News Archive

UBS cannot arbitrate vs Nasdaq over Facebook IPO: court

NEW YORK (Reuters) – A divided U.S. appeals court rejected UBS AG’s (UBSN.VX) bid to force Nasdaq OMX Group Inc (NDAQ.O) to arbitrate a dispute over the exchange operator’s alleged “catastrophic mismanagement” of Facebook Inc’s (FB.O) $16 billion initial public offering.

The 2nd U.S. Circuit Court of Appeals in New York on Friday said UBS’ agreement with Nasdaq to help make a market for Facebook shares did not entitle the Swiss bank to arbitration, in its effort to recoup more than $350 million of losses.

Circuit Judge Reena Raggi wrote for a 2-1 majority that the agreement was subject to a Nasdaq rule that “specifically disallows” claims over trading losses, showing that “the parties did not intend to submit such foreclosed claims to binding arbitration.”

UBS had no immediate comment. Nasdaq spokesman Joseph Christinat declined to comment.

Facebook’s first day of trading on May 18, 2012 was plagued by technology problems, resulting in a delayed opening and tens of thousands of trade and cancellation orders being stuck in Nasdaq’s system for more than two hours.

While market makers lost an estimated $500 million on Facebook’s IPO, federal regulators last year approved a plan for Nasdaq to repay only about $41.6 million.

Friday’s decision may therefore make it more difficult for UBS to recoup anything close to its estimated losses.

It upheld a June 2013 preliminary injunction issued by U.S. District Judge Robert Sweet barring arbitration.

Nasdaq agreed in May 2013 to pay a $10 million penalty, a record for a stock exchange, to settle U.S. Securities Exchange Commission charges over its alleged “poor systems and decision-making” for the IPO.

The exchange operator did not admit wrongdoing. Facebook investors are also suing Nasdaq over the IPO.

In its March 2013 arbitration demand, UBS claimed that Nasdaq had not been “up to the task” of handling such a big IPO, and was “grossly negligent” in allowing shares to trade despite lacking the necessary software.

UBS said this resulted in many duplicate or errant orders, made it impossible to determine what trades had been made, and caused the bank to unintentionally amass a net 40.2 million Facebook shares by the end of the first trading day.

Dissenting from Friday’s decision, Circuit Judge Chester Straub said federal courts had no power to review UBS state law claims premised on the rules of Nasdaq, a private company. He said the majority’s reasoning could flood courts with new cases.

“It simply cannot be true that every time a case involves a famous company or a multibillion-dollar IPO, federal courts have jurisdiction,” he wrote.

The case is Nasdaq OMX Group Inc et al v. UBS Securities LLC, 2nd U.S. Circuit Court of Appeals, No. 13-2657.

(Reporting by Jonathan Stempel in New York; Additional reporting by Sarah N. Lynch in Washington, D.C.; Editing by James Dalgleish)

Article source:

Samsung says Microsoft deal invites ‘charges of collusion’: filing

(Reuters) – Samsung said its collaboration with Microsoft on Windows phones raised antitrust problems once Microsoft completed its acquisition of Nokia’s handset business, according to a court filing.

The filing late on Thursday stems from Microsoft Corp’s (MSFT.O) lawsuit accusing Samsung Electronics Co Ltd (005930.KS) of breaching a business collaboration agreement. The lawsuit, filed earlier this year in a New York federal court, says South Korean smartphone company Samsung still owes $6.9 million in interest on more than $1 billion in patent royalties it delayed paying.

Samsung, meanwhile, said the April Nokia acquisition violated its 2011 deal with Microsoft.

In a court filing late on Thursday, Samsung said it agreed in 2011 to pay Microsoft royalties in exchange for a patent license covering Samsung’s Android phones. The Android operating system is developed by Google Inc (GOOGL.O).

However, Samsung also agreed to develop Windows phones and share confidential business information with Microsoft as part of that collaboration. Microsoft would reduce the royalty payments if Samsung met certain sales goals for Windows devices, the filing said.

Microsoft’s Windows phones have failed to take significant market share from iPhone maker Apple Inc (AAPL.O) and devices running on Android.

Once Microsoft acquired Nokia, it became a direct hardware competitor with Samsung, the filing said, and the South Korean company refused to continue sharing some sensitive information. Doing so could have created problems with U.S. antitrust laws, Samsung said.

“[T]he agreements, now between competitors, invite charges of collusion,” Samsung said in the filing.

In a statement, Microsoft said it was “confident that our case is strong” and that it will succeed.

Antitrust regulators in the United States and other countries have approved Microsoft’s Nokia acquisition.

The lawsuit in U.S. District Court, Southern District of New York is Microsoft Corp vs. Samsung Electronics Co Ltd, 14-6039.

(Reporting by Dan Levine in San Francisco; Editing by Lisa Von Ahn)

Article source:

Without a plan, junk status looms for Britain’s Tesco: Moody’s

LONDON (Reuters) – Tesco (TSCO.L) could see its debt downgraded to “junk” status unless it outlines plans to cut borrowing and improve trading, rating agency Moody’s said, raising the prospect of higher financing costs for Britain’s biggest grocer.

Tesco, already facing a severe slowdown in sales in its stores, said last month it had uncovered what has become a 263 million pound ($420 million) accounting hole, resulting in the suspension of eight senior members of staff and a Serious Fraud Office investigation.

Moody’s has already cut the supermarket group to one notch above junk, Baa3, and last week also put it on review for a further downgrade after first-half results showed the pension deficit and net debt growing, while trading profits slumped.

The agency urged the group to lay out its plans or face further cuts — a warning to newly appointed Tesco Chief Executive Dave Lewis who said last week investors should not expect a big strategy announcement.

“We expect to have a much better idea of the management’s strategy within three months,” Sven Reinke, the agency’s lead analyst on Tesco, told Reuters.

“There are a few big decisions to make — their strategy to turn around operations, what happens to the final dividend, the speculation about possible disposals and capital measures. Those things can’t just happen without anyone noticing so we would expect a material announcement at some stage.”

The prospect of a downgrade to non-investment grade, or junk, would mark a fall from grace for Britain’s biggest private employer, a staple of British pension funds which was rated A1 by Moody’s in 2008.

It could also prompt many investors to sell, as some funds cannot hold debt rated below investment grade.


Tesco does not face any short-term liquidity issues, and analysts point to significant spare cash and undrawn bank facilities at its disposal. But in the first half, interest costs amounted to almost 80 percent of its operating profit.

Its net debt stands at 7.5 billion pounds ($12 billion), with long-term liabilities of 16.5 billion pounds. It faces peak repayments in 2016 and 2017, when around a fifth of its debt matures.

In order for Tesco to keep its investment grade rating Moody’s wants to see a plan that would bring the group’s adjusted gross debt to core earnings down towards 4.5 times over the next 12 to 24 months.

On Moody’s calculations the ratio currently stands at 5.4. Thomson Reuters calculates the industry average for net debt to core earnings is close to 3.7, compared to 5.7 for Tesco.

With trading at its home market deteriorating at an alarming rate, the group has said it is reviewing all options to raise cash and would rather cut costs and sell assets before considering asking shareholders for a rights issue.

It has already cut the interim dividend by 75 percent and is expected to take a similar approach to the final payout.

Tesco Finance Director Alan Stewart, in the job for just over a month, told analysts last week he understood the need to stay on an investment grade rating but said his priority was to find the right strategy and shape of the group.

“In terms of commitment (to investment grade), you’re asking me slightly early in the process for me to give that,” he said. “I do understand the importance of a BBB or an investment grade rating. We… will continue to engage with the rating agencies.”

Sector bankers warned that Tesco would be loathe to be downgraded, but said it would take at least six months for it to begin selling off unwanted assets — such as the international operations or its data analytics firm Dunnhumby.

“While it might be unrealistic to expect Tesco to execute any disposals within the next three months, we do expect a credible strategy to emerge, and we will assess its likelihood of success,” Reinke said.

Both Fitch and Standard Poor’s have also downgraded Tesco to one notch above junk.

(Additional reporting by Anjuli Davies and Neil Maidment; editing by Clara Ferreira Marques)

Article source:

U.S. consumer spending falters; wage gains highest since 2008

WASHINGTON (Reuters) – U.S. consumer spending fell for the first time in eight months in September, suggesting the economy lost some momentum heading into the fourth quarter.

The slowdown in consumer spending, however, is likely to be temporary, as other data on Friday showed wages in the third quarter recorded their largest increase in more than six years.

Consumer spending declined 0.2 percent last month after a 0.5 percent increase in August, as demand for goods tumbled and demand for services barely rose, Commerce Department data showed.

Economists polled by Reuters had expected consumer spending, which accounts for more than two-thirds of U.S. economic activity, to increase 0.1 percent in September.

“We expect lower energy prices to be a positive for consumers and look for a pickup in spending growth in the fourth quarter,” said John Ryding, chief economist at RDQ Economics in New York.

When adjusted for inflation, consumer spending fell 0.2 percent. That was the first drop since April and followed a 0.5 percent rise in August.

In a separate report, the Labor Department said its Employment Cost Index, the broadest measure of labor costs, increased 0.7 percent after advancing by the same margin in the second quarter.

Wages and salaries, which account for 70 percent of employment costs, rose 0.8 percent in the third quarter, the largest increase since the second quarter of 2008. They had gained 0.6 percent in the second quarter.

Various business surveys have been hinting at an acceleration in wage growth. The third-quarter increase in wages and salaries is a welcome sign for the labor market.

Federal Reserve officials on Wednesday gave a fairly upbeat assessment of the labor market, dropping their characterization of labor market slack as “significant” and replacing it with “gradually diminishing.”


U.S. Treasury debt prices on Friday extended losses on the mixed data, while the dollar hit its highest level since June 2010 against a basket of currencies. U.S. stock index futures were trading higher.

The consumer spending data was included in Thursday’s gross domestic product report, which showed the economy expanded at a 3.5 percent annual rate in the third quarter after growing at a 4.6 percent pace in the second quarter.

The softer consumer spending at the end of the third quarter could add to expectations of slower growth in the final three months of the year. A report on Tuesday showed unexpected weakness in business spending plans for equipment in September.

But with gasoline prices at a near four-year low and improving wage growth, consumer spending is likely to rebound in the months ahead.

Income rose 0.2 percent in September after increasing 0.3 percent in the prior month. With income growth outpacing consumption, savings jumped to $732.2 billion, the highest level since December 2012, from $702 billion in August.

That lifted the saving rate to 5.6 percent from 5.4 percent in August.

Weak consumption kept a lid on inflation last month. A price index for consumer spending edged up 0.1 percent after slipping 0.1 percent in August. In the 12 months through September, the personal consumption expenditures (PCE) price index rose 1.4 percent for a second straight month.

Excluding food and energy, prices rose 0.1 percent for a third consecutive month. The so-called core PCE price index increased 1.5 percent in the 12 months through September.

Both price measures continue to run below the U.S. central bank’s 2 percent inflation target.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Article source:

Chevron profit jumps as refining offsets production dip

(Reuters) – Chevron Corp (CVX.N) posted a higher-than-expected quarterly profit on Friday as lower crude prices boosted its refinery operations, helping to offset sagging oil and gas production.

The company posted third-quarter net income of $5.59 billion, or $2.95 per share, compared with $4.95 billion, or $2.57 per share, a year earlier.

Analysts on average expected earnings of $2.55 per share, according to Thomson Reuters I/B/E/S.

Production fell nearly 1 percent to 2.57 million barrels of oil equivalent per day as new wells failed to offset declines at old ones.

The company’s downstream unit, which owns refineries throughout the world, posted a nearly fourfold jump in profit to $1.39 billion as the cheaper crude oil prices boosted margins.

Shares of Chevron rose 1.4 percent to $118.20 in premarket trading.

(Reporting by Ernest Scheyder; Editing by Lisa Von Ahn)

Article source:

S&P 500 to test record high after BOJ ramps up stimulus

NEW YORK (Reuters) – The SP 500 could set a record high at the open on Friday as markets rallied globally after the Bank of Japan significantly ramped up its stimulus program just days after the U.S. Federal Reserve wound down its own package of economic incentives.

If futures’ gains hold after the open, the SP 500 could test its record high set more than a month ago. The December e-minis contract ESZ4 hit an intraday record earlier on Friday.

The BOJ’s board voted 5-4 to accelerate purchases of Japanese government bonds while tripling its purchases of exchange-traded funds and real-estate investment trusts.

At the same time, Japan’s $1.2 trillion Government Pension Investment Fund announced new allocations for its portfolio, including raising its holdings of domestic and foreign stock holdings to 25 percent each from 12 percent. A Nikkei newspaper report on this announcement on Thursday contributed to an afternoon move higher in U.S. stocks.

The timing of the moves sends a strong signal to investors, coming right as six years of aggressive U.S. stimulus come to an end and as euro zone inflation data kept the pressure on the European Central Bank to further ease monetary policy.

“Investors have been watching for a while to see if the rest of the world would start to grow and help multinationals in the U.S.; this is a great step towards that,” said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.

“It is a significant development and I think it encourages the Europeans to also look to take more assertive steps to revive their economies.”

SP 500 e-mini futures ESc1 were up 21 points and fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract, indicated a higher open. Dow Jones industrial average e-mini futures 1YMc1 rose 171 points and Nasdaq 100 e-mini futures NQc1 added 61 points.

The U.S. dollar rallied as well, pressuring crude oil prices as well as spot gold XAU=, which dropped 2.8 percent, the most in more than a year.

Japan’s Nikkei .N225 rose 4.8 percent, while SP 500 e-mini futures rallied shortly before 1:00 a.m. New York time (1 a.m. EDT) in a sharp volume increase.

U.S. labor costs rose more than expected in the third quarter as wages recorded their largest gain since 2008, a sign that a long-awaited pick-up in wage growth was underway.

A Chicago survey of business activity and a measure of consumer sentiment are both due shortly after the opening bell on Wall Street.

Abbvie (ABBV.N) shares rose 4 percent after the drugmaker reported quarterly earnings.

GoPro (GPRO.O) shares jumped 15.3 percent the day after it forecast better-than-expected holiday quarter sales.

So far this earnings season has been strong, with 75.5 percent of SP 500 components reporting earnings above analyst expectations according to Thomson Reuters data, above the 63 percent average in the past 20 years.

(Reporting by Rodrigo Campos; Editing by Chizu Nomiyama)

Article source:

Exxon third-quarter profit rises 3 percent on refining

(Reuters) – Exxon Mobil Corp (XOM.N), the world’s largest publicly traded oil company, on Friday reported a better-than-expected 3 percent increase in quarterly profit on higher results in its refining and chemicals businesses.

Share rose nearly 1.4 percent to $95.75 in premarket trading.

“Exxon Mobil’s quarterly results demonstrate the strength of our integrated business model,” Chief Executive Officer Rex Tillerson said in a statement.

Integration across the company’s exploration and production, refining and chemicals businesses provides a competitive advantage regardless of market fluctuations, said Tillerson.

Profit in the third quarter rose to $8.07 billion, or $1.89 per share, from $7.87 billion, or $1.79 per share in the year-ago period.

Analyst, on average, expected a profit of $1.71 per share, according to Thomson Reuters I/B/E/S.

Oil and gas production fell 4.7 percent, the Irving, Texas company said. Exxon said it remained on track for full-year output of 4 million barrels oil equivalent per day (boed).

Profit in its refining business soared to $1.024 billion from $592 million a year earlier. Exxon’s chemicals unit had a profit of $1.2 billion, up 17 percent from a year earlier.

Earnings in Exxon’s exploration and production business fell 4.4 percent to $6.4 billion as lower crude oil prices took a toll.

(Reporting by Anna Driver in Houston; Editing by Jeffrey Benkoe)

Article source:

U.S. third-quarter wage gains largest since 2008

WASHINGTON Oct 31 (Reuters) – – U.S. labor costs rose more than expected in the third quarter as wages recorded their largest gain since 2008, a sign that a long-awaited pick-up in wage growth was underway.

The Employment Cost Index, the broadest measure of labor costs, increased 0.7 percent after advancing by the same margin

in the second quarter, the Labor Department said on Friday.

Economists polled by Reuters had forecast the employment cost index increasing 0.5 percent in the July-September period.

Wages and salaries, which account for 70 percent of employment costs, rose 0.8 percent in the third quarter, the largest increase since the second quarter of 2008. They had gained 0.6 percent in the second quarter.

Federal Reserve officials view the ECI as one of the better measures of labor market slack.

Policymakers at the U.S. central bank on Wednesday gave a fairly upbeat assessment of the labor market, dropping their

characterization of labor market slack as “significant” and replacing it with “gradually diminishing.”

In the 12 months through September, labor costs increased 2.2 percent, the largest increase since the second quarter of

2011. They had increased 2.0 percent in the 12 months through June.

Wages and salaries were up 2.1 percent in the 12 months through September, the biggest rise since the first quarter of

2009, after increasing 1.8 percent in the 12 months through June.

Various surveys have been hinting at an acceleration in wage growth.

Benefit costs increased 0.6 percent in the July-September period. That followed a 1.0 percent gain in the second quarter.

They increased 2.4 percent in the 12 months through September after rising 2.5 percent in the 12 months through June.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Article source:

Argentina default spreads to Par bonds, raising acceleration risk

BUENOS AIRES/NEW YORK (Reuters) – Argentina’s debt default spread to its Par bonds on Friday after the country failed to complete an interest payment, raising the risk that creditors could demand that its cash-strapped government immediately repay all of its debt.

The country last month deposited a $161 million payment with a newly appointed local trustee to try to circumvent U.S. court orders for it to settle with “holdout” investors suing for full repayment of bonds from a 2002 default before paying debtholders who accepted a restructuring.

Yet Par bondholders faced legal and technical hurdles in collecting the payments, and the 30-day grace period since the coupon was originally due expired at midnight Thursday.

The economy ministry has not said whether any bondholders have come forward to collect.

Argentina had already defaulted in July on its Discount notes, but holders of the Par bonds are more likely to claim the accelerated payment of the principal because they are trading at a steeper discount to their original value.

An acceleration could leave Argentina facing claims of up to $30 billion, more than it holds in foreign reserves.

Sources owning Argentine debt say other creditors have approached them about forming a group to accelerate. The move would require the backing of investors holding at least 25 percent of the nominal amount of any single bond series.

“We were asked in very theoretical terms what our thoughts were on acceleration,” said one source. “It was something intermediated by an investment bank. The shop leading the offer did not want to be identified.”

Analysts say many investors will be hesitant about the move as it could mean costly litigation with an uncertain outcome. It could also trigger a balance of payments crisis and further damage Argentina’s ailing economy, making an eventual payment even more difficult.


Those talking of acceleration may simply be sounding out options or putting pressure on Argentina to reach a deal with the holdout funds that rejected restructuring following its 2002 default and are seeking full repayment of their bonds.

Argentine cabinet chief Jorge Capitanich said on Thursday that instead of accelerating, those bondholders who accepted steep writedowns in 2005 and 2010 debt swaps should sue U.S. District Judge Griesa for blocking interest payments.

“The person violating the law is the judge and not Argentina, which is fulfilling its obligations to pay its sovereign debt,” he told reporters.

Some creditors fear acceleration would simply prevent a solution to the dispute with the holdouts, which would unblock interest payments.

“We are keeping our options open and not siding with anyone in an acceleration effort,” said one investor who requested anonymity. “Our interest is not to be an obstacle to a deal that can settle this all after Jan. 1.”

Argentina says it cannot reach a deal with holdouts until the year-end expiry of the so-called RUFO clause preventing it from paying them better terms than those taken by bondholders who accepted the writedowns in 2005 and 2010.

“I have heard from a number of Par holders that they will consider what their next move will be after the expiration of RUFO next year,” said a source at a fund holding Argentine debt.

Investors sounding out the option of acceleration have signaled patience with Argentina was growing thin, said Siobhan Morden, head of Latin America strategy at Jefferies in New York.

“But the real risk of acceleration will come next year, after RUFO expires,” she added.

(Additional reporting by Davide Scigliuzzo with IFR in New York and Hernan Nessi in Buenos Aires; Editing by Kieran Murray and Lisa Von Ahn)

Article source: