News Archive


U.S. pending homes sales decline in September


WASHINGTON Contracts to buy previously owned U.S. homes fell unexpectedly in September, a warning sign that the housing market recovery may be stumbling.

The National Association of Realtors said on Thursday its Pending Home Sales Index, based on contracts signed last month, dropped 2.3 percent to 106.8, the second lowest reading of 2015. The index was up 3.0 percent from the same month a year ago.

Economists polled by Reuters had forecast pending home sales rising 1.0 percent last month.

Pending home contracts become sales after a month or two, and last month’s decrease suggests a softening in home sales after more robust levels earlier this year.

Contracts fell in all four major U.S. regions in September. The Northeast recorded the biggest drop with a 4.0 percent decline. But contracts in all regions still remain above their levels from a year ago.

(Reporting by Lindsay Dunsmuir; Editing by Paul Simao)

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Virgin America tops third-quarter profit estimates


Virgin America Inc (VA.O) said Thursday that its third-quarter profit jumped, beating analyst estimates as lower fuel costs added to its bottom line.

The Burlingame, California-based airline earned $71.9 million in the quarter, up 73 percent from a year earlier. Excluding special items, it earned $73 million, or $1.64 per share, compared to the average analyst estimate of $1.56, according to Thomson Reuters I/B/E/S.


(Reporting By Jeffrey Dastin in New York)

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Deutsche Bank’s new chief warns of two tough years in strategy shift


FRANKFURT Deutsche Bank (DBKGn.DE) has warned of two tough years of dividend cuts, pay restraint and thousands of job cuts as new chief John Cryan admitted to grave problems in implementing strategic and cultural change at Germany’s biggest lender.

Cryan, who took charge in July, is under pressure to overhaul Deutsche, which is struggling to end costly litigation from past scandals and adapt to tighter banking rules.

The bank will slash 15,000 jobs and shed businesses employing some 20,000 staff, and will sacrifice its 2015 and 2016 dividends as it seeks to bolster its finances and retain money to pay for sins of the past.

“I do not think that 2016 and 2017 will be strong years,” Cryan told a news conference on Thursday.

The extended recovery period was taken negatively by many in the market. “That’s a long time and shareholders are wondering why they should stay invested,” said a Frankfurt-based trader.

Deutsche Bank shares, which had risen last week to a two-month high, slid 6.6 percent to 25.66 euros by 1231 GMT.

“Deutsche Bank does not have a strategy problem. We know exactly where we want to go. But we have had a grave problem in implementing it,” Cryan said, addressing reporters in German, in contrast to his predecessor Anshu Jain who regularly drew criticism for never mastering the language.

Nicholas Melhuish, head of global equities at Amundi Asset Management, one of Deutsche’s 10 largest investors, said Cryan is doing the right things and with greater conviction than his predecessor. “But as we all know, anything involving profound culture change often turns into a life’s work and is difficult to execute consistently,” he said.

“This is going to be a long haul.”

Co-CEO Juergen Fitschen acknowledged the bank has not yet done enough to reform. “Cultural change … it needs to be filled with content. What we have brought about is only the beginning,” Fitschen said.

Deutsche Bank’s staff will feel the pain in their pay packets, with remuneration linked more to profits and less to revenue. “I have said that it would not be all sweetness and light,” Cryan said, adding it would be unacceptable not to share some of the cost of the settlement of interest-rate rigging and consequences of poor past behavior.

NOT AMBITIOUS ENOUGH

Asked about prospects for bonuses for the board in the face of an expected full-year loss in 2015, Cryan said it was up to the supervisory board to decide on payouts.

In its second-biggest job cuts ever, the lender is to ax 9,000 full-time jobs and 6,000 external contractor positions. Three quarters of the other 20,000 jobs to go are at retail unit Postbank (DPBGn.DE), which Deutsche Bank is spinning off.

“We were concerned that our shareholders thought cost-cut goals were not ambitious enough. We think they are realistic based on the need to remain competitive,” Cryan said.

Deutsche Bank had said late on Wednesday it would not pay a dividend for this year and next, the first time it has not done so since its post-World War Two re-establishment in 1952.

As part of the overhaul, Deutsche Bank is splitting its investment bank in two and downsizing operations, severing ties with 50 percent of its clients to concentrate on the relatively small portion that produce most of the revenue.

While Credit Suisse, which also intends to slim down its investment bank, plans to raise 6 billion Swiss francs ($6 billion) from investors to bolster its capital, Deutsche has not so far signaled it is considering such a step.

“It would be a very positive signal if Deutsche Bank ruled out a capital increase as part of the strategy plan,” said fund manager Helmut Hipper at Union Investment, a large shareholder.

Deutsche posted a 20 percent rise in revenue at its lucrative bond trading business in the third quarter, helping take the sting out of a record 6 billion euro group pretax loss.

The bank is exiting 10 countries, including most of its Latin American operations, and moving Brazil trading activities to other hubs.

($1 = 0.9123 euros)

($1 = 0.9893 Swiss francs)

(Additional reporting by Katrhin Jones and Daniela Pegna in Frankfurt, with Sinead Cruise in London; Editing by Georgina Prodhan and David Holmes)

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MasterCard beats profit estimates as customers spend more


Payments network operator MasterCard Inc (MA.N) reported a bigger-than-expected quarterly profit as the value of transactions processed on its cards jumped 13 percent.

MasterCard’s gross dollar volume – the total value of transactions made by customers – rose to $1.16 trillion on a local currency basis.

Cross-border volumes – the value of transactions made by card holders outside the card-issuer’s country – jumped 16 percent.

The company’s net income fell to $977 million, or 86 cents per share, in the third quarter ended Sept. 30, from $1.02 billion, or 87 cents per share, a year earlier.

Net revenue rose 1.6 percent to $2.53 billion.

Excluding items, the company earned 91 cents per share, beating the average analyst estimate of 87 cents per share, according to Thomson Reuters I/B/E/S.

Up to Wednesday’s close, the stock had gained about 16 percent this year, underperforming rival Visa Inc’s (V.N) 20 percent increase.

(Reporting By Sudarshan Varadhan in Bengaluru; Editing by Saumyadeb Chakrabarty)

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U.S. jobless claims rise, four-week average lowest since 1973


WASHINGTON The number of Americans filing new applications for unemployment benefits rose marginally and the underlying trend continued to point to a fairly healthy labor market.

Initial claims for state unemployment benefits increased 1,000 to a seasonally adjusted 260,000 for the week ended Oct.

24, the Labor Department said on Thursday. They remained not too far from levels last seen in late 1973.

The prior week’s claims were unrevised. It was the 34th straight week that claims were below the 300,000 threshold, which is normally associated with a fairly healthy jobs market.

The very low level of layoffs suggests the labor market remains in good shape, despite a recent sharp slowdown in job growth. The Federal Reserve on Wednesday noted that the pace of job gains had slowed, but said “underutilization of labor

resources has diminished since early this year.”

Nonfarm payroll gains in August and September averaged 139,000, the weakest two-month rise since January last year Economists polled by Reuters had forecast claims rising to

263,000 last week. A Labor Department analyst said there were no special factors influencing the data.

The four-week moving average of claims, considered a better measure of labor market trends as it strips out week-to-week volatility, fell 4,000 to 259,250 last week, the lowest reading since December 1973.

The claims report showed the number of people still receiving benefits after an initial week of aid fell 37,000 to 2.14 million in the week ended Oct. 17, the lowest since November 2000.

The four-week moving average of continuing claims fell 12,750 to 2.17 million, also the lowest level since November 2000.

The continuing claims data covered the period that the government surveyed households for October’s unemployment rate.

The four-week average of continuing claims fell 61,500 between the September and October survey periods, suggesting an improvement in the unemployment rate from 5.1 percent last month.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

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Inventories hurt U.S. third-quarter GDP, domestic demand strong


WASHINGTON U.S. economic growth braked sharply in the third quarter as businesses cut back on restocking warehouses to work off an inventory glut, but solid domestic demand could encourage the Federal Reserve to raise interest rates in December.

Gross domestic product increased at a 1.5 percent annual rate after expanding at a 3.9 percent clip in the second quarter, the Commerce Department said on Thursday.

The inventory drag, however, is likely to be temporary and economists expect growth to pick up in the fourth quarter given strong domestic fundamentals.

The Fed on Wednesday described the economy as expanding at a “moderate” pace and put a December rate hike on the table with a direct reference to its next policy meeting. The U.S. central bank has kept benchmark overnight interest rates near zero since December 2008.

The economy has struggled to sustain a faster pace of growth since the end of the 2007-2009 recession, with average yearly growth failing to break above 2.5 percent.

Economists had forecast GDP expanding at a 1.6 percent rate in the third quarter.

Businesses accumulated $56.8 billion worth of inventory in the third quarter, the smallest since the first quarter of 2014 and down sharply from $113.5 billion in the April-June period.

The small inventory build sliced off 1.44 percentage points from third-quarter GDP growth, the largest since the fourth quarter of 2012.

CONSUMERS SAVE THE DAY

The blow from inventories was blunted by bullish consumers, who are getting a tailwind from cheaper gasoline and firming housing and labor markets.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a 3.2 percent rate after expanding at a 3.6 percent pace in the second quarter. A measure of private domestic demand, which excludes trade, inventories and government spending, rose at a sturdy 3.2 percent pace.

Given a strong dollar, export growth decelerated in the third quarter. The drag was, however, offset by a slowdown in imports, leaving the impact from trade on GDP growth neutral.

Ongoing spending cuts in the energy sector also undermined growth. A plunge in oil prices has prompted oil field companies like Schlumberger (SLB.N) and Halliburton (HAL.N) to slash investment.

Schlumberger said this month it did not expect a recovery in demand before 2017 and anticipated that exploration and production spending would fall again in 2016.

Investment on nonresidential structures contracted at a 4.0 percent pace as spending on mining exploration, wells and shafts tumbled at a 46.9 percent rate. This category dropped at a 68 percent pace in the second quarter.

Despite strong domestic demand, inflation retreated because of dollar strength and cheaper gasoline.

The personal consumption expenditures (PCE) price index roseat a 1.2 percent rate after rising 2.2 percent in the second quarter. Excluding food and energy, prices increased at a 1.3 percent pace.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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Ally Financial profit slumps on fewer auto loans


Ally Financial Inc (ALLY.N), the largest U.S. auto loan company, reported a 37 percent fall in quarterly profit as it made less money from its automotive and dealer financing businesses.

Net income fell to $268 million, or 47 cents per share, in the third quarter ended Sept. 30 from $423 million, or 74 cents per share, a year earlier.

Excluding items, the company earned 51 cents per share, in line with analysts’ average estimate, according to Thomson Reuters I/B/E/S.

Total auto loans made by Ally were down 6 percent at $11.1 billion.

Income from auto financing fell 16.4 percent to $347 million, while income from dealer financing decreased 18.5 percent to $387 million.

The company has been trying to boost its market share by financing cars made by Ford Motor Co (F.N) and Nissan Motor Co Ltd (7201.T) after General Motors Co (GM.N) replaced Ally as the exclusive lessor for Buick, GMC and Cadillac vehicles in February.

Up to Wednesday’s close of $20.70, Ally’s stock had lost about 12 percent this year.

(Reporting by Rachel Chitra in Bengaluru; Editing by Don Sebastian)

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Conoco posts quarterly loss, cuts 2015 spending target


ConocoPhillips reported a quarterly loss that met Wall Street expectations on Thursday and the largest U.S. independent oil company lowered its 2015 spending target in response to the lingering slump in crude prices.

The Houston-based company said it would further cut its 2015 capital budget, to $10.2 billion from $11.0 billion.

“We are accelerating actions to position our company for low and volatile prices, while improving the underlying performance of the business,” Ryan Lance, Conoco’s chairman and chief executive officer, said in a statement.

Conoco will divest assets and lower its cost structure in response to the more than 50 percent slide in crude oil prices from last year’s high over $100 per barrel, it said.

Still, the company remains committed to a “compelling” dividend, said Lance.

Conoco posted a loss of $1.1 billion, or 87 cents per share, for the third quarter compared with a profit of $2.7 billion, or $2.17 per share, a year ago.

Excluding one-time items related to restructuring and the cancellation of a Gulf of Mexico drillship contract, Conoco had a loss of 38 cents per share. That compares with Wall Street expectations for a loss of 37 cents per share, according to Thomson Reuters I/B/E/S.

Output from continuing operations, excluding Libya, was 1.554 million barrels oil equivalent per day (mboed), compared with 1.473 mboed a year ago.

(Reporting by Anna Driver and Swetha Gopinath; Editing by Savio D’Souza and Chizu Nomiyama)

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Pfizer said to be in talks with Allergan to forge $330 billion drugs giant


Pharmaceutical giant Pfizer Inc has held early talks with Botox-maker Allergan Plc to discuss what could be the biggest takeover deal this year, the Wall Street Journal and Financial Times reported.

Shares in Allergan jumped 11 percent in premarket trade to $320 by 1120 GMT on the reports.

The healthcare sector has seen an unprecedented wave of deals since early 2014, from large drugmakers buying up smaller rivals, to consolidation among makers of generic medicines and tie-ups between insurers.

A bid for Allergan, which has a market value of $113 billion, would be Pfizer’s second recent attempt to acquire a big rival, following its unsuccessful courtship last year of Anglo-Swedish pharmaceuticals group AstraZeneca Plc.

Combining Allergan and Pfizer, which is worth $219 billion, would create the world’s largest healthcare group with a market value of around $330 billion, ahead of Johnson Johnson on $278 billion.

A Pfizer spokesman said it “does not comment on market rumor and speculation”. Allergan also declined to comment.

The potential for lowering Pfizer’s tax bill by switching its headquarters from the United States to the United Kingdom was touted by Chief Executive Officer Ian Read as a key reason for the proposed AstraZeneca deal.

A takeover of Allergan could offer similar advantages given that the Botox-maker is based in lower-tax Dublin. A U.S. attempt to crack down on such tax avoidance deals led to the collapse of AbbVie Inc’s bid to buy Shire Plc, but it is unclear whether those rule changes would preclude potential tax advantages from a Pfizer-Allergan deal.

“When you’re the size of Pfizer, an acquisition like this may be the only choice you have in order to be able to move the needle for sequential growth…so the question now becomes, if not this, what, and if not now, when?” said WBB Securities’ analyst Stephen Brozak.

Pfizer, the largest U.S. drugmaker, has also been suggested as a possible acquirer of GlaxoSmithKline Plc and Shire, and shares in these two companies fell 1.5 and 1.8 percent on Thursday morning in London.

REVENUE BOOST

Allergan would give Pfizer, whose revenues are expected to slide 3.3 percent this year, a boost in top-line growth. The Botox-maker’s revenue is seen increasing 39 percent this year, according to Thomson Reuters I/B/E/S estimates.

Bernstein analyst Tim Anderson said Allergan was a good fit and Pfizer might feel now was the right time to do a deal, given a recent market correction that has made Allergan look cheap.

The merger talks are in early stages, and may not yield an agreement, while other details are unclear, the Wall Street Journal said. (on.wsj.com/1XA0qdo)

The Financial Times, which reported the talks later, described the talks as preliminary. Reuters was not immediately able to confirm the reports.

Allergan became the third-largest generic drugmaker in the United States after combining with Actavis in March.

Its chief executive, Brent Saunders, has been eager to do deals, having first orchestrated the sale of Forest Laboratories Inc, where he was initially CEO, to Actavis, then using the latter to seal the $66 billion purchase of Allergan.

Following the Actavis tie-up, Allergan sold its generic drugs business to Israel’s Teva Pharmaceutical Industries in July for $40.5 billion in cash and stock. And Saunders said after that he hoped to use those proceeds to do another large, “transformational” merger.

In its first full quarter after the Actavis deal, Allergan reported second-quarter revenue of $5.76 billion, led by $632 million in sales of wrinkle blocker Botox. Other top-selling drugs include dry eye treatment Restasis and Alzheimer’s drug Namenda.

Pfizer recently reported third-quarter revenue of $12.1 billion, including $1.58 billion for its Prevnar pneumococcal vaccines and $947 million for pain drug Lyrica.

While Pfizer wanted to buy AstraZeneca in part to boost Pfizer’s pipeline of cancer drugs, a deal with Allergan would involve dermatology drugs and generics.

(Additional reporting by Ben Hirschler and Deena Beasley; editing by Lisa Shumaker, Greg Mahlich)

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