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Fed’s Fisher: stronger dollar good for U.S. jobs

SAN FRANCISCO (Reuters) – Sharp gains in the U.S. dollar are good for the U.S. labor market, a top Federal Reserve official said on Friday, downplaying a crescendo of complaints from top executives over the dent to their profits.

“CEOs that have international operations complain about it,” Dallas Fed President Richard Fisher told Reuters in an interview. “I hear from every one of them – it offsets their powerful earnings here domestically.”

Fisher takes those complaints with a grain of salt.

“It brings to my mind the vision of Edward Munch’s painting ‘The Scream’,” he said, adding, “It’s not the end of the world.”

Fisher, who plans to retire from his post in March, holds views that are often far from those at the Fed’s core. Still, the former hedge-fund manager says he feels his views are heard at the policy-setting table.

“The more income and investment flows we get, the better it is for our companies big and small to go out and hire American workers,” Fisher said. “And it does help on the consumption side, if, for example, oil is denominated in dollars, it just helps us have cheaper goods.”

While a stronger dollar does hurt net exports, he said, it puts less of a damper on U.S. job creation than it may have in the past because the U.S. economy has become less export driven.

The U.S. dollar index .DXY has advanced for seven straight months through the end of January, marking the longest streak of gains since the greenback was floated as a fiat currency in 1971.

Fisher spoke just two days after the U.S. central bank signaled it remains on track with its plans to raise interest rates this year.

“The statement makes it clear that at some point, we are getting closer, we’ve reached the tipping point. The tipping point is rates will go up, the question is when,” he said.

Fisher has long called for the Fed to start tightening sooner rather than later.

But, he said, he is “resigned” to the fact that his view is in the minority at the Fed, and told Reuters he would not have dissented if he had a vote at this week’s policy-setting meeting.

(Reporting by Ann Saphir with reporting by Jonathan Spicer and Dan Bases in new York; Editing by Meredith Mazzilli)

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U.S. economy cools in fourth quarter, but consumer spending shines

WASHINGTON (Reuters) – U.S. economic growth slowed sharply in the fourth quarter as weak business spending and a wider trade deficit offset the fastest pace of consumer spending since 2006.

The slowdown followed two back-to-back quarters of bullish growth and is likely to be short-lived given the enormous tailwind from lower gasoline prices. Other data on Friday showed consumer sentiment jumped to an 11-year high in January.

“We look for strong domestic consumption to continue supporting growth momentum in the coming quarters even as investment suffers due to falling oil prices,” said Gennadiy Goldberg, an economist at TD Securities in New York.

Gross domestic product expanded at a 2.6 percent annual pace after the third quarter’s 5 percent rate, the Commerce Department said in its first snapshot of fourth-quarter GDP.

A gauge of underlying demand, which excludes trade, inventories and government, increased at a 3.9 percent pace. That compared to the third quarter’s 4.1 percent rate. Analysts said the data indicated domestic fundamentals were strong enough to cushion the blow on growth from weakening overseas economies.

“The strength of domestic demand will more than offset the headwinds from abroad, including a slower pace of export growth as a result of the strengthening U.S. dollar,” said Sam Bullard, a senior economist at Wells Fargo.

“Sharply lower oil prices do present downside risk to business investment, but accruing benefits to the consumer in the form of lower gasoline prices should increasingly offset the near-term drag.”

First-quarter growth estimates are currently converging around a 2.5 percent pace, with an acceleration anticipated for the rest of 2015. Economists had expected GDP to expand at a 3 percent rate in the fourth quarter.

U.S. stocks fell, while prices for U.S. Treasury debt rose, with the yield on the 30-year bond hitting a record low. The dollar was unchanged against a basket of currencies.

For all of 2014, the economy grew 2.4 percent compared to 2.2 percent in 2013. The report came two days after the Federal Reserve said the economy was growing at a “solid pace,” an upgraded assessment that keeps it on track to start raising interest rates this year.

The U.S. central bank has kept its short-term interest rate near zero since December 2008.


Consumer spending, which accounts for more than two-thirds of U.S. economic activity, advanced at a 4.3 percent pace in the fourth quarter – the fastest since the first quarter of 2006 and an acceleration from the third quarter’s 3.2 percent pace.

Lower gasoline prices – they are down 43 percent since June, according to government data – and a strengthening labor market are fueling a surge in optimism among households. The University of Michigan’s consumer sentiment rose to 98.1 this month, the best reading since January 2004, from 93.6 in December.

“The level of consumer sentiment supports our view that consumer spending will kick the year off on a robust foot after the drop in energy prices left consumers’ wallets full,” said Bricklin Dwyer, an economist at BNP Paribas in New York. A separate report from the Labor Department showed wages rising steadily in the fourth quarter, but still below levels that would bring inflation closer to the Fed’s 2 percent target.

Inflation pressures were muted in the fourth quarter, with the personal consumption expenditures price index falling at a 0.5 percent rate, the weakest reading since the first quarter of 2009. Excluding food and energy, prices rose at a 1.1 percent pace, the slowest since the second quarter of 2013.

“With inflation likely remaining sluggish in 2015, a patient Fed will likely wait until September to begin a slow and steady tightening cycle,” said Michelle Meyer, a senior economist at Bank of America Merrill Lynch in New York.

The strong pace of consumer spending in the fourth quarter, however, was overshadowed by a drop in capital expenditure. Business spending on equipment fell at a 1.9 percent rate. It was the largest contraction since the second quarter of 2009.

Business spending on equipment had advanced at an 11 percent rate in the third quarter. The fourth-quarter weakness could reflect cuts or delays to investment projects in the oil industry. But it could also be payback after two back-to-back quarters of robust gains.

A fourth report showing factory activity in the Midwest increased in January, after two straight months of declines, suggests that a rebound in business spending is in the cards.

A wider trade deficit, as slower global growth curbed exports and solid domestic demand sucked in imports, subtracted 1.02 percentage point from GDP growth in the fourth quarter. Trade had added 0.78 percentage point to third-quarter growth.

Restocking by businesses contributed 0.82 percentage point to fourth-quarter GDP. Government spending was a drag as a defense-driven investment burst faded, while residential construction made a mild contribution to GDP growth.

(Reporting by Lucia Mutikani; Additional reporting by Ryan Vlastelica in New York; Editing by Paul Simao)

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Mattel CEO feels ‘sense of urgency’ for new toys as Barbie ages

(Reuters) – Mattel Inc (MAT.O) needs to move with a “sense of urgency” to create toys that connect with young customers, its interim CEO said, as dolls based on Disney’s blockbuster film “Frozen” stole the show from its Barbie dolls in the holiday quarter.

The company, which also makes Fisher-Price preschool toys and Monster High and American Girl dolls, reported its fifth straight fall in worldwide quarterly sales on Friday.

Mattel’s shares were unchanged in noon trading, recovering from a 2.6 percent drop earlier.

Worldwide sales of Barbie fell 12 percent in the fourth quarter, while those of Fisher-Price toys declined 11 percent.

Christopher Sinclair, who took Mattel’s reins after it removed Bryan Stockton as CEO on Monday, said the company’s brand propositions were not compelling enough, mainly for Barbie and Fisher-Price.

Mattel spent 40 percent more on advertising in the quarter, but that did not translate into sales, Sinclair said.

Industry-wide toy sales in the United States rose 4 percent in 2014, according to consumer research firm NPD Group.

In the period, Mattel’s sales fell 7 percent, highlighting the company’s failure to innovate faster than smaller rivals Jakks Pacific Inc (JAKK.O) and Hasbro Inc (HAS.O).

Jakks makes dolls based on “Frozen”, such as Snow Glow Elsa and Anna Ice Skating doll. Hasbro’s products include My Little Pony toys and “Hunger Games” inspired Nerf Rebelle bow and arrow toys.

Mattel’s sales fell in six of the 12 quarters that Stockton was CEO. He took the top job in 2012.

Barbie sales have been falling for the past two years as young girls increasingly favor electronic toys, tablets and toys based on popular films.

Denmark’s privately held Lego Group dethroned Mattel as the world’s largest toymaker by sales in the first half of 2014, helped by the success of its toys based on “The Lego Movie”. Lego is yet to report full-year sales.

Most of Mattel’s revenue comes from brands that are at least three decades old. Fisher-Price was launched in 1930, Barbie in 1959 and American Girl in 1986.

The company’s net income plunged nearly 60 percent to $149.9 million, or 44 cents per share, in the fourth quarter.

Excluding items, Mattel earned 52 cents per share, lower than the average analyst estimate of 92 cents, according to Thomson Reuters I/B/E/S.

Worldwide sales fell about 6 percent to $1.99 billion.

Mattel’s shares were at $27 in noon trading on the Nasdaq.

(Editing by Kirti Pandey)

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American Airlines Group pilots approve contract to raise pay

(Reuters) – American Airlines Group (AAL.O) pilots have voted to accept a five-year contract that will raise their wages substantially and cement their relationship with the management, the pilots union said on Friday.

About 66 percent of the pilots who voted cast their ballots in favor of the contract, which will raise their pay by 23 percent retroactive to Dec. 2 and by another 3 percent above their original wages retroactive to Jan. 1, plus another 3 percent in 2016.

About 94 percent of the members voted during the two-week election, the union said in a statement. (

The company, which runs the world’s largest combined airline by passenger traffic since it merged with US Airways in December 2013, employs about 15,000 pilots totally, represented by the Allied Pilots Association.

American Airlines’ shares were down about 3 percent at $50.65 before the news. They remain mostly unchanged since.

While American Airlines has said the outcome will increase its costs by about $650 million in 2015, analysts view the news as a win for the airline, which appears to have earned the favor of its workers while locking in a joint contract faster than newly merged airlines often do.

“APA will now focus on further engagement with American Airlines management to address ongoing shortcomings in our contract,” APA President Keith Wilson said.

A “no” vote would have sent the pilots and management to binding arbitration, which would have capped wage gains to zero percent for December 2014, 3 percent for January and an extra 13 percent a year later, per an agreement that the pilots union had accepted during the merger.

“Getting a ratified contract speeds up merger integration, (makes for) a more efficient operation … reduces uncertainty and de-risks the business,” said CRT Capital Group analyst Michael Derchin in an email.

Going into Friday, it was not immediately clear which way American Airlines’ pilots would vote. The union had expressed frustration about work rules in the contract, such as the fact that pilots do not receive pay for each calendar day they are away from home but are not on an assignment.

“Our total compensation will still trail industry-leader Delta, while work rules affecting our pilots’ quality of life need meaningful improvement,” APA President Wilson said.

Negotiations to amend the pilots contract at Delta Air Lines (DAL.N) can begin as early as April.

American Airlines’ flight attendants were the first and only work group to reach a joint union-backed contract since the merger, receiving it in arbitration in December.

The “company has successfully built the foundation of a new bridge of trust with the combined pilot group,” said airline industry consultant Robert Mann in an email.

(Editing by Sriraj Kalluvila and Savio D’Souza)

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U.S. consumer sentiment rises to best since 2004

NEW YORK (Reuters) – U.S. consumer sentiment rose in January to its highest level in 11 years on better job and wage prospects, a survey released on Friday showed.

The Thomson Reuters/University of Michigan’s final January reading on the overall index on consumer sentiment came in at 98.1, its best showing on a final basis since January 2004 and the latest in a string of increases since August.

The reading was up from 93.6 the month before but slightly under the preliminary reading of 98.2, which was also the median forecast of among economists polled by Reuters.

“Consumers judged prospects for the national economy as the best in a decade, with half of all consumers expecting the economic expansion will continue for another five years,” said Richard Curtin, the survey’s director.

“While renewed strength in consumer spending will boost the pace of economic growth in 2015, most consumers are counting only on modest income gains during the years ahead. Without sufficient wage gains, consumers will be forced to demand large price discounts to complete their purchases, adding to disinflationary pressures.”

The survey’s barometer of current economic conditions rose to 109.3 from 104.8 in December, versus a forecast of 108 and a preliminary read of 108.3.

The survey’s gauge of consumer expectations climbed to 91 from December’s reading of 86.4, though it was below the preliminary January of 91.6. Analysts were looking for a reading of 91.5.

The survey’s one-year inflation expectation was 2.5 percent, compared with 2.8 percent in December.

(Reporting by Ryan Vlastelica; Editing by Meredith Mazzilli)

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Xerox cuts profit forecast again as revenue slide continues

(Reuters) – Xerox Corp (XRX.N), which has been shifting its focus to IT services from making printers and copiers, cut its profit forecast for 2015 for the second time after reporting its sixth-consecutive drop in quarterly revenue.

Shares of the company, which also forecast lower-than-expected profit for the first quarter, were down 3 percent at $13.19 on the New York Stock Exchange in early morning trading.

The forecast cut reflected a 5 cent per share impact from currency rate fluctuations, specifically the weakening of the euro, said Xerox, which gets about a third of its revenue from outside the United States.

The euro EUR= slipped 12 percent against the dollar last year. The European Central Bank’s drastic monetary easing last week pulled the currency down against major currencies.

Xerox said it now expects an adjusted profit per share of $1.00-$1.06 for 2015, down from the $1.05-$1.11 it forecast earlier.

Analysts on average were expecting $1.09, according to Thomson Reuters I/B/E/S.

Xerox’s adjusted profit forecast of 20-22 cents per share for the first quarter fell short of an expected 24 cents.

The 110-year-old company has been moving toward services in recent years to make up for the falling sales of its copiers and printers as companies cut down on printing and personal computing moves to tablets and smartphones.

Xerox bought Affiliated Computer Services Inc in 2009 to enter the services business, including business process outsourcing (BPO), information technology services, cloud computing and data management.

Last month, the company said it would sell its IT outsourcing arm to France-based Atos SE (ATOS.PA) for $1.05 billion to focus on faster-growing units such as BPO and document outsourcing.

Revenue from Xerox’s services business increased 1.1 percent to $2.72 billion in the fourth quarter ended Dec. 31, while revenue from its printing business declined 8.1 percent.

Total revenue fell to $5.03 billion from $5.21 billion.

Net Income from continuing operations attributable to Xerox rose to $305 million, or 26 cents per share, from $297 million, or 23 cents per share.

Excluding items, the company earned 31 cents per share.

Analysts expected a profit of 29 cents on revenue of 5.07 billion.

Xerox shares have fallen about 28 percent in the last one year, through Thursday.

(Reporting By Arathy S Nair in Bengaluru; Editing by Joyjeet Das)

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MasterCard profit beats expectations as customers spend more

(Reuters) – MasterCard Inc (MA.N), the world’s No. 2 debit and credit card company, reported a better-than-expected profit for the holiday shopping quarter as customers swiped their cards more often.

The company, whose shares were up 4 percent in premarket trading on Friday, said worldwide purchase volume increased 12.1 percent to $858 billion in local currency terms during the fourth quarter, while its cross-border volumes rose 19 percent.

“Despite a mixed global economy, we delivered solid results for the quarter and for the full year in 2014,” Chief Executive Ajay Banga said in a statement.

U.S. retail sales rose 5.5 percent from the day after Thanksgiving through Christmas Eve as demand for women’s apparel, jewelry and casual dining offset sluggish sales of electronics, MasterCard said in December.

The company’s net income rose to $801 million, or 69 cents per share, in the quarter ended Dec. 31 from $623 million, or 52 cents per share, a year earlier.

Net revenue rose 14 percent to $2.42 billion.

Analysts on average had expected earnings of 67 cents per share on revenue of $2.39 billion, according to Thomson Reuters I/B/E/S.

Larger rival Visa Inc (V.N) reported a better-than-expected quarterly profit on Thursday.

Up to Thursday’s close of $81.38, MasterCard shares had risen about 5 percent in the past year.

(Reporting by Amrutha Gayathri and Tanya Agrawal in Bengaluru; Editing by Saumyadeb Chakrabarty and Ted Kerr)

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Chevron quarterly profit drops 30 percent on cheap oil

WILLISTON, N.D. (Reuters) – Chevron Corp (CVX.N), the second-largest U.S. oil producer, said on Friday its quarterly profit fell 30 percent due to plunging crude prices CLc1.

The company posted fourth-quarter net income of $3.47 billion, or $1.85 per share, compared with $4.93 billion, or $2.57 per share, in the year-ago period.

Foreign currency conversion charges dented earnings by $432 million, Chevron said.

Production between the quarters held steady at 2.58 million barrels of oil equivalent per day (boepd).

Shares of the San Ramon, Calif.-based company are down about 22 percent in the past six months, closing Thursday at $103 per share.

(Reporting by Ernest Scheyder, Editing by Franklin Paul)

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Audi could hit two million car sales goal ahead of 2020

INGOLSTADT, Germany (Reuters) – German luxury carmaker Audi could reach its goal of 2 million sales a year before its 2020 target, helped by revamped models and new sport-utility vehicles, its chief executive told Reuters.

Rupert Stadler said demand in Europe, where Audi sold 44 percent of its cars last year, was stable, while he was upbeat about prospects for China, where some rivals have reported a drop-off in demand as economic growth slows.

Audi is the profit engine of Volkswagen (VOWG_p.DE), Europe’s biggest carmaker, and its sales goal is a key part of the parent company’s drive to overtake Japan’s Toyota (7203.T) to become global industry leader.

Audi’s target was “coming into view” ahead of 2020, Stadler said in an interview at the automaker’s base in Ingolstadt, Germany. “We have good potential.”

German rival BMW (BMWG.DE) retained the global luxury car sales crown for a tenth straight year in 2014, but Audi and Daimler’s (DAIGn.DE) Mercedes-Benz have reduced its lead and are striving to unseat BMW by the end of the decade.

Audi sold 11 percent more vehicles last year, a record 1.74 million, and has delivered double-digit percentage increases in four of the past five years.

Overhauls of its top-selling A4 saloon, the flagship Q7 SUV and the R8 sports car would fuel demand this year, Stadler said.

To beef up its presence in the fast-growing SUV market, Audi will build a new Q1 from 2016 and plans to launch a range-topping Q8 model before 2020.

Sales in January and February this year should be fueled by “very good” orders in late 2014, offsetting declining demand in Russia, Japan and Latin America, Stadler said

“The new year has started out dynamically, with good momentum from 2014,” he said. Audi posted double-digit sales gains in each of the final three months of 2014.

Stadler added demand in China, destination of a third of its vehicles, remained at a “high level”, and forecast overall volume there could grow as much as 9 percent in 2015 based on current estimates after a 6.9 percent increase last year.

BMW sales chief Ian Robertson told Reuters on Jan. 9 that Chinese demand “slowed down quite a lot” in the final quarter of 2014, leading the brand to reallocate some big models such as the X5 and 7-Series away from China.

However, Stadler said he couldn’t confirm a slowing in Chinese demand for larger Audi models, though he acknowledged competition had become more intense.

As for the United States, the world’s largest market for premium cars, Audi is pursuing a long-term goal of 300,000 deliveries after a 2018 target of 200,000 sales moved within reach last year.

Stadler also said an SUV concept vehicle called Urus by Audi’s Italian super car division Lamborghini would be delayed further. Almost three years after Lamborghini unveiled the model in China, production is still awaiting approval by VW’s management board of which Stadler is a member.

“We have yet to do some more homework,” Stadler said, citing the model’s design as well as synergies for development and production. “Such a project isn’t difficult provided the rate of return is right. In any case we need a decision this year.”

As for profits, Stadler said Audi had “very decent business” in 2014, but declined to elaborate. Full-year results will be published on March 10.

(Editing by Mark Potter)

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