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Surge in consumer confidence lifts euro zone economic sentiment

BRUSSELS (Reuters) – A surge in consumer confidence helped boost economic sentiment in the euro zone in March to its highest level since July 2011, data from the European Commission showed on Friday.

The lift will encourage those in the European Central Bank who have been grappling with sluggish price rises, which reflect weak consumer demand.

Consumers appeared to shrug off concerns about the impact of the crisis in Ukraine although a German GfK sentiment survey released on Wednesday, which was also upbeat, indicated the mood among consumers in Europe’s biggest economy could worsen if the crisis in Crimea spreads.

“Consumer confidence was particularly buoyant, registering the sharpest monthly increase since April 2009,” the European Commission said.

Economic sentiment across the 18-nation bloc increased to 102.4 this month from 101.2 in February, exceeding market expectations of 101.4, while the consumer confidence reading rose to -9.3 from -12.7 in February.

Economic sentiment has improved sharply this year and the March reading was the highest since July 2011, when it stood at 103.7, according to Thomson Reuters data.

Sentiment in the Netherlands jumped by 2.3 points to 100.3, followed by a 2.2 improvement in Spain. Italy rose by 1.3 points, France by 0.7. Morale in Germany, Europe’s strongest economy, brightened by 0.4 point.

Confidence among businesses was more mixed.

The European Commission said that increases in services and retail trade confidence were comparatively modest and industry and construction sentiment remained broadly unchanged compared to February.

The bullish consumer data is likely to strengthen those in the ECB who do not want to ease policy any further for now despite very low inflation, which raises the risk of potentially damaging deflation. Falling prices tend to discourage consumers from spending because they expect prices to fall further.

“While yesterday’s weak money and credit growth figures argue in favor of further monetary easing, the further brightening in economic sentiment in March will strengthen the hands of the hawks on the ECB’s Governing Council in making the case for continued inaction at next week’s policy meeting,” said Martin van Vliet, an analyst with ING.

Economists polled by Reuters expect the ECB to leave rates on hold at its policy meeting next Thursday despite February inflation at an uncomfortably low 0.7 percent year-on-year.

“We believe that if the ECB does eventually act, it will probably include measures aimed at adding liquidity,” said Howard Archer, chief European economist at IHS.

While economic recovery is strengthening and making Europeans more optimistic about the future, it is still too weak to spur robust job creation that would encourage more spending.

Archer said the sharp increase in consumer confidence brought the reading to a 76-month high in March, adding the hope now was that rising confidence would encourage businesses to hire more and boost investment plans.

Unemployment in the euro zone remains close to record highs at 12 percent, even though job creation in the last quarter of 2013 rose for the first time in nearly three years.

While employment plans were revised upwards in the retail trade and construction sectors, they remained virtually unchanged in industry and services, according to the European Commission data.

The business climate index for the 9.5 trillion euro economy was broadly unchanged at 0.39 in March, compared with 0.36 in February, the data showed. Analysts polled by Reuters saw the reading at 0.40 in March.

(Reporting by Martin Santa; Editing by John O’Donnell and Susan Fenton)

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BlackBerry posts smaller-than-expected loss; shares rise

TORONTO (Reuters) – BlackBerry Ltd reported a much smaller-than-expected quarterly loss on Friday, sending its shares up nearly 7 percent, even as its smartphone sales continued to slide.

The company said its net loss was $423 million, or 80 cents a share, for the fourth quarter ended March 1. That compared with a year-earlier profit of $98 million, or 19 cents a share.

Revenue fell to $976 million from $2.68 billion. Analysts on average had been expecting $1.11 billion, according to Thomson Reuters I/B/E/S.

Excluding restructuring charges and other one-time items, the company reported a loss of 8 cents a share. The analysts’ average estimate was 55 cents.

The company said it had recognized hardware revenue on about 1.3 million BlackBerry smartphones during the fourth quarter, compared with about 1.9 million devices in the previous period.

It also said about 3.4 million devices were sold through to end customers, and this included shipments made and recognized before the fourth quarter. The company said 68 percent of these devices were BlackBerry 7s, indicating that traction around its new line of BlackBerry 10 phones remains weak.

Morningstar analyst Brian Colello said operating expense reductions were encouraging and that he thought the company could get to break-even by the end of 2015 with further cost-cutting.

“The big question still remains what BlackBerry can do on the demand side,” he said. “A lot of their moves have been supply related and internal, but we’re still looking for strong signs that demand is improving.”

BlackBerry devices have lost ground to Apple Inc’s iPhone and smartphones powered by Google Inc’s Android operating system. As it tries to engineer a turnaround, the company is focusing on its services arm, which secures mobile devices on internal networks of big clients.

Under new Chief Executive John Chen, the Waterloo, Ontario-based company is also putting the emphasis back on its once hugely successful keyboard devices.

Chen told Reuters that BlackBerry was designing three new keyboard-centric devices and would probably introduce them in the next 18 months.

Shares of BlackBerry, whose global smartphone market share was below 1 percent at the end of 2013, were up 6.7 percent at $9.66 in trading before the market opened.

(Reporting by Euan Rocha, Allison Martell and Leah Schnurr; Editing by Lisa Von Ahn and Chizu Nomiyama)

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As U.S. momentum stocks take beating, some sectors benefit

NEW YORK (Reuters) – Investors in some of the past year’s hottest U.S. stocks have been given a savage lesson in the risks of so-called “momentum trading”.

A group of 24 such companies compiled by Credit Suisse has lost $63 billion in market value, or almost 19 percent, so far in March. One of them, streaming video service Netflix, has declined on 15 of the last 17 trading days, while another, online travel service Priceline, is on pace to for its worst month in nearly two years, while Twitter sank below its November first-day closing price for the first time.

The sell off may well have further to go, investors warn.

For one thing, the initial public offering market looks vulnerable after King Digital Entertainment, maker of the popular Candy Crush online game, cratered on its debut, losing 15 percent in its first day of trade on Wednesday, and another 2.7 percent on Thursday. If such raisings get pulled or pared back it will likely hurt the banks’ underwriting fees.

But while it all stands as a warning to those who joined crowded trades in richly priced stocks, it is good news for short sellers who are prepared to bet against what they see as over-valued stocks, and for investors who spend their time searching for unrecognized gems trading at bargain-basement levels.

It also indicates that the investing world may be returning to more normal rules, that includes sharper assessments of the risk in different sectors, now that the Federal Reserve’s bond-buying stimulus program is being reduced and there is less “easy money” sloshing around.

“The weakness in momentum stocks does have an implication for the broader market,” said Joshua Brown, vice president of investments at Fusion Analytics in New York. “The best way to gauge general risk appetite is to look at momentum sectors.”


Investors and strategists stress that the pain in the momentum area is mostly isolated to that world. The wider stock market isn’t in the crosshairs – and some sectors are benefiting as money is switched.

“It would normally be concerning to see this,” said Frank Gretz, market analyst at brokerage Wellington Shields Co in New York. “Instead, other companies are stepping up and new leaders are emerging. Enough is holding together that I haven’t given up on the bull market even with the leadership coming down.”

The SP 500 is within a few percent of record levels and inflows into equity funds remain positive. Investors have moved into utilities, financials and telecom stocks.

In Credit Suisse’s analysis of the 24 stocks, all but 1 of the companies derive at least 55 percent of their present value from their future growth prospects. Essentially, they’re big bets on the future, typical of biotech and IT names.

Some of the stocks have unenviable characteristics. Servicenow and Incyte are characterized as “worst in class” by Credit Suisse’s proprietary analytical models – which means they’re considered low quality names with weak price momentum and pricey in value. Others, like Pandora Media, are considered “momentum traps,” that are expensive and lower-quality, but have strong momentum.

But it’s far from certain that such names have a lot further to fall. The bull market has been resilient, and that has helped stocks like electric car maker Tesla Motors weather bouts of weakness as it did in the fall of 2013, when its shares lost 40 percent before streaking again to new highs.

John Hempton, chief investment officer of Bronte Capital, a small hedge fund based in Sydney, Australia – who is also a prominent short seller – said he was loath to say that momentum had “cracked.”

“If you go back to dot-com, there were five times it cracked before it really cracked, and if you shorted each of those cracks, you got yourself carried out,” he said of the Internet stocks boom in the late 1990s and the bust beginning in 2000.

He did say, however, that he has been shorting a number of biotechnology names. Other investors, too, have been reducing their presence in the sector as reflected by a nearly 14 percent slide in the Nasdaq Biotech index since late February.

“We owned biotechs for the last year and had a wonderful ride. We sold them because valuations got stretched,” said David Kotok, chairman and chief investment officer at Cumberland Advisors.

He isn’t ready to get back in yet. “Let’s induce some fear. Let’s correct some prices. Let people start to question what to do. Then there’s a re-entry time,” he said.


In the IPO market, investors have been fed a steady diet of new public offerings from companies yet to turn a profit. More than 50 IPOs have priced in 2014, and two-thirds of those are unprofitable, according to Renaissance Capital, an IPO investment advisor.

King Digital is actually profitable but suffers from concerns that Candy Crush may be a fad.

“Candy Crush is a reminder that the market sometimes gets frothy and that this is not free money,” said Sam Kendall, global head of equity capital markets at UBS.

Hempton said he was less concerned about the technology names coming to market than the biotech shares.

“Everything that I have seen is at least plausible that it could earn money. People are still funding projects that are real bets,” he said. “In biotech at the moment, people are funding projects because they can sell them to the stock market.”


Activity from short-sellers indicate that many do not believe the correction in momentum names has fully shaken out the group’s excess.

The 24 stocks identified by Credit Suisse have seen a slight increase in short bets in the last week, according to Markit. This group, on average, shows 18.8 percent of the shares available for borrowing being used for shorting, up 0.6 percentage points in the last week.

However, some of the names have seen shorts shaken out by periods in which they rallied. In the early part of 2013, more than 24 percent of Tesla shares were being shorted. That’s been halved as the stock has rocketed higher, boosting its forward price-to-earnings ratio to 113.

By most measures, shares are overvalued. But a full-scale retreat does not seem to be in the cards at this point. Scott Wallace, chief investment officer at Chicago-based hedge fund Shorepath Capital, has boosted his position in Facebook and is looking at biotechs more closely.

“It’s periods like these when you should start to think about great long term franchises and start to add to them,” he said. “I had zero exposure to biotech going into this, and now I’m doing my homework on a few of them.”

(Reporting by Ryan Vlastelica and David Gaffen; Additional reporting by Nicola Leske, David Randall and Tim McLaughlin; Editing by Dan Burns, Martin; Howell)

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Deutsche Boerse, Bank of China agree closer cooperation-sources

FRANKFURT (Reuters) – Deutsche Boerse (DB1Gn.DE) and Bank of China (601988.SS) are expected to sign a strategic partnership agreement that would make it easier for Chinese investors to gain access to the European capital market, two sources told Reuters on Friday.

The deal, which will make Bank of China a trade and clearing partner of Deutsche Boerse, will be sealed on Friday in Berlin during a state visit of Chinese President Xi Jinping, the sources said.

Deutsche Boerse declined to comment.

(Reporting by Alexander Huebner; Writing by Harro ten Wolde; Editing by Marilyn Gerlach)

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Amplats will not make profit at strike-hit Rustenburg mines this year

JOHANNESBURG (Reuters) – Anglo American Platinum (AMSJ.J) won’t make a profit this year at its Rustenburg mines due to a 10-week strike, its chief executive said on Friday, although it is unlikely to declare force majeure on supplies to customers.

“If we run out of metal we will go to the market to buy it … to supply our customers,” CEO Chris Griffith told journalists, adding that output was running at 60 percent.

Griffith also said job losses were inevitable in the strike-hit Rustenberg platinum belt.

Workers led by the Association of Mineworkers and Construction Union (AMCU) downed tools in late-January, demanding a doubling of wages that platinum producers have said they can ill-afford.

Talks, under the government mediator, resumed this week after they had collapsed three weeks ago because the union and companies – which also include Impala Platinum (IMPJ.J) and Lonmin (LONJ.J) (LMI.L) – were too far apart.

Following the meeting held with AMCU on the March 26, CCMA mediators will meet again with the platinum producers on March 31.

(Reporting by Ed Stoddard; Writing by Tiisetso Motsoeneng; Editing by Joe Brock)

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Warren Buffett-backed carmaker BYD says no immediate plans for share sale

SHANGHAI (Reuters) – BYD Co Ltd (002594.SZ) (1211.HK), the Warren Buffett-backed Chinese carmaker, said it has no immediate plans to sell new shares in Hong Kong.

On Thursday, Bloomberg reported that BYD planned to sell new shares worth as much as 20 percent of its Hong Kong-listed shares, and had submitted an application to China’s securities watchdog.

“We do not have such a plan now,” a BYD spokeswoman said on Friday. “This is pure speculation.”

There have been rumors since last year about a possible BYD share issuance plan, but they are not true, she said.

(Reporting by Samuel Shen and John Ruwitch. Editing by Jane Merriman)

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StanChart pays 118 staff $1.4 million or more, top earner Rees lands $9.5 million

LONDON (Reuters) – Asia-focused bank Standard Chartered Plc (STAN.L) paid 118 of its bankers at least 1 million euros ($1.4 million) last year, topped by a $9.5 million payout to Mike Rees, head of its wholesale or investment banking division.

Rees is often the biggest earner at Standard Chartered and his pay last year was down 35 percent from 2012 as profits at the bank fell, according to the bank’s annual report released on Friday.

Standard Chartered said Rees, who has been promoted to deputy chief executive, could be paid $11.4 million pounds this year. That is 47 percent down from a maximum payout he could have received in 2013 of $21.4 million.

The bank has adjusted its pay structure to meet EU rules that will this year cap bonuses at 200 percent of base salary, in a move aimed at limiting hefty bonuses, which were blamed for encouraging the risk-taking that contributed to the 2008/09 financial crisis.

Standard Chartered has increased base salaries and introduced “allowances” that increase the fixed pay element, and reduced potential bonus payments.

Chief Executive Peter Sands could be paid $12.4 million this year, down from a maximum payout of $14.5 million under the previous structure. He was paid $6.8 million last year, down 38 percent from 2012, as previously disclosed.

Standard Chartered reported its first drop in annual profits for a decade last year and said it faces a challenging first-half to 2014, as Asia markets slow, tougher regulations squeeze margins and its business in South Korea struggles.

The bank, which makes 90 percent of its profit in Asia, the Middle East and Africa, cut its bonus pool last year by 15 percent to $1.2 billion due to the weak performance.

Sands’ base pay has been increased to $1.86 million from $1.68 million and he will get an allowance of $1.1 million. Rees’ salary has gone up to $1.62 million and he will get an allowance of $1 million.

Standard Chartered is following several other banks, including Barclays (BARC.L), HSBC (HSBA.L) and Goldman Sachs (GS.N) to introduce an allowance, which will not be included in pension payments and should be more flexible than salaries.

Banks say they need to pay competitively to attract and retain staff, especially as many of the affected staff work outside Europe, and Asian and U.S. rivals do not face the same pay caps.

“The (EU bonus cap) proposal inevitably, and regrettably, resulted in an increase in fixed pay,” Standard Chartered said in its annual report.

It will pay the allowances to senior executives and hundreds of other staff. ($1 = 0.7278 Euros) ($1 = 0.6019 British Pounds)

(Editing by Huw Jones and David Holmes)

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GM unit Opel to make Buick vehicles for U.S. in Germany

FRANKFURT (Reuters) – General Motors (GM.N) unit Opel will make two additional vehicles at its plant in Ruesselsheim, Germany, including a Buick destined for the United States, it said on Friday.

The move forms part of a strategy to intertwine the Opel and Buick product ranges to share development costs, while focusing Opel sales in Europe, and Buick sales in the United States and China.

Opel already makes four variants of its Insignia sedan, which shares the same underpinnings as the Buick Regal, at the Ruesselsheim factory.

“Buick production in Ruesselsheim will further improve our capacity utilization,” Opel Chief Executive Karl-Thomas Neumann said in a statement.

In January 2015 Opel will stop exports to China.

“It would have cost hundreds of millions of euros to raise awareness of the Opel brand and to expand the distribution network. Buick, however, is one of the market leaders in China and we plan to intensify our future collaboration, with several projects currently under examination,” Neumann said.

Opel sold only 4,365 cars in China last year, compared with Buick, which sold 810,000 cars.

Opel said it would invest 245 million euros ($337 million) to build a new model at the factory. The investment comes on top of a 4 billion euros investment slated for Germany and Europe to overhaul Opel’s ageing product range with 23 new products and 13 new engines.

The auto maker revealed in December that it planned to make a new car, but declined to give further details as a way to preserve a competitive advantage.

($1 = 0.7278 Euros)

(Reporting by Edward Taylor; Editing by Christoph Steitz and Mark Potter)

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Spanish CPI shock flags euro deflation risks

LONDON (Reuters) – The euro slid to a three-week low and government bond yields across the euro zone fell on Friday as a surprise fall in Spanish inflation bolstered investors’ bets the European Central Bank will ease policy next week to ward off the threat of a sustained bout of deflation.

Spanish and Italian borrowing costs fell to their lowest in eight years, while stock markets drew support from the renewed potential for looser ECB policy and reports Beijing could fast track infrastructure spending to boost the Chinese economy.

The 0.2 percent annual rate decline in Spanish consumer prices this month was larger than expected and the weakest figure since October 2009.

The Spanish numbers put preliminary German inflation data for March later in the day under even greater scrutiny for signs that the threat of deflation is spreading from peripheral euro zone economies like Spain to the bloc’s powerful core.

“This is an ECB expectations-driven story,” said Ralf Umlauf, an analyst at Helaba Landesbank Hessen-Thueringen. “The market is definitely positioning for next week’s meeting. Market players are expecting some action – any kind of action.”

The euro hit a three-week low of $1.3704, falling further back from the $1.40 level many analysts think would be too strong for the fragile euro zone economy in the eyes of ECB policymakers.

At 1125 GMT it had recovered some ground to trade little changed on the day at $1.3735.

Spanish and Italian yields were flat on the day around 3.24 percent and 3.3 percent, after having slipped earlier to eight-year troughs of 3.2 percent and 3.27 percent, respectively.

Portugal’s 10-year yield dipped below 4 percent for the first time in over four years.

The ECB sets policy on Thursday next week, when it will have the euro zone-wide flash inflation estimate for March due on Monday. Economists expect that to slip to just 0.6 percent, well below the ECB’s target of below but close to 2 percent.


Europe’s main equity markets were all higher, posting early gains of up to four fifths of percent.

The FTSE Eurofirst 300 index .FTEU3 was up 0.4 percent at 1327 points, on for its fourth straight day of gains as investors square positions at the end of the quarter.

After the respective eight and six percent gains of the previous two quarters, equity investors have been much more cautious in the first three months of the year. The FTSE Eurofirst 300 is on track for a gain of around 1 percent.

Europe followed Asia and emerging markets higher on the back of comments from China’s Premier Li Keqiang, who was quoted by state media as saying the government would roll out targeted measures step-by-step to aid the economy.

“We’re making a little bit of a jolt higher, based on hopes of some form of Chinese fiscal stimulus, but that’s not the big game in town. The big question for China is whether it can deflate its credit bubble without creating a burst,” said Jeremy Batstone-Carr, analyst at Charles Stanley.

“The bounce we’re seeing today is a short-term effect.”

MSCI’s index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.7 percent and Japan’s Nikkei .N225 closed at a three-week high of 14,696 points ahead of the end of their financial year on March 31.

Emerging markets showed signs of recovering from a bruising few weeks, with hopes of further Chinese stimulus pushing with the military and geopolitical tensions surrounding Russia and Ukraine further into the background. EMRG/FRX

“The prospect of an economic rebound (in China) is likely to be priced into markets as policy support is announced. If so … it seems plausible that H1 2014 will mark the low water point in emerging market equity performance,” wrote Barclays in a note to clients.

The MSCI index of emerging shares .MSCIEF has climbed for six straight sessions to the highest since January 3. The index for Latin America .MILA00000PUS on Thursday boasted its biggest daily gain since July 2012 as Brazilian markets rallied.

In U.S. bond markets, Treasury yields were capped by the fall in European bond yields. Ten-year U.S. borrowing costs hovered around 2.68 percent, a couple of basis points above Thursday’s 11-day low.

Gold looked to snap its broad losing streak this month, rebounding from Thursday’s six-week low to trade up 0.4 percent on the day at $1,295.00 an ounce.

In the oil market, U.S. crude futures were almost flat on the day at $101.43 a barrel.

(Reporting by Jamie McGeever, Marius Zaharia and Alistair Smout; Editing by Toby Chopra)

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