News Archive


Market strains warrant caution on rate hikes: Fed’s George


WASHINGTON A Federal Reserve policymaker who has argued for a near-term U.S. interest rate hike said central bankers should take a “wait-and-see” approach to tightening policy due to a financial market sell-off and China’s economic slowdown.

The comments by Kansas City Fed Bank President Esther George, aired on Thursday in a cable television interview, were a sign that concerns over financial market turmoil have penetrated deeply into the U.S. central bank, further reducing the likelihood of a Fed rate hike in September.

George’s expressed caution followed comments made Wednesday by the head of the New York Fed that the case for a September rate lift-off now seemed “less compelling.” The chief of the Atlanta Fed on Monday also appeared more cautious about raising rates next month.

“Given what we’ve seen recently, I think we just have to wait and see,” George told Fox Business Network.

In an interview on CNBC network, George said “this week’s events complicate the rate picture.”

While softening her stance, George made clear she was not ruling out the possibility she would support a rate increase as early as September. “I don’t want to take too much signal from something that could turn out to be noise. I don’t want to overreact to short-term data that may not in the long term really turn out to be significant for that kind of decision,” she told Fox Business News.

(Reporting by Timothy Ahmann; Editing by Chizu Nomiyama and Andrea Ricci)

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ESM’s Regling says Greek debt relief possible, but no haircut


BERLIN The head of the European Stability Mechanism said on Thursday that options for easing Greece’s debt burden included extending loan maturities, suspending interest payments and transferring central bank profits, but he ruled out a debt “haircut”.

The International Monetary Fund says Greece’s debt is not sustainable and it does not want to participate in a third bailout unless there is some debt relief.

Klaus Regling, head of the ESM bailout fund, told a news conference in Berlin that another election in Greece was increasing uncertainty.

But “overall, I’m confident,” Regling said, adding that he expects support for the bailout to grow in Athens. “There has been a large majority in Greece’s parliament for these reforms.”

On Wednesday, outgoing Greek Prime Minister Alexis Tsipras, who hopes to return to power with an absolute majority, told Alpha TV that he favored longer repayment periods and lower interest rates on Greece’s debt burden.

But in the interview, he made no mention of writing off any debt – a campaign promise when he was elected in January that Germany, the biggest contributor to Greece’s three bailouts since 2010, opposes.

Regling said a Greek exit from the euro zone was a possibility and remains a threat if Athens does not fulfill the conditions of its third bailout agreement.

“This threat as a possibility must always be there and is still there,” he said.

(Reporting by Erik Kirschbaum and Paul Carrel; Editing by Noah Barkin/Ruth Pitchford)

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Syngenta shares rebound as management seen under pressure to act


FRANKFURT Shares in pesticides maker Syngenta (SYNN.VX) bounced back on Thursday from their worst ever slump in the previous session as the market speculated on management being pressured into quickly boosting the shares after suitor Monsanto walked away.

U.S. seeds giant Monsanto Co. (MON.N) on Wednesday abandoned its pursuit of its Swiss rival, which had rejected a recently sweetened $47 billion offer. Syngenta shares fell more than 18 percent on the news.

Shares were up 5.5 percent at 326.8 Swiss francs ($343) at 0837 GMT on Thursday from Wednesday’s close at 309.9 francs.

“If Syngenta’s share price remains at current levels of 310 Swiss francs, that is 40 percent below Monsanto’s most recent bid proposal, the pressure from Syngenta shareholders will arguably build up quickly to pursue changes that increase value. These could be announced soon,” analysts at Zuercher Kantonalbank wrote in a note.

Bank of America Merrill Lynch analysts said there was room for share buybacks at Syngenta. “Syngenta management are likely to be under pressure to make the situation more palatable with shareholders,” the brokerage said, pointing to the group saying it was committed to accelerate shareholder value creation.

Syngenta’s management, which has rebuffed Monsanto’s repeated approaches, has said it can create value under its own steam and that product development and cost-cutting efforts will bear more fruit than in the past.

The company last month reaffirmed its target for a 24-26 percent margin on earnings before interest, taxes, depreciation and amortization (EBITDA) over sales for 2018.

That is seen by many analysts and investors as a challenge amid weak agricultural markets in the United States and Brazil, coming from just 19.3 percent in 2014 and a projected 20 percent for this year.

Syngenta is trying to catch up with rivals, mainly through cost cuts in its underperforming seeds business. Its closest peer in pesticides, Bayer’s (BAYGn.DE) CropScience unit, had an EBITDA margin of 24.8 percent last year and Monsanto’s was 29 percent.

(Reporting by Ludwig Burger, editing by David Evans)

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Stocks fly after Fed official cools September rate hike talk


LONDON Stocks rose around the world on Thursday, following the biggest gains on Wall Street in four years, after a U.S. Federal Reserve policymaker said the case for an interest rate increase next month “seems less compelling” than it was a few weeks ago.

Increased appetite for risk also lifted crude oil prices further from last week’s lows. The price of government bonds and the Japanese yen fell.

In early European trading, the FTSEuroFirst index of leading 300 European shares was up 2.5 percent at 1,415 points. Germany’s DAX, France’s CAC 40 and Britain’s FTSE 100 were all up more then 2 percent.

“Financial market volatility has increased the likelihood that the first Fed hike will occur later than the September meeting,” said Angela Hsieh at Barclays. “The increasing likelihood of a later Fed lift-off has lifted market sentiment.”

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

Markets around the world plunged earlier in the week as a slump in Shanghai shares fueled worries over China’s economic health. Some calm returned after Beijing moved to ease policy late on Tuesday.

The two main Chinese indices surged 5.3 percent and 5.9 percent on Thursday, snapping a five-day losing streak that had wiped off around 20 percent from market value and sent tremors around global financial markets.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 2.7 percent, pulling away from a three-year low reached earlier in the week and chalking up its best day in three years.

Tokyo’s Nikkei ended up 1.1 percent, adding to the previous day’s 3.2-percent gain, after U.S. stocks racked up their biggest one-day gain in four years.

U.S. futures pointed to a rise of around 0.5 percent at the open on Thursday, adding to the previous day’s rise of almost 4 percent.

DAMAGE DONE

Dudley’s comments on Wednesday came amid alarming market volatility and just before many of the world’s top central bankers gather at an annual conference in Jackson Hole, Wyoming. Investors will be watching the conference how the turmoil may be shaking up policy plans.

Dudley also warned about over-reacting to “short-term” market moves, leaving the door ajar to raising rates when the Fed meets on Sept. 16-17.

“The damage to developed market shares has been done, though, with the SP500 still down 7.5 percent on the month,” noted Simon Smith, chief economist at FxPro in London.

Emerging markets stocks and currencies were rebounding on Thursday after Dudley’s comments and a recovery by Chinese equities. MSCI’s benchmark emerging market stocks index surged 2.5 percent as it looked to top Tuesday’s best day in two years.

In currencies, the Japanese yen fell as investors rediscovered their appetite for risk.

The dollar rose back above 120 yen, up a fifth of one percent on the day and recovering from a seven-month low of 116.15 yen plumbed on Monday. The euro rose a third of one percent above 136 yen.

The euro was steady against the dollar at $1.1320, after losing 1.7 percent in the previous session. It reached a seven-month peak of $1.1715 on Monday.

The euro was kept under pressure by comments from a senior European Central Bank official. Peter Praet said falling commodity prices and weakness in some overseas economies had increased the chances the ECB would miss its inflation target.

The yield on 10-year German bonds rose 3 basis points to 0.74 percent. The equivalent U.S. Treasury yield was steady at 2.16 percent, having slumped as low as 1.91 percent on Monday.

Crude oil rebounded. U.S. crude futures bounced 4.2 percent to $40.20 a barrel. The contracts had slumped to a 6 1/2-year low on Monday, dogged by supply glut woes and worries about China’s economy. Brent 4 percent to $44.81.

Copper was up about 1.9 percent at $5,026 a tonne, moving further away from Monday’s six-year low of $4,855.

Gold regained some lost ground after suffering its biggest fall in five weeks overnight as the dollar rebounded and U.S. stocks rallied. Spot gold rose about 0.2 percent to $1,127 an ounce.

(Additional reporting by Shinichi Saoshiro and Lisa Twaronite in Tokyo; Editing by Larry King; To read Reuters Global Investing Blog click here; for the MacroScope Blog click on blogs.reuters.com/macroscope; for Hedge Fund Blog Hub click on blogs.reuters.com/hedgehub)

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Goldman Sachs to hire several hundred people in Warsaw


WARSAW Goldman Sachs will hire “several hundred” employees for its Warsaw-based technology and operations units over the next three years, the U.S. bank said on Thursday.

The decision follows moves by Swiss banking giants UBS (UBSN.S) and Credit Suisse (CSGN.VX) to expand their operation centers in Poland, seeking to benefit from the country’s relatively inexpensive and skilled labor force.

“In a strategic decision, the firm will now expand its footprint in Warsaw,” said Goldman Sachs spokesman for central and eastern Europe, Adib Sisani.

“The expansion will be realized in a phased approach over the next three years to an office size of several hundred employees,” he said.

Goldman Sachs technology units are providing services for clients to support their sales, trading, banking, investment management and investment research operations, the bank said.

The units also support Goldman’s own legal, compliance and human resources management.

Poland, an European Union member since 2004, is central and eastern Europe largest economy. The country has enjoyed uninterrupted economic growth over the last two decades, but the average corporate wage is less than a third of its equivalent in Germany.

Goldman Sachs has had an office in Warsaw since 2011, including a small technology unit.

(Reporting by Marcin Goettig and Pawel Florkiewicz; Editing by Keith Weir)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/elSBoimjAJA/story01.htm

Panasonic to shut battery factory in Beijing, cut 1,300 jobs


TOKYO Japanese electronics giant Panasonic Corp (6752.T) on Thursday said it will stop making lithium-ion batteries at its factory in Beijing this month, cutting 1,300 jobs as part of a move to focus on higher-margin products such as electric car batteries.

The 15-year-old plant produces batteries for simple mobile phones and digital cameras, both of which are being increasingly overtaken by smartphones in popularity.

“The global market for these products has been shrinking,” Panasonic spokeswoman Yayoi Watanabe said, adding the closure was more about global technology trends rather than the recent turmoil that has battered Chinese markets. Employees were informed of the closure in late July, she said.

Finland’s Nokia, which sold its mobile phone business to Microsoft in 2014, was the main customer of the plant in its early days, according to the Nikkei business daily.

Panasonic took over the plant from Sanyo Electric, a leading maker of lithium-ion batteries and solar panels which it acquired in 2010. The deal failed to bring in much growth due to the emergence of South Korean manufacturers, analysts say, and the Japanese firm has since sold several Sanyo operations.

The plant closure comes as Panasonic restructures to focus on electric car batteries and energy-saving home systems rather than consumer electronics such as plasma TVs and smartphones, where it faces stiff competition from Asian rivals.

In June, it said it would invest about 60 billion yen ($499.83 million) in the fiscal year through March in its automotive business, including making lithium-ion batteries for Tesla Motors Inc (TSLA.O).

Panasonic is due to shoulder 30 to 40 percent of the cost of Tesla’s $5 billion Gigafactory plant in Nevada, a key facility in the automaker’s plans to ramp up sales.

The company’s shares were up 0.5 percent in afternoon trade compared with a 1.6 percent rise in the Nikkei 225 average.

(Reporting by Chang-Ran Kim and Ritsuko Ando; Editing by Stephen Coates)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/3YE3OSnp4Eg/story01.htm

Wal-Mart boosts holiday layaway, eyeing Star Wars toy launch


Wal-Mart Stores Inc (WMT.N) said it will bring forward its holiday layaway program by two weeks, as the world’s largest retailer hopes to get a jump on year-end demand and fuel sales of soon-to-be-launched Star Wars toys.

The company will kick off the program that allows shoppers to pay for holiday gifts and other products in installments, on August 28, two weeks earlier than last year, Anne Marie Kehoe, vice president of toys, said in a briefing.

It will make 40,000 items available under the payment plan, roughly a fifth more than last year.

The move reflects Wal-Mart’s desire to get a head start on a holiday season that is sure to be highly competitive. Toys are an especially big focus for retailers this year, ahead of the December release of “Star Wars: The Force Awakens” – the first in a new “Star Wars” trilogy being produced by Walt Disney Co.

Wal-Mart said it will have 500 new Star Wars products in stores on Sept 4, as part of a global roll-out of movie-related merchandise at various retailers. Wal-Mart will make thousands more items, including apparel, grocery and health products, available online.

Wal-Mart hopes the layaway program will ease purchases of Star Wars items, as well as other toys featured during a week-long toy promotion. Besides starting layaway earlier, it is reducing the minimum price for eligible items to $10 from $15 on a minimum basket of $50.

“In the five years we’ve been offering this holiday layaway program we’ve discovered that customers use it for a whole host of reasons, from being able to better budget their money and avoiding credit card fees,” Kehoe said.

Layaway programs can have a sizeable impact on a retailer’s sales. Retail consultant Burt Flickinger estimates layaway can account for as much as 10 to 15 percent of holiday revenues at Wal-Mart stores in poorer areas.

Wal-Mart said it would hold midnight Star Wars events at 2,900 stores on Sept 4 and family events at the same number of stores the following day. Kehoe said she expected strong demand for toys from collectors, besides children.

Helped by the Star Wars launch, the U.S. toy industry is poised to grow 6.2 percent in 2015 to $19.9 billion, according to research by the NPD Group tracking about 80 percent of U.S. retail sales.

(Reporting by Nathan Layne; Editing by Clarence Fernandez)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/E1Vai1rohhA/story01.htm

China market chaos blamed on exodus of regulatory ‘turtles’


SHANGHAI At the height of the 2008 financial crisis, as Wall Street slashed jobs, Beijing took advantage of the disarray to poach top Chinese financial talent from overseas to help reform its stock markets.

By summer 2015, China’s Securities Regulatory Commission (CSRC) needed them more than ever; a year-long market boom had imploded in a few weeks, and the government was desperate to keep the crisis from widening.

But the best and brightest returnees, known in China as “sea turtles”, had already left for the private sector, disillusioned and disappointed.

A former official at the CSRC, one of a group of 20 high-profile returnees, recalled the CSRC’s appeal to make “sacrifices for the motherland”.

“We moved our families back to China and gave up high-paying jobs, because we wanted to contribute,” he said.

He said the group was sent for special training at Jinggangshan, a former revolutionary base used by Mao Zedong during the Chinese civil war.

Their idealism soon turned to cynicism. Their pay was a fraction of what they could earn in the private sector, and the CSRC didn’t seem to value them.

“Several years passed, and none of us got promoted,” said the official. “Some of us didn’t even obtain a concrete position.”

“Just at the time they needed people with both domestic and international experience, those most internationally experienced people were forced out,” said Liu Li-Gang, China economist at ANZ.

The CSRC did not reply to requests for comment.

BRAIN DRAIN

Those who left include Tang Xiaodong, former head of ABN AMRO’s exotic credit derivatives, who served various roles at CSRC including driving reforms to foreign investor access programs; Li Bingtao from J.P. Morgan Chase’s global treasury department, who joined the CSRC planning committee; and Luo Dengpan, former student of Nobel Prize-winning economist Robert Shiller, who took charge of CSRC’s institutional innovation department.

None of them replied to requests for comment.

Insiders who spoke to Reuters point to a rising wave of resignations within the regulatory apparatus over the last 12 months, just when sound advice was most needed.

“Nearly every week, there are people submitting resignation letters,” said an official at the Shanghai Stock Exchange. “And the pace of people leaving appears to be accelerating.”

Chinese fund managers say the exodus left Chinese markets in the hands of people who don’t understand markets.

“They don’t have the same level of expertise as they did in recent years,” said a senior Chinese derivatives trader at a foreign bank in Hong Kong.

That led, he said, to misguided, counter-productive policies like the crackdown on derivatives and “malicious” short-selling that some say only accelerated the selloff.

“It’s not that they aren’t smart,” said an executive at a major fund who communicates regularly with the CSRC. “The difference is they don’t have financial expertise.”

An official still at the CSRC said regulators failed to grasp the significance of the surge in margin finance used for stock speculation that many warned was destabilizing the markets.

It’s also criticized for botching reform of the IPO market. It re-opened the market in early 2014 after a year’s suspension, but under new pricing guidelines that inadvertently made IPOs a one-way bet that sucked funds from the wider market. After a surge in summer IPOs was partly blamed for setting off the crash, the CSRC suspended them again, indefinitely.

CATALOG OF FAILURES

Such failures have hammered government’s credibility, not least with investors who trusted Beijing to rescue the market in July and bought back in.

Government directed 900 billion yuan ($140 billion) into stocks, but indexes continued to fall after a brief hiatus, wiping out all the year’s gains, and more than $4.5 trillion in market value – more than Germany’s gross domestic product.

The heavy-handed intervention also damaged the credibility of China’s public commitment to financial reform.

Analysts were not surprised when global stock index compiler MSCI delayed including Chinese shares in its benchmark emerging markets index, a move that might have brought billions of foreign dollars to China’s markets.

Former officials said most of the returnees left due to frustration over their lack of influence over policy, limited opportunities for promotion, and low pay. Others spoke of resentment from colleagues.

Some were effectively forced out by the fallout from Beijing’s anti-corruption drive, which led to salary cuts for senior staff and a campaign against “naked officials” – those who move family members and assets overseas in case the official is arrested.

“They can get high pay outside at lower risk, higher return. Why not?” said Oliver Rui, professor of finance at the China Europe International Business School in Shanghai.

(Additional reporting by Kevin Yao in Beijing, Saikat Chatterjee in Hong Kong and the Shanghai and Beijing newsrooms; Writing by Pete Sweeney; Editing by Will Waterman)

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Monsanto, rivals eye next step after Syngenta deal collapse


CHICAGO Monsanto Co (MON.N), having ditched an audacious $46 billion offer for Syngenta AG (SYNN.VX), may downshift to a humbler strategy of beefing up its crop protection portfolio through other acquisitions, partnerships and licensing agreements.

The deal’s collapse leaves Monsanto, Syngenta and other agrochemical sector companies facing a bleak landscape of plummeting grain prices and farm income. In the United States, farmers are tightening their budgets and cutting back on everything from equipment to seeds and pesticides.

On Wednesday, Monsanto said it was focused on its core businesses and plans to resume its two year, $10 billion share repurchase program, which was put on hold while it was bidding for Syngenta.

Monsanto declined to say anything more about its next move, including which companies might be the St. Louis-based firm’s next target or how much it would be willing to spend.

Monsanto President Brett Begemann had previously told Reuters in an interview that a Syngenta deal was not its only option going forward.

“There are other alternatives,” Begemann told Reuters last month.

Speaking at the same time, Michael Frank, vice-president of Monsanto’s global commercial business, said Monsanto wanted to expand its portfolio of crop-protection chemicals and seed-treatment products, with Syngenta or without it.

“If we don’t acquire Syngenta, we’ll still be on Plan A. But there will be a substitute company,” Frank said. “It won’t be Syngenta. It will be somebody else, or somebodies else.”

Or, say analysts, the company could opt to steer away from acquisitions and head into a different direction.

“We would expect Monsanto to continue to pursue further agreements in both licensing further molecules and collaborating with partners on joint development of molecular applications that expand Monsanto’s product offerings,” Canaccord Genuity analysts Keith Carpenter and Vitali Savitski wrote in an analyst report Wednesday.

For months, some of the major players in the farm chemicals and seeds business have been the subject of restructuring talk. During the summer, BASF SE put together loan guarantees for a prospective bid for Syngenta – but wouldn’t submit a bid unless Monsanto made a formal offer.

Meanwhile, activist investors in recent years have pushed DuPont Co (DD.N) and Dow Chemical (DOW.N) to divest assets exposed to commodity price swings, in efforts to tap into value not reflected in the parent company stock prices, industry sources said.

“Crop chemical assets are undervalued by the market and therefore any crop chemical asset is attractive,” said Pauline McPherson, co-fund manager of Kames Capital’s global equity fund, which holds Syngenta stock.

Paulson Co., the hedge fund headed up by billionaire investor John Paulson, took a stake in Syngenta in July and may have tried to pressure its board to negotiate with Monsanto, according to people familiar with the matter.

The Swiss pesticide maker could face further pressure in the coming months from incoming shareholder activists buying stock, said one senior Europe-based investment banker.

“They will be smelling an opportunity,” said the banker, who spoke on condition of anonymity.

Still, with Monsanto out of the picture, there are no obvious buyers for Syngenta with the possible exception of BASF (BASFn.DE), the German chemicals group, which lined up a loan package earlier this summer from large multinational banks.

Sources said BASF made the move, in part, so it could be in a position to block Monsanto from becoming the world’s largest agricultural chemical and seeds business.

A BASF spokeswoman told Reuters on Wednesday the company could not comment on the market or other companies.

(Reporting By P.J. Huffstutter in Chicago. Additional reporting by Mike Stone in New York, Sinead Cruise in London and Ludwig Burger in Frankfurt; Editing by Christian Plumb)

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