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Gold equities to fight back

The gold price is likely to remain flat throughout 2014 but a report from Hong Kong-based finance firm Reorient Financial Markets suggests that, somewhat counter-intuitively, the early form shown by gold equities in January may continue well into the year.

Gold did not enjoy 2013. The disaster that was April was met with a buying response, mainly from traditional hubs in the East, but the price drifted into the last quarter and ended the year at a lowly US$1,200/oz.

According to the Thomson Reuters GFMS Gold Survey 2013 Update 2, the depression of gold was chiefly down to a change in attitude from institutional investors in the West, which led the investment sector’s sale of 880t gold – the investment sector was a net buyer of gold in 2012, with 278t purchased. The damage was limited by a shift in demand for physical gold to the East, as some 80% of bar hoarding originated in East Asia, the Indian Sub-Continent and the Middle East.

London-based gold commentator and publisher of Precious Metals Weekly, Charles De Meester, said this week that gold divestment had been driven by “the arguable redundancy of gold against the backdrop of QE tapering and economies around the world on the mend”. He said interest rate rises were likely to follow the Federal Reserve’s decision to implement tapering, which would also hurt gold. With this view dominating in Western media, “those [who] have liquidated [their positions] will be hard to convince to come back to gold”.

In contrast, Meester said the strength of physical retail demand reflected an attitude of scepticism in the East regarding what many are heralding as a sustainable global recovery. The reinvigoration of retail investment demand in Europe and healthy jewellery consumption should also “continue to provide gold with essential support”.

“Memories of the events in Cyprus and a distrust of governments are also playing a part,” he said.

Thomson Reuters head of metals research and forecasting, Rhona O’Connell, reiterated Meester’s predictions, suggesting that gold would “take a back seat to other asset classes” this year, but “strong physical demand” would keep the 2014 average gold price above US$1,200/oz. Gold is expected to start strongly, testing US$1,330/oz in the March quarter, but fall away from the second quarter, potentially sinking below US$1,000/oz. A seasonal recovery is expected in the December quarter.

O’Connell expected the gold market to be “more or less in fundamental balance” during 2014.

Despite the flattish outlook for gold, gold equities may actually fair better than the physical commodity. This would make a nice change for gold companies, which have endured depressed market values through 2010 and into 2012 despite the bull run.

Some base level improvement may come from investors returning to equity markets in general as the global economic recovery firms, but Reorient analyst Jeremy Gray has cited six other reasons why gold equities may prove the phoenix of the mining sector.

“Gold miners are already the best performing sector in the global equity markets year-to-date and we think this trend is likely to accelerate,” he said in a note this week.

Firstly, the sell-off of the Aussie and Canadian dollars as well as the South African Rand has created “windfall margin expansion”, following a decade of strengthening currencies. Weighing into the margin reconfiguration have been industry-wide cost-cutting initiatives over the past two years, which have recently started to grip.

Thirdly, analyst consensus earnings have been cut by 82% on average since their peak in September 2011, prompting Reorient to call the start of a “huge upgrade cycle”. The firm also believes “technical action” in the gold price is very positive, led by the market’s tendency to ignore positive data out of the US and rally on negative numbers. According to Gray, it is clear gold bottomed in 2013.

Fifthly, the long awaited siege of mergers and acquisitions is threatening to finally assert itself with an early flurry of deals this month, headlined by Goldcorp’s C$2.6 billion (US$2.3 billion) unsolicited run at Osisko Mining. This, according to Gray, may prompt a “snowball effect” amongst gold companies.

And finally: “nobody seems to own gold shares”. Gray said 2013 was arguably the worst year for gold equities since the Bre-X scandal in 1996 as shares fell on average 56% and the gold price dropped 28%. He said several brokers were “competing to be the most bearish on gold” and encouraging gold companies to issue more shares before gold “truly falls out of bed”. But this advice has not been accompanied by sell recommendations, implying that many brokerages are readying themselves for a “potentially powerful move in gold miners”.

If Reorient and Gray are correct, these drivers should combine with predicted strength in first quarter gold prices and the general return of sentiment in equity markets to provide gold companies with the perfect storm for price appreciation in the immediate-term.

Gray said gold equities were coming out of an extended period of pain – a period they entered ahead of the gold price. He said gold equities were once again moving ahead of the gold price, only this time in a positive direction.

“You have so many catalysts for higher share prices that when the shares are this under-owned it’s very easy to see them push higher and for shorts to get squeezed.”

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Northern Star hedges some of its bets

Northern Star Resources Ltd has hedged a portion of the gold production expected over the next year from its mines in Western Australian.

The company recently agreed to buy the Plutonic and Kanowna Belle mines and a 51% interest in the East Kundana joint venture from Barrick Gold Corp for A$100 million (US$87 million).

Northern Star placed A$100 million worth of shares and agreed a A$50 million Investec loan following the acquisition announcements.

A statement said: “The board believes that entering into the hedge program is a prudent strategy for Northern Star in light of the recent volatility of the gold price, and the establishment of a A$50 million revolving credit facility with Investec.”

In total 100,000oz have been hedged for 12 months at an average gold price of A$1,462/oz. On Friday morning the gold price was trading just below A$1,430/oz.

The amount of gold hedged equals about 28% of the production expected from the new mines and the company’s existing Paulsens gold mine over the next year.

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Vedanta hit after Skorpion closure

Vedanta Resources plc has reported a fall in revenue in its third quarter after zinc production plunged following an unplanned shutdown of its Skorpion zinc mine and refinery in Namibia.

The site was closed for maintenance after a tank failure, the company said.

Group revenue slipped 3% to US$3.45 billion in the three months to end-December.

Vedanta said overall zinc production fell 19% to 84,000t, and zinc revenue by10% to US$319.3 million.

But group earnings before interest, taxes, depreciation and amortization (EBITDA) rose 3% to US$1.142 billion for the quarter on the back of a stronger performance from copper, aluminium, and oil and gas.

Vedanta resumed iron ore mining operations at Karnataka in India following the lifting of a suspension order by the Indian Supreme Court last year. It was ramping up production to a run-rate of around 0.5Mt/month and expects to commence sales through auction shortly.

Meanwhile, Norway’s finance ministry has announced its decision to exclude Vedanta subsidiary Sesa Sterlite Ltd from its global sovereign wealth fund. It said it had concerns linked to environmental damage and “serious violations of human rights.”

The Government Pension Fund of Norway, which oversees the fund, has excluded dozens of companies for breach of its ethical guidelines over the years, including Rio Tinto, Freeport McMoRan Copper Gold Inc, Barrick Gold Corp, and Potash Corporation of Saskatchewan.

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In Football and in Entrepreneurship, Why Is It So Hard to Predict Success?

He had the arm. He had the height. He had the confidence and the charisma.

It was spring of 2009; Mark Sanchez had just wrapped up a spectacular season as the starting quarterback for the University of Southern California, leading the Trojans to a 12-1 record, culminating in a Rose Bowl victory. His stats were equally impressive: a 65.9 percent completion rate, and 34 touchdowns, the second most in Trojan history.

It was easy to see why the New York Jets were infatuated. Despite his relative inexperience (he had only played one season as a full-time starter at USC), Sanchez showed enough promise for the Jets to trade their 17th pick, their second-round selection and three players in order to select him, making Sanchez the fifth overall pick in the draft that year.

For the Super Bowl-starved franchise, the future suddenly looked bright. The Jets, it seemed, finally had a quarterback who could bring them all the way to a championship. He just had to live up to his potential.

Of course, that’s not how things panned out. Sanchez enjoyed a relatively successful two first seasons, leading the Jets to consecutive conference championships, but the team’s respectable record masked Sanchez’s mediocre stats: his completion percentage in his first years was a sub-par 54 percent, and his interceptions exceeded his touchdowns (33 to 29, plus 19 fumbles).

From there, things only got worse. The Jets ended the 2011 season with a tepid 8-8 record, and 2012 was a straight-up disaster, perhaps best encapsulated by the “butt-fumble,” in which a disoriented Sanchez collided with guard Brandon Moore’s raised rear end, fumbled the ball on impact, and could only watch as it was promptly picked up by the Patriots’ defense and returned for a humiliating touchdown.

For all his promise, Sanchez had unequivocally failed to mature into a competent quarterback, much less an elite player capable of Tom Brady or Peyton Manning-like poise, leadership and ability. 

Related: The Kickoff: Three Startups Born from the NFL

How did the Jets get it so wrong?

Accurately predicting a quarterback’s success in the NFL is extremely difficult, says Todd McShay, a draft analyst and commentator for ESPN. Before a player is actually thrown into the brutally paced warzone that is professional football — a world so removed from college football that teams don’t bother analyzing players’ collegiate reels — it’s hard to predict how he will play, which is why the road is paved with so many Mark Sanchez’s (Tim Couch, Matt Leinart, Ryan Leaf), and why talented players are often drafted late (Tom Brady, Russell Wilson, Drew Brees).

One can rule out players based on obvious inefficiencies (clear-cut character issues, insufficient height, an inaccurate arm) but correctly identifying the magic combination of intangibles that will guarantee success is just too difficult. “Each team administers their own tests, they have their own psychologists…everyone is trying to crack the equation,” McShay says. “To date, no one has quite figured it out. It’s impossible to identify the perfect mental makeup because you just don’t know enough of the variables.”

Related: What I Learned in Business From Failing in College Football

Venture capitalists face this problem, too.

Paul Lee is the managing partner of Vanedge Capital, a $136 million Canadian ($121 million US) fund based in Vancouver, Canada that invests in digital media companies. The fund was founded in May 2010, and since then, Lee estimates he’s evaluated thousands of companies. Over the years, he’s realized that “even more critical than what the company is doing are the people who are doing it. It’s simple: If you find really good people, they are going to find a way to succeed.”

But how do you identify those really good ones? It’s tricky. Lee emphasizes the difficulties of predicting a startup entrepreneur’s success. In fact, his language is eerily similar to McShay’s depiction of the unreliability of forecasting college quarterbacks’ NFL careers.

“I don’t know if we can ever determine if someone is exactly what I’m looking for, but we are looking for signs that they’re not,” Lee says. “It’s always easier to find the errors, how they are going to fail, than to figure out how they are going to succeed.” Like a quarterback, a startup entrepreneur needs to possess an extensive arsenal of tools, most of them intangible. There are simply too many variables to ever guarantee success. “You never know when there will be other competitors, or if something unexpected is going to happen. Guys who are really good at all this stuff, they find ways to navigate through.”

So what are the intangibles Lee looks for, difficult as they are to decipher beforehand? They mirror McShay’s criteria for elite quarterbacks: leadership, the ability to adroitly adapt to shifting circumstances, clarity of vision under pressure and work ethic.

While these are essential qualities (try starting a business without them), they are also prerequisites for success in most competitive fields.

What unifies quarterbacks and startup entrepreneurs is their grit — an almost irrational unwillingness to accept failure, to back down or give up. Like a college quarterback attempting to make it in the NFL, the transition from a day job (even a high-ranking one) to entrepreneur is often rocky.

“Vince Lombardi liked to say ‘winning isn’t everything; it’s the only thing,’” says Dr. Stanley K. Ridgley, a former military intelligence officer for the U.S. Army and an assistant professor in the department of management at Drexel University’s LeBow College of Business, where he teaches strategic management and entrepreneurship. “This clangs against the senses of the average person who isn’t used to these declarative, unequivocal, unabashed pronouncements. Most of us are trained to be good losers. But this mentality is what separates entrepreneurs apart from the average person.”

Lee agrees. “We look for hunger,” he says. “People who have had a day job are fairly comfortable. They’re not paranoid enough: They can get another job, they’re not trying to prove anything, they don’t have a chip on their shoulder. If it doesn’t work out, they’ll just move on. They won’t think that their career or reputation is ruined.”

Related: What Entrepreneurs Can Learn From NFL Innovator Steve Sabol

Guard Louis Vasquez told that Peyton Manning has no “off” switch at the Broncos’ facility. “He’ll stop a lot of receivers midway through the locker room,” he told the outlet. “It seems like he’s going about his business and all of a sudden he’ll stop and ask a question about a route or even with us, a question about protection. Usually when guys are in the locker room, you stop to take a break. But his mind is always going.”

For the successful quarterback, during the season, football is his life. Whenever there’s an off moment, he turns to the tape. If he’s going to establish himself as a starting quarterback, this is the only way to do it. There’s no shortcut. 

There’s no shortcut for entrepreneurs, either. “It takes a very special person to be an early stage entrepreneur because in addition to being passionate about your idea and wanting to take it to market, you have to really understand what you’re signing yourself up for,” says George Deeb, a two time startup entrepreneur and now the managing partner of Red Rocket, a Chicago-based strategic consulting and financial advisory firm. “The long hours around the clock, the unknowns, the craziness, all the ebbs and flows… It’s very glamorous to say you just launched as startup, but to actually do it? It’s a crazy amount of work.”

If your business is your life, you’d better enjoy the work, preparation and sheer effort that go into starting something. Because the odds won’t be in your favor. “Simply put,” says Deeb, “there’s going to be a lot more bad times then good for most startups.” Maintaining a level of optimism that borders on lunacy (at least from the outside) can be helpful.

In his book Collision Low Crossers (Little Brown Company, 2013), which chronicles his year spent with the Jets, Nicholas Dawidoff writes that despite the frequent lopsidedness of the scoreboard, the Jets’ head coach Rex Ryan truly expected to win every game up until the final whistle. He believed that for the season, too, utterly convinced his team would be at the Super Bowl despite the piled up losses.

From the start, the Jets faced 31 other teams also trying to claw their way to the championship. Startup entrepreneurs face even more discouraging odds. Just getting funding is a strenuous battle in itself — out of over a thousand companies, Lee has funded 12 of them. That’s a pretty grim percentage.

And it’s no walk in the park for startups that do receive even substantial venture capital; failure is still common, success very rare. Shikhar Ghosh, a senior lecturer at Harvard Business School, told The Wall Street Journal that about three-quarters of venture-backed firms in the U.S. don’t return investors’ capital. Three to four out of every 10 belly flop, liquidating all assets.

Related: Mark Cuban: Outwork and Outlearn Your Competition

With this in mind, can you take the heat? “Entrepreneurship is about being able to make decisions that are cool and collected under conditions of intense stress,” Dr. Ridgley says. “It certainly isn’t for everyone. You have to have this incredible belief in yourself coupled with an honest and clear-eyed assessment of your idea’s actual value.”

Because entrepreneurship is a highly visible venture fraught with risk and studded with failure, there will always be jeers, naysayers, and thoughtful analyses of why a new venture is going to fail. Like a quarterback, an entrepreneur is publicly scrutinized, will be humiliated in the press for every misstep or “butt fumble”. Of quarterbacks, McShay says “You’re going to make mistakes… if you get your ass handed to you, are you able to bounce back up and deal with the pain and play at a high level?”

You can have the right degree, a high IQ, buckets of charm, all the right skills on paper, but if the answer is no, you probably shouldn’t be a quarterback, and you probably shouldn’t be an entrepreneur. Get a day job.

Because starting your own business, as Lee likes to say, is “a whole different game.”

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A beat for Sibanye

South African gold producer Sibanye Gold Ltd has said it beat both its production guidance and all-in-cost forecast for the December quarter of 2013.

Production came in at 386,000oz of gold for the last three months of the year, 2% up on guidance given on October 31. For the full year, output came in at 1.43Moz, 11% up on the guidance it gave back in May of 1.29Moz for 2013 and 17% higher than 2012.

All-in-costs averaged US$1,050/oz in the December quarter, 9% lower than recent guidance in dollar terms. Full year all-in-costs came in at US$1,150/oz, or R355,000/kg, better than May’s guidance of costs averaging above R380,000/kg.

The company also said its earnings per share (EPS) for the six months ending December 31, were expected to be R1.87-1.97/share, while for the full year it was expected to be R2.55-2.65/share, which both exceeded earnings in the same period a year earlier when the company was hit by labour strikes.

Sibanye said the increase in EPS for the six months to December 31 was “attributable to the higher production and lower costs achieved, a marginally higher realised rand gold price and an adjustment to the deferred tax rate.”

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Google’s outsized ad growth offsets steep price decline

SAN FRANCISCO (Reuters) – Google Inc’s quarterly revenue beat Wall Street’s target despite an ongoing decline in prices for its online ads and deepening losses at Motorola, the handset-making division to be sold to China’s Lenovo.

Shares of Google, which have risen more than 20 percent in the past three months, rose nearly 4 percent to $1,178 in after-hours trading on Thursday.

Google executives said in a conference call on Thursday that the company benefited from strong demand from brand marketers and retailers in the fourth quarter, as well as healthy demand for online ads in international markets.

“In the holiday season one thing has become very clear, the Web has truly become the new holiday store window,” Google Chief Business Officer Nikesh Arora said.

Paid clicks on Google’s online ads jumped 31 percent during the typically busy holiday quarter, but the average cost per click that marketers paid the company slid 11 percent.

Google’s advertising rates, like those of other Internet companies including Yahoo Inc, has been under pressure as more consumers access its online services on mobile devices such as smartphones and tablets, where advertising rates are lower than on PCs.

Motorola, which Google has agreed to sell to China’s top PC maker for $2.91 billion, saw operating losses of $384 million in the quarter, more than double the $152 million loss from a year earlier.

The Internet search giant has struggled to turn the unit around in the face of steep competition from Apple Inc, and the sale of the loss-making unit is considered a positive for Google.

Google’s consolidated revenue, which includes the money-losing Motorola smartphone business, rose to $16.86 billion from $14.42 billion in the fourth quarter of 2012. Analysts polled by Thomson Reuters I/B/E/S were looking for $16.75 billion.

Revenue in Google’s core Internet business totaled $15.7 billion in the last three months of the year, up 22 percent from the $12.91 billion in the year-ago period.

Google’s consolidated net income was $3.38 billion, or $9.90 per share, compared to $2.89 billion, or $8.62 per share, in the year-ago period. Excluding certain items, Google said it earned $12.01 per share, below analysts’ expectations for about $12.20.

(Reporting by Alexei Oreskovic; Editing by Bernard Orr)

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Japan inflation quickens to over five-year high, output rebounds

TOKYO (Reuters) – Japan’s core consumer inflation rose at the fastest pace in more than five years in December and the job market improved, encouraging signs for the Bank of Japan as it seeks to vanquish deflation with aggressive money printing.

Factory output also grew in December and manufacturers expect to keep increasing production, although some analysts fret about potential damage from the recent turmoil in emerging markets.

The data points to an economy that continues to pick up momentum on strong domestic demand. However, BOJ Governor Haruhiko Kuroda expressed some caution about export demand as many of Japan’s Asian trading partners remain weak.

“The core consumer price index was stronger than expected, and durable goods prices seem to be rebounding. Consumer prices will likely continue moderate growth,” said Junko Nishioka, chief economist at RBS Securities.

“I think the BOJ is unlikely to adopt additional easing because there is no reason to justify it given the positive macro-economic environment.”

Core consumer prices (CPI), which excludes fresh food but include energy costs, rose 1.3 percent in December from a year ago, data showed on Friday, just above a median market forecast for a 1.2 percent gain.

That followed a 1.2 percent increase in November, and marked the fastest annual gain since 1.9 percent in October 2008, data from the Ministry of Internal Affairs and Communications showed.

Last year, Japan’s core consumer prices rose 0.4 percent, the first increase in five years.

In a further sign price gains are broadening, the so-called core-core inflation index, which excludes food and energy prices and is similar to the core index used in the United States, rose 0.7 percent in the year to December, matching a high hit in August 1998.

Japan’s industrial output rose 1.1 percent in December, suggesting that robust domestic demand is underpinning the economy as consumers rush to beat a national sales tax hike in April. This is making up for soft exports to emerging markets.

The rise roughly matched a median market forecast of a 1.2 percent increase, and followed a 0.1 percent drop in November.

The jump in output is a welcome sign for the world’s third-largest economy, which has steadily recovered over the past year on the back of Prime Minister Shinzo Abe’s massive fiscal and monetary stimulus policies.

Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect output to rise 6.1 percent in January and increase 0.3 percent in February, data showed on Friday.

Robust domestic demand, coupled with a weak yen that inflates import costs, helped Japan pass the halfway mark toward achieving the BOJ’s 2 percent inflation target.

However, a recent selloff in emerging market stocks and currencies has reminded investors that Japan still faces risks that a renewed downturn in overseas economies will sap demand for Japanese goods.

“One reason Japan’s exports have struggled to pick up momentum is that emerging ASEAN countries that Japan has a close relationship with have not recovered as quickly as expected,” Kuroda told lawmakers in parliament.

“These economies are expected to recover, but we cannot say this will apply to every case.”

Kuroda has expressed confidence that prices will reach the bank’s target in the two-year timeframe it pledged when adopting an aggressive stimulus policy in April.

But many analysts remain skeptical on whether price growth will accelerate from here, worried about an expected slump in consumption after the tax hike and the fading boost from the weak yen to prices.

Annual wage negotiations, which take place in the spring, will be an important test of whether labor unions can secure higher salaries needed to help consumer spending weather the tax increase.

An International Monetary Fund official said Japan’s economy is likely to take longer than the target two-year timeframe to reach the inflation goal, even though prices are rising steadily.

(Editing by Eric Meijer)

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Asian stocks slip, yen rises in holiday-hit trade

TOKYO (Reuters) – Asian stocks slipped on Friday, as fears about the impact of the Federal Reserve’s stimulus withdrawal on emerging markets offset the reassurance of upbeat U.S. growth data.

European bourses were expected to start the session on the defensive. Capital Spreads predicted Britain’s FTSE 100 .FTSE would open 18 points lower, or 0.3 percent; Germany’s DAX .GDAXI to fall 15 points, or 0.2 percent; and France’s CAC 40 .FCHI to open flat.

“European markets look set to end the first month of 2014 on the back foot as worries about emerging market economies, the Fed tapering program and a slowdown in China continue to act as a weight on risk appetite,” Michael Hewson senior analyst at CMC Markets, said in a note to clients.

With several countries, including Hong Kong and Singapore, observing the Lunar New Year holiday, Asian activity was lighter than usual.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.1 percent after earlier wavering between positive and negative territory, on track for a monthly loss of around 5 percent.

Japan’s Nikkei stock average .N225 reversed sharply and ended down 0.6 percent as a resurgent yen took a toll on exporter shares. The index shed 7.8 percent for the week and 8.5 percent for the month.

Japanese data released early on Friday initially cheered investors, with the country’s core consumer inflation rising at the fastest pace in more than five years in December, the job market improving and factory output growing.

But the upbeat data also had its downside for market participants hoping for more easing steps from the Bank of Japan.

“I think the BOJ is unlikely to adopt additional easing because there is no reason to justify it, given the positive macro-economic environment,” said Junko Nishioka, chief economist at RBS Securities.

SP 500 e-mini futures were nearly flat on the day after initially climbing after Wall Street gains, as U.S. investors took heart from Thursday’s data showing U.S. gross domestic product grew at a 3.2 percent annualized pace in the fourth quarter of 2013 to round out the biggest half-year increase since 2003.

“I think the impact of emerging markets on G10 currencies will diminish and the market’s focus will return to the strength of the U.S. economy,” said Koichi Takamatsu, head of forex trading at Nomura Securities in Tokyo.

But the yen’s recovery on Friday afternoon showed that in the short-term, at least, the Japanese currency retains some of its safe-haven appeal.

The dollar slipped about 0.2 percent against the yen to 102.51 yen after dropping as low as 102.33 yen. It remained above a seven-week low of 101.77 yen hit on Monday.

The euro gave up its earlier gains against the Japanese currency and slipped about 0.3 percent against the yen to 138.80 yen, after falling as low as 138.68 yen, its lowest since December 5.

The U.S. dollar index was nearly flat on the day at 81.101 .DXY but remained close to a one-week high against a basket of major currencies hit on Thursday, when it rose as far as 81.135 from a session low of 80.545.

The upbeat U.S. growth data helped calm markets roiled by anxiety over emerging economies, but it also validated the Fed’s decision to stick to its tapering plan.

The Fed decided this week to stay the course on its stimulus withdrawal and reduced its bond purchases for a second time, to $65 billion per month from $75 billion as expected, reviving perennial concerns that capital will flow out of emerging markets.

Several emerging market central banks, including Turkey, South Africa and India, implemented extraordinary interest rate hikes this week in an effort to stem selling of their currencies. Russia’s central bank pledged unlimited foreign exchange intervention if the rouble strays outside its target band.

On the commodities front, spot gold was nearly flat at $1,243.00 an ounce, on the heels of a 2-percent overnight fall.

U.S. oil edged 0.4 percent lower to $97.80 a barrel.

(Additional reporting by Hideyuki Sano, Leika Kihara and Stanley White; Editing by Shri Navaratnam and Eric Meijer)

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Honda Q3 net profit more than doubles to $1.56 billion

TOKYO (Reuters) – Honda Motor Co’s (7267.T) October-December net profit more than doubled to 160.7 billion yen ($1.56 billion), back to pre-Lehman crisis levels but lower than expectations, helped by strong sales of the redesigned Fit subcompact that went on sale in Japan in September.

The results, announced by Japan’s third-biggest automaker by sales volume on Friday, were below the average estimate of 172 billion yen in a Thomson Reuters I/B/E/S poll of seven analysts. In the same period a year ago, Honda booked 77.4 billion yen in net profit.

For the year ending in March 2014, Honda stuck to its forecast of 580 billion yen in net profit, below expectations of 603.4 billion yen in a Thomson Reuters I/B/E/S survey of 20 analysts.

Honda cut its global car sales forecast for the financial year ending in March to 4.385 million vehicles from the previous forecast 4.43 million vehicles as sales in Thailand slowed after first-car buyer incentives ended.

Chief Executive Officer Takanobu Ito has set an aggressive goal of selling 6 million vehicles a year by end-March 2017, compared with a record 4.01 million in the year ended March 2013.

Honda is the first of Japan’s big three automakers to announce quarterly results. The world’s biggest carmaker, Toyota Motor Corp (7203.T), will report results on February 4 and Nissan Motor Co (7201.T), Japan’s second-biggest automaker, on February 10.

($1 = 102.7150 Japanese yen)

(Reporting by Yoko Kubota; Editing by Matt Driskill)

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