News Archive

Shell signs $11 billion deal to build petrochemicals plant in Iraq

BAGHDAD (Reuters) – Royal Dutch Shell (RDSa.L) has signed a deal with Iraq worth $11 billion (7 billion pounds) to build a petrochemicals plant in the southern oil hub of Basra, Industry Minister Nasser al-Esawi said on Wednesday.

Esawi told a press conference in Baghdad the Nibras complex, which is expected to come on line within five to six years, would make Iraq the largest petrochemical producer in the Middle East.

“The Nibras complex will be one of the largest (foreign) investments (in Iraq) and the most important in the petrochemical sector in the Middle East,” Esawi said.

A Shell spokesman told Reuters Iraq’s cabinet had authorised the project on Jan 13.

“Shell has been working with the Iraqi ministries of industry and minerals and jointly with the ministries of oil and transport to develop a joint investment model for a world-scale petrochemical cracker and derivative complex in the south of Iraq,” he said.

Shell is one of the main major oil companies operating in south of Iraq, operating the Majnoon oilfield and leading the Basra Gas Company joint venture. It signed a memorandum of understanding with the ministry for the Nibras project in 2012.

(Reporting by Saif Hameed; Writing by Stephen Kalin; Editing by Louise Heavens and Greg Mahlich)

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Alibaba finance arm sets up China consumer credit-scoring system

SHANGHAI (Reuters) – – The financial services affiliate of Alibaba (BABA.N) launched on Wednesday a system that will use the e-commerce giant’s data trove to assess the creditworthiness of Chinese consumers and businesses with little or no history at traditional lenders.

The credit-scoring system, Sesame Credit, will mine user data as well as payment histories from Alibaba Group Holding’s various platforms, Ant Financial Services Group in a statement.

Chief Data Scientist Yu Wujie said the system would take into consideration, among several factors, whether consumers are active Internet users, have a stable residential address and have been using the same mobile phone number for a long time.

Set up in 2014, Ant Financial has been growing rapidly, largely through targeting smaller businesses and hundreds of millions of consumers who are often underserved by China’s larger banks. Its services include payment processing, personal banking, wealth management, small business loans, personal credit and insurance.

Parent Alibaba has been using its dominant market position in e-commerce to push into the financial services market. The firm’s efforts include a money market fund for consumers, a mobile payment app and a private bank.

In November, Alibaba Group Executive Chairman Jack Ma said Ant Financial, which is not part of the New York-listed company, will definitely seek a separate listing for the e-commerce company’s crown jewel, ideally on a domestic stock market.

(Reporting by Engen Tham and Paul Carsten; Editing by Miral Fahmy)

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Oil drops more than 1 percent on firm dollar, U.S. stock build

LONDON (Reuters) – Oil slipped to $49 a barrel on Wednesday after an industry report said U.S. crude stocks rose by the most in two decades last week, and as a firmer dollar added to pressure on prices.

The American Petroleum Institute said late on Tuesday that U.S. crude stocks jumped by a massive 12.7 million barrels last week, triple the volume expected, and including a 2 million barrel increase at Cushing, Oklahoma, the delivery point of the U.S. oil contract. [API/S]

If confirmed by official data from the U.S. Energy Information Administration at 1530 GMT on Wednesday, the weekly rise would be the biggest since March 1994, according to EIA data, and follows a 10.1 million barrel build last week. [EIA/S]

“Crude oil stocks in the U.S. still appear to be growing incessantly,” Commerzbank analyst Carsten Fritsch said.

On Wednesday, Brent crude oil for March delivery LCOc1 was down 25 cents at $49.35 a barrel by 1148 GMT, having touched an intraday low of $48.79. It hit a near six-year low of $45.19 a barrel two weeks ago.

U.S. crude for March delivery CLc1 fell 76 cents to $45.47 a barrel, and hit an intraday low of $45.14.

Fast growing U.S. shale output has pushed oil prices almost 60 percent lower since June, with losses accelerating after the Organization of the Petroleum Exporting Countries said it would not cut output in a bid to preserve its market share.

Analysts at Goldman Sachs, widely seen as one of the most influential banks in commodity markets, said in a note published on Jan. 27 they expect U.S. crude, also known as WTI, to remain near $40 a barrel in the first half of this year.

“(That) should slow supply growth and balance the global oil market by 2016,” the Goldman analysts said.

“We then expect oil prices to move to the marginal cost of production,” which the bank pegged at $65 a barrel for WTI and $70 a barrel for Brent.

Brent has consolidated in a narrow range just below $50 in the past two weeks as traders assess whether further price falls would push too many small producers out of the market.

Crude futures settled up more than 2 percent on Tuesday, when the dollar index posted its biggest one-day fall since early October. But the dollar firmed on Wednesday and remains up by more than 15 percent in the last year.

A strong U.S. unit makes dollar-priced commodities more expensive for buyers holding other currencies, and has been an additional factor in oil’s near 60 percent collapse in the last seven months. [USD/]

(Additional reporting by Florence Tan in Singapore; Editing by Dale Hudson and David Evans)

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Citibank reaches pact with NY AG on ChexSystems data: WSJ

(Reuters) – Citibank, a unit of Citigroup Inc, has reached an agreement with New York Attorney General Eric Schneiderman to change its screening processes for checking and savings accounts to be more forgiving of customers’ histories, the Wall Street Journal reported.

Schneiderman’s office said the requirements previously in place often hurt low-income applicants and forced them to turn to high-cost alternative financial services, the newspaper reported. (

The new rules, scheduled to begin March 15, will change how Citibank uses information from ChexSystems, a database that provides data on how consumers handle deposit accounts at banks.

A consumer’s ChexSystems report typically contains banking irregularities such as check overdrafts, unsatisfied balances, depositing fraudulent checks, or suspicious account handling.

Under the agreement, Citibank will modify its screening criteria and only decline applicants if they have two or more reported incidents of account abuse in recent years, the newspaper said.

The company plans to make an announcement on Wednesday, the Journal reported.

With this Citigroup becomes the second financial institution to reach such an agreement.

Last June, Capital One Financial Corp had agreed to fundamentally change the way it uses ChexSystems to restrict only customers who land in the database for fraud.

Representatives at Citigroup and the New York Attorney General could not be reached for comment outside regular U.S. business hours.

(Reporting by Luke Koshi in Bangalore; Editing by Gopakumar Warrier)

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Fed seen remaining patient with rate guidance amid global turmoil

WASHINGTON (Reuters) – The Federal Reserve is expected to signal it remains on track to begin raising interest rates later this year, as the central bank shows confidence that low inflation and rising risks from abroad have yet to derail the U.S. economic recovery.

The Fed’s first two-day policy meeting of the year concludes on Wednesday, and policymakers will likely restate their “patient” approach to raising rates, while also voicing faith that the economy will continue improving.

Fed Chair Janet Yellen faces growing skepticism that the central bank can tighten monetary policy by mid-year, with a strengthening dollar and falling oil prices adding to worries that inflation readings remain too low for the Fed to begin hiking.

But U.S. central bank officials have argued that the drop in oil prices is a transitory factor that benefits U.S. consumers in the short run. And with unemployment dropping and growth on track, Fed officials have indicated they will move forward with an initial rate hike in the middle or latter half of the year even if other closely watched measures such as wages remain weak.

“The Fed will follow through and normalize rates later this year…Our thinking is June. I would not debate anybody who said September,” said Mark Zandi, chief economist for Moody’s Analytics.

This week’s Federal Open Market Committee meeting features four new regional bank presidents who rotate into voting positions: Atlanta’s Dennis Lockhart, Chicago’s Charles Evans, Richmond’s Jeffrey Lacker and San Francisco’s John Williams. With the exception of Lacker, an inflation hawk, the rest of that bloc are largely dovish central bankers who have favored keeping rates low throughout the economic recovery.


The Fed’s policy statement on Wednesday will follow a tumultuous few weeks in markets worldwide. In that time, the divergence between the U.S. and other major central banks has become stark, with a host of countries cutting interest rates and the European Central Bank launching a massive new stimulus program.

The collapse in global oil prices is already helping to push the Fed further from achieving a key policy goal of raising annual inflation to two percent. Lower energy prices and the ECB’s stimulus also adds further upward pressure on the dollar.

“The dollar, as a standalone, is unlikely to feature materially in the Fed’s decision. But the Fed will consider the extent to which international weakness and geo-political issues counter better economic conditions,” said Mohamed El-Erian, chief economic adviser at Allianz.

Morgan Stanley moved its Fed liftoff forecast to March 2016 from January, and lowered its 2015 core PCE growth forecast – a key Fed inflationary measure – to 1.2 percent from 1.9 percent.

U.S. economic data meanwhile has been mixed and futures contracts show investors betting on a greater chance of the Fed moving up rates in September or later, rather than June.

But in the Fed’s December statement, its addition of the word “patient” in reference to rate guidance showed the central bank was still inching closer to lift off. Yellen went further at the December press conference to say the Fed was unlikely to begin the process for at least the “next couple of meetings.”

That statement all but ruled out a move in January and March, with investors now watching for when ‘patient’ is dropped, which will likely signal the Fed is ready to move at the next meeting. While Yellen has said a rate decision depends on the data, the June meeting and its scheduled press conference appears to be the central bank’s target.

“The Fed is operating under the base case of a June liftoff, and June is still several months away,” said Cornerstone Macro economist Robert Perli, who added he expects, at most, minor changes to the Fed’s December statement. “The Fed can afford to buy itself some more time, and that’s exactly what we expect it to do.”

(Additional reporting by Jennifer Ablan in New York; Editing by Chizu Nomiyama)

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Microsoft stock punished as concerns multiply

SEATTLE (Reuters) – Investors wiped $35 billion off Microsoft Corp’s (MSFT.O) market value on Tuesday without any clear-cut, single explanation.

The world’s largest software company, whose shares had climbed about 30 percent over the past 12 months to near 15-year highs, instead worried investors with a series of troubling signals in its earnings report and conference call on Monday.

“The results weren’t that bad,” said Scott Kessler, an analyst at Standard Poor’s Capital IQ. “What really struck people was that it wasn’t just one thing and it wasn’t just a handful of things that had obvious or easy fixes.”

The panoply of Microsoft’s problems included an unexpectedly soggy PC market after a buying rush sparked by the end of Windows XP, an ongoing dip in companies’ spending on Office software, problems in Japan and China and a strong U.S. dollar eating away at the value of its huge overseas revenues.

Investors were aware of most of those issues before Monday, but the combination of concerns pushed Microsoft’s stock down 9.25 percent to $42.66, its biggest one day fall since Chief Executive Satya Nadella took over last February.

Until Tuesday, Nadella had enjoyed fanatical support from investors, who lapped up his plan to redesign Microsoft as a leader in cloud and mobile computing.

There are now signs that investors are more skeptical of how quickly Nadella can drag the PC-based titan into the mobile world.

“They made a splash with Office for iPad, but it remains to be seen to what extent they are really going to be able to pull through substantial percentages of their legacy applications business to the cloud,” said Kessler.

Some investors feel Microsoft is not helping itself in how it explains the financial effects of its move into the cloud, for example shifting Office customers from installed versions to the cloud-powered online version called Office 365.

Microsoft discloses revenue in broad business groups, but does not give out concrete user numbers or revenue figures for some of the cloud businesses investors want to know the most about.

“They’d probably serve themselves better if they were able to tease out the detail and demonstrate how strong that transition to the cloud is,” said Kevin Walkush, an analyst at Jensen Investment Management. “Right now people are just guessing, and when you leave it to people to guess, they are going to project the worst. It’s a frustration for me as an investor.”

(Reporting by Bill Rigby; Editing by Bernard Orr)

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Shares and dollar wilt before Fed test, Apple outperforms

SYDNEY (Reuters) – Asian stock markets followed Wall Street into the red early on Wednesday, while the euro managed a rare rally on speculation the Federal Reserve could take a dovish turn in its post-meeting statement later in the session.

Apple Inc (AAPL.O) provided some relief after the bell as record sales of its iPhone line helped it beat expectations, sending its stock up 5 percent.

But earnings from other majors generally disappointed, with multinationals from DuPont DD.N to Microsoft Corp (MSFT.O) complaining that a strong U.S. dollar was hurting profits.

That left a soggy air to early Asian trade and Australia’s main index .AXJO eased 0.4 percent while Nikkei futures JNIc1 pointed to an opening drop of around 0.8 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was off a slim 0.06 percent.

On Wall Street, the Dow .DJI ended with losses of 1.65 percent, while the SP 500 .SPX fell 1.34 percent and the Nasdaq .IXIC 1.89 percent.

Nine of the 10 primary SP 500 sectors fell, with tech .SPLRCT off 3.3 percent in its biggest one-day drop since November 2011. Shares in Microsoft slid over 10 percent, while Caterpillar (CAT.N) shed 7 percent.

The latest U.S. economic news was mixed with durable goods orders surprisingly soft, but notable strength seen in housing and consumer sentiment.

The softness in business investment and corporate earnings stoked talk the Fed would have to acknowledge the more difficult environment in its policy statement at 1400 GMT.

So far, the central bank has stuck by plans to raise interest rates around the middle of 2015, but markets have relentlessly pushed out the timing to year end and are plotting a much lower trajectory for future hikes.

Fed funds 0#FF: imply a rate of only 45 basis points by December, compared to the current effective funds rate of 12 basis points.

Just the risk of a dovish turn was enough to force speculators to cut back on crowded short positions in the euro, lifting the single currency to $1.1365 and away from Monday’s 11-year low of $1.1098.

The dollar also dipped to 117.75 yen and retreated against a basket of major currencies to 94.089 .DXY.

In commodity markets, the pullback in the dollar helped Brent crude oil LCOc1 gain $1.10 to $49.30 a barrel.

However, U.S. crude oil futures CLc1 were quoted 65 cents lower on Wednesday at $45.58 on news U.S. oil stockpiles surged by nearly 13 million barrels last week.

(Editing by Shri Navaratnam)

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Yahoo sets Alibaba stake spinoff plan, shares jump

SAN FRANCISCO (Reuters) – Yahoo Inc (YHOO.O) plans to spin off its 15 percent stake in China’s Alibaba Group Holding Ltd (BABA.N), responding to pressure to hand over to shareholders its prized e-commerce investment valued at roughly $40 billion.

Shares of Yahoo were up roughly 7 percent at $51.45 in after-hours trading on Tuesday, following the tax-free spin off announcement and earnings which just beat analysts forecasts even as its revenues slightly lagged estimates.

Shareholders feel that Yahoo and its stake in Alibaba would be worth more separately, so long as the Alibaba shares are not subject to the standard 35 percent tax rate that would be incurred from selling the shares.

“It’s the best possible outcome,” said BGC Partners analyst Colin Gillis. “The main point is that the money goes to shareholders, it doesn’t get spent on acquisitions. They don’t want to fritter it away.”

Yahoo’s market value is about $45 billion, while its Alibaba stake alone is worth nearly $40 billion, meaning the current Yahoo share price assigns little value to the core business. Some investors believe the email, Web site and other operations are worth between $7 billion and $8 billion.

While the spin-off will hold tax advantages for Yahoo and will allow it to simplify its structure, it will also ratchet up pressure on Chief Executive Marissa Mayer to strengthen Yahoo’s core media and advertising business.

Yahoo’s revenue, excluding fees paid to partner websites, declined 1.8 percent year-on-year in the final three months of 2014 to $1.18 billion, just shy of Wall Street expectations. The average analyst polled by Thomson Reuters I/B/E/S called for adjusted revenue of $1.185 billion.

Yahoo said it earned 30 cents per share in the fourth quarter, excluding certain items, beating by a penny the consensus forecast of analysts polled by Thomson Reuters I/B/E/S.

Yahoo, which is trying to reverse a multi-year decline in revenue, has faced increasing investor pressure more than two years after CEO Mayer took the reins to lead a comeback plan.

Activist investor Starboard said in September that it had acquired a significant stake in Yahoo and urged the company to cut costs, consider a merger with AOL Inc (AOL.N) and quickly “monetize” the Asian assets, which exceed the value of Yahoo’s actual business.

Yahoo said its board of directors has authorized a plan to spin off the stake, tax-free, into a newly formed independent registered investment company. The stock of the company will be distributed pro-rata to Yahoo shareholders and the transaction is expected to close in the fourth quarter of 2015, Yahoo said.

The new entity will include Yahoo’s 384 million shares in Alibaba as well as an unspecified “legacy, ancillary” Yahoo business, the company said.

Bank of America Merrill Lynch (BAC.N), Goldman Sachs Co (GS.N) and J.P. Morgan Securities (JPM.N) are serving as financial advisors on the transaction.

The spinoff of the second-largest stake in Alibaba is not expected to have much impact on the management of the fast-growing e-commerce company, but will be an option for investors who for some reason don’t want to buy shares in it directly.

The stake dates from 2005, when Yahoo bought into Alibaba early, paying $1 billion for a 40 percent stake in a deal credited to the American company’s co-founder Jerry Yang.

(Reporting by Alexei Oreskovic with contributions from Edwin Chan; Editing by Christian Plumb)

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AT&T results beat Wall Street, shares rise after hours

SAN FRANCISCO (Reuters) – ATT Inc (T.N) on Tuesday posted a quarterly net loss that was slightly slimmer than Wall Street expected, as its mobile device deals attracted more customers, but its users switched to other networks at a higher rate.

ATT shares rose about 2 percent in after-hours trading after closing at $32.81 on the New York Stock Exchange.

The second-largest U.S. wireless carrier posted a net loss of $4 billion, or 77 cents per share, in the fourth quarter, compared with net income $6.9 billion, or $1.31 per share, a year ago. The loss was partly the result of $10 billion in charges related to pension and retiree benefit plans that it had announced this month.

Excluding items, ATT earned 55 cents per share, beating analysts’ forecasts by a penny.

The company said postpaid churn, or the rate of customer defections, rose to 1.22 percent and average revenue per phone user declined 10.7 percent from a year earlier.

While postpaid churn had risen since last year, it was comparable to 2012, ATT executives told analysts on an earnings call. Both 2012 and 2014 saw the launch of numbered Apple phones, the iPhone 5 and iPhone 6, they added.

Faced with intense competition and promotional activity, wireless carriers have moved from two-year contract plans to equipment financing plans, which reduce service fees and eliminate subsidies for devices.

“Equipment sales were 13 percent better than consensus but service revenues which is really their real business were 2.7 percent light in wireless,” Craig Moffett, an analyst at MoffettNathanson said.

Such no-subsidy plans along with aggressive price cuts to tackle competition from rivals including T-Mobile (TMUS.N) and Sprint(S.N) have squeezed margins. ATT’s wireless profit margins, excluding certain items, narrowed to 36.7 percent from 42 percent a year earlier.

As the U.S. wireless market reaches saturation, the company has been expanding its footprint in Mexico. It said on Monday it would buy bankrupt NII Holdings Inc’s [NIHDQ.PK] wireless business in Mexico for $1.875 billion.

ATT is awaiting regulatory approval for its proposal to buy satellite TV company DirecTV for $48.5 million. It expects the deal to close later this year.

In 2015, ATT expects margin expansion along with adjusted earnings growth in “the low single-digit range.” It said it had added more than 2 million new wireless customers and 854,000 contract subscribers in the quarter.

Revenue rose to $34.4 billion from $33.16 billion a year earlier. Wall Street analysts, on average, had expected $34.27 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Malathi Nayak; Editing by David Gregorio)

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