News Archive

China’s Premier Li urges free trade talks with Germany

BEIJING China and Europe should establish a feasibility study on free trade talks as soon as possible, China’s Premier Li Keqiang said on Thursday during a meeting with German Chancellor Angela Merkel.

Premier Li also pointed out that China would be a huge market for Germany while the country can learn from Germany’s industry.

(Reporting by Michael Martina; Editing by Jacqueline Wong)

Article source:

Bank of Japan seen holding fire as output rebound offers some relief

TOKYO The Bank of Japan is expected to hold monetary policy steady on Friday even while diluting its rosy inflation forecasts, sources say, clinging to the hope a tightening job market will underpin consumption and help the economy emerge from a soft patch.

Some BOJ policymakers have worried that sluggish demand in emerging Asian markets could hurt output and corporate sentiment enough to delay planned capital investment and wage hikes.

But Thursday’s data showing a healthy rebound in output has eased pressure on the central bank to use its diminishing policy ammunition now, analysts say.

The BOJ is likely to stand pat with financial markets stable and no clear evidence yet that overseas headwinds are damaging corporate sentiment, say sources familiar with its thinking.

“Corporate activity remains firm for now and a positive economic cycle is intact. The key is how overseas headwinds could affect all this,” said one of the sources.

At Friday’s rate review, the BOJ is expected to maintain its pledge to increase base money, or cash and deposits at the central bank, at an annual pace of 80 trillion yen ($663 billion) through aggressive asset purchases.


Japan’s economy contracted in April-June and may shrink again in July-September on weak exports. Many analysts say any rebound in the current quarter will be too weak for the BOJ to achieve its 2 percent inflation target next year.

With the economy skirting recession, the BOJ is expected in a twice-yearly report due on Friday to cut its economic and price growth forecasts for the fiscal year that began in April.

But sources say the BOJ will only slightly tweak its forecast that inflation will hit 1.9 percent next fiscal year, giving it grounds to argue that Japan can hit the 2 percent inflation target without expanding stimulus.

A recent Reuters poll found economists are split on whether the BOJ will pull the policy-easing trigger.

Some bet that despite his optimistic tone on the economy, BOJ Governor Haruhiko Kuroda may surprise markets by easing, as he did in October last year.

BOJ officials have said economic conditions are much better than last October, when consumption took a direct hit from a sales tax hike, and companies were in no mood to raise wages.

When excluding the downward pressure from lower oil prices, consumer inflation is accelerating as more companies say they feel comfortable about raising prices.

Markets have shifted their bets more toward no action after a string of positive economic data this week.

Factory production rose 1.0 percent in September after two straight month of falls, data showed on Thursday, as robust U.S. and domestic demand for cars and cosmetics made up for weak machinery demand in China.

Output is seen rising roughly 4 percent in October-December after two straight quarters of declines, underscoring the BOJ’s view the economy will stay on the moderate recovery track.

“The output data was not that bad, so it doesn’t give the BOJ justification to ease,” said Taro Saito, senior economist at NLI Research Institute. “I doubt it will use its precious remaining options now.”

($1 = 120.6400 yen)

(Additional reporting by Sumio Ito and Yoshifumi Takemoto; Editing by Eric Meijer)

Article source:

Fed puts December rate hike firmly on the agenda

WASHINGTON The U.S. Federal Reserve kept interest rates unchanged on Wednesday and in a direct reference to its next policy meeting put a December rate hike firmly in play.

Investors had expected the Fed to remain pat on rates, but the overt reference to December came as a surprise.

The central bank also downplayed recent global financial market turmoil and said the U.S. labor market was still healing despite a slower pace of job growth.

“In determining whether it will be appropriate to raise the target range at its next meeting, the committee will assess progress – both realized and expected – toward its objectives of maximum employment and 2 percent inflation,” the Fed said in a statement after its latest two-day policy meeting.

Investors quickly placed bets reflecting a higher chance the U.S. central bank will raise rates in December, with futures contracts implying a 43 percent possibility compared to 34 percent prior to the statement.

“The Fed is seriously considering a December rate hike,” said Harm Bandholz, an economist at UniCredit in New York.

Going into the Fed meeting this week, the market had viewed March as the most likely time for the central bank to begin its rates “liftoff,” but it now sees a greater chance of that happening in late January.

The U.S. dollar rose sharply and yields for U.S. government debt soared in anticipation of higher rates. U.S. stock prices initially fell but regained momentum and closed sharply higher.

Michael Feroli, a former Fed economist now at JPMorgan, said the Fed statement was the first since 1999 in which policymakers pointed to a possible rate increase at the next meeting.

“By specifically referring to that meeting they are basically testing the waters a bit,” said Aneta Markowska, an economist at Societe Generale in New York. She described it as a “subtle attempt” to gently nudge the market in that direction.


The Fed has been struggling to convince investors a rate hike was imminent in the wake of data this month that showed U.S. employers slammed the brakes on hiring in August and September.

But it countered the skepticism on Wednesday by saying even slower hiring was still enough to get it closer to its goal of maximum employment.

Central bank policymakers also pointed to “solid rates” of growth in consumer spending and business investment, while eliminating a reference from their previous statement warning a global economic slowdown could sap U.S. economic strength.

Fed Chair Janet Yellen has been saying for much of this year that a rate hike would likely be needed in 2015 to keep the economy from eventually overheating.

More recently two Fed governors urged caution over rate hikes while questioning Yellen’s views on inflation, though such doubts appeared muted in Wednesday’s statement.

The Fed now has several important economic readings to parse, including two monthly employment reports, before it makes up its mind on whether to tighten policy at its Dec. 15-16 meeting.

It will also get a chance to see how monetary policy easing in Europe, Japan and China plays out in financial markets. Easy money policies abroad push the dollar higher, hurting U.S. exporters and making it harder for the Fed to get inflation back up to its 2 percent target. That may explain why the Fed sought to leave the door open for a rate hike rather than paint the economy as fully ready for a monetary policy tightening.

“The Fed has dialed down its anxiety over international developments, but it’s best to play it safe,” said Brian Jacobsen, a portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.

(Reporting by Lindsay Dunsmuir and Jason Lange; Editing by Paul Simao)

Article source:

GM promises additional U.S. investment to secure 3,300 jobs

DETROIT General Motors Co (GM.N) has promised the United Auto Workers union it will invest an additional $1.9 billion in its U.S. factories to secure 3,300 union jobs, and pay higher wages and bonuses under a proposed four-year contract.

GM will also pay bonuses of up to $8,000 to nearly 53,000 UAW workers once they ratify the agreement, according to details of the GM-UAW contract released Wednesday. The deal also provides for 4,000 UAW workers to get $60,000 early retirement packages.

The contract will give raises to both veteran and recently hired union workers at the automaker’s U.S. operations. Veteran UAW workers at GM have not had an hourly pay increase in a decade, but should get 3 percent base wage hikes in two of the four years of the new pact, if it is ratified. Veterans will get lump sum payments the other two years.

Workers hired since 2007 will for the first time have a clear pathway to earning the top wage for veterans provided they remain with the company for eight years.

Profit sharing formulas could pay handsomely for UAW members at GM. Union workers at GM will get $1,000 for every $1 billion in North American profit. GM North America has reported $8.3 billion in profit for the first nine months of 2015.

The GM contract and the contract agreed with Fiat Chrysler Automobiles NV’s U.S. operations are “very rich agreements,” UAW President Dennis Williams said Wednesday at a press conference.

The UAW made significant concessions to help the Detroit automakers survive the Great Recession. GM and its rivals are now generating robust profits from U.S. operations, and UAW members have pressed for a bigger share.

GM’s additional U.S. investment puts pressure on rival Ford Motor Co (F.N) when the Dearborn, Michigan automaker’s turn to bargain comes. UAW leaders fear Ford plans to move production of its Ford Focus small car to Mexico from a plant in Wayne, Michigan.

Rank and file UAW members at GM will start voting on the contract within the next few days, Williams said. The UAW needed two tries to win ratification for a new contract at Fiat Chrysler.

Under the GM and Fiat Chrysler agreements, workers who are hired at $17 an hour will earn progressively more until reaching a top hourly wage of $30 an hour after eight years. The new agreements eliminate a two-tier wage system established in 2007.

(Reporting by Bernie Woodall; Writing by Joe White; Editing by Richard Chang and Alan Crosby)

Article source:

Senators call for scrutiny of Walgreens-Rite Aid deal

Two influential U.S. senators called for close scrutiny of Walgreens Boots Alliance Inc’s (WBA.O) plan to buy Rite Aid Corp (RAD.N) for $9.4 billion, a deal that would unite two of the three biggest U.S. drugstore chains.

Walgreens Chief Executive Stefano Pessina said the company had analyzed the antitrust aspect of the deal but would not speculate on the number of drugstores it might need to divest in order to win regulatory approval.

Walgreens ranks first and Rite Aid third by number of stores, either side of CVS Health Corp (CVS.N).

The top two antitrust lawmakers in the U.S. Senate on Wednesday urged antitrust enforcers to give the plan careful scrutiny because of the importance of healthcare in the U.S. economy.

“I have fought tirelessly to promote competition in the health sector and I believe the proposed merger of two of the three largest drug store chains in the country raises serious issues,” Senator Amy Klobuchar, the top Democrat on the Senate Judiciary Committee’s antitrust subcommittee, said in a statement.

The subcommittee’s chair, Republican Senator Mike Lee, said he hoped antitrust agencies would “closely scrutinize” the deal.

Several analysts and antitrust lawyers said the deal would probably pass regulatory muster provided some stores were divested, especially in the northeastern United States, where Walgreens and Rite Aid stores overlap by more than 25 percent.

Walgreens shares closed down 10.7 percent on Wednesday. They had risen 7 percent on Tuesday after reports emerged that a deal was imminent.

Rite Aid shares, which rose 40 percent on Tuesday, fell 7.0 percent to $8.06.

“We have done significant analysis on how we can bring the two companies together, including the antitrust analysis,” Pessina said on a conference call with analysts on Wednesday.

He said the deal made sense as the company was facing “tough challenges” in all its markets, either from competitors or from the government’s “relentless” drive to manage healthcare costs.

Walgreens offered to buy Rite Aid to gain scale in the retail pharmacy industry and not to increase its negotiating power with insurers and pharmacy benefit managers, he added.

President Barack Obama’s national healthcare reform law, which seeks to limit spending by cutting payments in government insurance programs, has been a contributory factor to a recent spurt in consolidation across the healthcare industry.

Healthcare deal-making hit a record of $392.4 billion in 2014 and has already surpassed that this year, reaching $447.5 billion as of Sept. 10, according to Thomson Reuters data.

Walgreens, which also reported better-than-expected quarterly profit and sales on Wednesday, said it expects to save more than $1 billion from the Rite Aid deal.

But the company said it would suspend share repurchases under its $3 billion program to fund the deal.

(Reporting by Sruthi Ramakrishnan in Bengaluru and Diane Bartz in Washington; Additional reporting by Amrutha Penumudi; Editing by Sayantani Ghosh and Robin Paxton)

Article source:

Wall Street climbs as Fed puts December rate hike in play

U.S. stocks ended sharply higher on Wednesday after a volatile session as the Federal Reserve gave a vote of confidence in the U.S. economy by signaling a December interest rate hike was still on the table.

SP financials, which benefit from higher borrowing rates, shot up following the Fed statement and led sector gains. The financial index .SPSY ended up 2.4 percent, its biggest percentage gain in seven weeks. The KBW Nasdaq regional bank index .KRX jumped 4.1 percent.

SP utilities .SPLRCU, which tend to do worse when interest rates are rising, fell 1.1 percent and led SP sector declines.

The Fed left rates unchanged, as expected, and, in a direct reference to its next meeting, put a December rate hike firmly in play. It also downplayed global economic headwinds in its statement.

Stocks initially sold off following the statement, with the SP 500 erasing close to a 1 percent gain, but quickly rebounded to end at the day’s highs as investors saw the statement as a sign the Fed has confidence the U.S. economy can sustain a rate hike.

“Obviously the first move (in stocks) is down, which is conventional wisdom. However, I do like the idea of the Fed having more confidence in the economy, less concerned about the global backdrop and willing to ring the bell on the long-term health of the U.S. economy with a rate hike,” said Michael Marrale, head of research, sales and trading at ITG in New York.

The Fed has not raised rates in nearly a decade.

The Dow Jones industrial average .DJI rose 198.09 points, or 1.13 percent, to 17,779.52, the SP 500 .SPX gained 24.46 points, or 1.18 percent, to 2,090.35, its highest in more than two months.

The Nasdaq Composite .IXIC added 65.55 points, or 1.3 percent, to 5,095.69, while the Nasdaq 100 index of biggest non-financial names .NDX rose 0.9 percent to 4,678.57, just shy of a 15-year high.

A 4.1 percent gain in Apple’s shares to $119.27 also helped support indexes a day after stronger-than-expected results.

The company sold 48 million iPhones in the latest quarter and posted a near doubling of revenue from China, allaying concerns about its business in the world’s second-largest economy.

On the flip side, Twitter (TWTR.N) shares fell 1.5 percent to $30.87 while Akamai Technologies (AKAM.O) dropped 16.7 percent to $62.91, Both reported disappointing results late Tuesday.

The SP energy sector .SPNY snapped a three-day losing streak, ending up 2.2 percent, after a sharp rally in crude oil prices LCOc1 CLc1.

After the bell, shares of GoPro (GPRO.O) dropped 15.2 percent to $25.62 following its results.

Advancing issues outnumbered declining ones on the NYSE by 2,428 to 645, for a 3.76-to-1 ratio on the upside; on the Nasdaq, 2,252 issues rose and 605 fell for a 3.72-to-1 ratio favoring advancers.

The SP 500 posted 35 new 52-week highs and six new lows; the Nasdaq recorded 155 new highs and 82 new lows.

About 8.5 billion shares changed hands on U.S. exchanges, well above the 7.1 billion daily average for the past 20 trading days, according to Thomson Reuters data.

(Additional reporting by Chuck Mikolajczak; Editing by Nick Zieminski and James Dalgleish)

Article source:

PayPal’s China, Europe transaction volumes hit by strong dollar

Payment processor PayPal Holdings Inc (PYPL.O), spun off from eBay Inc (EBAY.O) reported quarterly revenue slightly below analysts’ expectations as a strong dollar hurt its transaction volumes in China and Europe.

Shares of PayPal, which listed for the second time on the Nasdaq in July, fell 5.6 percent in extended trading on Wednesday.

PayPal’s third-quarter revenue rose about 14 percent to $2.26 billion, nearly half of which came from markets outside the United States.

Excluding the impact of a strong dollar, revenue rose 19 percent, but missed the average analyst estimate of $2.27 billion, according to Thomson Reuters I/B/E/S.

“I think that the foreign exchange impact has been larger than expected,” Susquehanna Financial Group analyst James Friedman said.

PayPal said it expected the dollar to have a bigger impact on its 2015 revenue than previously anticipated. The company forecast a growth of 15-18 percent in full-year revenue, excluding the impact of a strong dollar.

Wedbush Securities analyst Gil Luria also attributed the fall in PayPal’s shares to likely high investor expectations after strong results from eBay.

PayPal said growth in its international total payment volumes was hurt somewhat because of weakness in China and Europe.

“When Americans buy in China or Europeans buy in the United States, PayPal makes the highest rates. So when the dollar is strong, that weakens demand from Europe and supply from China,” Luria said.

PayPal has also been facing fierce competition from payment processing startups such as Stripe Inc and Square Inc as well as Apple Inc’s (AAPL.O) Apple Pay in a market it helped create.

Square, headed by Twitter Inc (TWTR.N) Chief Executive Jack Dorsey, filed for an initial public offering this month.

PayPal’s transaction margin fell to 62.3 percent in the quarter ended Sept. 30 from 63.1 percent, a year earlier.

Active accounts increased 10 percent to 173 million, while total payment volume rose 20 percent to $69.74 billion. The company’s mobile transactions rose 38 percent to 345 million.

PayPal’s net income increased 28.6 percent to $301 million, or 25 cents per share.

Excluding items, the company earned 31 cents per share, handily beating the average analyst estimate of 29 cents.

PayPal’s shares were trading at $34.60 after the bell.

(Reporting by Arathy S Nair in Bengaluru; additional reporting by Devika Krishna Kumar; Editing by Kirti Pandey)

Article source:

Hershey sees squeeze from growing U.S. income gap

NEW YORK Chocolate maker Hershey Co (HSY.N), long a staple of middle-class U.S. households, is getting squeezed as consumers either pay up for fancier sweets or seek more savings. The maker of Hershey kisses and Reese’s peanut butter cups reported lower-than-expected U.S. sales on Wednesday and cut its profit forecast for the year, sending shares down 6.5 percent. It has cut such forecasts for five quarters in a row.

Hershey executives said the company is grappling with a growing gap between low and high-income households in the United States, which has changed buying patterns for many consumer goods. On the high-end, consumers are more willing to pay up for premium brands like Green Black’s organic chocolate bars. On the low end, families hunt for greater discounts for products.

Across the board, consumers are making fewer trips to stores, a trend that reduces impulse buying of chocolate bars and other items. Retailers such as Wal-Mart Stores Inc (WMT.N) are devoting less space to promote products from Hershey and other manufacturers as they respond to the new trends.

“We think the consumer bifurcation has been an important driver,” Hershey Chief Executive John P. Bilbrey said on an investor call, referring to the growing wage gap. Bilbrey said the company has secured more merchandising space for its products in the holiday season and expected trends to improve in the fourth quarter.

Companies ranging from Campbell Soup Co (CPB.N) to Mondelez International Inc (MDLZ.O) have spoken of similar pressures in the United States. Some have tried to introduce more products to appeal to low-income consumers at convenience stores and dollar stores. “We are seeing a widening disparity between upper-income and lower-income” consumers, said Mondelez CEO Irene Rosenfeld in an interview.

The maker of Cadbury chocolates and Oreo cookies has responded by increasing the variety of sizes, and prices, of its products on sale.

Hershey has tried to keep up by diversifying its portfolio and changing existing products to satisfy consumer preferences for natural ingredients and protein. Earlier this year, the company bought jerky-maker Krave Pure Foods Inc, and said it would use simpler ingredients in its namesake chocolate bars and kisses.

“The question now is whether Hershey’s chocolate could see a new era of somewhat slower growth based on health and wellness concerns among consumers and the premiumization of the chocolate category in the U.S.,” said Sanford Bernstein analyst Alexia Howard in a note.

(Reporting by Anjali Athavaley; Editing by David Gregorio)

Article source:

Deutsche Bank scraps dividend to boost capital in clean-up

FRANKFURT Deutsche Bank said it would sacrifice its 2015 and 2016 dividends as new Chief Executive John Cryan seeks to bolster the bank’s capital and retain money to pay for sins of the past.

Cryan is under pressure to overhaul Germany’s biggest bank, with costly litigation from past scandals and fallout from a market rout in Asia pushing its valuation well below rivals.

Deutsche Bank said on Wednesday it was targeting a reduction of its risk-weighted assets to about 320 billion euros ($349 billion) by end-2018 from 416 billion euros at the end of June – toward the top end of analysts’ expectations.

“The plan is based on the elimination of the Deutsche Bank common share dividend for the fiscal years 2015 and 2016,” it said in a statement, adding that it aimed to resume paying dividends thereafter “at a competitive payout ratio”.

Ever since its post-World War Two reestablishment in 1952, Deutsche Bank has always paid a dividend.

Earlier this month, the lender announced it would split its investment bank in two and part ways with three of its eight management board members.

The bank also said it was aiming to bring down adjusted non-interest expenses to less than 22 billion by 2018 from 23.8 billion euros in 2014, and to reduce its cost/income ratio to 70 percent in 2018 from 84.3 percent at the end of June.

By comparison, peers Barclays, Credit Suisse and UBS, which are also cutting costs and devising new strategies, currently only spend 64 to 77 cents to earn a euro.

Other major international banks such JP Morgan or UBS made swifter changes to their strategies to address persistently low interest rates and tighter regulation after the financial crisis.

As part of the revamp, Deutsche aims to cut about 23,000 jobs, or roughly a quarter of its workforce, by reducing technology activities and spinning off its PostBank unit, people familiar with the matter told Reuters last month.

Cryan said earlier this month a record pretax loss of 6 billion euros in the third quarter would also mean that staff will get lower bonuses.

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 capital, Deutsche Bank has not so far signaled it is considering such a step.

The capital hike will bring Credit Suisse’s capital ratio to 12.2 percent, while UBS had 14.4 percent at the end of June and the average for Europe’s 24 biggest banks was 13.2 percent, lifted by high levels at Nordic lenders.

Deutsche Bank is targeting a capital ratio of at least 12.5 percent and a leverage ratio of at least 4.5 percent from the end of 2018. At the end of June, the respective readings were 11.4 percent and 3.6 percent.

(Reporting by Arno Schuetze; additional reporting by Alexander Huebner; Editing by Georgina Prodhan and John Stonestreet)

Article source: