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G20 promises transparency on rate moves as global economy disappoints

ANKARA World financial leaders will agree to calibrate and communicate monetary policy carefully to avoid triggering capital flight, but will not call an expected U.S. rate rise a risk to growth, a draft communique showed on Friday.

Many emerging market economies are concerned that when the U.S. Federal Reserve raises borrowing costs, investors will withdraw from other markets and buy dollar assets, weakening other currencies and creating turbulence as capital flees.

Officials from emerging markets wanted the communique from finance ministers and central bank governors of the Group of 20 biggest economies, meeting in Turkey, to say that a U.S. rate rise now would be a risk to growth.

But the draft avoids such wording.

“We note that in line with the improving economic outlook, monetary policy tightening is more likely in some advanced economies,” the draft communique, seen by Reuters, said.

“We will carefully calibrate and clearly communicate our actions to minimize negative spillovers, mitigate uncertainty and promote transparency,” said the draft, which may yet change before it is finally agreed on Saturday.

An earlier version of the text said policy tightening in developed economies “may remain one of the main sources of uncertainty in financial markets”.

“In one of the wild formulations it said that this was the biggest threat to the world economy. This was killed immediately and forever,” a Russian source said earlier.

The text welcomed strengthening activity in some economies but said that global growth fell short of expectations, although it expressed confidence a recovery would gain speed.

It also indirectly addressed Chinese moves that weakened its yuan currency in August, in a sign these were not seen as a competitive devaluation to prop up Chinese exports. G20 members reiterated their commitment to exchange rate flexibility and would “refrain from competitive devaluations and resist all forms of protectionism,” it said.

Reinforcing that message, U.S. Treasury Secretary Jack Lew told Chinese Finance Minister Lou Jiwei that it was important that China let the yuan move up as well as down, and avoid any move to lower its value to gain a competitive edge in global trade, a U.S. official said.

China told the group it was committed to continuing structural reforms and to supporting economic growth, Europe’s Economic Commissioner Pierre Moscovici told reporters after the meeting.

Slower growth in China and rising market volatility have boosted the risks to the global economy, the International Monetary Fund warned ahead of the G20 meeting, citing a mix of potential dangers such as depreciating emerging market currencies and tumbling commodity prices.

But the G20 had been seen as unlikely to come up with any concrete new measures to address the spillover from instability in the world’s second-largest economy, or to call directly on Beijing to address structural issues such as rising bad debts.


Luxembourg Finance Minister Pierre Gramegna, whose country holds the rotating presidency of the European Union, shrugged off the prospect of U.S. interest rate hikes.

“We cannot live all the time on easy money … One has to be realistic that at one point in time the curve of interest rates will have to change,” he told Reuters.

Bank of Japan Governor Haruhiko Kuroda said any Fed rate rise would be a positive sign for the global economy, despite the unease in some emerging markets that such moves could cause capital outflows and currency volatility.

“If the U.S. were to raise rates, that would speak to the underlying firmness and growth in the U.S. economy, and that would actually be a plus for the global economy,” he said.

One specific idea being examined at the Ankara meetings is a proposal from a group of financial stability experts to adopt a two-stage approach for introducing Total Loss Absorption Capacity (TLAC) buffers for big banks, a G20 source said.

The buffer is a new layer of debt big banks like Goldman Sachs (GS.N) and Deutsche Bank AG DBGKn.DE must issue to write down in a crisis and bolster their capital.

The proposal would introduce a buffer of 16 percent of a bank’s risk-weighted assets from 2019 and 20 percent from 2022, the source said.

The United States had pushed for 20 percent, while some in Europe had been arguing for 16 percent on the grounds that their banks were still recapitalizing after the financial crisis.

The draft pencilled in that a deal should be ready for the endorsement of G20 leaders at their summit in southern Turkey in November, but some countries were concerned there would not be enough time to reach a final agreement by then.

There was no clear pronouncement on China’s desire to have the yuan included in the International Monetary Fund’s Special Drawing Rights basket of currencies, but the draft said G20 finance chiefs expected progress in November, when the IMF has a board meeting on the issue.

“China has moved in the direction in currency and monetary policy … that is necessary if they want to achieve the goal of getting China into the IMF currency basket,” German Finance Minister Wolfgang Schaeuble told reporters, welcoming Beijing’s near 2 percent yuan devaluation last month.

China is keen for the symbolic boost it would get from the yuan’s inclusion.

Bundesbank chief Jens Weidmann said he is open to discussion on including the yuan in the IMF basket, and said China’s recent market upheavals should not pose a lasting danger to the global economy.

“The currency basket should in principle reflect relative global economic strengths,” he told Reuters, but added China must fulfill the conditions for inclusion.

One delegate said it was possible that the likely failure of the U.S. Congress to approve an IMF quota reform that would give China and other emerging markets more say could work in Beijing’s favor on the SDR issue.

The reasoning goes that benefiting the leading emerging economy, China, could help offset the perennial failure to boost emerging market quotas.

However, IMF members will also be examining whether China’s heavy intervention in the yuan market was befitting of a freely convertible reserve currency, the delegate said.

One option being floated was the idea of giving China a more limited share of the SDR basket at first until its convertibility and market orientation improved.

(Additional reporting by Gernot Heller, Dasha Afanasieva and David Dolan in Ankara; Timothy Ahmann; Writing by Nick Tattersall; Editing by Jeremy Gaunt/Ruth Pitchford)

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Wall St. drops as jobs data leaves Fed-watchers hanging

NEW YORK U.S. stock indexes ended down more than 1 percent on Friday after a mixed August jobs report did little to quell investor uncertainty about whether the Federal Reserve will increase interest rates this month.

Based on the latest available data, the Dow Jones industrial average .DJI fell 272.18 points, or 1.66 percent, to 16,102.58, the SP 500 .SPX lost 29.89 points, or 1.53 percent, to 1,921.24 and the Nasdaq Composite .IXIC dropped 49.58 points, or 1.05 percent, to 4,683.92.

(Reporting by Caroline Valetkevitch; Editing by Chizu Nomiyama)

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Lyft, Uber poach key Twitter engineers, managers amid turmoil

SAN FRANCISCO Ride services Lyft and Uber have poached dozens of key Twitter Inc (TWTR.N) employees over the past year, including top engineering managers, to help personalize their apps.

Twitter’s management turmoil and 44 percent stock fall over the last 12 months have helped Lyft and Uber recruit key talent, as the micro-blogging site’s employees look to recreate its early success elsewhere, tech recruiters said.

At least 25 former Twitter employees have joined Uber since January 2014, according to a search by Reuters of LinkedIn, including top managers such as Raffi Krikorian, an engineering lead at Uber since March.

Lyft has poached approximately 15 former Twitter employees, including senior managers and engineers such as Peter Morelli, now a key engineering manager at Lyft.

That is an unusually large number of people leaving in a short time span, tech recruiters said.

Ride-sharing companies are especially attractive because they aim to disrupt the transportation industry, much as Twitter disrupted communication, said Dave Carvajal, founder and CEO of Dave Partners, a tech recruiting firm.

“Twitter is having harder times and there are only a few places in town that are larger companies that are going to go public. Lyft and Uber are some of the best of those places,” added Mehul Patel, CEO of Hired, a tech recruiting firm.

Twitter employees are especially valuable as they have data skills that help Lyft and Uber understand consumer behavior, critical for the ride services as they look to personalize customers’ experiences with their apps.

“These people are some of the brightest talent out there,” Carvajal said.

Recruiting has grown increasingly competitive in Silicon Valley as start-ups valued at more than $1 billion, including Lyft and Uber, ramp up hiring as they look to go public.

Lyft’s staff has grown more than 70 percent since the start of 2015, a spokeswoman told Reuters, but she declined to say how many employees it has. Uber has added nearly 1,000 employees over the past year, according to the company. The numbers do not include drivers, who the firms class as contractors rather than employees.

Twitter did not respond to repeated requests for comment.

(Reporting by Yasmeen Abutaleb, editing by Stephen R. Trousdale and Andrew Hay)

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BlackBerry to buy rival Good Technology for $425 million

TORONTO Canada’s BlackBerry Ltd (BB.TO) said on Friday it will buy rival mobile software provider Good Technology Corp (GDTC.O) for $425 million, to boost its ability to help corporate clients manage smartphones running on different operating systems.

The cash deal may help BlackBerry, a one-time smartphone pioneer, win new customers for its services business, a priority as it shifts focus to device management software for enterprise customers. More than half the devices running on Good’s systems are Apple Inc (AAPL.O) products such as the iPhone.

BlackBerry said it expects to realize about $160 million in revenue from the acquisition in the first year after the deal closes, expected by late November. Its Toronto listed shares were up 1.1 percent at C$7.97 in early trading.

On a call with analysts and investors, BlackBerry Chief Executive John Chen was asked about Good’s cash burn. He promised that BlackBerry would remain cash flow positive overall.

“There obviously will be hard work involved,” he said. “But I do see a lot of opportunity here to drive value for our shareholders.”

Chen said BlackBerry will maintain both company’s products as it develops a unified platform that customers can upgrade to. He said that a unified product may take a year or two.

Relations between BlackBerry and Silicon Valley-based Good had long been tense. The companies settled a series of patent lawsuits in 2004, but as recently as January 2015, BlackBerry critiqued one of Good’s product announcements in a blog post, annotating the rival company’s press release in red ink.

“There is a very long history here. We are in an incredibly competitive market and speak to many of the same customers,” said Good Chief Executive Christy Wyatt in an interview posted on BlackBerry’s news site.

Wyatt said her company’s technology would boost BlackBerry’s ability to manage “Internet of things” devices, supporting wearable technology such as the Apple Watch and Android-based competitors.

BlackBerry has recently made acquisitions to expand its services business, and in July Chen said the company would likely make more. On Friday, he compared the acquisition of Good with previously announced deals for Secusmart, Movirtu and WatchDox.

J.P. Morgan Securities LLC and Bank of America Merrill Lynch advised Good on the deal, BlackBerry said.

(With additional reporting by Anannya Pramanick in Bengaluru; Editing by Anil D’Silva and Chizu Nomiyama)

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Massachusetts regulator investigates BNY Mellon fund pricing snafu

BOSTON The top securities regulator of Massachusetts said on Friday he is investigating the computer glitch at BNY Mellon Corp (BK.N) that last month disrupted pricing on more than $400 billion worth of mutual fund and exchange-traded fund assets.

Secretary of the Commonwealth William Galvin said he has asked BNY Mellon and six of the largest fund companies affected how the technical glitch in fund accounting impacted individual investors.

“In the warp-speed of trading these days computer problems can happen,” Galvin said in a press release. “But the fallout that seems only to affect large financial institutions can hit the average investor looking at his and her retirement money.”

BNY Mellon roiled about 5 percent of the U.S. fund industry last month when one of the accounting systems it relies on to generate prices for mutual funds and exchange-traded funds collapsed. The problems lasted a week, but the root cause has not been determined. BNY Mellon declined to comment on Galvin’s investigation.

Galvin said his inquiry was initially focused on Goldman Sachs, Deutsche Bank, First Trust Advisors, Guggenheim Investments, Prudential Investments and Federated Investors Inc.

Goldman Sachs, Guggenheim and Deutsche declined to comment. Prudential, Federated and First Trust did not immediately respond to requests for comment.

The investigation asks that BNY Mellon and the investment companies detail the scope of the problem and type of corrective action that is being taken to address individual

investor harm, according to the press release from Galvin’s office.

(Reporting By Tim McLaughlin, Editing by Franklin Paul and Tom Brown)

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U.S. labor market shows some muscle despite slower job growth

WASHINGTON U.S. job growth slowed in August, but the unemployment rate dropped to a near 7-1/2-year low and wages accelerated, keeping alive prospects of a Federal Reserve interest rate hike later this month.

Nonfarm payrolls increased 173,000 last month after an upwardly revised gain of 245,000 in July, the Labor Department said on Friday. August’s gain was the smallest in five months as the factory sector lost the most jobs since July 2013.

The jobs count, however, may have been tarnished by a statistical fluke that has often led to sharp upward revisions to payroll figures for August after initial weak readings.

Indicating the hiring slowdown was likely not reflective of the economy’s true health, the jobless rate fell two-tenths of a point to 5.1 percent, its lowest level since April 2008.

In addition, payrolls data for June and July were revised to show 44,000 more jobs created than previously reported, bringing the average job gains for the past three months to a solid 221,000. Average hourly earnings increased 8 cents, the biggest rise in seven months and the length of the average workweek also expanded.

“The payrolls data is certainly good enough to allow for a Fed rate hike in September,” said Alan Ruskin, global head of currency strategy at Deutsche Bank in New York. “The big question is still whether financial market volatility will scupper the plans.”

Stocks on Wall Street, which could be pressured by higher rates, ended down more than 1 percent. Prices for U.S. government debt rose, while the dollar fell marginally against a basket of currencies.

While the mixed report did little to alter views that the U.S. economy remains vibrant despite volatile global financial markets and slowing Chinese growth, it could further complicate the Fed’s decision at a policy meeting on Sept. 16-17.

In the wake of a recent global equities sell-off, financial markets significantly scaled back bets on a September rate hike over the past month. But Fed Vice Chairman Stanley Fischer told CNBC last week it was too early to decide whether the stock market rout had made an increase less compelling.

“With this jobs report … the Federal Reserve finds itself in a real uncertainty jam,” said Mohamed El-Erian, chief economic adviser at Allianz in Newport Beach, California.


Economists in a Reuters survey had forecast nonfarm payrolls increasing by 220,000 last month, but they had also warned that the model used to smooth the data for seasonal fluctuations is often thrown off at the start of a new school year.

They said the data could be further muddied because of a typically low response rate from employers to the government’s payroll surveys in August.

But the evidence of a tightening labor market added to a string of upbeat data, including figures on automobile sales and housing, that has suggested the economy was moving ahead with strong momentum after growing at a robust 3.7 percent annual rate in the second quarter.

The decline in the unemployment rate brought it into the range that most Fed officials think is consistent with a low but steady rate of inflation, and would likely bolster their expectation that a pick-up in wages will help lift inflation toward their 2 percent target.

A broad measure of joblessness that includes people who want

to work but have given up searching and those working part-time

because they cannot find full-time employment fell to 10.3 percent, the lowest level since June 2008.

In August, construction payrolls rose 3,000 on top of the 7,000 jobs added in July. Mining and logging employment fell by 10,000 jobs, the eighth straight monthly decline.

The sector has shed 90,000 jobs so far this year, with industries that support mining activity accounting for 80 percent of the drop. Oilfield giants Schlumberger (SLB.N) and Halliburton (HAL.N) and many others in the oil and gas industry have announced thousands of job cuts this year.

Manufacturing payrolls slid 17,000 as sharp declines at metals, machinery and food industries offset a solid increase in employment in the automobile sector.

The 0.3 percent increase in hourly earnings left them 2.2 percent above their year-ago level, still well below the 3.5 percent growth rate economists consider healthy.

Aggregate weekly hours rose 0.4 percent, the largest gain since November. The combination of more hours and higher earnings left workers with a 0.7 percent increase in their take-home wages.

Some analysts think average hourly earnings are being held back by falling wages in oil field services.

But a tighter labor market and decisions by several state and local governments to raise the minimum wage should eventually translate into faster earnings growth.

A number of retailers, including Walmart (WMT.N), Target (TGT.N) and TJX Cos (TJX.N), have increased pay for hourly workers since the start of the year.

“Regardless of which meeting this year the Fed begins to raise rates, next year we expect core inflation to surprise on the upside, forcing the Fed into tightening policy more aggressively than the markets currently anticipate,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Tim Ahmann)

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Nissan to recall about 300,000 vehicles in U.S. to fix console panel

Nissan Motor Co Ltd’s North America unit said it would recall about 300,000 vehicles in the United States and 28,000 vehicles in Canada to adjust a console panel.

The affected vehicles have a console trim panel that may catch the driver’s shoe and potentially impede smooth pedal operation, the National Highway Traffic Safety Administration (NHTSA) said on its website. (

Nissan North America is expected to begin the recall by mid-October, the U.S. vehicle safety regulator said.

“We have had an accident with injury related to this issue,” Nissan North America spokesman Steve Yaeger said on Friday.

The recall would affect model years 2012-2015 Nissan Versa Sedan, 2014-2015 Versa Note and 2014-2015 Micra vehicles, Nissan said.

(Reporting by Radhika Rukmangadhan in Bengaluru; Editing by Sriraj Kalluvila)

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Canada’s top court says Ecuadoreans can sue Chevron in Ontario

OTTAWA Canada’s top court ruled on Friday that a group of Ecuadorean villagers could pursue a multi-billion pollution lawsuit against Chevron Corp in the Canadian province of Ontario.

Chevron is contesting a ruling by Ecuador’s highest court that said the oil giant had to pay $9.5 billion to clean up contamination at a site it once owned. The villagers are now going after Chevron’s assets in Canada, Brazil and Argentina.

“Canadian courts, like many others, have adopted a generous and liberal approach to the recognition and enforcement of foreign judgments,” the Canadian Supreme Court said in its unanimous ruling.

The decision marked the third defeat for Chevron on the merits of the case in Canadian courts. The villagers can now continue with a 2012 lawsuit against Chevron’s Canadian subsidiary in a lower Ontario court

In a ruling that affirms existing law, the court rejected Chevron’s argument that there was no legal basis for the villagers to sue Chevron Canada, which was not part of the Ecuadorean judgment.

Chevron said in an emailed statement it would argue in the lower Ontario court that the lawsuit should be stopped early on the grounds the initial judgment “is the product of fraud and other misconduct, and is therefore illegitimate and unenforceable.”

A U.S. judge concluded last year that the American lawyer who helped secure the settlement used corrupt means. That ruling has been appealed.

Fadel Gheit, an oil industry analyst at Oppenheimer Co, said he gave the villagers “very little chance of succeeding in Canada,” given the controversy over the original judgment and Chevron’s relatively limited asset base in Canada.

The villagers have been litigating the case for over 20 years. They initially sued Texaco, which Chevron later acquired, over contamination in the jungle around Lago Agrio, Ecuador, between 1964 and 1992.

“It is clearer than ever that Chevron’s long run from justice is coming to an end,” Aaron Marr Page, a U.S. lawyer for the villagers, said in a statement.

Canada’s Supreme Court said in its ruling that it was taking no position on the merits of the original case against Chevron.

Dianne Saxe, a Toronto environmental lawyer who has studied the case, said the Ontario court would have to decide whether the original judgment was valid and if Chevron Canada’s assets could be seized to pay off the debt.

“Those are the two big things that are left open and those were always the main ones,” she said.

The case is Daniel Carlos Lusitande Yaiguaje and others vs Chevron Corporation and Chevron Canada Ltd, file no 35682.

(Additional reporting by Ernest Scheyder in Williston, N.D.; Editing by W Simon, Jeffrey Hodgson and Paul Simao)

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GE set for cost cuts as EU decision on Alstom deal nears

General Electric Co is expected to win regulatory approval next week for its purchase of the power equipment business of France’s Alstom, allowing the U.S. industrial conglomerate to finally carry out a major cost-cutting program 16 months after first announcing the deal.

The European Commission has set a Sept. 11 deadline to decide on the roughly $13.5 billion deal, the biggest acquisition ever for GE, which will bring together two of the world’s largest manufacturers of power plant hardware.

European regulators have expressed concerns over the combined company’s control of the gas turbine market. GE has not disclosed what changes it has agreed to make to win clearance from European competition regulators.

In May, GE told investors it expects $3 billion in cost reductions over the next five years as it combines its operations with those of Alstom, more than double the previous target when the deal was first announced in April 2014.

GE has also projected the deal would add 15 to 20 cents per share to earnings in 2018, or nearly 10 percent of GE’s overall profit expected that year by Wall Street, according to Thomson Reuters I/B/E/S.  

To hit those goals, GE will consolidate manufacturing operations, cut duplicated overheads, and make savings on purchasing expenses, according to GE presentations on the deal. But to gain the blessing of the French government last year, GE committed to add 1,000 jobs in the country, possibly handcuffing the conglomerate’s ability to reap savings from Alstom’s home base.

Outside of France, GE said last year that 18,000 of Alstom’s 65,000 total employees involved in the deal worked in Europe, where works councils can make job cuts difficult.

“The challenges in making it work is you’re buying a huge European-centric organization, and history has said it’s hard to get synergies in Europe,” said Peter Bates, portfolio manager for T. Rowe Price’s global industrials fund, adding that he still thinks GE will be able to pull off the integration.

GE is also in the middle of its own cost cutting plans, which aim to reduce industrial sales and administrative expenses to 12 percent of revenue, from just under 16 percent in 2013, while improving gross margin by about 0.5 percentage points in 2015 and 2016.

Meanwhile, GE has stressed the benefits of having Alstom as part of its operations. The French company has a strong franchise in steam turbines and sells equipment GE has previously lacked, such as heat recovery steam generators. Those are needed for “combined cycle” power plants that increase efficiency by using both gas and steam turbines. Such plants are expected to account for more than 70 percent of future gas turbine purchases, GE said last year.

GE also stands to profit from servicing Alstom-made equipment. RBC Capital Markets analyst Deane Dray says service revenue could be the “jewel” of the deal, noting that GE’s service margins for thermal equipment are nearly twice those of Alstom’s. 

GE still has obstacles to climb. Sluggish global economic growth could temper power demand in the near term, especially in emerging markets, and undercut revenue prospects.

Meanwhile, Alstom’s financial performance has weakened as the deal has been reviewed, with sales in its energy business down 7 percent and orders down 12 percent in its most recent fiscal year.

“Even with some top-line risk, they should be able to make the deal work based on the cost synergies,” UBS analyst Shannon O’Callaghan said.

(Reporting by Lewis Krauskopf in New York; Editing by Bill Rigby)

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