News Archive

U.S. leaning against regulatory relief for three banks in Libor scandal

WASHINGTON The U.S. Labor Department is leaning toward denying requests for regulatory relief by three big foreign banks that pleaded guilty to manipulating Libor interest rates but want to keep managing retirement accounts for clients.

In letters to units of Deutsche Bank, UBS (UBSG.VX) and the Royal Bank of Scotland (RBS.L), the department said it has “tentatively decided not to propose” exemptions sought by the banks due to their “failure to demonstrate that the exemptions would be in the interest of plan clients.”

The July 16 letters give each bank the opportunity to submit additional materials to make their case and try to sway the department.

“We continue to engage with the DOL through the full application process to provide the information that we believe supports the grant of an exemption,” UBS spokesman Gregg Rosenberg said.

A Deutsche Bank spokeswoman had a similar comment, noting the bank takes “the concerns in the tentative denial letter very seriously” and is working to address them.

A spokesman for RBS had no immediate comment.

Pressure has been mounting on U.S. policymakers to more closely scrutinize regulatory exemptions sought by big banks that break the law. Last year, Securities and Exchange Commission Democratic member Kara Stein issued a scathing dissent against RBS, which had applied to the SEC for regulatory waivers also in connection with the Libor guilty plea.

Under federal laws governing securities and retirement accounts, banks that commit crimes or are found liable for civil fraud are banned from managing client plans or certain capital-raising activities. They must seek exemptions in order to continue business as usual.

Stein lambasted the agency for granting the bank a waiver, saying too often such requests are rubber-stamped and perpetuate a problem of banks being “too big to bar.”

Since then, Democratic members of Congress have urged the SEC and the Labor Department to more closely scrutinize the activities of law-breaking banks before granting exemptions.

At the Labor Department, banks with criminal convictions must apply for exemptions to permit them to continue managing retirement accounts.

The Labor Department reviews the request and if ample evidence is provided, it will then propose an exemption and give the public a chance to weigh in before finalizing it.

Already this year the Labor Department has held one public hearing over a request by Credit Suisse (MLPN.P) for an exemption, after it pleaded guilty to conspiring to help U.S. citizens dodge taxes.

Deutsche Bank, meanwhile, actually has two requests pending before the department.

In addition to the request related to the Libor matter, it is also requesting an exemption following a 2011 indictment for manipulating the Korean stock market.

On Aug. 24, the department proposed granting the bank a temporary exemption in advance of a Sept. 3 verdict in the South Korea case.

The Labor Department’s tentative denial of the other three exemption requests connected to the Libor cases was reported earlier by Politico.

(Reporting by Sarah N. Lynch; Editing by David Gregorio)

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Google rejects ‘unfounded’ EU antitrust charges of market abuse

BRUSSELS Google Inc (GOOGL.O) has rejected EU antitrust charges that it abused its market power, exposing the company to the risk of a hefty fine if it does not alter its business practices.

The company’s comments came after the European Commission in April accused it of distorting internet search results to favor its shopping service, harming both rivals and consumers.

“Economic data spanning more than a decade, an array of documents and statements from complainants all confirm that product search is robustly competitive,” Kent Walker, Google’s general counsel, wrote in a blog on Thursday.

“We believe that the statement of objection’s preliminary conclusions are wrong as a matter of fact, law, and economics.”

The comments coincide with the company’s 150-page submission countering the Commission’s charges.

Commission spokesman Ricardo Cardoso confirmed the receipt of Google’s response to the charge sheet. “We will carefully consider Google’s response before taking any decision on how to proceed and do not want to prejudge the final outcome of the investigation,” he said.

If found guilty, the company could face a fine set at a level sufficient to ensure deterrence, according to the Commission’s charge sheet seen by Reuters. The EU antitrust authority can sanction wrongdoers up to 10 percent of their global turnover.

In his blog, Walker said the EU authority had failed to take into account strong competition from online retailers Inc (AMZN.O) and eBay Inc (EBAY.O).

He also said internet traffic had risen by 227 percent in the last decade in the countries where the Commission said it had abused its power to the detriment of rivals.


Walker said the regulator’s demand that Google give equal treatment to its rivals was “peculiar and problematic” and only justifiable if the company provided an essential service like an electricity company.

Google’s foes were scathing of the company’s arguments.

“We have seen this movie before. Defendants in big European antitrust cases have made the same arguments,” said Thomas Vinje, a lawyer at lobby group FairSearch, whose members include Microsoft Corp (MSFT.O), Nokia Oyj (NOKIA.HE) and TripAdvisor Inc (TRIP.O).

“And they argued, again like Google today, that the antitrust authorities just don’t get it, and that the remedy they demand cannot be implemented without causing technical and market chaos.”

Google has however been backed by one study by the Centre for European Reform, a pro-EU think tank. It surveyed prices of 63 items in Britain’s consumer inflation basket, comparing prices on Google Shopping with those of the first-placed retailer in normal search results.

Google Shopping was 2.9 per cent cheaper.

“Those who lose most from Google’s behavior are producers, not consumers, at least in the UK,” author John Springford said in a report published last month.

“If Google’s prioritization of its own shopping service gave it monopoly power, one would expect prices to be higher in its own service.”

(Additional reporting by Eric Auchard in Frankfurt; Editing by Susan Thomas and David Holmes)

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August U.S. auto sales seen down 3.9 percent: JD Power/LMC

DETROIT This week’s fall in equities markets is not expected to have a major impact on August U.S. auto sales, industry consultants J.D. Power and LMC Automotive said on Thursday.

The consultancies say monthly auto sales to be reported next Tuesday by major automakers will show a decline of 3.9 percent from a year ago, to 1.52 million vehicles.

This is “due to a quirk in the calendar” that pushes results of Labor Day weekend sales into September, JD Power and LMC said. While Labor Day is always in September, automakers normally count that weekend’s sales in August results.

The annualized rate of sales for August will be 17.2 million vehicles, and the two consultancies maintained the forecast for 2015 at 17.1 million vehicles.

(Reporting by Bernie Woodall; Editing by Matthew Lewis)

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Ukraine reaches ‘win-win’ deal with creditors on $18 billion debt

KIEV Ukraine reached what its finance minister called a “win-win” deal with its largest group of creditors to ease repayments on its $18 billion debt, winning breathing space for an economy drained by the cost of fighting with pro-Russian separatists.

The agreement, which includes a write-down of 20 percent of the principal owed, ended months of tense negotiations aimed at helping to keep Ukraine on track with its International Monetary Fund-led bailout program, plugging a funding gap and preventing a unilateral debt default.

As both sides vowed to work together to secure full support from bondholders for the deal, the only dissenting voice came from Russia, a big creditor, which said it would continue to demand full repayment by Ukraine of a $3 billion eurobond coming due in December.

The creditors, led by Franklin Templeton and including other asset managers, accepted a small increase in the coupon on most of the bonds to 7.75 percent and extended each maturity by four years. However, it must be approved by creditors outside the group.

Ukraine said the deal, announced on Thursday, would reduce the payments due over the next four years by $11.5 billion.

This will free up funds to help the war effort in the east, support the poor, cover purchases of Russian gas over the winter period and help keep the national currency, the hryvnia, stable according to a factsheet issued by the finance ministry.

“Everyone’s done well out of this deal. That’s why it’s collaborative. It’s not one side winning, it’s a win-win situation. We’re all now moving forward without putting the value of the bonds at any further risk,” Finance Minister Natalia Yaresko said late on Wednesday in remarks embargoed until Thursday.

The country’s sovereign dollar bond prices surged and debt insurance costs fell after the details were released.

Ukraine and the creditors said in a joint statement they would work together “to ensure the rapid implementation of the deal.”

But though Prime Minister Arseny Yatseniuk and Yaresko savored a victory after months of gloom, there was a question mark over whether the other creditors would fall in line.

The joint statement appealed to other bondholders to approve the deal and urged the international community to provide non-debt support to Ukraine in the form of grants. In Washington, IMF chief Christine Lagarde said it was important that the agreement gained “broad support from all concerned eurobond holders”.

Yaresko said she hoped it was “highly unlikely” remaining creditors would reject the agreement and forecast that the process would be wrapped up by the end of October.


However, a dispute immediately took shape with Russia over Ukraine’s $3 billion eurobond that matures in December.

Russian Finance minister Anton Siluanov said Moscow needed foreign currency and therefore could not participate in Ukraine’s restructuring agreement.

He said that Ukraine’s debt to Russia was official, country-to-country debt rather than commercial debt.

“We have always insisted and will continue to demand from Ukraine a full implementation of the (Eurobond) terms,” Siluanov told the state-run Rossiya 1 television channel. “We insist on a full repayment in December of this year of $3 billion, including interest payments,” he said.

Kiev views Russia’s $3 billion bond as part of the sovereign and sovereign-guaranteed bonds to be restructured under the agreement.

Defaulting to Russia would carry fresh risks for Ukraine because the IMF is not officially allowed to continue lending to a country that is in default to another sovereign.

Ukraine’s 2017 dollar bond issue firmed 8.7 cents to trade at 64.5 cents in the dollar on news of the deal according to Tradeweb data, while the 2022 bond rose 10 cents. XS080875819=TE XS091760584=TE

An issue maturing at the end of September, which is also subject to restructuring, rose 4.3 cents to also trade at 64 cents. XS0543783434=R


Market players endorsed the deal terms as more favorable to creditors than initially expected when Ukraine had insisted on a 40 percent writedown.

Also, while a 20 percent writedown had been broadly priced in over recent weeks, a coupon of 7.75 percent and the inclusion of GDP warrants – new instruments linked to growth-recovery – appeared to be the main drivers for a 10-11 cent rally in bond prices.

“The maturity extension was a little bit better than expected because people were thinking they would extend even longer,” said one fund manager in London who holds the bond.

“And the coupon is not as low as some people fear so now everyone needs to run their spreadsheet to work out the NPV (net present value) of the bonds.” NPV refers to the worth of future bond payments in current terms.

But some said the deal might not be enough to put Ukraine’s economy on the right path.

“Clearly more generous to bond holders than I had thought,” said Exotix credit strategist Jokob Christensen. “I have a hard time seeing how this generous deal will help reduce the debt to 71% of GDP in 2020, which is one of the crucial targets in the operation..”

Gabriel Sterne, head of global macro at Oxford Economics also cast doubt on whether the deal would make Ukraine’s debt levels sustainable and added: “There is a strong likelihood that they will be back at negotiating table in before too many IMF reviews have passed.”

(Additional reporting by Sujata Rao, Karin Strohecker and Marc Jones in London, Darya Korsunskaya, Lidia Kelly, Alexander Winning and Vladimir Soldatkin in Moscow; Writing by Richard Balmforth; editing by Anna Willard)

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Oil services firms beat expectations, tough times loom

LONDON/BANGALORE Oil and gas service companies have fared better than expected in the first half of the year despite a weak market, thanks to deep-pocketed Middle Eastern customers and stringent cost cuts.

However, they warn the second half of the year will likely be much harder as oil companies cut spending even further after a near 30 percent fall in oil prices since the start of July. Prices have more than halved since peaks hit in summer last year.

Norway’s Seadrill (SDRL.OL), which expects to make $500 million of cash savings this year, and Britain’s Hunting (HTG.L) beat analysts’ expectations, as did rivals such as Technip (TECF.PA), Subsea 7 (SUBC.OL) or Wood Group (WG.L).

Many oil services companies – which do everything from surveying to drilling wells – relied on business in the Middle East to counter balance a drop in activity in costly areas such as the North Sea or the Gulf of Mexico.

Oil operations in the Middle East are managed by cash-rich governments which in turn rely on income from the sector. Oil production costs in the region are some of the lowest in the world.

“The Middle East, which fortunately is where we geographically are located, is probably one of the least affected areas,” said James Moffat, chief executive of Dubai-based oil and gas equipment maker Lamprell.

Amec Foster Wheeler (AMFW.L), created last year by Amec’s $3 billion takeover of Foster Wheeler, saw revenue in its division including the Middle East grow 6 percent in the first half.

Wood Group (WG.L) made $40 million worth of cost cuts in the first half, especially through contractor rate reductions, while Petrofac (PFC.L) saved $80 million over the same period.

But with oil companies already drastically cutting back on investments – around $200 billion worth of projects are on hold or scrapped – and likely to cut further due to a persistent crude oil glut and weak prices, the overall outlook is bleak.

The FTSE All Share Oil Equipment and Services index .FTASX0570 has fallen 19 percent in the last three months.

“While everyone is doing their best to cope, it still makes for uncomfortable viewing,” analysts at Investec bank said. “A ‘lower-for-longer’ scenario is beginning to be baked into market expectations.”

Echoing peers, Scotland-based Weir Group (WEIR.L) said it expects its second-half margins to be slightly below first-half levels, reflecting the full impact of pricing pressure.

Customers’ cost cuts could also accelerate consolidation in the services sector as companies scramble to offer a broader range of products to offset lower demand for traditional offerings.

Schlumberger Ltd (SLB.N), the world’s largest oilfield services firm, said on Wednesday it had made a $14.8 billion bid for equipment maker Cameron International.

In November last year, Halliburton and Baker Hughes, Schlumberger’s rivals, agreed to a $35 billion tie-up.

Some are also eyeing opportunities in Iran, which reached a deal in July to curb its nuclear program in exchange for the eventual removal of sanctions.

“We have a good understanding with Iran about what they would like to do first. The day the sanctions are lifted that’s when we can start,” said Samir Brikho, chief executive of Amec Foster Wheeler, which has worked in Iran.

(Reporting by Karolin Schaps; editing by Susan Thomas)

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Stocks fly after U.S. data, Fed official cools on rate hike

NEW YORK Stock markets around the world rallied on Thursday, shaking off a slump related to China growth fears, as strong U.S. economic data boosted investor sentiment and crude oil rebounded sharply.

All three major U.S. indexes closed up more than 2 percent, putting them higher for the week, following share rebounds in China and Europe. Increased appetite for risk sent government bonds and the Japanese yen down Wednesday while the dollar rose.

Annual U.S. gross domestic product growth was revised to 3.7 percent from the 2.3 percent rate reported last month and last week’s jobless claims fell more than expected.

“Can the U.S. economy prove the naysayers wrong? Well, so far it has been able to do that and today’s data really puts a line under that,” said Peter Kenny, chief market strategist at Clearpool Group in New York.

The data came after New York Fed President William Dudley had said Wednesday that arguments for a September rate increase “seem less compelling” than only weeks ago, given the threat posed to the U.S. economy by recent market turmoil.

On top of these factors investor nerves in China and Europe were helped overnight by Wall Street’s Wednesday rally, as well as strong lending data from Europe, according to John Canally, Chief Economic Strategist for LPL Financial.

“People are just taking a second look at what caused the 10 percent correction in the first place. Not only is the Chinese market not connected to the global economy. It’s not connected to the Chinese economy.”

Markets around the world plunged earlier in the week as a slump in Shanghai shares fueled worries over China’s economic health. While Beijing moved to ease policy late on Tuesday, stocks still ended weak that day, but Wall Street staged a strong comeback late Wednesday and its biggest daily gain in four years helped to calm investor nerves overseas.

The Dow Jones industrial average .DJI rose 369.26 points, or 2.27 percent, to 16,654.77, the SP 500 .SPX gained 47.15 points, or 2.43 percent, to 1,987.66 and the Nasdaq Composite .IXIC added 115.17 points, or 2.45 percent, to 4,812.71.

Most U.S. Treasuries prices fell modestly, as the Wall Street rally and the U.S. data revived some bets the Federal Reserve would raise rates by year-end.

The spate of market volatility comes also as investors watch an annual meeting of the world’s top central bankers in Jackson Hole, Wyoming for clues on how the turmoil may shake up policy plans.

In Europe, the FTSEuroFirst index .FTEU3 of leading European companies closed up 3.6 percent. Germany’s DAX .GDAXI, France’s CAC 40 .FCHI and Britain’s FTSE 100 .FTSE all climbed more than 3 percent.

The two main Chinese indices surged 5.3 percent .SSEC and 5.9 percent .CSI300 on Thursday, snapping a five-day losing streak that had sent tremors around global financial markets.

Emerging markets stocks rebounded with MSCI’s benchmark emerging market stocks index .MSCIEF up 3.3 percent.

The dollar advanced for a third consecutive session, bolstered by gains in global equities as well as the U.S. data. The dollar index .DXY, which measures the greenback against a basket of major currencies, was up 0.7 percent Thursday afternoon.

Crude oil rocketed in its biggest one-day rally since 2009 as recovering equity markets and news of diminished crude supplies set off a short-covering surge by bearish traders.

U.S. crude futures CLc1 settled up 10.3 percent at $42.56 a barrel. The contracts had slumped to a 6 1/2-year low on Monday, dogged by a supply glut and China worries. Brent LCOc1 settled up 10.3 percent to $47.56.

Copper CMCU3 was up about 4.2 percent, moving further away from Monday’s six-year low.

(Additional reporting by Shinichi Saoshiro and Lisa Twaronite in Tokyo and Chuck Mikolajczak in New York; Editing by Larry King and Nick Zieminski; To read Reuters Global Investing Blog click here; for the MacroScope Blog click on; for Hedge Fund Blog Hub click on

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Stock gains drove U.S. corporate director pay to $250,000 in 2014: study

BOSTON Pay for outside directors at large U.S. companies reached a record $250,000 last year, driven by higher stock values, according to a study released on Thursday by consulting firm Towers Watson.

In its annual analysis of Fortune 500 companies, the firm found median total compensation for outside directors in 2014 including cash and stock awards rose 4 percent from 2013.

Paul Conley, a Towers Watson division leader, said director pay has been rising in the face of new financial regulations and because of public attention to executive pay and other questions of corporate governance overseen by company boards.

CEO pay “is not just a highly charged topic, but it also means increased responsibilities” for directors who oversee how much executives receive, Conley said.

The median value of cash compensation for the directors remained flat at $100,000 in 2014, Towers Watson found, leaving higher stock values to deliver the overall increase compared with 2013.

Among Fortune 500 companies, directors in the health care sector were paid the most, with a median total compensation of $285,785, followed by directors at energy and information technology companies, whose median total compensation was $279,548 and $275,587, respectively.

Directors at utility companies made the least, with median total compensation of $228,329, Towers Watson found.

(Reporting by Ross Kerber; Editing by Lisa Shumaker)

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Drugmaker Abbott says not pursuing an offer for St Jude Medical

Drugmaker Abbott Laboratories (ABT.N), knocking down a report in the Financial Times, denied on Thursday that it was preparing a bid for medical device maker St Jude Medical Inc (STJ.N).

The FT, citing people familiar with the matter, reported that Abbott has been working with advisers for several weeks to line up financing for a $25 billion cash and stock bid for St. Paul, Minnesota-based St Jude. St Jude’s shares, which jumped 15 percent premarket trading following the report, were up 3.4 percent at $71.72 in early trading.

The company had a market value of about $19.5 billion as of Wednesday’s close.

“I can tell you that we are not pursuing an offer for St Jude,” Abbott spokesman Scott Stoffel told Reuters.

St Jude did not immediately respond to a request for comment.

A source familiar with Abbott’s thinking said he did not believe a deal was seriously contemplated, while Evercore ISI analyst Vijay Kumar said Abbott was more likely to do medium-sized deals than a big transaction.

Abbott Chief Executive Miles White said last month that he was interested in acquisitions, including in the device sector, but would be cautious because a flurry of deals in the healthcare industry had pushed up valuations.

Abbott had cash on hand of almost $4 billion as of June 30.

RBC Capital Markets analyst Glenn Novarro said last month that a deal in the region of $5 billion for a device maker was more likely than something larger.

Kumar and Wells Fargo Securities’ Larry Biegelsen said on Thursday they expected Abbott to strike a deal in either the medical device or generic drug industries.

Abbott shares, which had fallen about 2 percent this year up to Wednesday’s close, were up 1.8 percent at $44.75.

(This version of the story was refiled to correct syntax in paragraph 5)

(Additional reporting by Mike Stone in New York; Editing by Saumyadeb Chakrabarty and Ted Kerr)

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Pending home sales rise in July

WASHINGTON Contracts to buy previously owned U.S. homes rose less than expected in July, but continued to suggest upward momentum in the housing market recovery.

The National Association of Realtors said on Thursday its

Pending Home Sales Index, based on contracts signed last month, increased 0.5 percent to 110.9.

Pending home contracts become sales after a month or two, and last month’s increase suggested further gains in home resales, which reached an 8-1/2-year high in July. Economists had forecast pending home sales rising 1.0 percent last month.

Housing is gaining steam, driven by a tightening labor market. Pending home sales rose 7.4 percent from a year ago.

Contracts increased 4.0 percent in the Northeast and were unchanged in the Midwest. They rose 0.6 percent in the South, but fell 1.4 percent in the West.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

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