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Global shares jump, yen slumps as BOJ cranks up stimulus

LONDON (Reuters) – World shares jumped and the yen fell to a near seven-year low against the dollar on Friday as the Bank of Japan surprised financial markets by significantly expanding its massive stimulus program.

In a rare split decision, the BOJ’s board voted 5-4 to accelerate purchases of Japanese government bonds so that its holdings increase at an annual pace of 80 trillion yen ($725 billion), up by 30 trillion yen.

The central bank also said it would triple its purchases of exchange-traded funds and real-estate investment trusts (REITs), while sources said the government’s huge pension fund would more than double its holdings of domestic stocks.

For investors, the timing of the moves sent a strong signal, coming as six years of aggressive U.S. stimulus ends and as weak euro zone inflation data keeps the pressure on the ECB to further ease its policy. ECONG7

Tokyo’s Nikkei share index .N225 jumped almost 5 percent to its highest level since late 2007 as the BOJ said its move was a preemptive strike at “a critical moment in the effort to break free from the deflationary mindset” in Japan.

European stocks .FTEU3 got a big lift too, climbing 1.4 percent and U.S. futures ESc1 pointed to similar gains when trading resumes in New York. Stocks there were lifted on Thursday by strong third quarter U.S. GDP data and another round of upbeat earnings. [.N]

“What is important today is not only the BOJ action but also the news that the Japanese government’s pension fund will be increasing the allocation to Japanese equities,” Alvin Tan, an FX strategist at Societe Generale in London, said.

“This plus the fact the U.S. stock market appears to be experiencing a v-shaped recovery from the recent sell-off is preparing the ground for a pretty strong ‘risk-on’ situation until the end of the year,” he added.

In frenetic currency market trading, the yen tumbled to its lowest level in nearly seven years against the dollar, putting it on track for its biggest losses in more than a year.

The dollar surged more than 2 percent, soaring past its Oct. 1 high of 110.09 yen to 111.70 yen JPY=, the highest since January 2008.

BOJ Governor Haruhiko Kuroda told reporters after its meeting that there was still room for further easing if needed, but the central bank believed Friday’s steps were sufficient.


The day’s packed schedule of U.S. economic data started mixed as the weakest consumer spending figures in eight months offset the largest quarterly increase in U.S. wages since 2008. Later there is business activity and consumer sentiment data too.

Japan’s moves, though, meant there was an intense appetite for higher-yielding but riskier assets as investors put aside nerves about this week’s end of U.S. stimulus and bet the new flood of central bank money would continue to buoy asset prices.

As U.S. trading neared, the FTSEurofirst 300 .FTEU3 index of top European shares was up 1.4 percent at 1,345.93 points, extending a sharp two-week rally, while southern European government bonds also made ground at the expense of Treasuries and Bunds. [GVD/EUR]

A tick up in euro zone inflation to 0.4 percent had offered a glimmer of hope the bloc’s beleaguered economy will avoid deflation though the reading that strips out volatile elements like energy, food and tobacco dipped.

“The data does little to relieve the pressure on Mario Draghi to embark on a quantitative easing program,” said Hargreaves Lansdown economist Ben Brettell.

Those expectations left the euro 0.4 percent lower at $1.2561 EUR= while the dollar index .DXY, which surged this week after the Federal Reserve ended its stimulus program with some confident-sounding rhetoric, was up 0.6 percent.


There was also intense focus on Russia as a 150 basis points rate hike to 9.5 percent by its central bank failed to bring relief to the badly beaten rouble.

It went into a fresh slide shortly after the decision and was testing its all-time low at 42.3575 to the dollar RUB=. For traders, the big issue is the bank’s automatic intervention policy. Market talk beforehand was that it could scrap it, something currently planned for early next year.

Precious metals were also taking a hammering. Gold XAU=, and silver XAG=, both down 3 percent, slumped to their lowest since 2010 as the dollar and stock markets soared.

The more growth-attuned copper CMCU3, aluminum CMAL3 and nickel CMNI3 climbed, but the stronger dollar also meant Brent oil LCOc1 fell back towards $85 a barrel as it headed for its steepest monthly drop since 2012.

A strong greenback makes commodities such as oil more expensive for buyers using other currencies, suppressing demand. There are also concerns OPEC’s big producers are getting dragged into a price war. [O/R]

“The market is asking how low the price must go before output is trimmed,” said Bjarne Schieldrop, chief commodities analyst at SEB in Oslo.

(Additional reporting by Alexander Winning in Moscow and Sam Wilkin in London; Editing by Andrew Heavens)

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Samsung Electronics seeks China comeback with first metallic smartphones

SEOUL (Reuters) – Samsung Electronics Co Ltd unveiled two mid-tier handsets with a premium design as it prepared to deliver a riposte to its low-priced Chinese rivals and reclaim its title as the top brand in the world’s biggest smartphone market.

Samsung’s smartphone woes began late last year and persisted through July-September, with its global market share down on year for the third straight quarter and its profit scraping at a three-year low.

Its struggles were prominent in China, the world’s biggest smartphone market, where Samsung was dethroned by local upstart Xiaomi Inc as the top smartphone maker in the second quarter. It does not help that Samsung’s lower-end products are too expensive and not sufficiently distinctive compared to those touted by Xiaomi and Lenovo Group Ltd, analysts say.

The Galaxy A3 and A5 are seen by analysts as Samsung’s first counter-strike. Initially launching in China in November, they will be Samsung’s first devices to feature fully metallic bodies and its thinnest smartphones to date. In size, the A3 and A5 are comparable to those of the top-of-the-line Galaxy S5, though of lesser screen resolution quality.

“I think improving specs on the mid-tier products by using features like a full metal body is something that Samsung needed to do to respond to the Chinese rivals,” said Seoul-based IBK Asset Management fund manager Kim Hyun-su, who holds Samsung shares.

Samsung classified the new phones as mid-tier, and said they will be launched in other “select markets”, without disclosing the pricing.

The announcement, combined with hopes for an earnings recovery and bigger dividends, pushed Samsung’s shares in Seoul to the highest close in more than two months. The stock has gained 10 percent since Thursday.


Success for the devices remains to be seen in China and elsewhere as Samsung’s rivals continue to make strides. In comparison to the A5, for example, Xiaomi’s Mi4 device is thicker but sports a faster processor and a higher quality display.

“We’ll have to wait and see how well these phones sell,” said Seoul-based CIMB analyst Lee Do-hoon, adding that the lack of disclosure on pricing makes the devices’ success harder to predict.

Samsung is expected to launch more devices in the near term. The company on Thursday admitted that it was too slow to respond to “rapid shifts in the competitive landscape” and vowed to deliver new products.

“For our mid to low-end smartphones we will enhance product competitiveness by differentiating our displays and materials as well as upgrading camera functionality,” Senior Vice President Kim Hyun-joon told analysts on Thursday, pledging to take efforts to keep margins at double-digit rates going forward.

Such margins may be difficult to achieve, though. Global smartphone market growth is increasingly driven by the low-end segment, making it a race to the bottom for all but companies like Apple Inc that can still command a price premium.

Samsung has vowed to improve price competitiveness, as well, which will only further erode the bottom line. Most analysts do not expect a meaningful profit recovery for the firm’s smartphone business until mid-2015 at the earliest, when the company may start seeing tangible results from a line-up revamp.

“A line-up change is a costly process, just like re-doing your home interior design,” said KTB Investment analyst Jin Sung-hye.

(Additional reporting by Sohee Kim in SEOUL; Editing by Ryan Woo)

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Sony reports narrower second-quarter loss than estimated on strong PlayStation 4 sales

TOKYO (Reuters) – Sony Corp (6758.T) posted a smaller than expected second-quarter operating loss on Friday, hailed by its finance chief as proof that the Japanese group’s restructuring program is paying off.

The company said the reduced operating loss was due in part to rising sales of image sensors to smartphone manufacturers, though the poor showing from its own Xperia phones weighed heavily on results.

Sales of the image sensors, used in Apple’s (AAPL.O) iPhones and increasingly in Chinese-made handsets, made the devices unit the biggest earner within Sony’s flagship electronics division and offset some of a 176 billion yen ($1.58 billion) impairment charge on its mobile division.

That left an overall operating loss for the three months to Sept. 30 of 85.6 billion yen, beating analyst expectations of nearly double that.

“We are on our way to achieving 400 billion yen in operating profit next year,” CFO Kenichiro Yoshida declared at a media briefing on Friday, referring to a target set in May when he announced plans to set aside 135 billion yen to restructure the bloated electronics division.

“Restructuring is progressing well and right now we think we will be able to cut 20 percent of staff at our distribution companies and 30 percent at headquarters.”

However, poor sales of the Xperia smartphone have dashed Sony’s ambitions of becoming the world’s third-biggest smartphone maker behind Apple (AAPL.O) and Samsung Electronics (005930.KS).


Yoshida said on Friday that Sony would shrink its exposure to the Chinese smartphone market, where more nimble, fast-growing rivals have dented his company’s hopes of making any significant progress in the world’s biggest smartphone market.

Sony will quit the development and sale of China-only handsets, Yoshida said, with an accompanying cut in its smartphone sales forecast to 41 million from 43 million, against sales of 39 million last year.

It also wound back its operating loss forecast by 28 billion yen. In addition to the impairment charge, that leaves the mobile operation heading for a 204 billion yen loss this financial year.

Incoming mobile division chief Hiroki Totoki, picked by Chief Executive Kazuo Hirai to turn around the ailing unit after earning his stripes at a Sony Internet subsidiary and Sony Bank, said he would focus on improving the speed of management response to changes in the market after assuming his new post on Nov. 16.

“Sony’s got the will to continue with its smartphone business and it’s hoping income from the business improves. Todoki has reformed businesses before, so he’s probably thinking of rebuilding it,” said Hideyuki Fukunaga, the chief executive of fund manager Investrust.


Sony’s shrinking slice of the smartphone market is in stark contrast to its dominance in game consoles, where its PlayStation 4 has trounced the Xbox One made by closest rival Microsoft Corp (MSFT.O) and has broken even within only a year of its release, a feat its predecessor achieved in four years.

Sony increased its annual operating profit forecast for the gaming unit by 40 percent to 35 billion yen after selling 3.3 million PlayStation 4 consoles in its second quarter. By Oct. 18 it had sold 12.3 million consoles, against 6.1 million Xbox One sales, according to market research website VG Chartz.

The operating profit outlook for Sony’s imaging, music and device units was also increased. Strong sales of image sensors and batteries, as well as a weaker yen, propelled the devices business to a quarterly operating profit of 29.6 billion yen, up 149 percent year on year.

However, a weaker yen is negative for Sony as a whole, Yoshida said, with the company losing 3 billion yen for every yen the Japanese currency falls against the dollar.

Shares of Sony closed 0.8 percent higher before the earnings announcement, compared with a 4.8 percent rise for the Nikkei benchmark index .N225 after the Bank of Japan announced further monetary easing that weakened the yen by as much as 2.5 percent to beyond 111 against the dollar.

Sony posted a net loss of 136 billion yen for the quarter and held its full-year net loss forecast at 230 billion yen.

($1 = 111.1200 yen)

(This version removes extraneous word from lead)

(Editing by David Goodman)

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Fed’s Williams: inflation targets work, but room for improvement

(Reuters) – A top Federal Reserve policymaker on Friday said global central banks have had good success with inflation-targeting, but should consider other methods that may work better in the face of low interest rates and the risk of asset bubbles.

While San Francisco Fed President John Williams was careful to say he was not advocating either of the approaches he discussed – price-level targeting and nominal-income targeting – both imply even easier monetary policy than what the Fed has used as it has battled low inflation since the Great Recession.

His comments came just two days after the U.S. central bank ended its controversial bond-buying stimulus and upgraded its assessment of the labor market, laying the groundwork for the Fed to tighten monetary policy sometime next year.

Williams is seen as a centrist policymaker whose views are largely aligned with Fed Chair Janet Yellen. His remarks, prepared for delivery to a conference held at the South African Reserve Bank, did not include comments on his outlook for the U.S. economy or monetary policy.

Most major central banks, including the Fed, currently aim at a longer-term inflation rate of 2 percent to 3 percent.

That approach, first adopted 25 years ago by New Zealand’s central bank, has been “remarkably successful at providing a nominal anchor and keeping inflation low and relatively stable during a period of severe turbulence,” Williams said. “Nonetheless, recent events have revealed some chinks in the armor of inflation targeting.”

Boosting inflation to acceptable levels is hard to pull off when interest rates are near zero, he said, as they are now and as they may be more often in the future, given slowdowns in productivity and other drags on economic growth.

That has been an ongoing challenge in the United States, where inflation has lingered below the Fed’s 2-percent target for years, despite the central bank’s extraordinarily accommodative monetary policy.

A second challenge is the ongoing risk of housing, debt, or other bubbles fueled by low interest rates. While central banks may want to raise rates to protect against such risks, he said, doing so would also lower inflation, a potentially costly move if inflation expectations are already low.

Given those two challenges, he said, price-level targeting and nominal-income targeting “may have some advantages” over inflation targeting, he said. Under price-level targeting, a central bank allows inflation to run hot for a time to make up for periods when the economy labored under too-low inflation.

Under nominal-income targeting, the Fed targets a path for GDP. Both approaches can protect against debt-fueled booms and busts, he said.

Still, he said, “it’s too early to judge” whether either would be better than inflation targeting, and they could have unintended negative consequences or could be difficult to carry out because they are hard to explain.

(Writing by Ann Saphir; Editing by Chizu Nomiyama)

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Asia shares edge up on brightening US prospects, BOJ awaited

TOKYO (Reuters) – Asian shares ticked higher on Friday on Wall Street’s cheer after upbeat U.S. growth data, while the dollar traded around four-week highs against the yen as investors awaited the outcome of the Bank of Japan’s monetary policy meeting.

The BOJ is widely expected to maintain its massive asset buying program and its upbeat forecast that inflation will hit its 2 percent target next year, suggesting no further stimulus is on the horizon. The policy decision is expected around 0230-0330 GMT (9.30-10.30 p.m. ET).

But data released early on Friday showed Japan’s annual core consumer inflation slowed for a second straight month in September, adding to evidence the BOJ is likely to miss its price goal.

“It is difficult to have a baseline scenario that forecasts anything other than ‘no further easing.’ Amid the mobilization of Abenomics policy, however, we would now be unsurprised if the BOJ did take some kind of action,” strategists at Barclays wrote in a note to clients.

Wall Street surged late in the session on Thursday, after data showed surprisingly strong third-quarter U.S. economic growth as the trade gap narrowed. But domestic demand slipped, hinting at some loss of momentum.

The data came a day after the U.S. Federal Reserve surprised markets with an optimistic assessment of the U.S. economy when it announced the end of its monthly bond buying stimulus program.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS nudged up 0.1 percent in early trade, while Japan’s Nikkei stock average .N225 added 1.2 percent.

Japanese shares also got a lift from news that Japan’s Government Pension Investment Fund is poised to approve on Friday allocation targets which aim to raise the portion of Japanese shares to 25 percent of its portfolio from the current target of 12 percent, two government sources said.

But data released before the market showed Japan’s jobless rate rose in September and the availability of jobs fell for the first time in more than three years, suggesting the labor market is starting to lose some momentum. Japanese household spending also fell more than expected in September.

Against the yen, the dollar bought 109.26, up about 0.1 percent on the day and not far from Thursday’s four-week high of 109.47.

The euro edged down about 0.1 percent to $1.2603.

In commodities trading, spot gold edged up 0.1 percent to $1,199.99 an ounce after plumbing a three-week low of $1,195.70 on Thursday.

(Editing by Shri Navaratnam)

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Citigroup sets aside $600 million more to cover legal costs

(Reuters) – Citigroup Inc (C.N) said it was setting aside an extra $600 million to cover legal expenses in the third quarter due to “rapidly evolving regulatory inquiries,” while also disclosing that it was subject to foreign exchange market probes.

Citigroup is one of six major banks that are expected to settle with Britain’s Financial Conduct Authority by mid-November over allegations that the banks manipulated foreign exchange markets.

The banks are aiming to settle for a total of around 1.5 billion pounds sterling, or $2.42 billion, sources have told Reuters. Barclays Plc, another of the six banks, said on Thursday it had set aside 500 million pounds for the third quarter to cover potential fines.

Big banks have paid billions of dollars in recent years to settle investigations into their mortgage lending, commodities and interest-rate trading, and a wide range of other activities. Authorities have broadly been trying to hold banks accountable for the excesses that led to the financial crisis.

While the legal costs have hit profits, weighed on share prices, and consumed management time, they have not forced banks to raise money by issuing shares, and are not expected to.

Citigroup, for example, is likely to make nearly $28 billion in pre-tax profits over the next five quarters, way more than enough to cover heightened legal expenses, according to analysts at Bernstein Research.

The bank’s shares fell 2 percent to $52.05 in extended trading after it revised down its third-quarter net income to $2.84 billion from the $3.44 billion it had posted on Oct. 14.

On a per-share basis, Citigroup adjusted its profit to 88 cents for the quarter. It had earlier reported a profit of $1.07 per share.

Like most banks, Citigroup does not disclose how much money it has set aside to cover legal costs that it can dip into in the future, known as its “reserves.” Bernstein Research analysts estimated before Thursday’s announcement that Citigroup’s remaining reserves were about $2.5 billion at the end of September.

Citigroup did not say specifically that the additional legal expenses were recognized in anticipation of a settlement of the foreign exchange probes.


After announcing the additional legal expense on Thursday, Citigroup said in a quarterly filing with the Securities and Exchange Commission that its estimate of possible legal costs in excess of its litigation reserves was about $5 billion, the same as it estimated for the end of the previous quarter and for year-end.

Citigroup faces additional possible settlements. Federal authorities are investigating possible money laundering through Citigroup’s Banamex USA unit, for example. The Mexican part of the Banamex business has been beset by multiple problems in the last few years, including fraudulent loans and rogue trading.

Citigroup said in the filing that it was cooperating fully with investigations into its foreign exchange business in Britain, the United States, and elsewhere.

(Reporting by David Henry in New York and Ankur Banerjee in Bangalore; Editing by Saumyadeb Chakrabarty, Robin Paxton, Dan Wilchins, Andrew Hay and David Gregorio)

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World Bank to cut 500 jobs in some units as part of revamp

WASHINGTON (Reuters) – The World Bank said it plans to cut 500 jobs over the next three years as part of a broad restructuring meant to make it more efficient but that has rattled employees.

The long-expected layoffs, along with budget cuts and internal reorganization, have sparked regular staff protests and fears of a broader revolt at a time when the bank is trying to ramp up its work in fighting the Ebola outbreak and other global challenges, and maintain its relevance.

The cuts, announced on Thursday, represent about an 11 percent reduction in the 4,500-employee workforce of the bank’s internal-facing divisions, including finance, human resources, research and security. These divisions employ about a quarter of the bank’s total staff.

The bank also plans to cancel 70 vacant job openings, though it wants to hire 250 to 300 new people, largely in its Chennai, India office, which runs some of its administrative and other operations.

Some of the 500 employees whose jobs will be cut will also be able to apply for jobs in other World Bank divisions, said the bank, which provides financial and technical assistance to developing countries.

The net result will be a loss of about 250 positions, World Bank President Jim Yong Kim said in a note to staff on Thursday.

“Staffing decisions are always challenging,” Kim said in the note, which was obtained by Reuters. “But we feel confident that the changes we are making will help us better align our staffing to our strategy, which is what our clients want and what we must deliver.”

Kim launched the first major reorganization for the lender since 1996, to make it more selective and better attuned to the needs of the governments it serves.

The reorganization has entailed $400 million in budget cuts to make the institution more competitive with development rivals and allow it to boost lending to middle-income countries.

Employees complain the bank is overly focused on minor cuts to areas such as breakfast allowances and parking instead of dealing with meaningful changes to the quality and efficiency of the bank’s lending.

Staff were also incensed after discovering the bank’s chief financial officer, who has pushed much of the cost-cutting, received a $94,000 bonus this year. To quell staff discontent, Bertrand Badre earlier this month said he would forego the $24,000 or so of the bonus that he had not yet received.

But that has not stopped employees from organizing regular work “stoppages” on Thursdays, advertised via yellow flyers of unknown provenance.

About 300 staff showed up at the latest meeting earlier this Thursday, according to one attendee, to discuss the declining quality of World Bank projects and the so-called “expenditure review,” among other issues.

The bank plans to announce further details about the budget cuts and layoffs next week, Kim said in the note to staff.

(Reporting by Anna Yukhananov; EDiting by Steve Orlofsky)

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Wall St. up on GDP, earnings; fund year-end lifts winners

NEW YORK (Reuters) – U.S. stocks rose on Thursday, boosted by a strong reading on quarterly economic growth and by another round of upbeat earnings reports including Visa, which accounted for nearly 140 points in the Dow industrials.

Despite the bullish data and the Federal Reserve’s Wednesday statement indicating the economy is strengthening, gains on the SP 500 were led by healthcare and utilities, traditionally defensive sectors.

Analysts cited mutual funds purchases of the best performing stocks for the run in those sectors, as funds close their books for the year at the end of this month. Healthcare .SPXHC and utilities .SPLRCU are both up nearly 20 percent year-to-date.

“End of year for mutual funds is most likely going to be selling losers and continue to buy winners,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.

Healthcare also got a boost by Bristol-Myers Squibb (BMY.N), up 8.9 percent to $58.98 after results from an experimental clinical trial on a lung cancer drug were encouraging.

Gross domestic product grew at a 3.5 percent annual rate in the third quarter, beating expectations. A separate report showed first-time applications for unemployment benefits rose marginally last week, but a measure of underlying trends hit its lowest level since May 2000 in a show of labor market strength.

Adding to support from earnings and economic data, market participants cited a report from the Nikkei newspaper that confirmed expectations that Japan’s Government Pension Investment Fund, considered a bellwether for other Japanese institutional investors, will cut holdings of Japanese bonds and add to local and foreign equities.

The iShares MSCI Japan ETF (EWJ.P) gained 0.8 percent and U.S. dollar denominated Nikkei futures NKc1 gained 0.7 percent.

“The more you hear demand for equities picking up globally, that is going to be a net positive for U.S. equities,” said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

“If you look globally, growth is here in the United States,” she said.

The Dow Jones industrial average .DJI rose 221.11 points, or 1.3 percent, to 17,195.42, the SP 500 .SPX gained 12.35 points, or 0.62 percent, to 1,994.65 and the Nasdaq Composite .IXIC added 16.91 points, or 0.37 percent, to 4,566.14.

Visa (V.N) jumped 10.2 percent to $236.65, the biggest boost to both the Dow and SP 500, a day after it reported adjusted earnings that topped expectations, and said the mobile payment industry would be “a great driver” for business.

MasterCard (MA.N) also posted a better-than-expected profit, while revenue was up almost 13 percent. Its shares added 9.4 percent to $83.13.

So far this reporting season, 75.5 percent of SP 500 companies have exceeded profit expectations, according to Thomson Reuters data, above the long-term average of 63 percent.


The New York Stock Exchange said it had experienced an outage in publishing and receiving trades and quotes on two of its exchanges, the latest incident to hit data processors key to trading.

Within 10 minutes of the initial notification, the exchange released a statement that said the issue, which affected the NYSE and NYSE MKT exchanges, had been resolved. Traders noted that a sudden, huge surge in equity futures volume occurred concurrently with the problems, but could not say whether it was related.

Despite the outage, trading in NYSE-listed securities appeared to be relatively unaffected, with steady volume still seen in those issues.

Overall volume on U.S. exchanges was 6.9 billion, below the daily average so far this month of 7.8 billion, according to BATS Global Markets data.

Advancing issues outnumbered declining ones on the NYSE by 1,948 to 1,116, for a 1.75-to-1 ratio on the upside; on the Nasdaq, 1,689 issues rose and 975 fell for a 1.73-to-1 ratio.

The benchmark SP 500 index posted 81 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 125 new highs and 50 new lows.

(Reporting by Rodrigo Campos, additional reporting by Chuck Mikolajczak and Caroline Valetkevitch; Editing by Nick Zieminski)

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Starbucks Americas sales disappoint on softer traffic

(Reuters) – Starbucks Corp’s (SBUX.O) early re-launch of its popular Pumpkin Spice latte drink failed to heat up business at its U.S. cafes, disappointing Wall Street and sending the company’s shares down almost 5 percent.

The world’s biggest coffee chain said a 1 percent increase in traffic contributed to a 5 percent gain in sales for Americas-region cafes open at least 13 months.

But that result fell short of the 6.2 percent same-store sales gain expected by analysts polled by Consensus Metrix.

The U.S.-dominated Americas region contributes the majority of Starbucks revenue. Sales for the region rose 6 percent for the third quarter, bolstered by a 2 percent increase in traffic.

“We grew traffic, but it was at a bit of slower clip,” Troy Alstead, Starbucks’ chief operating officer, told Reuters.

Free coffee giveaways and other battles for breakfast customers were not to blame for Starbucks’ traffic deceleration, Chief Executive Officer Howard Schultz said on a call with analysts.

“This is not a Starbucks issue. There is nothing external in terms of competitive issues,” said Schultz, who added that the rise of online and mobile shopping has resulted in fewer people visiting shopping malls and other retail areas during the winter holiday season and the weeks leading up to it.

The report from the world’s biggest coffee chain came on the heels of disappointing news from breakfast rivals McDonald’s Corp (MCD.N) and Dunkin’ Donuts parent Dunkin’ Brands (DNKN.O).

While Starbucks reported stronger same-store sales than those chains, its growth paled in comparison to Chipotle Mexican Grill Inc’s (CMG.N) outsized 19.8 percent jump in same-restaurant sales for the latest quarter.

The Seattle-based company’s net income was $587.9 million, or 77 cents per share, for the fiscal fourth quarter that ended Sept. 28. That compared with a loss of $1.23 billion, or $1.64 per share in the year ago quarter, when it booked a large charge related to ending its grocery coffee distribution deal with Kraft.

Starbucks also forecast fiscal 2015 revenue growth of 16 to 18 percent, including more than $1 billion in incremental revenue from the planned acquisition of Starbucks Japan.

It now expects earnings excluding items in the range of $3.08 to $3.13. The company previously forecast earnings growth at the low end of a range of 15 to 20 percent. The new forecast falls in the middle of that range, Chief Financial Officer Scott Maw told Reuters.

This holiday season, the company is giving away 13 “Starbucks for Life” passes to North American users of its Starbucks loyalty card or mobile pay service. Winners will get one free food or drink selection per day for 30 years.

Shares of Starbucks fell $3.68 to $73.64 in after-hours trading.

(Reporting by Lisa Baertlein in Los Angeles; Editing by Bernard Orr)

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