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Wall Street falls amid worries about China and Greece

NEW YORK U.S. stocks slipped on Thursday as mixed messages about Greece’s debt talks kept investor uncertainty high, while a sharp drop in Chinese indexes after brokers tightened margin rules also weighed on sentiment.

The Dow Jones industrial average .DJI fell 36.8 points, or 0.2 percent, to 18,126.19, the SP 500 .SPX lost 2.6 points, or 0.12 percent, to 2,120.88 and the Nasdaq Composite .IXIC dropped 8.62 points, or 0.17 percent, to 5,097.98.

The SP had earlier fallen as much as 0.5 percent.

(Reporting by Rodrigo Campos; Editing by Nick Zieminski)

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No change in Greek debt talks after another day of spin

BRUSSELS The euro leapt, Greek bond yields fell, global financial markets brightened, but nothing actually changed in another day of conflicting statements on Greece’s long-running debt talks with international creditors.

Traders latched on to an upbeat statement issued by a Greek government official on Wednesday afternoon asserting that negotiators were starting to draft a “staff level agreement” – a prerequisite for releasing any more bailout funds.

The snag was that talks had not even resumed at that point due to a Belgian air traffic control breakdown that forced the Greek delegation’s plane to land in Duesseldorf, Germany.

When the meeting with representatives of the International Monetary Fund, European Central Bank and European Commission finally began several hours late, there was no start on drafting a deal because too much remains to be agreed, EU officials said.

“We’re not there yet,” an official following the talks said.

Desperate to receive more funds before it runs out of cash, the leftist-led government of Prime Minister Alexis Tsipras has alternated between lashing out at the creditors, especially the IMF, and declaring that a deal is just around the corner.

EU officials and euro zone paymaster Germany have rushed to pour cold water on such optimism, saying that little or nothing has changed at the negotiating table.

On Wednesday, European Commission Vice-President for the euro Valdis Dombrovskis said progress was slow and listed a string of issues including pension and labor market reform and fiscal targets that remained unresolved.

Hardline German Finance Minister Wolfgang Schaeuble went on television to say: “One is hearing all this positive news coming from Greece. That’s nice. But on the substance, we haven’t got much further in the negotiations between the three institutions and the Greek government.”

And IMF Managing Director Christine Lagarde said the talks had not yet produced substantial results. “Things have moved, but there is still a lot of work to do,” she told ARD television on Thursday.

(Additional reporting by Renee Maltezou in Athens; Writing by Paul Taylor; editing by David Stamp)

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U.S. reaches deals with four more banks under Swiss program

WASHINGTON/NEW YORK Four more Swiss banks have cut deals with the U.S. Department of Justice to avoid possible prosecution for helping Americans evade taxes, the department said on Thursday.

The banks are Societe Generale Private Banking (Lugano-Svizzera), MediBank AG, LBBW (Schweiz) AG, and Scobag Privatbank AG. The banks agreed to pay penalties ranging from $9,090 to $1.36 million.

The banks settled under a voluntary program the Justice Department launched in 2013 to allow Swiss banks to resolve potential criminal charges by disclosing cross-border activities that helped U.S. account holders conceal assets.

Under the program, banks also must provide detailed information on the accounts of U.S. taxpayers under investigation.

Three banks settled under the program earlier this year and dozens more are expected to do so in the coming months.

Banks that were already under criminal investigation, such as Julius Baer and HSBC’s Swiss private bank, were excluded from the program.

Swiss banks have come under intense pressure to give up their traditional secrecy in recent years.

The department is now investigating account holders, bank employees and others based on information supplied, in part, by the banks participating in the program, Acting Assistant Attorney General Caroline Ciraolo said in a statement.

“There is no safe haven,” Ciraolo said.

Societe Generale Private Banking, based in Lugano, will pay $1.36 million after managing over 100 U.S.-related accounts worth about $140 million since 2008, the Justice Department said.

The bank helped account holders conceal assets and income from the U.S. Internal Revenue Service through numbered accounts or holding accounts in the names of sham entities, the department said.

The other banks provided similar services.

MediBank AG, of Zug, Switzerland, will pay $826,000 after helping U.S. taxpayers hide assets, the department said. MediBank had 14 U.S.-related accounts worth $8.6 million under management since 2008.

LBBW (Schweiz), based in Zurich, held 35 U.S.-related accounts with $128 million in assets under management since August 2008, the department said. It will pay $34,000.

Scobag Privatbank AG, based in Basel, had 13 U.S.-related accounts worth nearly $7 million since 2008 and will pay a penalty of $9,090, according to the Justice Department.

The banks mitigated their penalties by encouraging U.S. taxpayers to meet their obligations, the department said.

The banks could not immediately be reached for comment.

(Reporting by Karen Freifeld. Additional reporting by Jonathan Stempel in New York and and Sarah N. Lynch in Washington, D.C.; Editing by Alden Bentley; and Peter Galloway)

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Fed’s Bullard: low rate vow is ‘not helpful,’ GDP targeting is

Forward guidance and bond-buying, two mainstays of global central banking since the 2007-2009 financial crisis, may actually be of little use in jump-starting a moribund economy, a study by a top Federal Reserve official showed on Thursday.

Instead, the best way to spur growth amid a severe economic downturn is to engineer temporarily higher inflation, according to the paper by St. Louis Fed President James Bullard.

“In the framework presented here the forward guidance policy – promising to remain at the zero lower bound beyond the time that the zero lower bound is actually constraining – is not helpful,” Bullard wrote with his co-authors, Washington University’s Costas Azariadis, University of Sydney’s Aarti Singh and Narodowy Bank Polski’s Jacek Suda.

“Quantitative easing doesn’t look like a good policy either,” he told reporters in a conference call, although the paper’s findings in that regard are more equivocal. “What would be a good policy here is nominal GDP targeting, with these special price level adjustments when the zero lower bound threatens.”

Most of Bullard’s colleagues at the Fed credit forward guidance and bond-buying with averting an even more severe recession and an even slower recovery.

But to Bullard, the Fed’s low rates have not done their job, and it is time to assess other approaches.

Boosting inflation temporarily, a form of so-called nominal GDP targeting, would still allow the central bank to target an inflation goal because policymakers would aim for lower inflation during high-growth periods to balance out higher inflation during low-growth times, Bullard explained to reporters.

Adjusting inflation in this way would help households borrow, lend and save at rates that will best keep the economy growing and functioning smoothly, he said.

It’s an approach whose roots in academic research go back 40 years, but which has never gained real traction among policymakers, in part because it is difficult to explain and potentially to carry out.

Bullard did not lay out how a central bank would achieve a temporarily higher inflation rate, leaving that detail to future research.

One drawback to nominal GDP targeting, the paper found, is that it can hurt the cash-using segments of the population more than those households that rely on credit, exacerbating already pronounced income inequality.

Still, he said, that drawback can be addressed by targeting a long-term inflation rate and keeping inflation below that level during times of high growth.

(Reporting by Ann Saphir; Editing by Chizu Nomiyama)

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Delta Air Lines says seeks Asia alliances

TOULOUSE, France Delta Air Lines (DAL.N) is interested in forging alliances with carriers in Asia, the airline’s president said on Thursday.

Ed Bastian, speaking at a media event in France, also said he expected Italy’s Alitalia to remain part of a transatlantic joint venture with Delta and Air France-KLM (AIRF.PA) despite its growing ties with new 49 percent shareholder Etihad.

“We are constantly pursuing opportunities where we can find good matches. In Europe we have partners and great coverage … Alitalia is still in our partnership and we are going to continue that way, so there is no change.”

The tie-up between Alitalia and Etihad has however caused some friction between Air France-KLM and the Italian carrier.

On future partnerships, Bastian said: “I think there may be some opportunities in Asia that arise”. Delta is already a partner of Korean Air Lines and may seek to strengthen that, he added.

Bastian predicted further consolidation between smaller U.S. carriers, but not among the big four U.S. airlines.

“I don’t see the big carriers getting any bigger necessarily … but among the smaller guys, will there be consolidation? I think that is probably inevitable.”

He was speaking as Delta took delivery of the airline’s first new Airbus (AIR.PA) aircraft since it merged with Northwest in 2009, sparking a series of large-scale airline tie-ups.

Delta ordered 40 A330 aircraft in 2013 including 10 A330s. It recently placed an order for A330s and A350s in a blow to Boeing (BA.N), which later said it had lost because it had been unable to supply 787 Dreamliners as early as Delta had wanted.

Bastian denied this, saying Boeing had delivery positions available and had lost for competitive reasons.

He sidestepped a question on whether he could be tapped as a future successor to Chief Executive Richard Anderson, directing the reporter to either Anderson or the Delta board.

Skyteam member Delta has increased its exposure to the UK and Latin America in recent years, taking a 49 percent stake in Virgin Atlantic Airways and expanding shared routes and marketing with Mexico’s Grupo Aeromexico SAB de CV (AEROMEX.MX) and Brazil’s Gol Linhas Aereas Inteligentes SA (GOL.N).

In Asia, it serves 17 destinations compared with 31 for United Airlines (UAL.N), including Australia/New Zealand.

(Corrects attribution of quote in fifth paragraph)

(Additional reporting by Jeffrey Dastin; Editing by James Regan and David Holmes)

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Abercrombie signals better year as Hollister sales improve

Abercrombie Fitch Co (ANF.N) said its business was showing signs of recovery as sales of its Hollister-branded clothes improved, suggesting that recent efforts to revitalize the teen apparel retailer may be starting to pay off.

The company’s shares rose nearly 12 percent on Thursday after it reported comparable sales fell less than expected in the first quarter ended May 2, as revamped Hollister stores and lower prices drove traffic.

Abercrombie, once popular for the preppy clothing it sold under its namesake brand, has been struggling to revive flagging sales as customers have tired of its logo-centric apparel.

Such apparel has been replaced by trendier clothing with new styles in denim and floral prints over the past months.

The company has cut prices in some international markets for its Hollister line, which offers South California-inspired t-shirts, skirts, tops and hoodies.

Abercrombie has changed the music, lighting and how it stacks clothes in several Hollister stores, moves that have resulted in slightly higher sales, Executive Chairman Arthur Martinez said on a post-earnings call.

The company said it expects comparable sales to improve through the year and forecast full-year gross margins to be flat with or slightly higher than a year earlier, helped by lower costs.

Still, there’s a long way to go.

For one, company-wide same-store sales still fell 8 percent in the quarter, though less than the 8.7 percent analysts on average had expected, according to Consensus Metrix.

“There’s really a lot of things they’re working on right now, but (a turnaround) is not going to really happen overnight,” FBR Capital Markets analyst Susan Anderson said.

“But I think we’ll continue to see incremental improvement throughout the year.”

Comparable sales at Hollister fell 6 percent, less than the 8.9 percent decline analysts had expected.

Net sales declined 14 percent to $709.4 million and net loss nearly tripled to $63.2 million, or 91 cents per share.

Abercrombie, which gets nearly 37 percent of its revenue from international markets, said it expects a stronger dollar to continue eating into revenue this year.

The dollar, which had risen 1.81 percent against a basket of currencies from February to April, lowered Abercrombie’s sales by about 6 percent in the latest quarter.

The company’s shares rose to a session high of $21.90. Up to Wednesday’s close, the stock has nearly halved over the past 12 months.

(Editing by Savio D’Souza and Sayantani Ghosh)

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U.S. pending home sales race to nine-year high in April

WASHINGTON Contracts to buy previously owned U.S. homes rose for a fourth straight month in April to a nine-year high, buoying the outlook for the housing market.

The National Association of Realtors said on Thursday its Pending Home Sales Index, based on contracts signed last month, increased 3.4 percent to 112.4, the highest level since May 2006.

These contracts become sales after a month or two, and last month’s increase pointed to a pick-up in home resales after they lost momentum in April. Economists had forecast pending home sales rising 0.9 percent last month.

Pending home sales increased 14.0 percent from a year ago, the largest year-on-year increase since September 2012.

Contracts surged 10.1 percent in the Northeast and increased 5.0 percent in the Midwest. They rose 2.3 percent in the South and gained 0.1 percent in the West.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

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U.S. housing data, sturdy jobs market buoy growth outlook

WASHINGTON Contracts to buy previously owned U.S. homes rose for a fourth straight month in April to a nine-year high, buoying the outlook for the housing market and the overall economy.

While other data on Thursday showed an unexpected increase in new applications for unemployment benefits, filings remained at levels consistent with a tightening labor market.

The National Association of Realtors said its Pending Home Sales Index, based on contracts signed last month, increased 3.4 percent to 112.4, the highest level since May 2006.

Generally contracts become sales after a month or two, and last month’s increase pointed to a pick-up in home resales after they lost momentum in April. Economists had forecast pending home sales rising only 0.9 percent last month.

“Today’s report suggests we may see continued strength in resales in the months ahead. However, the current low inventory levels, which are placing upward pressure on home prices, remain a bit of a downside risk,” said Derek Lindsey, an economist at BNP Paribas in New York.

The jobless claims and housing data joined upbeat reports on consumer confidence and business spending plans that have hinted the economy might finally be gaining steam as some drags on growth in the first quarter either fade or ease.

April data on retail sales and industrial production had pointed to modest growth early in the second quarter.

Prices for U.S. Treasury debt slipped, while the dollar was little changed against a basket of currencies. U.S. stocks were trading lower as traders worried Greece could default on its debt repayments.

Firming housing and the tightening jobs market will likely keep the Federal Reserve on track to raise interest rates this year.


Housing is being supported by the strengthening labor market, which is encouraging young adults to move out of their parents’ basements and setting up their own households.

While tight inventories are pushing up house prices and constraining activity, there is hope higher home values will encourage more homeowners to put their houses on the market and builders to break more ground on new projects.

An accelerating housing market would pick up some of the slack from weak business investment, which has been undermined by deep spending cuts in the energy sector in response to a sharp drop in oil prices.

In a separate report, the Labor Department said initial claims for state unemployment benefits rose 7,000 to a seasonally adjusted 282,000 for the week ended May 23.

While that confounded economists’ expectations for a drop to 270,000, claims stayed below 300,000, a threshold associated with a firming jobs market, for a 12th straight week, an unusually long stretch given a sluggish economic backdrop.

“The data have reinforced our view that the underlying trend in growth has not weakened significantly and that employment growth remains more than strong enough to keep unemployment trending down,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York.

Outside the energy sector, which has suffered thousands of job losses because of the lower oil prices, layoffs remain subdued even as economic growth struggles to rebound strongly after slumping at the start of the year.

The claims report showed the number of people still receiving benefits after an initial week of aid rose 11,000 to 2.22 million in the week ended May 16.

The four-week moving average of the so-called continuing claims, which irons out week-to-week volatility, fell to its lowest level since November 2000.

Continuing claims covered the period during which the government surveyed households for May’s unemployment rate. The four-week average declined 70,250 between the April and May survey periods, suggesting a dip in the jobless rate from a near seven-year low of 5.4 percent last month.

“The continuing claims data continue to point to slack in the labor market diminishing,” said John Ryding, chief economist at RDQ Economics in New York.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

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Citigroup CEO defends credit card deal with Costco

NEW YORK Citigroup Inc (C.N) CEO Mike Corbat said the deal the bank made with Costco Wholesale Corp (COST.O) to replace American Express Co (AXP.N) as the issuer of credit cards for the retailer will be profitable for his shareholders.

Responding to speculation in the card industry that Citigroup gave too much to Costco in negotiations earlier, Corbat said the deal is “without a doubt accretive” to shareholders and would be even if Citigroup did not have deferred tax assets it can use to shelter income from taxes.

Corbat, speaking at an investor conference in New York, also said second-quarter revenue from capital markets trading is “very similar” so far to the same period a year earlier.

(Reporting by David Henry in New York)

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