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Oil prices drop on possible Iran deal, dollar

SINGAPORE (Reuters) – Oil prices fell on Monday as traders focused on whether Iran and six world powers would reach a deal that could add fuel to an already oversupplied market if sanctions against Tehran are lifted.

The two sides are trying to reach an agreement in nuclear negotiations by a Tuesday deadline.

“Any relaxation of Iran oil sanctions could see increased exports adding to swelling global supplies and further pressuring prices,” ANZ said.

Brent crude futures LCOc1 were down 42 cents at $55.99 by 0633 GMT as the market began to price in a potential deal with Iran. U.S. West Texas Intermediate (WTI) CLc1 was down 84 cents at $48.03 a barrel.

Barclays said that the U.S. build-up in stocks would make its way into an already oversupplied market in the second quarter and that global demand would unlikely be strong enough to support oil prices once that happens.

“In OECD Asia, demand growth actually fell from -3 percent to -4 percent (in Q1) … Apparent demand in China was around 2 percent higher, but actual demand is likely to be lower since seasonal stockbuilding typically takes place after the start of the year,” the bank said. It added that demand growth in the OECD region had been in structural decline over the past five years.

“Continued dollar strength is (also) a headwind to the oil price recovery,” Barclays said, forecasting the dollar rising slightly above parity with the euro by Q4.

A potential climb in prices could come from an OPEC production cut, which some members have lobbied for but its biggest exporter Saudi Arabia has resisted.

“Saudi Arabia had to cut its price in Asia to ensure its crude oil remained attractive,” energy consultancy Wood Mackenzie said.

“Other suppliers looking to position themselves in Asia will have to pay close attention to the Saudi’s pricing strategy,” it added.

Morgan Stanley said that crude demand would also be dented via the refinery sector, where production tends to fall towards the middle of the year.

In the United States, the oil rig count continued to drop, although analysts said that lower drilling activity would only affect oil production later this year.

“The current rig count is pointing to U.S. production declining slightly sequentially in 2Q15 and 3Q15,” Goldman Sachs said although it added activity could bounce back in 2016 as drillers benefited from falling production costs.

(Editing by Joseph Radford and Richard Pullin)

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Dufry to raise $4 billion via rights issue and debt for WDF bid

ZURICH (Reuters) – Swiss travel retailer Dufry (DUFN.S) plans to raise around 3.6 billion euros ($4 billion) through a mixture of debt and equity for its planned takeover of Italy’s World Duty Free (WDF.MI).

The deal will cement Dufry’s position as the world’s leading travel retailer, creating a combined group with a market share of 25 percent and projected annual sales of $9 billion.

To finance the purchase, Basel-based Dufry expects to raise at least 2.1 billion euros through a rights issue of new stock and up to 1.5 billion via long-term debt instruments, the Swiss company said in a statement on Monday.

Qatar Investment Authority, Government of Singapore Investment Corp (GIC) [GIC.UL] and investment firm Temasek Holdings [TEM.UL] have each committed to buying up to 450 million Swiss francs ($468 million) worth of shares.

Dufry expects to detail the exact terms of the rights issue before a general shareholder meeting, to be held by May 15, to approve the equity financing.

Total retail spending at airports around the world is expected to almost double to $59 billion in 2019 from $36.8 billion in 2014, analysts predict, driven by rapid growth in Asia, where more than 350 new airports are set to be built in the next eight years.

Edizione, the holding company owned by the Benetton family that controls World Duty Free (WDF), agreed to sell its 50.1 percent stake to Dufry for 10.25 euros per share, valuing the group at just under 3.6 billion euros including debt, which stood at 970 million euros, Edizione said on Saturday

After purchasing the stake, Dufry said it would make a mandatory bid for the remaining shares.

Dufry bought Nuance Group for $1.7 billion last year.

($1 = 0.9206 euros)

($1 = 0.9618 Swiss francs)

(Reporting by Joshua Franklin and Thomas Atkins; Editing by Kenneth Maxwell and David Holmes)

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Hong Kong retail rents drop as Chinese shoppers stop

HONG KONG (Reuters) – A drop in Chinese tourist numbers is driving down shop rentals in Hong Kong, with vacancies increasing in the same prime areas that just three years ago pipped New York’s Fifth Avenue to become the world’s most expensive retail real estate.

Spooked by months of cross-border tensions and pro-democracy protests, tour groups visiting Hong Kong from China plunged about 80 percent this month, dealing a blow to the retailers that had built their businesses around these mainland visitors’ once insatiable demand.

A Chinese government crackdown on lavish spending which shows no signs of letting up has also encouraged tourists to shop further away from home, just as a drop in the yen and the won make Japan and South Korea more attractive destinations.

That has further dimmed the appeal of Hong Kong’s Causeway Bay, where renting a 500-square foot space (46 square meters) – the size of a school classroom – can cost HK$500,000 ($64,000) a month.

“If they don’t cut the rent, I will leave,” said the head of a consumer goods chain that also has a shop in Causeway Bay. Revenues have fallen 30 percent over the past year as the number of mainland visitors fell by half, he said.

“We can’t bear the costs,” he added, declining to be named as he did not want to highlight his company’s financial situation.

Hong Kong retail sales in January fell to their lowest level since 2003, a factor property agents said prompted more retailers to negotiate lower leases, or just move out.

The decline in sales also coincides with plans by several luxury retailers, including Chanel and Compagnie Financiere Richemont SA’s Cartier, to cut prices in Asia to counter the sharp decline in the euro.

“Their businesses aren’t doing so well, so they decided to essentially hand the keys back to landlord,” said Tom Gaffney, head of retail at property consultancy Jones Lang LaSalle.

Property consultancy Savills says average prime street shop rentals fell 8.5 percent year-on-year in 2014, as the number of Chinese tourists began to fall.

This year, a luxury goods retailer in Causeway Bay managed to negotiate a 15 percent discount on its lease while another retailer renewed their contract at the same terms, a property agency involved in the deals told Reuters.

The slowdown is forcing many retailers to adapt.

Paul Tang, the owner of a tiny shop in the heart of Causeway Bay, said sales of his eclectic mix of banned Chinese books and milk powder fell 25 percent this year, forcing him to courier goods to clients in China. “It’s no use sitting in my shop and crying,” he said.

A possible restriction by the authorities on multiple daily visits to Hong Kong could further add to the pressure on landlords more exposed to the retail market, such as Hysan Development, Wharf Holdings Ltd and Sun Hung Kai Properties.

Day-trippers accounted for about 60 percent of the 47 million mainland visitors to Hong Kong last year often buying daily necessities such as milk powder. But some landlords are worried that protests by activists accusing mainland visitors of crowding public transport and causing shortages of goods could make things worse.

“The current political and social sentiment may diminish mainlanders’ enthusiasm to visit and shop in Hong Kong,” Roger Hao, chief financial officer of market leader Hysan, told Reuters. “But Hysan has a diverse yet balanced retail portfolio … and that should minimize the impact.”

(Editing by James Pomfret and Miral Fahmy)

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Soros says ready to invest $1 billion in Ukraine if West helps

VIENNA (Reuters) – Billionaire financier George Soros is ready to invest $1 billion in Ukraine, if Western countries help private investment there. He also put the odds of Greece leaving the euro at a third, in an interview with Austrian newspaper Der Standard.

Soros has previously urged the West to step up aid to Ukraine, outlining steps towards a $50 billion financing package that he said should be viewed as a bulwark against an increasingly aggressive Russia.

“The West can help Ukraine by increasing attractiveness for investors. A political risk insurance is necessary. This could take the form of mezzanine financing at EU interest rates — very close to zero,” he said in an interview published on Monday.

“I stand ready. There are concrete investment ideas, for example in agriculture and infrastructure projects. I would put in $1 billion. This must generate a profit. My foundation would benefit from this … Private engagement needs strong political leadership.”

The Hungarian-born hedge fund magnate, who made his name betting against the pound in 1992, also put the chance of Greece leaving the euro zone at a third. Last week he put it at 50:50.

(Reporting By Shadia Nasralla; Editing by Larry King)

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GM’s Cadillac CT6 tests strategy for taking fat out of big cars

NEW YORK (Reuters) – When General Motors Co (GM.N) takes the wraps off its new Cadillac CT6 on Tuesday the most important thing about the vehicle could be what is under its skin.

The CT6, to be unveiled ahead of the April 3-12 New York auto show, is an expensive car aimed more at boosting Cadillac’s brand image than sales volume. Among the promised features is a system that will enable partly autonomous highway cruising.

But the CT6 could have a broader impact on GM’s future products because of the way it is built. The car is the largest scale application of the company’s new approach to using a mix of steel, aluminum and other materials to build vehicles light enough to meet tougher fuel efficiency standards, but big enough for customers who want spacious cars.

GM engineers are studying variations on the CT6’s multi-material construction for at least four other future vehicle architectures and other models could be derived from the CT6’s “Omega” architecture, Travis Hester, CT6’s chief engineer, said in an interview.

Automakers are under pressure in the United States and China to dramatically increase fuel efficiency over the next decade to reduce greenhouse gas emissions. But as oil prices tumble, consumers in the world’s two richest auto markets are paying premiums for luxury sedans and sport utility vehicles, not small cars.

That means automakers are racing to build vehicles that are large, but light.

“They need to get the weight out,” says Jeff Schuster, senior vice president for forecasting at LMC Automotive. Some of GM’s big rivals, including Ford Motor Co (F.N) are moving toward largely aluminum bodies to shed pounds.

The CT6’s engineers were headed in the same direction, but then they fed data on the properties of different materials into a computer model designed to show where in the car’s body each would perform best.

“What came out was a whole different set of combinations,” said Hester, the engineer.

CT6 engineers decided to use high strength steel around the passenger compartment. Aluminum would have been lighter, but steel makes a better sound shield, so the car needs less noise absorbing padding, Hester said.

GM saved money by eliminating costly metal-forming dies, in one case replacing 35 parts with one casting.

“If done right, mixed materials takes costs out,” said Mark Reuss, GM’s head of global product development.

Overall, the CT6 body is about 198 pounds lighter than a comparable body made of steel. Some of the weight savings will be offset by features with more visible showroom appeal, including wheels up to 20 inches in diameter.

(Editing by Grant McCool)

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Asia shares swing higher as China nears seven year high

SYDNEY (Reuters) – Asian stock markets rose on Monday, with China stocks nearing a seven-year peak on hopes for more infrastructure spending and policy stimulus, while oil prices suffered further from excess supply.

Activity was guarded most elsewhere in a week book-ended with holidays and a U.S. jobs report that could affect the timing of interest rate hikes there.

Shanghai shares .SSEC climbed 1.9 percent to test highs last seen in May 2008 on hints that Beijing supported the market’s rise. The Hang Seng China Enterprises Index .HSCE also added 3.5 percent after China allowed mainland mutual funds to buy Hong Kong stocks.

After some early dithering, Japan’s Nikkei .N225 firmed 0.8 percent, helped by talk of demand for the new quarter and financial year.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS recouped early losses to gain 0.4 percent.

European bourses were tipped to open firmer, while SP EMini stock futures ESc1 were quoted up 0.4 percent.

Federal Reserve Chair Janet Yellen on Friday reaffirmed that U.S. rates would likely start rising later this year but emphasized the pace of tightening would be gradual and data-dependent.

The conditional outlook helped nudge longer-dated Treasury yields lower and left the dollar listless for the moment. It fetched 119.21 yen JPY= on Monday, a whisker higher than at the end of last week and short of the near eight-year peak of 122.04 set early this month.

The euro eased back to $1.0861 EUR=, having in the last two weeks pulled up from a 12-year trough of $1.0457.

Oil prices fell further as Iran and six world powers tried to reach a nuclear deal that could add more supply to the market if sanctions against Tehran are lifted.

U.S. crude CLc1 eased 77 cents to $48.10 a barrel and Brent LCOc1 lost 42 cents to $55.99.

The data diary in Asia was rather sparse, with Japan reporting a disappointing decline in industrial output for February. Figures on German inflation, European confidence and U.S. personal income and spending are due later in the session.

Flash inflation data for the euro zone are out Tuesday and manufacturing surveys on China the day after. That should be just an appetizer for Friday’s U.S. payrolls report.

Economists polled by Reuters are forecasting a healthy 244,000 rise in non-farm payrolls in March. If confirmed, it would be the 13th straight month of job gains of over 200,000, a run not seen since 1994-95. ECONUS

The market reaction will be complicated by holidays across much of the western world on Friday. Only some U.S. markets will be open and then only for shortened hours.

Investors will again have to keep a wary eye on Greece and its talks with international creditors where the parties are struggling to come up with a list of acceptable reforms.

Greece will run out of money by April 20 if it does not secure funding from its European partners, a source familiar with the matter told Reuters last week.

(Editing by Shri Navaratnam Kim Coghill)

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Ford revives the Lincoln Continental, aims at U.S. and China

NEW YORK (Reuters) – Ford Motor Co (F.N) will resurrect the Lincoln Continental as its top-of-the line luxury sedan, betting the classic name will help rebuild the brand’s image in the United States and China.

Ford’s Lincoln will unveil a prototype of the future Continental sedan on Monday ahead of the April 3-12 New York auto show, which will feature many of the Continental’s future rivals, including the Cadillac CT6 sedan from General Motors Co (GM.N), a new Jaguar XF sedan from Jaguar Land Rover and a bevy of super-premium models from Daimler AG’s (DAIGn.DE) Mercedes Benz.

Ford retired the Continental name in 2002, and joined its rivals in using letter and number codes for most models. But memories lived on in China, where Continentals had been the car of political leaders and celebrities. China now is the main market for premium sedans such as the Audi A6 or A8, the Mercedes S-class or the BMW 7-series.

Ford executives say they were surprised to learn that the Continental name also had legs in the United States, where grandly-proportioned Continentals from the 1960s had prominent cameo roles in movies such as the popular “Matrix” science fiction series.

What clinched it, said Ford Chief Executive Mark Fields, was that early designs for the next large Lincoln sedan “weren’t as good as we wanted them to be.” About 18 months ago, Fields said he and other senior executives decided to call the car the Continental based on the positive research.

“Immediately, people’s eyes lit up,” Fields said. The show car debuts a new look for Lincoln, with a grille and stance that lean more toward Jaguar or Maserati than Cadillac or BMW.

When it launches next year, the production Continental will be the latest salvo in a $2.5 billion renovation of Lincoln. In the United States, the brand lags well behind BMW, Mercedes, Audi, Cadillac and Lexus. Lincoln’s U.S. sales are up 1.2 percent for the first two months of 2015, lagging the 9.2 percent increase in the overall market.

By 2020, Ford wants to expand Lincoln sales globally to 300,000 vehicles a year, about triple current sales, Fields said.

Ford is in the early stages of relaunching Lincoln in China, with 11 dealerships and 25 planned by the end of 2015. Ford has not announced plans to build Lincoln vehicles there. GM says it plans to build the CT6 in China and at its factory in Hamtramck, Michigan.

(Editing by Grant McCool)

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South Korea picks KAI, with Lockheed, for $7.9 billion fighter jet development

SEOUL (Reuters) – South Korea chose on Monday Korea Aerospace Industries Ltd (047810.KS), which expects to partner Lockheed Martin Corp (LMT.N), to develop a mid-level fighter jet that will cost around 8.7 trillion won ($7.88 billion).

The Defense Acquisition Program Administration (DAPA) also confirmed its decision to upgrade South Korea’s Patriot missile system, with Raytheon Co (RTN.N) chosen to upgrade the launch systems. PAC-3 missiles will be bought from the United States.

South Korea has been trying to bolster its arsenal in the face of a missile threat from North Korea.

“Once the Patriot upgrades are completed, the warheads of North Korean ballistic missiles can be struck directly, and minimizing damage to the ground,” DAPA said in a statement.

Reclusive North Korea sporadically test fires missiles on the Korean peninsula, most recently in protest against annual U.S.-South Korean military exercises.

The KF-X mid-level fighter jet program will aim to develop jets to replace aging F-4 and F-5 fighters by 2025, as well as adding air defense for its sole foreign partner, Indonesia, which is paying a fifth of the development cost.

KAI beat out Korean Air Lines (003490.KS), which had partnered with Airbus (AIR.PA).

The PAC-3 missiles will be built by Lockheed Martin. The total upgrade is expected to cost about 1.3 trillion won ($1.18 billion), two people with knowledge of the matter said.

Both declined to be identified because the details of the projects are confidential.

With South Korea’s arms procurement budget increasingly constrained, some analysts have questioned the viability of the fighter jet project. A state-run South Korean think tank estimated the KF-X program would need an additional 10 trillion won for production.

Indonesia agreed last year to pay 20 percent of the development costs.

DAPA’s estimated budget requirement for arms procurement in 2016-2020 was 96 trillion won, up from 72 trillion won DAPA estimated for 2015-2019, Yonhap reported this month.

The budget has already been hit by high-profile purchases such as the 40 Lockheed Martin F-35 fighter jets for 7.34 trillion won finalised last year, and four in-flight refueling tankers for about 1.4 trillion won under negotiation.

DAPA declined to comment on the cost of the projects, or on Lockheed’s involvement.

Lockheed Martin said it was committed to supporting the KF-X program but did not have any immediate comment on the Patriot upgrade. Raytheon could not be reached for immediate comment.

($1 = 1,104.0000 won)

(Editing by Paul Tait)

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Exclusive: Fidelity moves to end DuPont proxy battle

NEW YORK (Reuters) – Fidelity Investments, a major investor in DuPont (DD.N), has put pressure on activist fund Trian Fund Management LP and the chemical conglomerate to reach a settlement in what it sees as a detrimental proxy fight, according to people close to the matter.

Fidelity, whose 2.5 percent stake makes it DuPont’s sixth largest shareholder, has not publicly revealed what sort of compromise it was seeking. Yet its unusual intervention as peacemaker could influence other mutual fund investors in DuPont and pre-empt what could be this year’s biggest battle over board representation.

In a filing with the U.S. Security and Exchange Commission last Wednesday, Trian disclosed that on March 11 it received a call from one of DuPont’s largest stockholders encouraging Trian and the company to resolve the proxy contest and avoid a costly and disruptive conflict. It did not disclose the name of that investor, but those familiar with the matter said it was Fidelity, the second largest U.S. mutual fund company.

A Fidelity spokesman declined to comment. DuPont and Trian reiterated their positions, but declined to comment on Fidelity’s involvement.

“Since 2009, DuPont has been executing a transformational strategy that is delivering superior results,” a DuPont spokeswoman said.

“In direct contrast, Trian has a singular, value-destructive agenda to break up and add excessive debt to DuPont, which we believe would put shareholder value at risk,” she added.

A Trian spokeswoman rejected the criticism.

“We have met recently with many of DuPont’s largest stockholders and our ideas clearly resonate with them,” she said. “We believe that Trian’s presence on the board will help to drive sales, margins, and earnings growth at a company where EPS (earnings per share) is expected to be lower in 2015 than in 2011 for the fourth year in a row.”

Trian, which owns a 2.7 percent stake in DuPont, is pushing for the appointment of four of its own directors at the company’s annual shareholder meeting on May 13. The slate includes Trian’s co-founder and Chief Executive Officer Nelson Peltz, who has requested a seat on the board since earlier this year.

DuPont, which has a market capitalization of $65 billion, named two of its own nominees, Ed Breen and Jim Gallogly, as directors last month. In an attempt to end the proxy war, the Wilmington, Delaware-based company has said it is prepared to accept one of the fund’s nominees, but has refused to add Peltz to its board. [ID:nL3N0WP50E]

DuPont had said it would spin off its performance chemicals business. Peltz also wants the company to separate its volatile but cash flow-strong materials businesses from its nutrition and health, agriculture, and industrial biosciences divisions.

DuPont has rejected the proposal, stressing that keeping its businesses together would allow the company to benefit from its science platform, global scale, market access and brand.


Over the past few weeks, both camps have been lobbying with DuPont’s top 30 to top 40 investors, the sources said.

A Reuters poll of investors who hold about 48 million DuPont shares representing 5 percent of the company, found them split on Trian’s board representation.

“We bought DuPont before this happened, and we do think this is, at minimum a distraction, at maximum a dislocation to the plan that is in place,” said Robert Zagunis, managing director of Jensen Investment Management, which owns 1.8 million DuPont shares. “We want this to be resolved, and with DuPont winning the proxy.”

Others disagreed. “We think the board needs to make decisions in the boardroom to maximize value. Trian brings one perspective for them,” said Aeisha Mastagni, an investment officer for California State Teachers’ Retirement System, which held about 3.6 million shares as of Feb. 28.

(Additional reporting by Tim McLaughlin in Boston; Editing by Greg Roumeliotis and Tomasz Janowski)

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