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Muddle in the middle

Among the firm’s biggest concerns is the seaborne thermal coal market.

“One of the major problems in the seaborne thermal coal market now is that production costs in most major exporting regions, including Australia, South Africa and Indonesia, have been falling as cyclical cost deflation has kicked in with a vengeance,” Jefferies said. “Weaker domestic currencies and higher volumes (fixed cost leverage) have led to lower US dollar-denominated unit costs and a flattening cost curve. Marginal cost deflation has pulled coal prices lower. This is highly problematic and unlikely to reverse anytime soon.”

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Mixed reaction to weak euro zone inflation data

LONDON (Reuters) – European stocks trimmed gains on Monday while government bond yields and the euro rose after weak euro zone inflation data cemented expectations the European Central Bank will ease policy but also prompted investors to take profit on these bets.

Inflation across the 18-nation bloc fell to 0.5 percent in March, according to preliminary estimates. That is the lowest level in over four years and likely to support expectations the ECB could act to counter the deflationary threat as early as this week when it holds its next policy meeting.

But the low number was not a major shock. So after stocks briefly popped higher and the euro slipped in anticipation the ECB will soon act, traders shifted their focus to the looming end of the first quarter and reduced their positions.

“It is only a matter of time before the (ECB’s) Governing Council will conclude that it needs to take further policy action to prevent a worsening of the medium-term inflation outlook,” wrote Capital Economics in a note to clients.

“Action later this week cannot be ruled out,” it said.

As the second quarter looms, investors are drawing comfort from expectations of further stimulus from the ECB and Chinese authorities, which they hope will mitigate the gradual withdrawal of stimulus from the U.S. Federal Reserve.

At 1015 GMT the FTSE EuroFirst 300 index of leading shares was up 0.1 percent at 1,333 points .FTEU3. Britain’s FTSE 100 .FTSE was up 0.2 percent at 6,627 points, Germany’s DAX .GDAXI was down 0.1 percent at 9,574 points and France’s CAC 40 .FCHI was down a similar amount at 4,405 points.

U.S. stock futures pointed to gains of between a third and half of one percent across the three major U.S. indices.

Earlier in Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.9 percent to close at a three-week high of 137.84 points, on heightened speculation Beijing will launch new spending measures and on reduced geopolitical and military tensions in Ukraine.

Tokyo’s Nikkei stock average .N225 also rose 0.9 percent to a three-week high of 14,827 points, supported by comments from China’s Premier Li Keqiang on Friday that Beijing was ready to support the cooling economy, saying the government had the necessary policies in place and would push ahead with infrastructure investment.


It has been a lackluster quarter for equity investors, however, with Wall Street and the main European indices only managing to eke out slender gains of around 1 percent.

The U.S. central bank has started trimming its bond-buying stimulus, and new Fed chair Janet Yellen said on March 19 that interest rates could start to rise six months after the bond buying is finished completely. That could be early next year.

Yellen will speak in Chicago later on Monday and the focus is on whether she maintains her stance on rates, which the market has interpreted as hawkish.

The 10-year yield on U.S. Treasuries rose on Monday to 2.75 percent. This lent broad support to the dollar, which was flat on the day against a basket of six major currencies at 80.2 .DXY.

The euro rose a quarter of one percent to $1.3784, drifting up from Friday’s one-month low. On Saturday, Bundesbank president Jens Weidmann said the euro zone was not in a deflationary cycle and the ECB should not over-react to low inflation data.

“The weaker CPI reading means that the ECB doves now have an argument in favor of moving sooner rather than later. Even if the ECB does not act this week, the euro should be under pressure from stronger U.S. data,” BNP Paribas strategists said.

German benchmark 10-year yields rose to 1.59 percent, while in peripheral euro zone bond markets Spanish 10-year yields were steady on the day at 3.24 percent, near Friday’s eight-year low of 3.2 percent.

Even after six consecutive quarters of decline, the fall in Spanish yields accelerated in the first quarter. The plunge of around 90 basis points in the first three months of the year is the biggest quarterly fall since the end of 1996.

In emerging markets, Turkey’s lira hit a two-month high against the dollar after Prime Minister Tayyip Erdogan declared victory in local polls that had become a referendum on his rule, stirring hopes months of political turbulence would ease. The lira brushed 2.165, its strongest against the greenback since late January.

In commodities gold ticked higher to $1,295.80 an ounce, picking up from Friday’s six-week low of $1,285.34, and U.S. crude oil futures edged down 20 cents to $101.47 a barrel after settling on Friday at its highest level since March 7.

(Reporting by Jamie McGeever; Editing by Pravin Char)

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ARM draws a line under Bumi era

Asia Resource Minerals plc (ARM) made good on its pact to replace chairman Samin Tan on Friday, two days after the long-awaited separation deal with the Indonesian Bakrie family completed. Its latest results show its future will by no means be plain sailing though.

ARM, formerly Bumi plc, made Chris Walton chairman of the board, replacing Samin Tan, who announced last year that he would step down from the role once the company had separated from the Bakrie Group and the family’s majority-owned miner, PT Bumi Resources Tbk. Companies associated with Tan, which originally took 23.8% of ARM off the Bakries, now own 47.6% of ARM.

Walton, a seasoned executive who served as senior independent director and audit chairman of Rockhopper Exploration plc, and audit chairman of the Kazakhstan State Railways, would form part of what ARM called a “refreshed” board.

The company has sought to rid itself of executives and non-executives associated with the Bakrie family, while bolstering its operational team at its Indonesian coal mines as it seeks to cut costs and ramp-up output.

Despite all of these changes, the company is fighting a losing battle with falling thermal coal prices. In 2013, the company produced 23.5Mt of the black stuff, up 11.7% from the 21Mt it produced in 2012, but revenues came in 7% lighter at US$1.4 billion. The company received an average realised price of US$59.6/t for the year, down from US$70.9/t in 2012.

It reported an underlying loss of US$173 million for the year, compared with a restated US$60 million loss a year earlier, writing down US$74 million of the carrying value of its 85%-owned Indonesian coal miner PT Berau Coal Energy Tbk.

While shareholders will be concerned with a second consecutive loss, they would still be hoping that some cash would be heading their way shortly. Following the separation deal, which saw ARM sell its 29.2% stake in PT Bumi Resources Tbk to the Bakrie Group and Samin Tan acquire 23.8% of ARM that the Bakries held for proceeds of US$501 million, senior independent director Nick Salmon said ARM would now be in the position to return US$400 million to investors.

This is some light relief for those that have hung in since the company listed in London back in 2010, offering an opportunity to gain exposure to a world-class asset base in one of the most prospective regions. Since then, infighting between the two founders, Nathaniel Rothschild, scion of the famous banking dynasty, and the Bakries, one of the most influential families in Indonesia, as well as allegations of financial irregularities at its Indonesian subsidiaries, have seen its shares fall more than 75% since listing back in July 2010.

While ARM has left behind the Bumi-era for “a new chapter in the company’s life,” according to CEO Nick von Schirnding, its influence will be felt for years to come. Investors will remain wary of deals too good to be true and regulators will look out for early warning signs before they get the nod to enter the bourse’s door.

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China’s Huawei aims to double last year’s record revenue by 2018

SHENZHEN/BEIJING (Reuters) – China’s Huawei Technologies Co Ltd has targeted 2018 revenue almost double the record reaped last year when the company booked 34 percent profit growth and became the world’s third-biggest smartphone manufacturer.

Huawei has been flooding emerging markets with low-priced smartphones and tapping advanced economies with high-end offerings to make up for slowing growth in its primary business of building mobile telephone networks.

Smartphones last year contributed the most to revenue growth in yuan terms and are likely to feature prominently in reaching a revenue target which translates as roughly 10 percent annual growth.

To reach that target, the company will have to improve on 2013 when revenue hit a record yet grew at a pace slower than Huawei’s 10 percent goal primarily because overseas companies spent less on networks.

Huawei also missed its smartphone sales target as local peers Lenovo Group and ZTE Corp pursued similar strategies to close the gap with leaders Apple Inc and Samsung Electronics Co.

“In 2014, we are aiming our sales efforts at improving our branding image,” Eric Xu, Huawei’s rotating and current chief executive, said on Monday.

“At the same time, we are going to build our (smartphone) product portfolio in the mid-range and high level,” Xu said after the unlisted company released audited earnings results.

In 2013, revenue hit a record 239 billion yuan ($38.47 billion), helping operating profit land within Huawei’s guidance range, and pushing net profit up 34.4 percent to 21 billion yuan – its quickest profit growth in four years.

Revenue grew 18 percent in Huawei’s consumer division, which includes smartphone manufacturing, and the company expects a similar rate of growth this year.

In the enterprise division, which builds private networks for companies and organizations, revenue grew 32 percent thanks to companies investing heavily in cloud and mobile computing.

Revenue in the carrier network business – which accounts for about 70 percent of overall income – grew just 4 percent. Huawei aims to double that to 8 percent this year as carriers increase investment in 4G, particularly in China.

Overall, Huawei targets revenue of $70 billion by 2018, or annual growth of about 10 percent, executives said at the press conference.

Growth was 8.6 percent last year rather than the targeted 10 percent, and smartphone shipments reached 52 million handsets instead of the 60 million handset goal.


Huawei smartphone sales last year barely made a dent in the U.S., the second-biggest market, where lawmakers have flagged Chinese telecommunications equipment as potential security risks.

Earlier this month, the New York Times and Der Spiegel cited documents leaked by former U.S. security contractor Edward Snowden as saying the National Security Agency accessed Huawei’s servers and obtained sensitive data.

After the latest reports, Huawei “maintained calm” and operated “business as usual”, said Xu. “If the New York Times report is true, I think we will have known about this long ago.”

One of the goals of the NSA operation was to find any connection between Huawei and the Chinese People’s Liberation Army, according to a 2010 document cited by the Times.

“Nobody has ever said that Huawei has the capacity to spy on the U.S. network and things like that,” said Xu. “For a business organization, no one would be so unwise as to do such a thing.

“The whole focus point of all the ongoing discussion is the concern that the Chinese government may leverage Huawei’s equipment (for spying),” Xu said. “I think it will take a lot of effort to address (allegations that Huawei has the capacity to spy).” ($1 = 6.2122 Chinese Yuan)

(Editing by Christopher Cushing)

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‘Chinese iron ore imports to rise by 90Mt in 2014’

An environmental clamp-down on high-polluting Chinese steel plants will neither curb growth in domestic steel-production or cut seaborne imports of iron ore, which are predicted to rise by a further 90Mt in 2014 to a record 921Mt, according to Wood Mackenzie.

Steel plants in some Chinese regions have been told to slash capacity, as well as idle coke batteries and sintering operations as part of push to cut emissions that are viewed as a source of toxic smog enveloping Beijing and Shanghai.

But Wood Mackenzie said there is plenty of unused capacity within China’s steel industry ready to replace any lost production due to shut-downs resulting from harsher emissions controls.

The energy consultancy added: “The iron market is understandably spooked …by the introduction of environmental controls and their potential financial impact on the steel industry…..and this has caused price volatility will prices plunging to 17-month lows in recent weeks, before picking up again recently.

“However during the remainder of 2014, we expect that fighting emissions will have negligible impact on total Chinese crude steel production and limited impact on iron ore demand in terms of quantity.”

Earlier this week, Australia’s Bureau of Resources and Energy Economics predicted that iron ore spot prices will fall 30% over the next five years due to increased supply of the steel-making mineral.

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Randgold targets output of 1Moz

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Hyundai Motor chief earned $13 million last year

SEOUL (Reuters) – Hyundai Motor Co (005380.KS) chairman Chung Mong-koo earned a combined 14 billion Korean won ($13.09 million) in pay last year from the South Korean automaker and its two key affiliates in their first such disclosure under new rules.

Chung, a son of the automaker’s founder, received 5.6 billion won from Hyundai Motor and 4.2 billion won each from its steelmaking unit, Hyundai Steel Co (004020.KS), and its parts supplier, Hyundai Mobis Co Ltd (012330.KS), Hyundai Motor said in its filing with the stock exchange on Monday.

Chung Eui-sun, the founder’s grandson, took 1.8 billion won home from Hyundai Motor, the world’s fifth-biggest automaker along with affiliate Kia Motors Corp (000270.KS).

They compared with Ford Motor Co (F.N) Chief Executive Alan Mulally who was awarded $23.2 million in compensation last year.

Asian peers have not released the 2013 pay of their top executives, but Nissan Motor Co (7201.T) Chief Executive Carlos Ghosn received 988 million yen ($10.1 million) and Akio Toyoda, the president of Toyota, made 184 million yen ($1.9 million) for the year ended in March last year.

In addition to his annual pay, the 76-year-old Chung, who holds a 5.2 percent stake in Hyundai Motor, earned an annual dividend of 22.2 billion won from the carmaker last year, according to Reuters’ calculations.

Chung had driven Hyundai’s rapid sales and profit growth since he took over in 2000, but the automaker has been losing steam in recent years, with rivals making a comeback and the local currency strengthening.

Last year, Hyundai’s operating profit suffered its first fall since the 2008 global financial crisis, although its profit margin was 9.5 percent.

Hyundai said that its vehicle sales growth will slow to 4 percent this year from 7 percent globally last year even after it launched a revamped version of its popular Sonata sedan starting in South Korea on March 24.

South Korean financial authorities changed regulations late last year, requiring listed companies to include annual compensation details of executives who earn more than 500 million won in their annual reports.

The head of Samsung Electronics Co’s (005930.KS) mobile business, J.K. Shin, received a $5.8 million compensation package last year, beating the paycheck of his counterpart, Tim Cook at U.S. rival Apple Inc (AAPL.O).

($1 = 1,069.30 Korean won)

(Reporting by Hyunjoo Jin; Editing by Matt Driskill)

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SocGen facing bribery lawsuit over Libyan deals

(Reuters) – Libya’s sovereign wealth fund has filed a $1.5 billion lawsuit against Societe Generale (SOGN.PA), accusing it of funneling bribes worth tens of millions of dollars to associates of Saif al-Islam, the son of former Libyan leader Muammar Gaddafi.

“Societe Generale contests the unfounded allegations in the Libyan Investment Authority’s (LIA) complaint,” a spokeswoman for France’s second-biggest bank said in an emailed statement, without giving more details.

The LIA said it had filed its lawsuit against the bank in London’s High Court. (

The LIA alleges that SocGen paid at least $58 million to Leinada, a Panamanian-registered company, for advisory services related to $2.1 billion of derivative trades that the Libyan sovereign wealth fund entered into with SocGen between late 2007 and 2009.

The LIA’s legal filing claims that Leinada did not have the expertise to advise or structure such deals.

“The payments were purportedly for advisory support, including around structuring the transactions, though the legal papers highlight that the descriptions of the services provided were deliberately opaque and inconsistent, and the nature and scale of the remuneration was hidden from the LIA,” it said.

The LIA said it had suffered heavy losses in the deals with SocGen, and was seeking to have the trades voided to recoup the money allegedly paid to Leinada and to be awarded damages for the alleged fraud.

“This claim, together with the one against Goldman Sachs that was initiated in January 2014, reflects the desire of the LIA’s new board of directors to redress previous wrongs and seek the recovery of these substantial funds as it seeks to invest and generate wealth for the people of Libya,” the statement quoted AbdulMagid Breish, chairman of the LIA, as saying.

(Reporting by Aashika Jain in Bangalore, William Maclean in Dubai; Editing by Eric Walsh and Mark Potter)

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New York state joins NYC in suing FedEx for shipping untaxed cigarettes

(Reuters) – New York state joined New York City in suing package delivery company FedEx Corp for allegedly violating state and federal laws by illegally delivering contraband cigarettes to people’s homes.

The City of New York had sued FedEx last December, accusing the company of creating a “public nuisance” through its partnership with Shinnecock Smoke Shop to ship untaxed cigarettes to homes.

An amended complaint filed on Sunday included the State of New York Attorney General Eric Schneiderman among the plaintiffs, and sought more than $239 million in damages and penalties.

The New York state alleged that FedEx knowingly shipped nearly 400,000 cartons of unstamped cigarettes to homes in the state, depriving it of $15, $27.50 or $43.50 on each carton in tax revenue.

The New York city had earlier alleged that the company deprived it of excise tax of $15 per carton.

“The claims advanced in the Amended Complaint by the NYAG are substantively identical to the City’s claims in the original Complaint,” Assistant Corporation Counsel Eric Proshansky, who represents the New York City in the case, said in a letter on Sunday.

“Accordingly, the proposed objections to the pleadings raised by FXG (FedEx Ground Package) should still form the basis for discussion at the April 9th pre-motion conference.”

FedEx requested the court last week to dismiss or substantially narrow New York City’s complaint.

Schneiderman’s office and FedEx were not immediately available for comment outside regular business hours.

The case is City of New York v. FedEx Ground Package System Inc et al, U.S. District Court, Southern District of New York, No. 13-09173.

(Reporting by Supriya Kurane in Bangalore; Editing by Joyjeet Das)

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