News Archive


Apple iPhone sales trample expectations as profit sets global record


(Reuters) – Apple Inc (AAPL.O) quarterly results smashed Wall Street expectations with record sales of big-screen iPhones in the holiday shopping season and a 70 percent rise in China sales, powering the company to the largest profit in corporate history.

The company sold 74.5 million iPhones in its fiscal first quarter ended Dec. 27, while many analysts had expected fewer than 70 million. Revenue rose to $74.6 billion from $57.6 billion a year earlier.

Profit of $18 billion was the biggest ever reported by a public company, worldwide, according to SP analyst Howard Silverblatt. Apple’s cash pile is now $178 billion, enough to buy IBM (IBM.N) or the equivalent to $556 for every American.

Apple Chief Executive Officer Tim Cook said the Cupertino, California-based company would release its next product, the Apple Watch, in April.

Shares rose about 5 percent to $114.90 in after-hours trade.

Daniel Morgan, senior portfolio manager at Apple-shareholder Synovus Trust Company in Atlanta, Georgia, said that the report was a good sign in a quarter where big tech companies such as IBM and Microsoft Corp (MSFT.O) have disappointed.

Apple Chief Financial Officer Luca Maestri told Reuters in an interview that the company did not sell more iPhones in China than the United States, despite some earlier predictions by research analysts.

But the big-screen iPhone 6 and 6 plus drove revenues in China were up 70 percent in the quarter from a year earlier. The company’s success in the competitive Chinese market can be attributed to its partnership with China Mobile Ltd (0941.HK), the largest global mobile carrier, and the appeal of the larger screen size of the iPhone 6 and 6 Plus.

Maestri said he does not expect Apple to struggle because of China’s slipping economic growth. “We haven’t seen a slowdown,” he added.

Maestri also said the company doubled iPhone sales in Singapore and Brazil.

Apple will reach 40 company stores in greater China by mid-2016, Maestri told analysts on a conference call.

Carolina Milanesi, an analyst with Kantar Worldpanel ComTech, also lauded a 14 percent rise in unit sales of Apple Macintosh computers and sales of older iPhone models.

Apple was well positioned for the current quarter in China, she added, which will include the Chinese New Year holiday and reflect Apple’s attempts to sell through new channels.

Apple reported net profit of $18.02 billion, or $3.06 per diluted share, compared with $13.07 billion, or $2.07 per share, a year earlier. That topped expectations of $2.60 per share, according to Thomson Reuters I/B/E/S. Analysts had expected revenue of $67.69 billion.

Maestri said that Apple faced “a clear headwind” from the strong dollar but that it had included the challenge in its forecasts. Apple predicted revenue of $52 billion to $55 billion in its fiscal second quarter, compared with Wall Street’s average target of $53.79 billion.

Cook said that the company’s new mobile payment service, Apple Pay, which lets customer buy products from select merchants with their phones, was in its “first inning” and the company would consider adding new features as it looked at expanding outside the United States.

(Reporting by Christina Farr in San Francisco; Additional reporting by Supantha Mukherjee in Bengaluru and Caroline Valetkevitch in New York; Editing by Peter Henderson, Ted Kerr and Lisa Shumaker)

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Oil jumps on weaker dollar; traders wary of stock build


NEW YORK (Reuters) – Oil jumped as much as 3 percent on Tuesday as a weak dollar propped up commodities, but crude prices came off their highs in post-settlement trading on signs of another big U.S. supply build last week.

Oil prices were up most of the day, tracking the dollar, despite concerns about rising U.S. inventories. While some traders expressed surprise with the market’s behavior, others shrugged it off as they did not think oil was on the cusp of an extended recovery because of nagging worries about the global oversupply in crude.

The American Petroleum Institute (API), an industry group, said after the market’s close that U.S. oil stockpiles surged by nearly 13 million barrels last week. [API/S]

A Reuters poll showed U.S. crude stockpiles rose by 4.1 million barrels, on average, in the week to Jan. 23. That would add to the previous week’s build of over 10 million barrels, the biggest in 14 years, which had already brought inventories to the highest level on record for this time of year. [EIA/S]

Genscape, which tracks oil inventories, reported a near 2.4 million-barrel build last week in Cushing, the Oklahoma delivery point for U.S. crude futures, a market source said.

Official data on last week’s inventories will be reported by the U.S. Energy Information Administration on Wednesday.

“Given the expectations in supply, it’s kind of surprising to see the market pop this much today,” said Andrew Lipow, president at Lipow Oil Associates in Texas.

“There’s probably some short-covering after the extended selloff we’ve had for weeks now, but I don’t think fundamentally anything’s changed.”

The dollar retreated from an 11-year high in the previous session, falling about 1 percent to the euro EUR= after weaker-than-expected orders for U.S. durable goods in December. [USD/]

Benchmark Brent crude LCOc1 settled up $1.44, or 3 percent, at $49.60 a barrel after rallying to just a penny short of $50. The last time Brent was at $50 was on Jan. 22.

U.S. crude futures CLc1 finished up $1.08, or 2.4 percent, at $46.23 a barrel, after a session peak at $46.55.

The API data, released two hours after the close in U.S. crude, pared the trading gains. Brent was at $49.25 a barrel by 5:00 p.m. ET, while U.S. crude traded below $45.80.

Trading volumes in U.S. oil futures were about half their usual levels, with many traders in New York working away from their desks after a blizzard swept across the northeastern United States. Thomson Reuters data showed less than 300,000 lots traded for the front-month contract in U.S. crude.

Oil prices have slumped nearly 60 percent since peaking in June, driven lower by ample supplies from the U.S. shale oil boom and the Organization of the Petroleum Exporting Countries’ decision not to cut output.

OPEC Secretary-General Abdullah al-Badri said on Monday prices might have bottomed after the seven-month selloff, and warned of a possible spike to $200 a barrel.

Investment banks, however, remain bearish on oil. Swiss bank UBS lowered its 2015 forecasts for Brent to $52.50 a barrel and WTI to $49 a barrel.

Goldman Sachs’ chief commodity analyst said in a research note that demand growth in China and other emerging economies was set to slow.

(Additional reporting by Himanshu Ojha in London and Florence Tan and Henning Gloystein in Singapore; Editing by Michael Urquhart, Meredith Mazzilli, Marguerita Choy and Andre Grenon)

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BNY Mellon may face bribery charges over sovereign wealth funds: filing


(Reuters) – Bank of New York Mellon Corp (BK.N) has disclosed in a filing that U.S. regulators are considering charging it with violating U.S. foreign bribery laws after an investigation into internships it gave to relatives of sovereign wealth fund officials.

In a regulatory filing on Friday, BNY Mellon said that U.S. Securities and Exchange Commission staff had notified it that they would recommend the SEC charge the bank over alleged violations of the Foreign Corrupt Practices Act.

A case from the SEC would be the first to come from a long-running investigation into banks’ dealings with sovereign wealth funds.

BNY Mellon said the so-called Wells notice came after SEC staff provided a similar notice in the third quarter of 2014 to some current and former employees about possible charges.

A Wells notice indicates the SEC believes civil charges may be warranted and gives a recipient a chance to mount a defense.

BNY Mellon said the employees’ Wells notice indicated the SEC was considering charges in connection with the internships. The bank received a similar notice in the fourth quarter, it said.

The bank said it is cooperating with the investigation and did not believe the outcome of the investigation will materially affect its business or finances.

It is unclear which sovereign wealth funds are at issue or which employees could face charges.

A spokesman for BNY Mellon declined to comment Tuesday beyond the disclosure filing, and representatives of the SEC did not respond to requests for comment.

The SEC had in 2011 sent letters to several financial institutions asking for information about their business with state-owned investment funds as part of a foreign bribery probe.

U.S. authorities have also undertaken investigations in recent years into banks’ overseas hiring practices and whether they violate the FCPA.

Other banks that have disclosed FCPA investigations related to their hiring practices include Goldman Sachs Group Inc (GS.N), JPMorgan Chase Co (JPM.N) and Deutsche Bank AG (DBKGn.DE).

Goldman Sachs and Deutsche Bank declined to comment Tuesday, while a JPMorgan spokeswoman did not respond to a request for comment.

(Reporting by Nate Raymond in New York and Aruna Viswanatha in Washington, D.C.; Editing by Alan Crosby)

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U.S. business spending weakens, but consumers upbeat


WASHINGTON (Reuters) – U.S. business investment spending fell for a fourth straight month in December, a sign that slowing global growth may be weighing on the economy, but consumers remained upbeat and new home sales in December hit their highest level since June 2008.

“The drop in (capital spending) will weigh on growth, though stronger consumer spending should keep GDP from slowing too much,” said Chris Low, chief economist at FTN Financial in New York.

The Commerce Department said non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dropped 0.6 percent last month after a similar decline in November. Orders for these so-called core capital goods started falling in September, the longest downward stretch since 2012.

Economists, who had expected a 0.5 percent gain, said the surprise drop last month likely reflected weak overseas demand for a wide range of U.S. capital goods and declining demand at home for energy-related equipment.

A strengthening U.S. dollar may also have been a factor, analysts said. The dollar gained 12.8 percent last year and is up 4.2 pct so far in 2015 against a basket of currencies, making U.S. exports more expensive.

The dour business investment report came as construction and mining equipment maker Caterpillar Inc (CAT.N) reported a nearly 25 percent decline in fourth-quarter profit and warned that falling oil prices would hurt its business in 2015.

A number of U.S. oil producers already have curtailed drilling activity and announced job cuts after crude oil prices fell about 60 percent since June.

U.S dollar strength is also undermining corporate profits. Procter Gamble Co (PG.N), the world’s largest household products maker, said full-year sales were likely to fall 3.0 to 4.0 percent, due to the rising dollar. Microsoft Corp (MSFT.O) on Monday said the dollar was a factor behind a decline in its quarterly earnings as well.

U.S. stock prices ended lower with the SP 500 .SPX down 1.34 percent. The 30-year U.S. Treasury yield fell to a record low of 2.33 percent, and the U.S. dollar fell against a basket of major currencies .DXY.

FEDERAL RESERVE DECISION DUE WEDNESDAY

Weak equipment spending is likely to catch the attention of Federal Reserve officials, who have been eyeing mid-year for a possible interest rate rise. Fed officials are due to conclude a two-day policy meeting on Wednesday.

“This is … evidence that the dollar’s strength is starting to show up in terms of weaker orders, a new soft spot for manufacturing that perhaps will give some of the policymakers pause if not worry,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.

Shipments of core capital goods, which are used to calculate equipment spending in U.S. gross domestic product, fell 0.2 percent last month after slipping 0.6 percent in November and 0.9 percent in October.

Economists said that suggested a downside risk to their fourth-quarter economic growth estimates, most of which currently hover around a 3.0 percent annual pace. The government will publish its first snapshot of fourth-quarter GDP on Friday.

CONSUMER SPIRITS HIGH

On the brighter side, U.S. consumer confidence strengthened to its highest level in more than seven years in January on growing optimism about the jobs market and the overall economy, according to industry group, the Conference Board, on Tuesday.

The Board’s index of consumer attitudes jumped to 102.9 from an upwardly revised 93.1 in December. Economists expected a January reading of 95.1, according to a Reuters poll.

U.S. services sector growth also rebounded modestly in January but companies reported the weakest level of new business growth in more than five years, according to private data vendor Markit Tuesday.

Markit’s preliminary Purchasing Managers Index for the service sector rose to 54.0 in January from 53.3 in December, which had matched a 10-month low. The January figure marked the first rise in the index since it peaked in June with a reading of 61.

Another report from the Commerce Department showed new home sales jumped in December to their highest level since 2008. The increase came as mortgage interest rates trended lower, fueling a jump in home loan applications this month.

“January’s impressive surge in mortgage applications suggests we may see continued momentum in new home sales,” said Derek Lindsey, an analyst at BNP Paribas in New York. A fourth report on Tuesday though showed a slowdown in house price gains. The SP/Case Shiller composite index of 20 metropolitan areas rose 4.3 percent in November from the prior year, the slowest since October 2012.

(Reporting by Lucia Mutikani; Additional reporting by Richard Leong in New York; Editing by Paul Simao)

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Amgen profit tops expectations on Enbrel sales, tax credit


(Reuters) – Amgen Inc (AMGN.O) on Tuesday reported higher-than-expected fourth-quarter profit, driven by strong sales of its blockbuster rheumatoid arthritis drug Enbrel and a tax credit.

Despite pressure on overseas sales from the strong dollar that has put a crimp in pharmaceutical company profits, Amgen reiterated the 2015 forecast it provided in October for adjusted earnings of $9.05 to $9.40 per share on revenue of $20.8 billion to $21.3 billion. Analysts are estimating earnings of $9.28 per share and revenue of $20.87 billion.

Amgen is less exposed to foreign exchange fluctuations than other large drugmakers as only about 25 percent of its sales come from outside the United States.

Excluding items, Amgen earned $2.16 per share, topping analysts’ average expectations by 11 cents, according to Thomson Reuters I/B/E/S. The results were helped by a research and development tax credit that came through in the quarter, adding about 10 cents per share to earnings, the company said.

On the positive side, RBC Capital Markets analyst Michael Yee said “they affirmed the strong 2015 outlook.” But, he added, a good chunk of the earnings beat “came from a tax credit that was not in the guidance.”

The world’s largest biotechnology company posted a net profit of $1.29 billion, or $1.68 per share, compared with a profit of $1.02 billion, or $1.33 per share, a year ago.

Revenue rose 6 percent to $5.33 billion, edging past Wall Street estimates of $5.19 billion.

Enbrel sales rose 11 percent in the quarter to $1.34 billion, topping analyst expectations of $1.21 billion.

The white blood cell boosters Neupogen and Neulasta had combined worldwide sales of $1.45 billion. The older Neupogen is expected to face competition this year from the first U.S. approved biosimilar version.

Kyprolis, the multiple myeloma drug Amgen acquired with its $10 billion purchase of Onyx Pharmaceuticals, had sales of $91 million, falling short of Wall Street estimates of $109 million.

However, based on positive clinical trial data, Amgen said it filed applications with U.S. and European regulators to approve Kyprolis use earlier in the disease, after one prior treatment has failed rather than two. This should boost future sales.

U.S. approval decisions on two new drugs, ivabradine for heart failure and T-Vec for melanoma, will be delayed by three months each as regulators asked for additional data, which Amgen said it has supplied.

(Reporting by Bill Berkrot; Editing by Diane Craft)

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Wall Street falls 1 percent on earnings; Apple rallies late


NEW YORK (Reuters) – U.S. stocks closed more than 1 percent lower on Tuesday as disappointing results from a number of bellwether companies pointed to weakening conditions, while an unexpected decline in durable goods orders also weighed on sentiment.

The day’s losses were broad, with nine of the 10 primary SP 500 sectors lower on the day, though tech .SPLRCT was the biggest drag by far. The group lost 3.3 percent in its biggest one-day drop since November 2011, in the wake of results from industry bellwether Microsoft. Industrial shares fell, led by Caterpillar.

The two names were the biggest decliners on the Dow, but fellow components Procter Gable (PG.N) and DuPont Co (DD.N) also tumbled.

Microsoft (MSFT.O) fell 9.3 percent to $42.66 a day after the main engine of its historic earnings power – selling Windows and Office to big businesses – showed signs of waning.

Heavy machinery marker Caterpillar (CAT.N) gave an outlook below expectations, warning the recent plunge in oil prices would hurt its energy equipment business. Shares dropped 7.2 percent to $79.85.

“There’s clearly a lot of froth baked into certain areas of tech, while Caterpillar is giving tangible evidence that things can go down more than they already have,” said Jim O’Donnell, chief investment officer at Forward in San Francisco.

“People may not be aware of the sensitivities that heavy industrial guys have to the oil cycle, or what the ripple effects of oil’s weakness will be. There are a lot of companies that are going to be adversely impacted.”

With 24 percent of the SP 500 having reported, 70.6 percent of companies have topped earnings expectations while 55.5 percent have beaten on revenue, according to Thomson Reuters data. That compares with the long-term average of 63 percent for earnings and 61 percent for revenue.

Still, many multinational companies disappointed this quarter, with the stronger dollar a common culprit. PG was one of the companies pressured by a stronger dollar, sending shares down 3.4 percent to $86.49.

After the market closed, Apple Inc (AAPL.O) rose 5.4 percent to $115 after it posted better-than-expected revenue growth, along with record sales of its iPhone line.

ATT Inc’s (T.N) revenue rose more than expected in the latest quarter. Yahoo Inc (YHOO.O) reported its results and unveiled a plan for a tax-free spin-off of its 15 percent stake in China’s Alibaba Group Holding Ltd (BABA.N), a first step in a highly-anticipated process to unwind the holding, valued at roughly $40 billion.

Shares of ATT rose 1.8 percent to $33.40 after the bell, while Yahoo added 7.7 percent to $51.69.

The Dow Jones industrial average .DJI fell 291.49 points, or 1.65 percent, to 17,387.21, the SP 500 .SPX lost 27.54 points, or 1.34 percent, to 2,029.55 and the Nasdaq Composite .IXIC dropped 90.27 points, or 1.89 percent, to 4,681.50.

Adding to the day’s weakness, a gauge of U.S. business investment plans unexpectedly fell in December, another sign that slowing global growth and falling crude oil prices were having an impact on the economy.

On the plus side, consumer confidence posted its highest reading since August 2007. That helped indexes recover from their lows of the session; the Dow earlier fell as much as 2.2 percent.

About 6.5 billion shares traded on all U.S. platforms, according to BATS exchange data, below the month-to-date average of 7.2 billion.

Declining issues outnumbered advancing ones on the NYSE by 1,726 to 1,337, for a 1.29-to-1 ratio; on the Nasdaq, 1,710 issues fell and 1,029 advanced, for a 1.66-to-1 ratio favoring decliners.

The SP 500 posted 41 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 57 new highs and 49 new lows.

(Editing by Nick Zieminski)

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JPMorgan profited from soaring Swiss franc: Bloomberg


(Reuters) – JPMorgan Chase Co’s (JPM.N) currency traders made a profit of as much as $300 million when the Swiss central bank shocked markets by scrapping its cap on the franc this month, Bloomberg reported, citing two people with knowledge of the matter.

JPMorgan netted $250 million to $300 million on the day the Swiss National Bank (SNB) removed the franc’s ceiling of 1.20 against the euro, Bloomberg said, citing the people. (bloom.bg/1JBAh6Y)

JPMorgan was not immediately available for comment.

The franc soared by as much as 41 percent against the euro after the three-year-old cap was abolished on Jan. 15.

Citigroup Inc (C.N), Deutsche Bank AG (DBKGn.DE) and Barclays Plc (BARC.L) ran up cumulative losses of about $400 million as a result of the SNB’s move, Bloomberg quoted the people as saying.

Bank of America Corp (BAC.N), Morgan Stanley (MS.N) and Goldman Sachs Group Inc (GS.N) have said the elimination of the cap had little impact on their operations.

JPMorgan told clients it would complete all orders at 1.02 francs per euro as the Swiss currency appreciated to almost 0.85 francs per euro from 1.20 on Jan. 15, Bloomberg said.

The decision allowed the traders at bank to assess their position immediately and buy or sell the franc accordingly, Bloomberg said, citing the people.

(Reporting By Sudarshan Varadhan; Editing by Ted Kerr)

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U.S. multinationals hit hard by strong dollar, to bleed further into 2015


NEW YORK (Reuters) – A slew of U.S. multinational companies, from DuPont (DD.N) to Procter Gamble (PG.N), showed that a strong U.S. dollar hurt their earnings, and several blue-chip exporters said the situation will get worse if the greenback holds its strength.

All told, the resurgent U.S. currency could shave up to $12 billion off U.S. companies’ fourth-quarter 2014 revenue alone, according to currency expert Wolfgang Koester, chief executive of FireApps, a data analytics company in Phoenix, Arizona, that examines quarterly reports for currency-related losses.

The pain is hitting multiple sectors, including industrial companies such as 3M Co (MMM.N), technology companies like Microsoft Corp (MSFT.O) and Apple Inc (AAPL.O), airlines such as American Airlines Group Inc (AAL.O), healthcare companies, including Bristol-Myers Squibb Co (BMY.N) and Pfizer Inc (PFE.N), and consumer firms like Procter Gamble – which all garner a large portion of their sales from outside the United States.

“This is a slow-motion crash,” said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh. It could take a couple of quarters for currency conversion losses to show up, she said.

After hitting a 6-1/2 month low in May, the dollar .DXY has surged nearly 20 percent against a basket of major currencies, making overseas sales denominated in other currencies less valuable in dollar terms.

The stronger dollar can also make U.S.-made products more expensive for consumers in other currencies and thus cut demand.

The Dow Jones industrial average .DJI, composed of large and well-known companies, was hit especially hard on Tuesday as six of seven companies in the index that reported results since Monday evening declined, with only United Technologies gaining.

“You have companies who don’t normally complain about (the dollar) who are starting to harp on it and it does make sense from an economic perspective that this would be a drag,” said James Liu, global market strategist at JPMorgan Funds in Chicago. “It’s really the pace that matters – not just whether it is strengthening or weakening.”

HEDGING HELP LIMITED WITH SHARP MOVES

The choice for multinationals is stark. They can keep customers loyal by maintaining overseas prices and take a revenue hit from a tough conversion to dollars, or raise prices and risk the loss of customers to cheaper local competitors.

While many companies successfully use currency hedging to at least partly protect against foreign exchange-related losses, the speed and extent of recent fluctuations have made it more difficult to hedge. This has also hurt Wall Street analysts’ ability to estimate losses.

One of the worst-hit companies appears to be chemicals giant DuPont, which derives roughly 60 percent of its revenue from overseas. DuPont said the strong dollar cut 7 cents per share off fourth-quarter earnings and will shave 60 cents off 2015 earnings per share based on recent currency rates.

Procter Gamble said foreign exchange will reduce its fiscal 2015 sales by 5 percent and its net earnings by 12 percent in what it described as its most significant currency impact ever. Bristol-Myers said it expects foreign exchange rates to cut its 2015 revenue by $800 million and 12 to 14 cents in terms of earnings per share.

The impact looks even more abysmal when compared with the 1 cent per share currency impact target that multinationals set for their foreign exchange managers, according to FireApps.

American icon Apple Inc (AAPL.O) is also at risk as it brings in roughly 62 percent of its revenue from overseas. It had to close its online store in Russia temporarily in December due to dramatic currency fluctuations.

Currency could shave as much as $3 billion off Apple’s 2015 revenue even if its hedging strategy succeeds in halving the impact, technology analyst Shannon Cross at Cross Research in Millburn, New Jersey, said ahead of its report.

Apple’s Chief Financial Officer said on Tuesday that foreign exchange is a “clear headwind” included in the company’s guidance for the year ahead.

Shares in Microsoft, which gets nearly three-quarters of its revenue from overseas, finished off 9.2 percent on Tuesday after it said it was hurt by the strong dollar but gave no specifics.

Medical device maker Stryker Corp (SYK.N) said that if exchange rates stay around current levels, it expects first- quarter and 2015 sales to be hurt by 3 percent to 4 percent.

Other notables names citing currency headwinds so far in the earnings season include Johnson Johnson (JNJ.N) and IBM (IBM.N).

Dollar strength already shaved at least $4 billion off U.S. corporate revenue in the third quarter, according to FireApps. But actual losses may be much higher as many firms citing currency impacts did not disclose the amount, it noted.

(Additional reporting by Caroline Humer and Ransdell Pierson; Editing by Linda Stern, Dan Grebler and Christian Plumb)

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American Express plans to start operations in Cuba


(Reuters) – American Express Co (AXP.N) said it would launch operations in Cuba following President Barack Obama’s decision this month to ease sanctions against the communist-ruled island.

MasterCard Inc (MA.N) said last week it would allow its cards issued in the United States to be used in Cuba from March 1 as Washington eases restrictions on travel, trade and financial activities.

Marina Norville, a spokeswoman for American Express, confirmed in an email that AmEx also planned to start business activities in Cuba but provided no further details.

Visa Inc (V.N) has not revealed its plans for Cuba, and company executives were not available to comment on Tuesday.

(Reporting by Amrutha Gayathri in Bengaluru; Editing by Ted Kerr)

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