News Archive

S&P nears settlement on real-estate bond ratings: WSJ

(Reuters) – Standard Poor’s Ratings Services is nearing a settlement with regulators over their investigation of how the company graded real-estate bonds, the Wall Street Journal reported, citing people familiar with the matter.

The proposed deal, which could be reached as early as next month, is a joint settlement with the Securities and Exchange Commission, New York Attorney General Eric Schneiderman and Massachusetts Attorney General Martha Coakley, the newspaper reported. (

The settlement could involve a suspension of SP for several months or even a year from rating some deals and a fine of at least $60 million, the Journal said.

SP spokeswoman Catherine Mathis, representatives at the SEC, the NY AG’s office and Coakley’s office could not be reached for comment outside regular U.S. business hours.

In October, SP’s parent McGraw Hill Financial Inc said it was in “active” settlement talks with federal and state regulators over its ratings on six commercial mortgage-backed securities and took a $60 million charge in the third quarter for a possible accord.

SP suffered a huge blow to its commercial mortgage-backed securities business in 2011, after a major error on a $1.5 billion deal caused its market share to shrink.

It isn’t clear whether SP will be asked to admit wrongdoing, the Journal said.

The U.S. Department of Justice sued SP for $5 billion in February 2013, accusing it of issuing inflated ratings before the 2008 financial crisis to win more fees from issuers, and failing to downgrade debt backed by mortgage-backed securities fast enough. That lawsuit remains pending.

The rating agency also faces related lawsuits by many U.S. states. Its main U.S. rivals, Moody’s Investors Service and Fitch Ratings, do not face similar lawsuits.

(Reporting by Supriya Kurane in Bengaluru; Editing by Sunil Nair)

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Brent holds above $60 in thin Christmas trading

SINGAPORE (Reuters) – Brent crude prices held above $60 a barrel in early Asian trade on Friday as strong U.S. economic data supported the market, while a building supply glut capped gains.

On the supply side, data suggested an increasing glut as U.S. data showed crude inventories unexpectedly rose by 7.3 million barrels last week to their highest December level on record. Analysts had expected a seasonal draw. [EIA/S]

Yet on the demand side there was price supporting data as the U.S. Labor Department said weekly jobless claims fell for the fourth straight week and the Commerce Department’s final estimate of U.S. third-quarter economic growth indicated the quickest pace in over a decade.

Front-month Brent crude prices were trading at $60.40 at 0240 GMT, up 16 cents, while U.S. WTI’s front-month contract was up 24 cents at $56.08 a barrel in thin trading as many countries were still on Christmas holiday.

(Editing by Himani Sarkar; Editing by Himani Sarkar)

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Japan inflation slows as oil price falls, keeps BOJ under pressure

TOKYO (Reuters) – Japanese annual core consumer inflation slowed for a fourth straight month in November due largely to sliding oil prices, highlighting the challenges the central bank faces in achieving its 2 percent inflation target.

Factory output unexpectedly fell and household spending remained weak, separate data showed, suggesting that any rebound in the economy from recession will be mild and fragile.

The core consumer price index (CPI), which excludes volatile fresh food but includes oil products, rose 2.7 percent in November from a year earlier, matching a median market forecast, government data showed on Friday.

Stripping out the effects of a sales tax hike in April, core consumer inflation was 0.7 percent, slowing from 0.9 percent in October and far below the Bank of Japan’s 2 percent target.

Sharp falls in fuel and gasoline prices were largely behind the slowdown in inflation, the data showed.

Separate data showed industrial output unexpectedly fell 0.6 percent in November, down for the first time in three months and compared with a median estimate of a 0.8 percent gain.

In a glimmer of hope, however, manufacturers surveyed by the government expect output to rise 3.2 percent in December and increase 5.7 percent in January, the data showed.

BOJ Governor Haruhiko Kuroda stressed last week that Japan was on track to hit the price goal, shrugging off speculation that a recent plunge in oil prices would weigh on consumer prices and force him to ease policy again early next year.

But many analysts remain doubtful that the BOJ can meet its pledge of accelerating inflation to 2 percent in the next fiscal year beginning in April 2015.

The job market continued to tighten, reflecting the recovery.The jobless rate stood at 3.5 percent in November, flat from October, and job availability hit a 22-year high. The number of part-time workers exceeded 20 million for the first time since relevant data became available in 1984, suggesting that companies will have to raise wages to lure employees.

Consumers have yet to loosen their purse strings given slow wage growth. Household spending fell 2.5 percent in the year to November, against a market forecast for a 3.8 percent drop.

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Russia says ruble crisis over as reserves dive, inflation climbs

MOSCOW (Reuters) – Russia said on Thursday its currency crisis was over even though its forex reserves have plunged and annual inflation has climbed above 10 percent, adding to the problems facing the government as it fights its worst economic crisis since 1998.

The ruble plunged to all-time lows last week on heavy falls in the price of oil, the backbone of the Russian economy, and Western sanctions over the Ukraine crisis that made it near impossible for Russian firms to borrow on Western markets.

But it has since rebounded sharply after authorities took steps to halt its slide and bring down inflation, which after years of stability threatens President Vladimir Putin’s reputation for ensuring the country’s prosperity.

Those measures included a hike in interest rates to 17 percent from 10.5 percent, curbs on grain exports and informal capital controls.

“The key rate was raised in order to stabilize the situation on the currency market. … That period has already, in our opinion, passed. The rouble is now strengthening,” Finance Minister Anton Siluanov told the upper house of parliament on Thursday.

He added that interest rates would be lowered if the situation remained stable.

Standard Poor’s credit ratings agency said this week it could downgrade Russia to junk as soon as January due to a rapid deterioration in “monetary flexibility”.

Keen to avert a downgrade, Russia said it had started talks with ratings agencies to explain the government’s actions. Siluanov said the budget deficit next year would be “significantly more” than the 0.6 percent of gross domestic product originally planned.

The ruble slumped to 80 per dollar in mid-December from an average of 30-35 in the first half of 2014. It has strengthened in the last few days to trade as strong as 52 per dollar on Thursday, in part thanks to government pressure on exporters to sell hard currency.

Russians have tracked the exchange rate closely since the collapse of the Soviet Union, when hyper-inflation wiped out their savings over several years in the early 1990s. The central bank had to spend heavily in recent months to prop the currency.

Last week, Russia’s gold and foreign currency reserves dropped by as much as $15.7 billion to below $400 billion for the first time since August 2009 and down from over $510 billion at the start of the year.

Analysts said around $5 billion were spent on propping up the ruble, while around $7 billion was due to foreign currency loaned to banks as part of repo operations, meaning the money will be returned to the regulator at a later stage.


Russia imports large amounts of food, high-tech equipment and cars. As the ruble weakens it has to pay more for its imports, which pushes up inflation at home and in turn encourages people to protect their earnings by buying dollars, thereby adding to the pressure on the rouble.

Putin’s economic aide Andrei Belousov said on Thursday that annual inflation was at 10.4 percent and could reach around 11 percent by the end of the month, surpassing the psychologically key 10 percent mark for the first time since the 2008/09 global financial crisis.

Prices for some goods, such as beef and fish, have risen 40 to 50 percent in recent months after Russia slapped an import ban on certain Western food products in retaliation for European Union and U.S. sanctions over Ukraine.

Bank officials say they saw a spike in withdrawals from ruble deposits in mid-December as Russians rushed to convert their savings into hard currencies.

The deputy head of top state lender Sberbank, Alexander Torbakhov, said this week that demand for hard currencies spiked to five times usual levels last week, when the rouble plummeted to all-time lows.

But he added that the bank had seen depositors returning in large numbers after most lenders ramped up their deposit rates, some offering as much as 20 percent in annual interest.

“We have managed to cope (with deposit withdrawals). Can the situation be repeated? Yes, it can,” Torbakhov said, declining to discuss what could trigger a new flurry of withdrawals.

Analysts say that apart from oil prices, they will watch ratings agency decisions.

SP warned this week there was at least a 50 percent chance it would cut Russia’s sovereign rating below investment grade within 90 days. Moody’s ratings agency warned this week that Russia’s GDP could contract by 5.5 percent in 2015 and 3 percent in 2016 due to weaker oil prices and the ruble’s slide.

(Writing by Dmitry Zhdannikov; Editing by Hugh Lawson)

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Russian ruble strengthens in thin trade

MOSCOW (Reuters) – Russia’s rouble strengthened on Thursday as exporters sold foreign currency in response to government pressure and to meet tax payments, but trading volumes were thin as many Western markets were closed for the Christmas Day holidays.

At 0825 GMT (3.25 a.m. EST), the rouble was 1.7 percent stronger against the dollar at 52.55 RUBUTSTN=MCX and gained 1.5 percent to trade at 64.53 versus the euro EURRUBTN=MCX.

The rouble earlier hit its highest against the dollar and euro since Dec. 4 and has trimmed its losses against the greenback to around 37 percent this year.

The Russian currency is supported towards the end of each month by tax payments to the state budget that require Russian exporters to convert part of their foreign-currency earnings into rubles.

Forex sales have also risen after the government told large exporters on Tuesday that by March 1 they must bring their net foreign exchange assets back to the levels of Oct. 1.

Analysts, however, are cautious on the near-term outlook for the rouble, saying much depends on oil prices, which remain weak, and progress in talks to secure a lasting peace in eastern Ukraine.

“We think the short-term upside for the rouble is limited,” Dmitry Polevoy at ING Bank said in a note, also citing the risk of Russia being downgraded to ‘junk’ status by ratings agency SP as a factor weighing on investors’ mood.

The central bank has spent over $80 billion defending the rouble this year amid a slump in oil prices and Western sanctions over the Ukraine crisis that have restricted Russian firms’ access to international capital markets.

It said on Thursday that it and the Finance Ministry had not conducted forex market interventions on Dec 23.

Russian shares were mixed on Thursday, largely reflecting the moves in the rouble.

The dollar-denominated RTS index .IRTS was up 2.4 percent to 834 points, while its rouble-based peer MICEX traded 0.5 percent lower at 1,393 points.

Shares in the country’s second-largest bank VTB (VTBR.MM) rose over 5 percent. The Finance Ministry said on Thursday it was doing everything it could to ensure VTB gets money from the National Wealth Fund by the end of the year.

For rouble poll data see FXRUB FXEURRUB FXRUS

For Russian equities guide see RU/EQUITY

For Russian treasury bonds see 0#RUTSY=MM

Russia in graphics:

(Reporting by Alexander Winning; Editing by Vladimir Soldatkin)

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Subaru scraps plan to shift Crosstrek production to U.S.: source

TOKYO (Reuters) – Fuji Heavy Industries (7270.T), the maker of Subaru brand cars and SUVs, has scrapped a plan to shift production of the new XV Crosstrek to its U.S. plant and will instead make the SUV in Japan, a source familiar with the company’s production plans said.

Fuji Heavy, which has a policy of making cars in markets where they are sold, decided to make the new vehicle in Japan because of capacity constraints in Indiana and the relatively high sales price of the crossover SUV, which makes domestic production more viable, the source said.

Pricing for the Crosstrek starts at just under $25,000 for the limited edition and just under $30,000 for the hybrid version.

The company had originally planned to make about 65,000 XV Crosstrek vehicles a year in Lafayette, Indiana, but will instead assemble them at its plant in Gunma prefecture, northwest of Tokyo, according to production plans reviewed by Reuters and a person with knowledge of the situation, who asked not to be named.

The automaker has achieved record-breaking sales in the United States, with a 21 percent surge in the year through November compared with a year earlier.

A Fuji Heavy spokesman said he could not comment on production plans for individual vehicles but said there was no change to the company’s overall strategy of localizing production.

Fuji Heavy’s decision to keep Crosstrek production in Japan follows moves by other Japanese automakers to shift some production back home as the yen weakens.

Since mid-October, the yen has lost about 11 percent against the U.S. dollar and now trades above 120 per dollar, its lowest since 2007.

Fuji Heavy is planning to begin manufacturing the Crosstrek in Japan around April 2017, the source said.

Toyota Motor Corp (7203.T) announced in late 2013 that it would end its arrangement with Fuji Heavy for producing Camry sedans at the Indiana plant, freeing up capacity for Subaru models.

Toyota is considering moving production of some new Camrys from its Kentucky plant to Japan, sources familiar with the situation told Reuters this week.

Nissan Motor Co (7201.T) CEO Carlos Ghosn told reporters last week that the automaker would take advantage of the weakened yen to return production of its popular Rogue SUV to a Japanese plant for export to the United States.

(Writing by Mari Saito and Kevin Krolicki; Editing by Edmund Klamann)

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Wall St. ends flat in short session, Dow ekes out record close

NEW YORK (Reuters) – U.S. stocks closed flat in a short session on Wednesday as investors found few reasons to push major indexes to their sixth straight day of gains despite strength in biotechs and bullish labor market data.

While both the SP 500 and Dow touched intraday records, and the Dow closed at a slight record, the day’s moves were slight and volume was light with many market participants already out for the Christmas holiday.

In a session that ended three hours early, about 2.5 billion shares traded on all U.S. platforms, according to BATS exchange data, well below the month-to-date average of 7.66 billion. Markets will reopen Friday.

Equities have been on a hot streak of late, with the Dow closing above 18,000 for the first time ever on Tuesday. The SP 500 rose 5.5 percent over the past six sessions and has notched 51 closes this year, the most since 1995 and the fourth best in history.

Those gains have come on central bank assurances and improving economic data, a trend that continued with jobless claims on Wednesday. Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 280,000, their fourth straight week of declines, and below the forecast of 290,000.

“Equities are heading towards the year-end finale in a good position,” said Terry Sandven, senior equity strategist at U.S. Bank Wealth Management in Minneapolis. “Fundamental and macro factors are supportive of higher equity prices, and clearly today if you look at the claims data which was generally in line with expectations, it still points toward an improving labor market.”

Biotechs were the big gainers of the day, with the Nasdaq Biotech index .NBI up 1.6 percent in a partial rebound from the drop of nearly 7 percent over the previous two sessions. Celgene Corp (CELG.O) rose 3.3 percent to $109.60 while Gilead Sciences (GILD.O) added 2 percent to $91.29.

The Dow Jones industrial average .DJI rose 6.1 points, or 0.03 percent, to 18,030.27, the SP 500 .SPX lost 0.29 points, or 0.01 percent, to 2,081.88 and the Nasdaq Composite .IXIC added 8.05 points, or 0.17 percent, to 4,773.47.

Both the Dow and SP closed out their sixth straight daily advance, the longest streak for the benchmark SP since June.

Energy shares continued their recent weakness as crude oil CLc1 lost 3.5 percent to $55.15 per barrel and hovered near its lowest level since 2009. The SP energy index .SPNY fell 0.8 percent; Exxon Mobil (XOM.N) lost 0.9 percent to $93.78 while ConocoPhillips (COP.N) slid 1.3 percent to $70.13.

Declining issues outnumbered advancing ones on the NYSE by 1,542 to 1,453, for a 1.06-to-1 ratio on the downside; on the Nasdaq, 1,550 issues rose and 1,090 fell for a 1.42-to-1 ratio favoring advancers.

The benchmark SP 500 index was posting 78 new 52-week highs and 5 new lows; the Nasdaq Composite was recording 96 new highs and 24 new lows.

(Additional reporting by Chuck Mikolajczak; Editing by Meredith Mazzilli)

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U.S. retailers likely to just meet holiday sales forecasts: experts

CHICAGO (Reuters) – U.S. consumers have not turned out in force for the final shopping days before Christmas, suggesting that traditional retailers will just meet industry sales forecasts in a season marked by deep discounts and growing encroachment from online rivals led by Inc (AMZN.O).

Super Saturday – the last pre-Christmas Saturday, which fell on Dec. 20 this year – failed to make up for spotty performance this season. That included a disappointing Black Friday, the day after the U.S. Thanksgiving holiday that is typically one of the busiest shopping days of the year.

“The past weekend will not save this holiday season,” said Craig Johnson, president of the retail and consumer product-oriented private equity fund Customer Growth Partners. “But combined with online sales, it would certainly save the year from being a dismal one.”     

Johnson said if sales hold up in the next few days and the week after Christmas, retailers may finish close to his company’s November and December forecast of 3.4 percent growth in store and online sales. He estimates that Super Saturday weekend sales, which include store and online, rose 2.5 percent to $42 billion this year.

The National Retail Federation (NRF), the leading industry trade body, forecast a 4.1 percent rise in holiday sales this year, including online and store sales. The NRF is hoping to meet its expectations amid falling gasoline prices, lower U.S. unemployment and consumer spending which showed signs of increasing during the first two weeks of December.

Promotions heated up in the past five days but that did not boost store traffic materially, said Keith Jelinek, senior managing director of FTI Consulting.

Most retailers offered an additional 20 to 30 percent off on top of 30 to 40 percent discounts on a wide range of products, Reuters found during a series of visits to three dozen stores in Chicago over the weekend.

Best-sellers during the season included Apple Inc’s (AAPL.O) iPhone 6, toys based on the Walt Disney Co (DIS.N) animated movie “Frozen,” and winter clothing such as coats from retailers like Macy’s Inc (M.N) after a cold spell last month.

Home appliances including mixers, coffee makers and food processors from chains like Home Depot Inc (HD.N), Lowe’s Companies Inc (LOW.N) JC Penney Co Inc (JCP.N) and Target Corp (TGT.N) were also particularly popular, industry-watchers said.


Super Saturday sales rose 0.5 percent to $9.15 billion from $9.1 billion a year ago, according to early estimates by ShopperTrak, which surveys spending at brick-and-mortar stores. This fell short of the firm’s $10 billion sales forecast for the day, founder Bill Martin told Reuters.

Analytics firm RetailNext, which tracks specialty stores and large footprint retailers, said sales dropped 8.9 percent over the weekend versus a year ago, and store traffic dipped 10.2 percent. However, customers who did hit the stores spent more. Specialty stores in the United States include chains like Best Buy Co Inc (BBY.N) and large footprint retailers include Wal-Mart Stores Inc (WMT.N) and Target.

“Even with this drop in growth, Super Saturday was still better compared to Black Friday,” said Shelley Kohan, vice president of retail consulting at RetailNext. “It generated a tad more in terms of sales on slightly less traffic.”

Promotions earlier in November took a toll on in-store sales during the Thanksgiving weekend, when total spending fell by 11 percent from a year earlier.

Highly discounted categories like consumer electronics and home improvement, which have had a strong season this year, continued to do well on Super Saturday.

The apparel segment, which has had one of its worst years, also picked up momentum, although not enough to offset slower growth in the past two months.

Experts including Craig Johnson said the growth in apparel is occurring on the back of heavily discounted pricing, so margins this year will be weak in most of the category.

FTI Consulting’s Jelinek pointed to a jump in online shopping this past weekend which, he said, will bring relief to retailers with physical stores who also have an online presence.

“The majority of retailers will be flat to negative in their bricks and mortar business but their online sales will show significant double-digit increases. This should boost the overall sales number.”

(Additional reporting by Samantha Sunne in New York; editing by Michele Gershberg and Matthew Lewis)

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Oil slides, Brent tests $60 as data shows glut building

NEW YORK (Reuters) – Global oil markets fell again on Wednesday in holiday-thin trade, extending more than a week of see-saw volatility as traders jousted over whether a growing supply glut had been fully priced in.

Oil whipped lower early in the day and tested new lows after U.S. data showed crude inventories unexpectedly rose by 7.3 million barrels last week to their highest December level on record. Analysts had expected a seasonal draw. [EIA/S]

“It’s a Christmas flood of oil at a time when refiners and producers usually are letting inventories get lower for end-of-year tax reasons,” said Phil Flynn, analyst at Price Futures Group in Chicago. “But with this flood of supply there’s no place to put it.”

U.S. crude’s front-month contract fell $1.28 to settle at $55.84 a barrel at 1:30 p.m. EST (1730 GMT), when the New York Mercantile Exchange shut early for the Christmas holiday. Around 180,000 contracts were traded, about half the recent norm.

Front-month Brent fell $1.45 to $60.24 a barrel after a session low of $59.37. Brent has fluctuated wildly on either side of $60 a barrel for the past seven days, but has yet to break definitively below that psychological level.

Oil prices slid throughout the day, reversing all the previous day’s gains that were triggered by data showing the U.S. economy had grown 5 percent in the third quarter, the fastest pace since 2003 and much faster than the 3.9 percent annual rate previously reported by the Commerce Department.

New York diesel futures, also called ULSD outperformed the oil complex for much of the day, after weekly data showed Northeast stocks were still unseasonably low even though atypically warm weather has curbed demand. But a late wave of profit-taking hit the close, taking the day’s losses past 3 percent.

Oil prices this year have collapsed to their lowest since the financial crisis. Weak demand and growth in U.S. shale output has created a global supply glut that OPEC kingpin Saudi Arabia has said it will not erase by cutting its own output.

Traders are struggling to figure out how low prices can go, fueling a spike in volatility and wild price swings. Brent crude has averaged a $3.30 a barrel intra-day trading range over the past seven days, $1 more than its average in November.

(Additional reporting by Keith Wallis in Singapore and Simon Fallush in London; Editing by Jason Neely and David Gregorio)

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