort to buy Baker Hughes collapsed under pressure from the Justice Department’s Antitrust Division. Under the agreement, GE will combine Baker Hughes with its oil and gas business to create a publicly traded company.

Following news of the antitrust approval, shares of Baker Hughes added slightly to gains and were up 1.1 percent to $56.14.

The deal was approved on condition that GE sell its Water Process Technologies business, the department said. The asset sale was required because GE and Baker Hughes are two of four companies that sell refineries the specialized chemicals they need to remove impurities from hydrocarbons, the department said in a court filing.

Baker Hughes has some 35 percent of the market for refinery process chemicals, while GE has about 20 percent, the department said in a court filing.

(Reporting by Diane Bartz; Editing by Peter Cooney)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/rmDGuepbPYk/us-baker-hughes-m-a-ge-idUSKBN1932B1

Airbus may look beyond UK unless Brexit demands met

LONDON Airbus (AIR.PA) could move production of new aircraft models out of Britain if the European plane-maker’s “non-negotiable” demands over the free movement of people and trade tariffs are not delivered in upcoming Brexit talks, the Sunday Times reported.

Britain is due to begin negotiations with the rest of the European Union about the terms of its departure in nine days time, despite Prime Minister Theresa May being weakened by losing her majority in Thursday’s election.

Fabrice Bregier, chief operating officer of Airbus, said a deal must allow its staff from all over the world to enter Britain easily, ensure that parts are exempt from trade tariffs and ensure certain regulatory standards are maintained.

Otherwise, he said, Britain would risk losing Airbus production in the future. “For new productions, it’s very easy to have a new plant somewhere in the world. We would have plenty of offers to do that,” Bregier said, according to the newspaper.

“We want to stay in the UK — provided the conditions to work in an integrated organization are met.”

May might be forced to reassess her Brexit priorities after being weakened by the election. She has previously said she wants Britain to withdraw from Europe’s custom union as well as its single market. She has also said no deal would be better than a bad deal, implying she could accept tariffs on imports and exports.

Airbus Chief Executive Tom Enders said on Thursday that a “hard Brexit” where trade tariffs between the UK and European Union were imposed could potentially impact the competitiveness of the firm’s activities in Britain.

Airbus employs over 10,000 people across two plants in Britain, according to the company’s website.

(Reporting by Alistair Smout; Editing by Bill Rigby)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/ZwKLvL9D5n0/us-britain-eu-airbus-idUSKBN19200C

UniCredit CEO confident Italian banks will help rescue Veneto lenders

MILAN The chief executive of UniCredit (CRDI.MI), Italy’s biggest bank by assets, said on Sunday he was confident a solution for the country’s two ailing Veneto-based lenders would be found with the help of other domestic banks.

UniCredit’s boss Jean Pierre Mustier is leading talks with the Rome government and European authorities as Italy’s biggest banks mull helping Rome bail out Popolare di Vicenza and Veneto Banca to avoid being hit by costly depositor guarantees if European regulators shut them down, sources said on Thursday.

“I always see the glass half-full. I am optimistic by nature and I am in this case too,” Mustier told reporters on the sidelines of a concert in Milan when asked whether he was confident a solution for the Veneto lenders could be found with the help of other Italian banks.

(Reporting by Gianluca Semeraro, writing by Silvia Aloisi)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/9kDK4ATvCEA/us-eurozone-banks-italy-veneto-idUSKBN192136

Sirius to invest $480 million in Pandora, may be path to music streaming

Sirius XM Holdings Inc (SIRI.O) said on Friday it will invest $480 million in Pandora Media Inc (P.N), giving the satellite radio company better exposure to internet music streaming while providing financial footing to Pandora.

While Sirius XM has a strong presence in the auto market, where its channels are offered in most new cars in the United States, it has trailed Pandora and other music providers in mobile and streaming content. The relationship could give Sirius expertise in expanding its listening base outside of the car.

“We believe there are future opportunities to accelerate Pandora’s growth and further increase stockholder value,” Sirius XM Chief Executive Officer Jim Meyer said in a statement.

While the companies did not provide details about how they would work together, Barclays analyst Kannan Venkateshwar said Sirius XM could bundle Pandora services to its customers, similar to how Amazon (AMZN.O) sells HBO and Showtime subscriptions.

Pandora CEO Tim Westergren said the investment “infuses resources to help Pandora continue to grow and innovate.”

Pandora’s shares have lost more than 30 percent over the past 12 months, and the company has never turned a profit on an annual basis.

As of Friday, Pandora’s market capitalization of approximately $2 billion was dwarfed by Sirius XM’s $25 billion.

Sirius XM, controlled by media mogul John Malone’s Liberty Media Corp (FWONA.O) will receive three board seats and appoint the chairman. Sirius is prevented from buying additional Pandora stock for 18 months and will not buy more than 31.5 percent of Pandora after that period.

The deal ends a strategic review by Pandora and should ease pressure from activist investor Corvex Management LP that goes back more than year. The deal is a “new opportunity” for Pandora that raises its value, Corvex CEO Keith Meister told CNBC on Friday.

The investment also ends an earlier agreement for KKR Co (KKR.N) to make an equity investment. KKR will get a $22.5 million termination fee.

Reuters first reported on Thursday that Sirius XM was looking to invest in Pandora after their merger negotiations fell apart, citing sources.

While Sirius XM agreed to a standstill agreement for 18 months, it probably does not rule out an outright acquisition of Pandora later, analysts said.

Sirius XM’s owner Liberty Media, controls a media empire that includes big stakes in sports teams, cable and internet companies. It took full control of Sirius XM in 2013, five years after it first bought a stake. Liberty owns more than 60 percent of Sirius.

The latest investment by Sirius is convertible into Pandora common stock at $10.50 per share, a 23.8 percent premium to its Wednesday close.

Pandora also said on Friday it will sell its ticketing firm Ticketfly to Eventbrite for $200 million, less than half of the $450 million it paid last year.

Shares of Pandora were up 1.1 percent at $8.51 in afternoon trading, while Sirius was off 3.4 percent at $5.22 per share.

Sirius XM was advised by Allen Co and Bank of America, while Pandora was advised by Centerview Partners and Morgan Stanley.

(Reporting by Liana B. Baker in San Francisco and Aishwarya Venugopal in Bengaluru; Editing by Shounak Dasgupta and Jeffrey Benkoe)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/nWqmuxr_xHg/us-pandora-media-m-a-sirius-xm-holdgs-idUSKBN1901ST

Western Digital to raise Toshiba chip offer in last-ditch bid: source

TOKYO Western Digital Corp (WDC.O) plans to raise its offer for Toshiba Corp’s (6502.T) prized semiconductor unit to $18 billion or more, a person familiar with the matter said, in a last-ditch effort to clinch a deal both companies consider vital.

The U.S. chipmaker is part of a consortium led by a Japanese government-backed fund. The group will present the new offer of 2 trillion yen or more by Thursday, when the struggling Japanese conglomerate is due to choose a preferred bidder for its Toshiba Memory Corp unit, the world’s second-largest producer of NAND memory chips, the person told Reuters on Saturday.

Toshiba has been favoring a rival bid from U.S. chipmaker Broadcom Ltd (AVGO.O), which has partnered with U.S. private equity firm Silver Lake to offer 2.2 trillion yen, people familiar with the matter have told Reuters.

A spokesman for Western Digital had no comment. Toshiba could not immediately be reached for comment.

Toshiba had set a 2 trillion yen threshold for the sale as it rushes to find a buyer to cover billions of dollars in cost overruns at its now-bankrupt U.S. nuclear business Westinghouse Electric Corp.

The offer by Western Digital, a long-time partner of the laptops-to-nuclear conglomerate’s lucrative chips division, comes as uncertainty about the make-up of the groups bidding for Toshiba’s crown jewel has increased.

Western Digital has been seen by some sources as crucial to successful deal, as it jointly operates a key flash-memory chip plant with Toshiba in western Japan.


But the two companies have been at loggerheads over the auction. Western Digital is pursuing an international arbitration claim that Toshiba has breached joint-venture contracts by entertaining outside bids.

Western Digital argues that the sale cannot proceed without its consent but the U.S. firm will drop its claim if Toshiba agrees to the new offer, the source said on Saturday.

Toshiba is concerned an acquisition by Western Digital would run into antitrust objections from China and elsewhere as the U.S. firm is the world’s third-largest NAND producer behind South Korea’s Samsung Electronics Co (005930.KS) and Toshiba.

To counter those concerns, the Western Digital portion of the consortium’s new offer will be in the form of a debt purchase whereas the U.S. firm had previously been looking for an equity stake in Toshiba Memory, the source said.

The Japan-Western Digital consortium initially offered 1.6 trillion yen, sources have said. CEO Steve Milligan then raised the offer to close to 2 trillion yen on Friday in a meeting with Toshiba CEO Satoshi Tsunakawa, the source said on Saturday.

But Toshiba expressed dissatisfaction with Friday’s bid. “Our concerns about the prospects of success for a deal were not wiped out,” a Toshiba spokeswoman said.

That set the stage for the latest offer of 2 trillion yen, or more.

In Friday’s meeting, Toshiba’s Tsunakawa asked if Western Digital “could further increase the price”, the source said, adding that the U.S. firm would modify its proposal, “to align with their thinking”.

Western Digital’s new offer will also include a commitment to $25 billion dollars in capital spending for the joint venture’s Yokkaichi facility, including building two fabrication plants, the source said.

It will also pledge $39 billion for research and development and money to boost the local economy, while expanding the workforce there by five percent a year for two years, he said.

(Additional reporting by Liana B. Baker in San Francisco and Naomi Tajitsu in Tokyo; editing by William Mallard and David Clarke)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/NQefX4icaN8/us-toshiba-accounting-idUSKBN1910CA

Lawmakers urges U.S. Treasury to reject Aleris sale to China aluminum giant

WASHINGTON More than two dozen U.S. lawmakers have urged U.S. Treasury Secretary Steven Mnuchin to reject the proposed sale of U.S. aluminum products maker Aleris Corp (ALSD.PK) to China Zhongwang Holdings Ltd (1333.HK) to protect U.S. security interests.

In a June 9 letter to Mnuchin shared with Reuters, the 27 lawmakers said it would be a “strategic misstep” to allow the $2.33 billion sale to go ahead.

“It is critical that CFIUS (Committee on Foreign Investment in the United States) exercise extreme caution when a foreign investment transaction includes the transfer of military proficiencies and sensitive technology to China,” the lawmakers wrote.

They added: “It would be a serious strategic misstep to permit a company like Zhongwang Holdings Ltd to take control of a U.S. aluminum firm like Aleris.”

The lawmakers said Aleris was involved in the production and testing of specialized alloys used by the defense industry, and the company’s research and technology were critical to U.S. economic and national security interests.

“Chinese entities, including state-owned or state-controlled enterprises, often maintain relationships with China’s military, compounding the risk that U.S. technologies will fall into the wrong hands,” they wrote.

Additionally, Zhongwang was under investigation by the U.S. Department of Commerce for allegedly evading U.S. import duties, and was being probed by U.S. agencies over allegations of smuggling, conspiracy and wire fraud, they said.

Aleris spokesman Jason Saragian said Aleris did not make defense products in the United States.

“We believe this letter is based on misinformation,” he said. “The facts are that the completion of this transaction would result in job preservation and growth for hundreds of US Aluminum manufacturing jobs,” he said in an emailed response to the letter.

Zhongwang, backed by Chinese aluminum magnate Liu Zhongtian, announced the deal in August, in a bet by the billionaire that the nascent U.S. automotive aluminum sector will be the industry’s next big growth market.

Last November, a dozen U.S. senators wrote to then Treasury Secretary Jack Lew urging him to launch a review of the deal by the Committee on Foreign Investments by the United States.

Lawmakers who signed the new letter include House of Representative Democrats David Loebsack, Tim Ryan, Gene Green, Debbie Dingell, Seth Moulton, Marcy Kapur, Pete Aguilar, Tony Cardenas, Brenda Lawrence, Norma Torres, Linda Sanchez, and Republicans Robert Pittenger, Keith Rothfus, and French Hill.

(Reporting by Diane Bartz and Lesley Wroughton; Editing by Marguerita Choy)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/XP9Jg0ulK3M/us-usa-aleris-lawmakers-idUSKBN1910U9

Regional banks may keep lagging without Washington lift

NEW YORK A rough few months for most U.S. bank stocks has been particularly unkind to regional banks, and that’s not likely to change soon as hopes dim for higher long-term interest rates and timely policy relief from Washington.

While some investors see bargains in lower valuations of regional banks’ shares, few can point with any confidence to near-term catalysts for a turnaround in their fortunes.

After outperforming larger banks in the wake of the Nov. 8 U.S. Presidential election, the SP 600 index .SPSMCBKS of small cap banks are down 8.1 percent so far this year, data through Thursday showed, while the SP 500 index of the biggest U.S. banks .SPXBK is unchanged. The full SP 500 .SPX, meanwhile, is up 8.7 percent.

Last year, investors bet heavily that smaller, entirely U.S.-focused banks would benefit most from Donald Trump’s promises of tax cuts, deregulation and economic stimulus.

But those hopes dwindled dramatically as it became clear that President Trump would have difficulty gaining enough support to deliver on any of his pro-growth proposals.

“I  would expect (smaller banks) to continue to underperform as long as we don’t get some of these policy decisions to move through,” said Stephen Scouten, banking analyst for Sandler O’Neill in Atlanta.

Fading hopes for an economic boost from Trump’s agenda has compressed the gap between short- and long-term interest rates, putting pressure on bank loan profit margins. This is a bigger issue for regionals which have a greater dependence on lending for their profits than bigger, more diversified banks.

Also, commercial and industrial loan growth has slowed this year after climbing steadily since late 2010. The Federal Reserve’s latest Senior Loan Officer Opinion Survey, released May 8, showed domestic banks reporting weaker commercial and industrial loan demand from firms of all sizes in the first quarter.


Part of the problem is that companies are waiting for clarity on economic growth prospects and tax rates before making borrowing decisions, according to investors and analysts.

“Eventually, for the smaller banks to outperform, concerns about the overall economy need to dissipate. Better economic growth usually leads to better lending growth and in that environment the yield curve steepens as well,” said Brian Kleinhanzl, analyst at Keefe, Bruyette Woods in New York.

Short selling has decreased in most regional and diversified banking sectors so far this year. But short interest in both the SPDR SP Bank Exchange Traded Fund (KBE.P) and SPDR SP Regional Banking ETF (KRE.P) increased as short sellers may be replacing exposure to individual banks with short bets on the sector.

Short interest in the SP bank ETF is up 36 percent for the year while it is up 23 percent in the regional banking ETF.

While tax cuts are viewed as one of the biggest boosts for regional banks of all Trump’s policy proposals, investors are skeptical it will come any time soon. JPMorgan analysts on Thursday scaled back their forecast on the size of possible U.S. tax cuts and pushed out the timing to the second quarter of 2018 from the third quarter of 2017.

White House economic adviser Gary Cohn has said he expects U.S. Congress to get tax reform done this year. But investors say 2018 would likely be the earliest this could happen.

Treasury Secretary Steven Mnuchin is expected this month to unveil plans for regulating the U.S. banking sector including a relaxation of regulations for community banks, which have struggled with rules imposed after the 2007 to 2009 financial crisis.

While investors expect the administration to have trouble winning congressional support for legislative changes to regulations such as Dodd-Frank, some are hoping Trump will be able to appoint people to key regulatory positions.

If Trump can replace the Federal Reserve’s head of banking supervision, this might at least help slow the pace of regulation, said investment managers.

Trump is expected to nominate Carnegie Mellon University professor Marvin Goodfriend and former Treasury Department staffer Randal Quarles to fill two of three open seats at the Fed, according to a New York Times report.

“If they do get traction and get some of these (policy changes) done, even if they’re more watered-down versions of what they had proposed, that’s probably very good for sentiment and good for the fundamentals,” said Miles Lewis, portfolio manager for American Century Investments’ Small Cap Value fund.

For a graphic on regional banks running out of steam, click reut.rs/2s8NYep

(Reporting by Sinead Carew and Megan Davies; Editing by Bill Rigby)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/ivOiws3BAH4/us-usa-stocks-weekahead-idUSKBN1901J1

Apple dips after report that future iPhone modems could lag rivals

Shares of Apple Inc (AAPL.O) fell more than 3 percent on Friday after Bloomberg News reported that iPhones launched later this year will use modem chips with slower download speeds than some rival smartphones.

Apple is widely expected to upgrade its iPhone this year, which marks the device’s 10th anniversary, and suggestions that its technology will lag the performance of high-end smartphones running Alphabet Inc’s (GOOGL.O) Android system could hurt its sales.

An Apple spokesman did not immediately respond to a request for comment.

Apple supplier Qualcomm Inc (QCOM.O) sells modems capable of downloading data at cutting-edge 1 gigabit speeds, but rival chipmaker Intel Corp’s (INTC.O) modem technology does not yet have that capability, according to the Bloomberg report.

Since Apple is traditionally reluctant to rely on just one supplier, it is using modems from both companies, but capping download speeds of the quicker Qualcomm modems so that all of the new iPhones perform the same, Bloomberg reported, citing unnamed sources.

Shares of the Cupertino, California company have surged 29 percent so far in 2017, largely in anticipation of the iPhone upgrade. The stock on Friday declined 3.5 percent to $149.60.

(Reporting by Noel Randewich; Editing by Bill Rigby)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/iCKRsyCTbTQ/us-apple-stocks-idUSKBN1902ON

Wilbur Ross seen imposing Mexico sugar deal over industry objections

WASHINGTON U.S. Commerce Secretary Wilbur Ross is likely to impose a new sugar trade deal with Mexico even if final revisions to it fail to win support from the U.S. industry, trade lawyers and experts say.

After announcing a deal this week that would dramatically cut the amount of refined sugar that Mexico ships to the United States, officials from the two countries are working with their industries on final language that would govern its operation.

At issue is a new right of first refusal granted to Mexico to supply all U.S. sugar needs not met by domestic suppliers or other foreign quota holders.

A coalition of American sugar cane and beet farmers and a major refiner want a more explicit guarantee that the U.S. Department of Agriculture, not Mexican producers, will dictate what type of sugar fills that gap. They are worried that a flood of refined sugar will pour in, rather than the raw sugar needed to keep U.S. mills running.

The final sticking point stands in the way of resolving a years-long dispute over Mexican access to the highly regulated U.S. sugar market, which is protected by a complex web of subsidies and rationed quotas for foreign producers.

The sugar industry is known for its sway in Washington. But its point of view on Mexican imports is not shared by sugar users such as confectioners and soda makers.

The Trump administration wants to clear away the sugar dispute and a lumber trade row with Canada before starting full-scale negotiations to revise the North American Free Trade Agreement.

An industry rarely objects to a government-negotiated settlement of its anti-dumping case, and U.S. sugar producers could do little to stop the Commerce Department from implementing a final deal after a two-week comment period, said Seattle-based trade lawyer William Perry, who previously worked at Commerce and the U.S. International Trade Commission.

While the industry could ask the International Trade Commission to overturn the settlement that suspends anti-dumping and anti-subsidy duty orders issued in 2014, chances for success look slim. The panel in 2015 rejected a challenge by two sugar refiners to the previous U.S.-Mexico pact.

“Petitioners are never entirely happy with suspension agreements like this,” Perry said. “They would rather have anti-dumping and countervailing duty orders with rates high enough to shut out imports.”

A Commerce spokesman said that Ross hoped the U.S. sugar industry would ultimately endorse the final agreement.

Gary Hufbauer, a trade expert at the Peterson Institute for International Economics, said the administration was probably willing to compromise on some industry-specific concerns to help reach its larger NAFTA goals of reducing U.S. trade deficits.

The U.S. sugar industry must probably present evidence of new Mexican dumping before going back to Commerce for more changes to the deal, said Daniel Pearson, a senior fellow of the libertarian Cato Institute and former International Trade Commission chairman.

“They would do well to take this agreement and run with it and see how it works,” Pearson said, noting that it raises prices and keeps U.S. refiners well-supplied with raw sugar.

Mexico made major concessions to maintain its access to the lucrative U.S. market, agreeing to ship no less than 70 percent of its quota volume as raw sugar to U.S. refineries. It gave ground on nearly all of the U.S. producers’ demands.

American Sugar Alliance spokesman Phillip Hayes said the final hurdle should be easy to address by making clear that the USDA, not Mexico, can dictate the type and purity level of any additional imports.

But Juan Cortina, head of Mexico’s main sugar trade group, said there was no problem with the language because any additional needs would filled with raw sugar, as Mexican producers would have to keep higher inventories of that grade.

(Additional reporting by Adriana Barrera in Mexico City and Chris Prentice in New York; Editing by Lisa Von Ahn)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/qefLGEEZdnk/us-usa-trade-mexico-sugar-idUSKBN1902JS

Tech stocks tumble, backing Wall Street away from highs

Technology stocks sold off on Friday, wounding the Nasdaq and holding down other major Wall Street indexes, which had touched record highs earlier in the session.

The technology sector .SPLRCT, which has soared this year and led the market’s rally, dropped 3.6 percent.

Apple (AAPL.O) shares fell 4.8 percent and were the biggest weight on the three major indexes, after a report that upcoming iPhones launched will use modem chips with slower download speeds than some rival smartphones.

Microsoft (MSFT.O), Facebook (FB.O) and Alphabet (GOOGL.O) all were off more than 3 percent, while chipmaker Nvidia (NVDA.O) traded down 8.8 percent at $147.60 after Citron Research said the stock could trade back to $130.

Shares of software company Cloudera (CLDR.N) tumbled 16.7 percent after its earnings report.

“Tech has been on a tear for a very, very long period of time,” said John Praveen, managing director for Prudential International Investments Advisers in Newark, New Jersey, adding that investors may be using the earnings report as “an excuse to take some profits.”

The Dow Jones Industrial Average .DJI fell 17.02 points, or 0.08 percent, to 21,165.51, the SP 500 .SPX lost 15.88 points, or 0.65 percent, to 2,417.91 and the Nasdaq Composite .IXIC dropped 166.89 points, or 2.64 percent, to 6,154.87.

Countering tech’s slide, financials .SPSY rose 1.4 percent and energy shares .SPNY gained 2.3 percent as oil prices moved higher.

Investors were also digesting major political and economic events this week in the United States and Europe.

U.S. stocks had started the session strong after the results of the UK election, where British Prime Minister Theresa May’s Conservative Party lost its parliamentary majority.

Investors also viewed former FBI Director James Comey’s testimony on Thursday as not damaging enough to Donald Trump’s presidency.

Market watchers were concerned result of the Congressional hearing could derail Trump’s plans for lower taxes, fiscal spending and looser regulations, which have helped drive the SP 500 up more than 13 percent since his election.

Focus was turning to the Federal Reserve’s meeting next week, when the U.S. central bank is overwhelmingly expected to raise interest rates.

“Markets are probably expecting that the Fed will raise rates, but they will be very gradual in removing monetary accommodation,” Praveen said.

Advancing issues outnumbered declining ones on the NYSE by a 1.50-to-1 ratio; on Nasdaq, a 1.01-to-1 ratio favored advancers.

(Additiona reporting by Tanya Agrawal and Yashaswini Swamynathan in Bengaluru; Editing by Nick Zieminski)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/iWhkCY3a-O0/us-usa-stocks-idUSKBN1901LX

‘Trump trade’ comeback not enough to boost Wall Street

NEW YORK The ‘Trump trade’ made a comeback on Thursday on Wall Street but major indexes were in and out of negative territory as former FBI director James Comey said President Donald Trump fired him to undermine an investigation into Russian meddling into last November’s U.S. election.

Traders had been on tenterhooks ahead of Comey’s testimony to a Senate committee, his first since being fired by Trump on May 9. His prepared remarks had been made public Wednesday.

The market’s concern on the issue is whether the Trump administration can put the investigation behind it and revive momentum for their agenda of lower taxes and looser regulations. Bets on that agenda are partly behind a rally that has taken stock indexes to record highs.

The Trump ‘reflation trade’ that favored banks and sectors linked to infrastructure spending, among others, was back Thursday, with the SP 500 financial sector .SPSY up 1.2 percent.

The SP 1500 construction and engineering index .SPCOMCSE rose 1.5 percent and a gauge of construction materials’ stocks .SPCOMCEMT added 1.4 percent.

“If there was something (damning) that’s going to come out, as leaky as things seem to be, we would have heard something more than what we’ve been hearing so far,” said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute in St. Louis, Missouri.

Also supporting infrastructure stocks, specifically steel companies, was an announcement from Commerce Secretary Wilbur Ross that a national security review of the U.S. steel industry will seek to protect the interests of both domestic steel producers and consumers.

In his statement, Comey said the president lied in describing their encounters and that he had no doubt that Russia interfered with the election, but was confident that no votes had been altered.

The Dow Jones Industrial Average .DJI fell 19.19 points, or 0.09 percent, to 21,154.5, the SP 500 .SPX lost 2.87 points, or 0.12 percent, to 2,430.27 and the Nasdaq Composite .IXIC added 11.27 points, or 0.18 percent, to 6,308.65.

Other analysts were not so rosy about the effect on Comey’s testimony on the Trump agenda.

“It leaves us where we were before. It becomes that much more difficult for the Trump administration to put together a fiscal stimulus package,” said John Canavan, market strategist at Stone McCarthy Research Associates in Princeton, New Jersey.

“Anything they could put together with tax reform and infrastructure spending would be a lot smaller than had been expected. You are also pushing back the timing on any fiscal stimulus into 2018, possibly in 2019.”

Utilities stocks fell the most on the SP 500 as Treasury yields rose, tracking German Bund yields, after European Central Bank upgraded its growth forecast for the euro zone even as it suggested its stimulus plan will remain in place as inflation remains subdued.

The SP utilities sector .SPLRCU was down 1.3 percent, the most for any day since early March.

Traders kept an eye on the UK as Britons voted in a snap election predicted to give Prime Minister Theresa May a larger parliamentary majority, which she hopes will strengthen her hand in looming divorce talks with the European Union.

Among specific stocks, Nordstrom (JWN.N) jumped 8.6 percent to $43.95 after the department store operator said that some members of the controlling Nordstrom family have formed a group to consider taking the company private.

Alibaba shares (BABA.N) were up 12.9 percent to $141.82 after the company said it expects revenue growth of 45-49 percent in the 2018 fiscal year.

The largest percentage gainer on the SP 500 was Yahoo (YHOO.O), which rose 9.7 percent, while the largest decliner was Advance Auto Parts (AAP.N), down 3.4 percent.

Advancing issues outnumbered declining ones on the NYSE by a 1.22-to-1 ratio; on Nasdaq, a 1.96-to-1 ratio favored advancers.

(Reporting by Rodrigo Campos, additional reporting by Richard Leong and Caroline Valetkevitch; Editing by Chizu Nomiyama)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/g0SHYmZnjyY/us-usa-stocks-idUSKBN18Z1J1

Verizon plans to cut 2,000 jobs at Yahoo, AOL: source

Verizon Communications Inc (VZ.N) is expected to cut about 2,000 jobs when it completes its $4.48 billion acquisition of Yahoo Inc’s (YHOO.O) core assets next week, a person briefed on the matter said.

The cuts are expected to come from Verizon’s AOL and Yahoo units and represent about 15 percent of the staff at the two units. About 14,000 people work at AOL and Yahoo.

Many of the jobs are in California and some are outside the United States, according to the source, who asked not to be identified because the matter is not yet public.

Yahoo shareholders on Thursday approved the company’s sale, according to preliminary results from a shareholder meeting, and it is expected to be completed on Tuesday.

The No. 1 U.S. wireless operator is combining Yahoo’s search, email and messenger assets as well as advertising technology tools with its AOL unit, which it bought in 2015 for $4.4 billion. Verizon expects mobile video and advertising to be new sources of revenue outside the oversaturated wireless market.

Verizon shares are down 15 percent this year.

The acquisition marks the end of the line for Yahoo as a standalone company, a storied Web pioneer once valued at more than $100 billion.

Verizon is rebranding AOL and Yahoo as part of a new venture called Oath, led by AOL Chief Executive Officer Tim Armstrong.

Verizon is betting it can use data from more than 200 million unique monthly visitors to Yahoo sites and combine it with data on 150 million unique monthly AOL users and its own user base of over 100 million wireless subscribers to offer more targeted services for advertisers.

The Yahoo deal came after activist investors led by Starboard Value LP lost faith in Yahoo Chief Executive Officer Marissa Mayer, who was hired in 2012, and forced the sale of the company’s core assets. Mayer is not expected to remain at Yahoo after the sale is completed.

Yahoo is still one of the largest properties on the internet, with hundreds of millions of customers using its email, finance and sports offerings, and a heavily trafficked home page. In February 2016, Yahoo announced it was cutting 1,600 employees, or 15 percent of its staff.

The deal’s closing was delayed as the companies assessed the fallout from two Yahoo data breaches.

Yahoo disclosed in December that data from more than 1 billion user accounts was compromised in August 2013, making it the largest breach in history. This followed a separate disclosure that at least 500 million accounts were affected in a 2014 breach.

(Editing by Tom Brown and Bernadette Baum)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/IpA3iUCZPB4/us-verizon-jobs-idUSKBN18Z2EF

Jobless claims drop; labor market slack shrinking

WASHINGTON The number of Americans filing for unemployment benefits fell last week, unwinding half of the prior period’s jump and suggesting the labor market was tightening despite a recent slowdown in job growth.

Initial claims for state unemployment benefits declined 10,000 to a seasonally adjusted 245,000 for the week ended June 3, the Labor Department said on Thursday. The report followed data on Tuesday showing job openings at a record high in April.

“There is no sign of a pickup in the rate of layoffs. Against this backdrop of high job openings, firms appear to be holding on to their workers,” said John Ryding, chief economist at RDQ Economics in New York.

Claims surged by 20,000 in the prior week, with California, Tennessee, Kansas, and Missouri accounting for the bulk of the increase. Some of that increase was related to school summer breaks in which bus drivers and cafeteria workers were left temporarily unemployed.

Claims have now been below 300,000, a threshold associated with a healthy labor market, for 118 straight weeks. That is the longest such stretch since 1970, when the labor market was smaller. The labor market is near full employment, with the jobless rate at a 16-year low of 4.3 percent.

Economists polled by Reuters had forecast first-time applications for jobless benefits falling to 240,000 in the latest week. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, increased 2,250 to 242,000 last week.

The dollar rose against the euro after the European Central Bank kept interest rates on hold but cut its forecasts for inflation and said policymakers had not discussed scaling back the central bank’s massive bond-buying program. Prices for U.S. Treasuries fell, while stocks on Wall Street were slightly higher.


Low layoffs and record high job openings suggest a deceleration in job growth in May was likely because companies could not find suitable workers. The economy created 138,000 jobs in May, well below the average monthly 181,000 jobs gained over the prior 12 months.

The Labor Department reported on Tuesday that job openings, a measure of labor demand, increased by 259,000 to a seasonally adjusted 6.0 million in April, the highest level since the government started tracking the series in 2000.

“Labor market supply constraints are expected to bite into job creation but should also help to keep a lid on jobless claims as employers focus on retaining talent, so long as the economy continues to chug along,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.

Economists believe that labor market tightness could encourage the Federal Reserve to raise interest rates at its June 13-14 policy meeting. The U.S. central bank lifted its benchmark overnight interest rate by 25 basis points in March.

“The Fed will continue to view the labor market data as signalizing that the economy remains at or near full employment,” said Michael Gapen, chief economist at Barclays in New York.

Thursday’s claims report also showed the number of people still receiving benefits after an initial week of aid fell 2,000 to 1.92 million in the week ended May 27. The so-called continuing claims now have been below 2 million for eight straight weeks, pointing to diminishing labor market slack.

The four-week moving average of continuing claims slipped 750 to 1.91 million, the lowest level since January 1974.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/u6bl2twO4U4/us-usa-economy-idUSKBN18Z1OZ

Abu Dhabi port eases restrictions on oil tankers going to and from Qatar

SINGAPORE/DUBAI Abu Dhabi port authorities have eased restrictions on oil tankers going to and from Qatar, according to industry sources and shipping circulars seen by Reuters on Wednesday.

Abu Dhabi Petroleum Ports Authority issued a new circular on Wednesday removing previous restrictions on non-Qatar owned, flagged or operated vessels sailing to and from Qatar.

This effectively allows direct trade between the two ports and co-loading of crude cargoes, a Singapore-based shipbroker said.

A Middle East-based industry source said there had been no official notification on halting the co-loading of crude cargoes.

The ban on vessels carrying the Qatari flag and vessels owned or operated by Qatar is still in place, according to the circular.

But given there are few Qatari-flagged or owned vessels, this is unlikely to have as big an impact on the market as the previous circular, the shipbroker added.

Reuters reported on Wednesday two very large crude carriers (VLCCs), which can each carry up to 2 million barrels of oil, loaded Abu Dhabi grades on Wednesday, despite having taken Qatari crude in an earlier leg of the voyage.

On Monday, Saudi Arabia’s Ports Authority told shipping agents not to accept vessels flying the Qatari flag or ships owned by Qatari companies or individuals, it said on its Twitter account, adding that Qatari goods would be barred from unloading in Saudi ports.

On Wednesday, Saudi’s Ras Tanura oil port issued a notice stressing the restrictions issued earlier by the Saudi Ports Authority, according to a copy seen by Reuters.

Another industry source said the notice indicated co-loading of crude cargoes at Saudi ports would be allowed.

On Monday, Saudi Arabia, Egypt, the United Arab Emirates and Bahrain severed ties including all air, land and sea transport links with Qatar, accusing it of supporting terrorism. Doha denies the accusation.

(Reporting by Jessica Jaganathan, Roslan Khasawneh in Singapore, Rania El Gamal in Dubai and Reem Shamseddine in Khobar; Editing by Dale Hudson)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/NhZ6Akug5JI/us-gulf-qatar-oil-idUSKBN18Y1DY

Exclusive: Toshiba aims to name buyer of $18 billion chips business on June 15

TOKYO/SAN FRANCISCO Toshiba Corp (6502.T) aims to name a winner for its prized semiconductor business next week, people familiar with the matter said on Wednesday, as a row with one of the bidders over the sale appeared to escalate.

Sources told Reuters the choice has narrowed to one bid from U.S. chipmaker Broadcom Ltd (AVGO.O) and U.S. tech fund Silver Lake and another from Toshiba chip partner Western Digital Corp (WDC.O) and Japanese government-related investors.

Toshiba is rushing to find a buyer for the world’s second-largest producer of NAND chips, which it values at $18 billion or more, to cover billions of dollars in cost overruns at its now-bankrupt U.S. nuclear business Westinghouse Electric Corp.

The laptops-to-nuclear giant will hold a board meeting on June 15 to decide on the preferred bidder, two sources said.

Western Digital, which jointly operates Toshiba’s main chip plant in Yokkaichi, western Japan, has complicated the sale effort with a legal challenge, accusing Toshiba of a serious breach of contract over the joint venture.

It argues that the unit cannot be sold without its consent and has demanded exclusive negotiating rights.

But in a letter seen by Reuters, Toshiba struck back, again asking Western Digital to stop challenging the plans.

“Toshiba encourages Western Digital to redirect the considerable efforts that it has put into disrupting Toshiba’s sale process into more productive channels.”

Toshiba and Western Digital did not immediately respond to requests for comment.

The Broadcom-Silver Lake bid is attractive because of its higher price of 2.2 trillion yen ($20 billion), sources have said.

This compares with an offer of less than 2 trillion yen from Western Digital, which could also face antitrust hurdles because the firm is the third-largest maker of NAND flash-memory chips.

“Naturally, for the Toshiba corporate side, Broadcom is the best choice,” one source said. .

Other bidders include U.S. private-equity firm Bain Capital with South Korean chipmaker SK Hynix Inc (000660.KS), and Taiwan’s Hon Hai Precision Industry Co Ltd (2317.TW) with its Japanese unit Sharp Corp.

(Additional reporting by Taro Fuse in TOKYO; editing by William Mallard/Alexander Smith)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/P3OIdRbg2Q8/us-toshiba-accounting-western-digital-idUSKBN18Y27O

Wall St. slips as oil weighs; Thursday’s events awaited

U.S. stocks slipped in early afternoon trading on Wednesday, weighed down by a fall in oil prices, while caution reigned ahead of Thursday’s major political and economic events.

Oil prices fell more than 4 percent due to an unexpected rise in U.S. crude inventories and took a toll on the energy sector .SPNY, which dropped 2.1 percent. [O/R]

Exxon’s (XOM.N) 0.7 percent fall and Chevron’s (CVX.N) 1.3 percent fall were among the biggest drags on the SP 500 and the Dow.

Investors are also keeping a watch on Britain’s general election, the European Central Bank’s policy meeting and former FBI Director James Comey’s testimony before a Senate panel on Thursday.

Opinion polls have shown British Prime Minister Theresa May’s lead over the opposition Labor party narrow over the last three weeks, with some even suggesting she could fall short of a majority government.

The election could determine whether the country has a smooth or hard exit from the European Union.

“If the Conservative party extends its majority, markets will be pretty calm, but anything less than that is going to have people worried about how we approach the Brexit negotiation,” said Luke Hickmore, senior investment manager at Aberdeen Asset Management.

Comey’s first public appearance since he was fired by U.S. President Donald Trump might shed more light on a probe by the FBI into alleged Russian meddling in last year’s U.S. presidential election.

Any damaging revelation in Comey’s testimony could dampen already flagging momentum for Trump’s pro-business fiscal agenda.

“I think the Comey news led to an initial surprise but the rebound was equally swift,” said Liz Ann Sonders, chief investment strategist at Charles Schwab Co.

“I’m not sure that unless Comey says something completely shocking or he suggests something that there’s no way the House can’t consider obstruction of justice … aside from that I don’t see his testimony as market moving.”

The ECB will also hold its policy meeting on Thursday and is expected to reiterate its plan to extend the money-printing scheme at least until the end of the year.

At 12:53 p.m. (1653 GMT), the Dow Jones Industrial Average .DJI was down 13.5 points, or 0.06 percent, at 21,122.73 and the SP 500 .SPX was down 3.46 points, or 0.14 percent, at 2,425.87. The Nasdaq Composite .IXIC was down 5.79 points, or 0.09 percent, at 6,269.27.

Seven of the 11 major SP 500 sectors were higher, with the financial index’s .SPSY 0.78 percent rise leading the advancers.

Shares of Navistar International (NAV.N) were down 4.2 percent at $28.68 after the truck and engine maker posted a quarterly loss.

Declining issues outnumbered advancers on the NYSE by 1,526 to 1,283. On the Nasdaq, 1,444 issues rose and 1,343 fell.

(Reporting by Tanya Agrawal in Bengaluru; Editing by Anil D’Silva)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/1xVgFvKfelQ/us-usa-stocks-idUSKBN18Y1GG

U.S. job openings hit record high; skills mismatch rising

WASHINGTON U.S. job openings surged to a record high in April and employers appeared to have trouble finding suitable workers, pointing to a tightening labor market that could encourage the Federal Reserve to raise interest rates next month.

The Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS, published on Tuesday also suggests that a recent moderation in job growth could be the result of a skills mismatch rather than easing demand for labor.

“These data underscore the difficulty in hiring new workers, which we think is increasingly likely to be a factor restraining payroll growth going forward,” said John Ryding, chief economist at RDQ Economics in New York. “The Fed becomes somewhat uneasy when the labor market becomes too tight and this report supports the Fed’s case to nudge rates higher next week.”

JOLTS is one of the metrics on Fed Chair Janet Yellen’s so-called dashboard of labor market indicators. It came ahead of the U.S. central bank’s June 13-14 policy meeting, at which it is expected to raise its benchmark overnight interest rate by 25 basis points.

Job openings, a measure of labor demand, increased 259,000 to a seasonally adjusted 6.0 million in April, the highest since the government started tracking the series in 2000.

The monthly increase was the largest in just over a year and pushed the jobs openings rate to 4.0 percent, the highest since last July, from 3.8 percent in March.

Hiring, however, decreased by 253,000 jobs to 5.1 million. That lowered the hiring rate to a one-year low of 3.5 percent from 3.6 percent in March.

The gap between job openings and hiring points to a growing skills mismatch. A report from the National Federation of Independent Business last week showed the share of small business owners reporting job openings they could not fill in May was the highest since November 2000.


The economy created 138,000 in May, well below the average monthly job gains of 181,000 over the prior 12 months.

Economists believe tightening labor market conditions could soon unleash a faster pace of wage growth. Wage gains have remained sluggish even as the unemployment rate has tumbled to a 16-year low of 4.3 percent.

The JOLTS report also showed 1.6 million people were laid off in April, little changed from March. The layoffs and discharges rate was unchanged at 1.1 percent for five straight months. The number of people voluntarily quitting their jobs fell by 111,000 to 3.0 million in April.

As a result, the quits rate, which the Fed looks at as a measure of job market confidence, dipped to 2.1 percent from 2.2 percent in March.

“The economy has already reached the nirvana of full employment. At full employment the focus shifts from worries about the demand for labor to concerns about the supply of labor,” said Chris Rupkey, chief economist at MUFG in New York.

“There aren’t enough workers to man the factories and stock the store shelves. The supply demand imbalance is only likely to grow worse as the baby boom generation retires.”

(Reporting By Lucia Mutikani; Editing by Andrea Ricci and Chizu Nomiyama)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/WTgUZ6LSY3c/us-usa-economy-idUSKBN18X1S7

Uber fires 20 employees after harassment probe: source

SAN FRANCISCO Uber Technologies Inc [UBER.UL] told staff on Tuesday that it had fired 20 employees following an internal investigation into harassment and related claims by law firm Perkins Coie, a person familiar with the matter said.

The law firm, which is investigating in parallel with a broader probe by former U.S. Attorney General Eric Holder, investigated 215 harassment complaints going back as far as 2012, employees were told.

Uber told staff it had taken remedial action in 58 cases and decided no action was needed on 100 more. Other investigations are continuing, the person said.

The company also told staff it would expand its employee relations unit to better investigate claims and that it would dramatically increase management training since most Uber managers were first-time bosses, the person said.

Bloomberg reported some of the details earlier on Tuesday and said that Bobbie Wilson, an attorney at Perkins Coie, gave the assessment to a meeting of Uber’s more than 12,000 employees.

Uber did not immediately respond to requests for comment.

(Additional reporting Heather Somerville in San Francisco, Rishika Sadam in Bengaluru; Editing by Arun Koyyur, Peter Henderson and Bill Rigby)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/9_8t6smtpC4/us-uber-sexual-harassment-idUSKBN18X2GZ

Wall Street slightly lower as UK vote, Comey testimony loom

U.S. stocks were slightly lower in early afternoon trading on Tuesday as investors shunned riskier assets ahead of what is expected to be a busy Thursday, when Britain goes to the polls and former FBI director James Comey testifies before Congress.

Comey, who was investigating a possible collusion between Donald Trump’s presidential campaign and Russia to sway the 2016 U.S. election, was fired in May.

His testimony could dampen already flagging momentum for Trump’s legislative agenda of rolling back healthcare reforms and overhauling the tax code.

Investors will also watch out for the European Central Bank’s meet, where policymakers are expected to take a more benign view of the economy, according to sources.

“We have a relatively light week in terms of economic data and investors are awaiting Thursday’s events,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

“The market’s reaction to Comey’s testimony would depend on if he says something new that nobody knows about, although, a lot of what he might be asked could be classified information.”

Safe havens were in favor, with gold XAU= touching its highest in about seven weeks and U.S. 10-year Treasury yields falling to their lowest levels since the days following the November election.

At 12:35 p.m. ET, the Dow Jones Industrial Average .DJI was down 20.17 points, or 0.1 percent, at 21,163.87 and the SP 500 .SPX was down 3.28 points, or 0.13 percent, at 2,432.82.

The Nasdaq Composite .IXIC was down 3.97 points, or 0.06 percent, at 6,291.72.

Six of the 11 major SP 500 sectors were lower, with the consumer discretionary .SPLRCD and financial indexes .SPSY leading the decliners.

Walt Disney’s (DIS.N) 1 percent fall weighed the most on the consumer discretionary sector.

Shares of Wal-Mart Stores (WMT.N) fell 1.8 percent to $78.85, dragging down the Dow and the SP.

Amazon.com (AMZN.O) said it would offer Prime subscription service at a discount to its U.S. customers on government aid, taking aim at a key customer base of the discount retailer. Amazon was up 0.2 percent.

HD Supply Holdings (HDS.O) plunged 19 percent to a near seven-month low of $33.41 after the industrial distributor said it would sell a unit to private equity firm for $2.5 billion. The stock was the second-biggest drag on the Nasdaq.

Michaels Cos (MIK.O) fell as much as 9 percent to a three-year low of $18.05 after the crafts and home decor retailer slashed its forecast.

Declining issues outnumbered advancers on the NYSE by 1,633 to 1,182. On the Nasdaq, 1,788 issues fell and 989 advanced.

The SP 500 index showed 28 new 52-week highs and 11 new lows, while the Nasdaq recorded 82 new highs and 70 new lows.

(Reporting by Tanya Agrawal in Bengaluru; Editing by Anil D’Silva)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/bRyYTsCIeGg/us-usa-stocks-idUSKBN18X1D8

Amazon Prime Video to come to Apple devices

Apple Inc (AAPL.O) Chief Executive Tim Cook said on Monday that Amazon Prime Video would be available on Apple TV and other Apple devices starting later this year.

Apple has about 50 media partners that supply content to its Apple TV and on the television app on its popular iPhone. But Amazon.com Inc’s (AMZN.O) service, which includes hit shows like “Transparent,” has been a notable absence from Apple’s hardware.

(Reporting by Stephen Nellis; Editing by Meredith Mazzilli)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/9DlMlmozG00/us-apple-developer-amazon-idUSKBN18W2AM

U.S. services, factory data point to moderate economic growth

WASHINGTON U.S. services sector activity slowed in May as new orders tumbled, but a jump in employment to a near two-year high pointed to sustained labor market strength despite a deceleration in job growth last month.

The moderation in services industries production, together with other data on Monday showing orders for manufactured goods falling in April for the first time in five months and worker productivity unchanged in the first quarter, suggest limited scope for faster economic growth.

“The economy is neither accelerating nor slowing, but the labor market is looking up,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

The Institute for Supply Management (ISM) said its non-manufacturing activity index fell six-tenths of a percentage point to a reading of 56.9. A reading above 50 indicates expansion in the sector, which accounts for more than two-thirds of U.S. economic activity.

Services industries reported a 5.5 percentage points dive in new orders last month. Prices paid by non-manufacturing industries for materials and services declined after increasing for 13 straight months.

But a measure of services sector employment surged 6.4 percentage points to its highest level since July 2015, suggesting labor market strength even as nonfarm payrolls increased 138,000 in May after rising 174,000 in April.

The drop in prices paid by services industries could attract attention from some Federal Reserve officials when they meet on June 13-14 to deliberate on monetary policy.

The U.S. central bank is expected to raise its benchmark overnight interest rate by 25 basis points at that meeting after a similar increase in March.


“Most inflation comes from services rather than goods sitting on store shelves, so if services prices are in decline, the Fed has little hope of achieving its 2 percent inflation objective,” said Chris Rupkey, chief economist at MFUG in New York.

“We will see if this alters their gradual pace of rate hikes later on this year when they provide their latest interest rate forecasts at the upcoming meeting.”

U.S. stocks were trading lower, while the dollar rose against a basket of currencies. Prices for U.S. Treasuries fell.

In a separate report on Monday, the Commerce Department said factory goods orders dropped 0.2 percent in April after jumping 1.0 percent in March. Orders rose 4.4 percent from a year ago.

Manufacturing, which accounts for about 12 percent of the U.S. economy, is being supported by a recovery in the energy sector that has led to demand for oil and gas drilling equipment.

“The slow growth narrative for the manufacturing sector and business spending outlook remains intact,” said Tim Quinlan, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

A third report from the Labor Department showed nonfarm productivity, which measures hourly output per worker, was unchanged in the last quarter. It was previously reported to have declined at a 0.6 percent annualized pace.

Productivity has increased at an average annual rate of 0.6 percent over the last five years, below its long-term rate of 2.1 percent from 1947 to 2016, indicating that the economy’s potential rate of growth has declined.

Economists blame low capital expenditure, which they say has resulted in a sharp drop in the capital-to-labor ratio, for the weakness in productivity. There are also perceptions that productivity is being inaccurately measured, especially on the information technology side.

“The result is an economy that is still stuck on a shallow growth track,” said Steven Ricchiuto, chief U.S. economist at Mizuho in New York.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/svvm_o7rJhE/us-usa-economy-productiviy-idUSKBN18W1N6

Apple pushes Siri to the fore at annual developer conference

Apple Inc (AAPL.O) kicked off its annual developer conference on Monday by unveiling a “Siri face” for the Apple Watch that will enable the voice-activated assistant to provide users with information like commute times for upcoming appointments.

Analysts and investors are watching the conference this year for signs of what the company’s next blockbuster product might be a decade after the introduction of its iPhone.

The company was expected to introduce iOS 11, the next version of the software that powers the iPhone and iPad. Developers will keep an eye out for hints about new capabilities in the next iPhone, such as so-called augmented reality, in which digital information is overlaid on real-world images.

Apple was also expected to unveil improvements to Siri, its digital voice assistant that competes with Amazon.com Inc’s Alexa (AMZN.O) and the Google Assistant helper.

The Siri face for the Apple Watch was the first step in that direction, blending users’ calendar information with other useful details, like airline tickets they may have booked. While Siri was previously available on the Apple Watch, the assistant’s ability to automatically show information was limited.

The company is also reportedly working on a home speaker powered by Siri that could be unveiled during the conference, which would be a rarity for an event that traditionally features software and minor updates to hardware such as its Mac laptops.

Apple Chief Executive Tim Cook also announced on Monday that content from Amazon Prime Video, long absent from the Apple TV product, would come to Apple devices such as the TV, iPhones and iPad later this year.

(Reporting by Stephen Nellis; Editing by Meredith Mazzilli)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/OlzR2VoDKBs/us-apple-developer-idUSKBN18W2D2

Audi CEO may not stay until end 2022 due to board pact: sources

BERLIN Embattled Audi Chief Executive Rupert Stadler only got a five-year contract extension last month because of an agreement among supervisory board members that he would not serve out his full term, two sources close to the company’s supervisory board told Reuters.

How long Stadler will remain in his current position remains unclear, the sources said. Stadler’s contract was extended on May 17 this year until end-2022.

Since his contract was extended, Stadler has come under further pressure after it emerged that Munich prosecutors had widened an investigation into the premium carmaker and after Germany’s transport ministry accused Audi of cheating on emissions tests.

Munich prosecutors have been investigating Audi on suspicion of fraud and criminal advertising in the United States, where parent Volkswagen’s (VOWG_p.DE) emissions scandal broke in September 2015.

They have expanded the inquiry to include vehicle sales in the brand’s home region, a spokesman for prosecutors said earlier this week.

Audi is a division of Volkswagen Group.

Volkswagen’s former Chief Executive Martin Winterkorn came under similar pressure after the diesel emissions cheating scandal broke on September 18, 2015. Despite receiving a contract extension on September 2, 2015, he was out by September 23, 2015.

VW has said its executive board did not learn of the software violations until late August 2015 and formally reported the cheating to U.S. authorities in early September that year.

Winterkorn has refused to say when he first learned about systematic exhaust emissions cheating but said it was no earlier than VW has officially admitted.

He has denied personal involvement in the scandal.

Audi and Volkswagen were not immediately available for comment. Stadler’s office had no immediate comment late on Saturday.

(Reporting by Andreas Cremer; Writing by Edward Taylor; Editing by Georgina Prodhan)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/yUSrSwj7HR0/us-volkswagen-emissions-audi-ceo-idUSKBN18V0EE

Deutsche Bank’s Baenziger not in bonus clawback talks: paper

FRANKFURT Deutsche Bank (DBKGn.DE) is not in advanced talks over frozen bonus payments, former board member Hugo Baenziger told Frankfurter Allgemeine Sonntagszeitung.

Baenziger’s remarks run counter to comments made by the bank’s current chairman Paul Achleitner who said the lender was in talks to persuade former board members to make a financial contribution toward the costs of paying for the bank’s involvement in past misconduct.

“What Achleiter is referring to, I do not know. Until the annual general meeting I had not been in contact with him for nine months,” Baenziger was quoted as saying.

Deutsche Bank’s current and former board members have not been found guilty of personal misconduct. But the lender chose to freeze some bonus payments for senior bankers, in a bid to persuade shareholders that managers are being incentivised to stop any misconduct at the bank.

Baenziger, a former risk manager at Deutsche Bank, also told the newspaper he saw no legal basis for action against former board members. Baenziger could not be reached for comment.

Deutsche Bank declined to comment on Baenziger’s remarks but referred to comments made by Achleitner when he told shareholders the bank was exploring legal ways for the bank to get former board members to take personal and collective responsibility for the bank’s legal troubles.

(Reporting by Tom Sims; Writing by Edward Taylor. Editing by Jane Merriman)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/T3t4o1JZFh8/us-deutschebank-bonuses-baenziger-idUSKBN18V0RJ

Exclusive: Trump administration concerned about U.S. firms giving financial ‘lifeline’ to Venezuela

WASHINGTON The Trump administration is concerned about any action by U.S. companies that provides a financial lifeline to Venezuela’s government, senior White House officials told Reuters, after Goldman Sachs Group Inc came under fire for purchasing $2.8 billion of state oil company bonds at a steep discount.

Venezuela’s political opposition and some U.S. lawmakers have condemned the purchase of so-called “hunger bonds” as a way to prop up President Nicolas Maduro’s cash-strapped government, accused of being behind food shortages affecting millions of Venezuelans in a worsening crisis.

The New York-based investment bank said last week that it never transacted directly with Venezuelan authorities when it bought the bonds of oil firm PDVSA for pennies on the dollar.

“We’re concerned by anything that provides a lifeline for the status quo,” one U.S. official, speaking on condition of anonymity, told Reuters. “I would prefer them not to.”

A second administration official said U.S. companies making Venezuela investments should “think morally about what they’re doing.”

The officials said they did not know whether the Trump administration had made its case directly to Goldman Sachs.

Goldman Sachs did not respond to a request for comment.

Julio Borges, head of Venezuela’s opposition-led Congress, accused Goldman Sachs on Monday of “aiding and abetting the country’s dictatorial regime.”

In a letter to Goldman Sachs President Lloyd Blankfein, Borges said Congress would open an investigation into the transaction and he would recommend “to any future democratic government of Venezuela not to recognize or pay these bonds.”

Eliot Engel, the senior Democrat on the House of Representatives Foreign Affairs Committee, urged President Donald Trump on Friday to condemn Goldman Sachs for the bond purchase.

The Trump administration, which has several former Goldman Sachs executives in senior roles, has yet to officially comment on the issue.

Engel said the bond purchase allowed Maduro and his associates to “regularly abuse the human rights of Venezuelan citizens while at the same time blocking their access to much-needed food and medicine.”

Venezuela’s opposition won control of the legislature in a 2015 election, but the pro-government Supreme Court has annulled all its measures and essentially stripped its powers. The country has been engulfed in two months of anti-government unrest, which has left more than 60 people dead on both sides.

Maduro’s government says the United States and Venezuela’s opposition are seeking to oust him from power.

With Venezuela’s inefficient state-led economic model struggling under lower oil prices, Maduro’s unpopular government has become ever more dependent on financial deals or asset sales to bring in coveted foreign exchange. Venezuela’s international reserves rose by $749 million on Thursday and Friday, reaching around $10.86 billion, according to the central bank.

(Reporting by Matt Spetalnick and Girish Gupta; Editing by Yara Bayoumy and Mary Milliken)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/HZFwviXyY4s/us-venezuela-goldmansachs-exclusive-idUSKBN18V096

As large cap gets larger, can the tech rally continue?

NEW YORK Technology shares have led U.S. stocks to record highs and are expected to continue to rise, but as market value becomes concentrated in the largest companies, some are beginning to look for the next rally leader.

The technology sector of the SP 500 .SPLRCT has risen roughly 20 percent so far in 2017, led by Apple (AAPL.O), Alphabet (GOOGL.O), Facebook (FB.O) and Microsoft (MSFT.O).

The only other company with comparable gains in market value this year is Amazon (AMZN.O), a market darling not in the tech sector despite being a big player in cloud services and data storage.

“These are the dominant players in their specific spaces and the hottest areas in tech,” said Daniel Morgan, senior portfolio manager at Synovus Trust Company in Atlanta, highlighting their exposure to the cloud and artificial intelligence.

“You will continue to see money flowing into those names. People want to be exposed to the hottest areas,” he said.

(To view a graphic on ‘The Five Horsemen: growing influence of largest technology companies’ click reut.rs/2sntpYb)

Active funds have continued to throw their money behind the leaders with a record overweight on the technology sector, according to BofA/Merrill Lynch data going back to 2008.

But more than a third of the 2017 gains in the SP 500 have come from these five companies, and the concentration of the advance has some investors jittery.

“Given how significant the (large cap) leadership has been year to date, I kind of think you need to find another group to produce that leadership,” said Jim Tierney, chief investment officer of concentrated U.S. growth at AllianceBernstein in New York.

Echoing Dell[DI.UL], Cisco (CSCO.O), Intel (INTC.O) and yes, Microsoft itself, the leaders of the Y2K tech boom, these new “five horsemen” have added more than $612 billion in value to the stock market this year. Their 2017 gains alone could buy the 85 smallest companies of the SP 500.

Their combined value, near $3 trillion, is not far from the market value of all the other components of the Nasdaq 100.


This tech rally has come hand in hand with heightened expectations for profits. Investors are currently paying $18.50 for every $1 in earnings expected over the next 12 months in the sector, compared to the more than $40 they paid during the dot-com bubble and even the $20-plus seen during the most recent market peak in 2007.

Tech sector earnings are expected to grow 11 percent in the second quarter after rising near 21 percent in the first, according to Thomson Reuters I/B/E/S data.

However, with gains of more than 33 percent for Apple, Facebook and Amazon, near 25 percent for Alphabet and 15 percent in Microsoft, compared to a gain of 8.5 percent for the SP 500, the room for more upside is declining.

Despite expecting gains upward of 20 percent for the rest of the year on the so-called FANG stocks – Facebook, Amazon, Netflix and Alphabet – and their ilk, analysts at Fundstrat recommended in a Friday note balancing portfolios by scooping up the year’s underperformers: banks, energy and telecoms.

They are not alone in searching for exposure outside technology.

“We’re most overweight in technology but I don’t want to stay too long at the party,” said Alan Gayle, director of asset allocation at RidgeWorth Investments in Atlanta.

“What I’m watching for is an opportunity to lighten up on tech exposure and put it into some of the more cyclical areas,” he said. “Financials are going to be catching a tailwind.”

AllianceBernstein’s Tierney bets beyond tech on healthcare .SPXHC, the second-largest sector weight on the SP 500.

“Healthcare has really lagged the last 18 months or so. They could certainly pick up the mantle.”

(Reporting by Rodrigo Campos, additional reporting by Sinead Carew and Chuck Mikolajczak; Editing by Cynthia Osterman)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/ygQfvClkLHo/us-usa-stocks-weekahead-idUSKBN18T330

Toyota sells all shares in Tesla as their tie-up ends

TOKYO Toyota Motor Corp (7203.T) said on Saturday it had sold all shares in Tesla Inc (TSLA.O) by the end of 2016, having canceled its tie-up with the U.S. luxury automaker to jointly develop electric vehicles.

Japan’s biggest automaker had bought around a 3 percent stake in the Palo Alto-based automaker for $50 million.

Toyota spokesman Ryo Sakai said the company had sold all of its shares in Tesla as of the end of 2016, part of a regular, periodic review of its investments, after it had initially sold down a portion in 2014.

“Our development partnership with Tesla ended a while ago, and since there has not been any new developments on that front, we decided it was time to sell the remaining stake,” he said.

In November, the Japanese automaker appointed its president to lead their newly-formed electric car division, flagging its commitment to develop a technology that it has been slow to embrace.

The department comprises a new in-house unit to plan Toyota’s strategy to develop and market electric cars as part of the company’s efforts to keep pace with tightening global emissions regulations.

(Reporting by Naomi Tajitsu, Writing by Osamu Tsukimori; Editing by Jacqueline Wong)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/Q3vwQOlirE0/us-toyota-tesla-idUSKBN18U05E

Wal-Mart reassures employees as it touts tech investments

FAYETTEVILLE, Ark. Wal-Mart Stores Inc (WMT.N) executives on Friday reassured workers they remained integral to the company’s success as they highlighted investments in online sales and other technology to compete with rivals like Amazon.com Inc (AMZN.O).

Wal-Mart is successfully using e-commerce to boost sales but does not want to alienate workers who have helped drive gains with improved customer service and higher morale following a rise in base pay to $10 an hour.

“We will compete with technology, but win with people,” Chief Executive Doug McMillon said at Wal-Mart’s annual shareholder meeting where all the company’s board member nominations were approved. “We will be people-led and tech-empowered.”

The nod to store employees and the retail workforce was a departure from past years when the company focused shareholder presentations on the technology it was adopting to close the online gap with Amazon and beat other competitors.

The shift followed complaints by labor groups that Wal-Mart had to do more for workers, despite the company’s $2.7 billion investment in employee training and wages in 2015 and the 2016 wage increase to $10.

McMillon’s comments capped a three-day media event during which the company announced initiatives like a test program that allows store workers to deliver packages ordered on the retailer’s website and the use of blockchain technology to ensure safety in its food supply chain.

Wal-Mart’s investments in technology helped deliver a 63 percent rise in first quarter online sales, up from 29 percent growth in the fourth quarter and 20 percent in the third quarter.

Its results have also outshined rivals like Target Corp (TGT.N), department-store chains and apparel retailers.


The shareholders meeting at the Bud Walton Arena in Fayetteville, Arkansas, 30 miles from the company’s headquarters in Bentonville, was packed with 14,000 people, including workers from around 27 countries and shareholders. The company tapped Blake Shelton to host the show which included pop stars like Gwen Stefani, Mary J. Blige and Rachel Platten.

Wal-Mart’s shareholders approved all 11 company-recommended board members and voted in-line with company wishes. None of the four shareholder proposals put forward were approved. One from Making Change at Wal-Mart, part of the United Food and Commercial Workers Union, called for an independent chairman to act in the interests of Wal-Mart’s hourly workers.

“How can any Wal-Mart associate build a better life when they have been with the company for five years or more and they make $9 or $10 an hour,” said Amy Ritter from the labor group, who presented the proposal.

For years, influential proxy advisory firms have recommended shareholders vote in favor of an independent board chairman without ties to management or the founding family, ever since bribery allegations several years ago exposed serious board oversight failures.

About 51 percent of Wal-Mart’s stock is controlled by the Walton family and current Chairman of the Board Greg Penner is married to the grandaughter of Wal-Mart founder Sam Walton.

(Reporting by Nandita Bose; Editing by Andrew Hay)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/yEJd2Wnu17o/us-walmart-shareholders-idUSKBN18T2Y1

U.S. job growth slows; unemployment rate drops to 4.3 percent

WASHINGTON U.S. job growth slowed in May and employment gains in the prior two months were not as strong as previously reported, suggesting the labor market was losing momentum despite the unemployment rate falling to a 16-year low of 4.3 percent.

Nonfarm payrolls increased 138,000 last month as the manufacturing, government and retail sectors lost jobs, the Labor Department said on Friday. The economy created 66,000 fewer jobs than previously reported in March and April.

Last month’s job gains could still be sufficient for the Federal Reserve to raise interest rates at its June 13-14 policy meeting. The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population.

“While the message was a little muddied today, the evidence generally suggests the labor market is cyclically tightening, and the Fed will need to continue to lean against that,” said Michael Feroli, an economist at JPMorgan in New York.

“We still believe it is very likely that the Fed will hike later this month. Perhaps more in question is the signal coming out of that meeting regarding subsequent hikes.”

Details of the employment report were weak. Though the unemployment rate fell one-tenth of a percentage point to its lowest level since May 2001, that was because 429,000 people dropped out of the labor force.

The survey of households from which the unemployment rate is derived also showed a drop in employment. The jobless rate has declined five-tenths of a percentage point this year.

Average hourly earnings rose four cents or 0.2 percent in May after a similar gain in April, leaving the year-on-year increase in wages at 2.5 percent.

Job growth has decelerated from the 181,000 monthly average over the past 12 months as the labor market nears full employment. There is growing anecdotal evidence of companies struggling to find qualified workers.

Economists also believe that companies might be holding off hiring amid worries political scandals engulfing President Donald Trump could imperil his economic agenda, including tax cuts and infrastructure spending.

“Political uncertainty in Washington is another factor holding back the job market,” said Sung Won Sohn, an economics professor at California State University Channel Islands in Camarillo. “The probability that any of the Trump stimulus would become reality has decreased significantly in recent weeks.”

Economists had forecast payrolls increasing by 185,000 jobs last month and the unemployment rate holding steady at 4.4 percent. U.S. financial markets are almost pricing in a 25 basis point increase in the Fed’s benchmark overnight interest rate this month, according to CME FedWatch.

The dollar fell to seven-month lows on views the jobs data could portend diminished chances for a Fed rate hike in the second half of the year. Long-dated U.S. Treasury yields fell to nearly seven-month lows, and short-dated yields touched their lowest in more than two weeks, but U.S. stocks edged up to new highs. [MKTS/GLOB].


The modest payrolls gain could temper expectations of a sharp acceleration in economic growth in the second quarter after gross domestic product increased at a tepid 1.2 percent annualized rate at the start of the year.

While consumer spending picked up in April, a second report on Friday showed the trade deficit widening 5.2 percent to $47.6 billion. The Atlanta Fed is forecasting GDP increasing at a 3.4 percent pace in the second quarter.

There was some good news in the employment report. A broad measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, fell two-tenths of a percentage point to 8.4 percent, the lowest since November 2007.

As a result, the spread between the jobless rate and this broad unemployment gauge, considered a better measure of labor market slack, was the smallest since early 2008.

But the labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell two-tenths of a percentage point to 62.7 percent. The volatile 16-24 age group accounted for much of the drop in the participation rate last month, suggesting a rebound is likely.

Manufacturing employment fell by 1,000 jobs last month as payrolls in the automobile sector dropped 1,500 amid declining sales. Ford Motor Co (F.N) said last month it planned to cut 1,400 salaried jobs in North America and Asia through voluntary early retirement and other financial incentives.

Construction payrolls rose 11,000 last month after decreasing by 1,000 jobs in April. Retail employment fell 6,100, declining for a fourth straight month, with department stores shedding 3,700 jobs.

Department store chains like J.C. Penney Co Inc (JCP.N), Macy’s Inc (M.N) and Abercrombie Fitch (ANF.N) are struggling against stiff competition from online retailers led by Amazon (AMZN.O). Nonstore retailers, including online merchants, hired 2,900 workers last month.

Government employment decreased 9,000 last month, with state and local governments accounting for all the decrease.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/FJUokWW9G-k/us-usa-economy-idUSKBN18T0BT

Big U.S. companies stay on White House panel despite climate jolt

WASHINGTON Several major U.S. companies, including Wal-Mart Stores Inc (WMT.N) and IBM Corp (IBM.N), on Friday said their CEOs will remain in an influential presidential advisory group despite objecting to President Donald Trump’s withdrawal from the Paris climate accord.

Citing the need to stay engaged with the administration, business leaders said they would remain in their advisory roles to continue working to influence White House policies.

Trump, a Republican, on Thursday said he would pull the United States from the landmark 2015 global agreement to fight climate change, drawing anger and condemnation from world leaders and heads of industry.

Tesla Inc (TSLA.O) Chief Executive Officer Elon Musk and Walt Disney Co (DIS.N) CEO Robert Iger reacted by leaving White House advisory councils after Trump’s move.

“Climate change is real. Leaving Paris is not good for America or the world,” Musk said in a Twitter post on Thursday. He is a member of the business advisory group, known as the President’s Strategic and Policy Forum. He also belongs to Trump’s manufacturing jobs council.

However, a spokesman for Wal-Mart Stores Inc (WMT.N), the largest U.S. retailer, said on Friday that Chief Executive Doug McMillon would remain on the business council.

McMillon said in a Facebook post late on Thursday he was “disappointed in today’s news about the Paris Agreement. We think it’s important for countries to work together to reduce greenhouse gas emissions.”

IBM CEO Ginni Rometty will remain on the council, the company said on Friday as it reaffirmed its support for the Paris accord.

“IBM believes we can make a constructive contribution by having a direct dialogue with the administration – as we do with governments around the world,” a company spokeswoman said.

Cleveland Clinic Chief Executive Toby Cosgrove will also remain on the council, a spokeswoman said.

Another prominent chief executive, Jamie Dimon of JPMorgan Chase Co (JPM.N), criticized Trump’s decision, but suggested in a statement on Friday that he would not step down from Trump’s business group.

“I absolutely disagree with the administration on this issue, but we have a responsibility to engage our elected officials to work constructively and advocate for policies that improve people’s lives and protect our environment,” Dimon said.

PepsiCo Inc (PEP.N) Chief Executive Indra Nooyi is expected to remain on the council. The company said in a statement on Friday that while it is “disappointed with the announcement, we hope there is a way for the accord to move forward with the U.S. at the table.”


Other chief executives also issued statements criticizing the decision to withdraw from the accord, including the heads of Facebook Inc (FB.O), Alphabet Inc (GOOGL.O), Goldman Sachs (GS.N) and General Electric Co (GE.N). GE’s CEO, Jeff Immelt, is on Trump’s manufacturing council.

AFL-CIO President Richard Trumka, who is also on Trump’s manufacturing council, called the withdrawal “a failure of American leadership.” A union spokesman said on Friday that Trumka intends to remain on the council to serve “as a voice for working people.”

Trump administration officials pushed back against company criticisms in television interviews on Friday.

National Economic Council Director Gary Cohn dismissed concerns about potential economic fallout from the climate deal withdrawal, such as the potential of other countries slapping tariffs on American manufacturers.

In an interview on CNBC on Friday, Cohn said the move was part of the administration’s efforts to boost U.S. economic growth and help companies by increasing demand for U.S. goods, along with other efforts targeting regulations, taxes and infrastructure.

“If we can grow our economy, we’re going to consume more and more products,” he said. “We’re going to need more manufacturing in the United States just to deal with domestic consumption.”

The issue could resurface later this month when, according to an administration spokesman, the White House plans to hold a June 19 meeting with technology leaders.

Kellyanne Conway, a White House senior adviser, said on Fox News the deal would have “a statistically insignificant impact on the environment.”

“If you really cared about that piece, and you’re one of these CEOs crowing today, then you would say ‘let’s get a better deal,'” she said in the interview on Friday, adding that Trump had said he was open to future negotiations.

Trump created the business advisory group in December before taking office to assist him in making policy decisions. The council is led by Stephen Schwarzman, chief executive of Blackstone Group LP (BX.N).

Blackrock Inc (BLK.N) Chief Executive Larry Fink said on Thursday he would continue to serve on Trump’s business forum, despite reservations about the White House climate decision because he believes he can add to policy discussions and be a voice for investors.

General Motors Co (GM.N) said Chief Executive Officer Mary Barra also would remain on the presidential advisory panel, while it remained unclear whether Ford Motor Co’s (F.N) new chief executive, James Hackett, would join the group.

In February, Uber Technologies Inc [UBER.UL] CEO Travis Kalanick quit the business advisory council amid internal pressure over Trump’s immigration policies.

(Editing by Matthew Lewis)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/2bBT7VKxqdc/us-usa-climatechange-ceos-idUSKBN18T2MC