News Archive


Euro on shaky ground, stocks up on talk of aggressive ECB easing


LONDON The euro slipped back towards seven-month lows, bond yields fell and European shares rallied on Thursday as talk of aggressive stimulus from the European Central Bank next week gained ground.

The pan-European FTSEurofirst 300 index .FTEU3 rose 0.8 percent, adding to Wednesday’s 1.4 percent gain, while the Euro STOXX 50 index .STOXX50E was up 1.2 percent.

The firm gains came as Wall Street shares closed flat overnight in a pre-Thanksgiving holiday lull and Asian stocks closed modestly higher. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.5 percent.

“Expectations surrounding the ECB are running very high and this is driving European markets higher, weakening the euro and helping them do better than U.S. stocks,” said Marco Vailati, head of research and investment at Italy’s Cassa Lombarda.

“I think and hope the ECB will not disappoint but I realize that it won’t be that easy,” he said.

Euro zone central bank officials are considering options such as staggered charges on banks hoarding cash and buying more debt ahead of next week’s ECB meeting, Reuters reported on Wednesday.

That fueled talk that the central bank is getting ready for aggressive measures to lift inflation and economic growth in the 19-member euro zone.

HOW LOW FOR EURO?

Against this backdrop, the euro remained on the back foot, dipping 0.15 percent to $1.0626 EUR=. It tumbled on Wednesday to $1.0565, its lowest level since mid-April, before recovering. Against the yen, the euro fell 0.2 percent to 130.12 yen, having hit a 7-month low of 129.77 EURJPY=R on Wednesday.

Overall market activity was thin due to the holiday in the United States.

“Ultimately, I think the ECB will be aggressive and that divergence in policy with the United States must imply a weaker euro,” said Chris Scicluna, head of economic research at Daiwa Capital Markets in London.

“The question now is how far can we go, and as the Fed tightens, euro/dollar parity is looking likely by the second quarter of next year.”

Euro zone lending expanded at its fastest rate in nearly four years in October while a broader measure of money circulating grew well ahead of expectations, data from the ECB showed on Thursday.

Still, banks continue to park around 160 billion euros in overnight deposits with the ECB, indicating that even negative rates and extraordinary monetary stimulus has not unblocked the lending channel.

Short-term euro zone interest rates fell to record lows as markets interpreted an ECB debate about two-tier deposit rates as signaling the intention for an aggressive cut.

ECB easing expectations also pushed German five-year government bond yields DE5YT=TWEB to a new record low of -0.196 percent, while two-year yields DE2YT=TWEB hovered just above lows of -0.418 percent.

Expectations for a divergence in monetary policy meanwhile rose after U.S. economic data on Wednesday cemented expectations that U.S. interest rates will rise soon, helping push the gap between short-dated bond yields in the U.S. and Germany to their widest since 2006 and underpinning the dollar.

OIL LOWER, COPPER REBOUNDS

Oil prices fell, after six days of gains, as concerns that escalating violence in the Middle East would disrupt supply faded, and the focus returned to a persistent market glut. [O/R]

Brent LCOc1 crude oil futures were down 0.9 percent at $45.75 a barrel.

Spot gold XAU= was little changed at $1,071.65 an ounce, hovering close to its lowest in nearly six years on the back of a firmer dollar and expectations for higher U.S. interest rates.

Copper prices CMCU3 bounced to their highest in nearly two weeks, helped by funds starting to reverse some of their bets on lower prices. The metal has been hit hard in recent weeks by dollar strength.

Elsewhere, Turkish assets remained under pressure as a dispute with Russia over its downed jet rumbled on, but other emerging equities edged up, snapping a three-day losing streak.

Emerging stocks .MSCIEF were last up about 0.25 percent.

(Additional reporting by Danilo Masoni; Editing by Dominic Evans)

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VW’s Audi suspends two engineers in emissions probe


BERLIN Volkswagen’s (VOWG_p.DE) luxury flagship Audi has suspended two engineers after its larger diesel engines were found evading emissions limits in the United States, Audi CEO Rupert Stadler said in a newspaper interview published on Thursday.

Volkswagen (VW) and Audi notified U.S. authorities last Thursday that about 85,000 vehicles with 3.0 liter V6 diesel engines were fitted with emissions-control equipment that was not disclosed to U.S. regulators.

The news widened a scandal at parent VW which has led to the ouster of its long-time chief executive and wiped more than 20 billion euros ($21 billion) off the group’s market value.

Audi is now investigating whether employees in technical development and other departments deliberately manipulated emission-control devices and has suspended two engineers, Stadler said in an interview with the Donaukurier regional newspaper, without giving any further details.

The V6 diesel engine was designed and assembled by Audi at its factory in Neckarsulm, Germany and widely used in premium models sold by the group’s VW, Audi and Porsche brands in model years 2009 through 2016, Audi said on Monday.

The Audi suspensions take the number of officials confirmed to have been put on leave across the VW group as a result of its internal investigations to eight, including at least six senior individuals.

Ingolstadt-based Audi has said it failed to notify authorities in the United States of three so-called auxiliary emissions control devices (AECD) in luxury models, one of which is classified there as a banned “defeat device.”

The admission from Audi, which contributes about 40 percent to VW group profit, is raising pressure on Stadler, a 25 year VW group veteran who has led Audi for nine years.

Asked by Donaukurier about potential personal consequences, the 52-year-old Stadler said: “What’s at stake now is (to find out) the truth and I will not rest until everything is on the table.”

A spokesman for Audi’s works council, which has about half the seats on the carmaker’s supervisory board, said the company’s labor boss would comment on the situation later on Thursday.

Audi Chairman Berthold Huber “has expressed no criticism (of Stadler) whatsoever,” a VW spokesman said, citing a “continuous dialogue” between VW and the former IG Metall union chief.

($1 = 0.9428 euros)

(Reporting by Andreas Cremer; Editing by Mark Potter)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/4GQJj8dUj3E/story01.htm

Big banks accused of interest rate-swap fixing in U.S. class action suit


NEW YORK (IFR/Reuters) – A class action lawsuit, filed Wednesday, accuses 10 of Wall Street’s biggest banks and two trading platforms of conspiring to limit competition in the $320 trillion market for interest rate swaps.

The class action lawsuit, filed in U.S. District Court in Manhattan, accuses Goldman Sachs Group (GS.N), Bank of America Merrill Lynch (BAC.N), JPMorgan Chase(JPM.N), Citigroup(C.N), Credit Suisse Group (CSGN.VX), Barclays Plc (BARC.L), BNP Paribas SA (BNPP.PA), UBS (UBSG.VX), Deutsche Bank AG (DBKGn.DE), and the Royal Bank of Scotland (RBS.L) of colluding to prevent the trading of interest rate swaps on electronic exchanges, like the ones on which stocks are traded.

As a result, the lawsuit alleges, banks have successfully prevented new competition from non-banks in the lucrative market for dealing interest rate swaps, the world’s most commonly traded derivative.

The banks “have been able to extract billions of dollars in monopoly rents, year after year, from the class members in this case,” the lawsuit alleged.

Goldman Sachs, Citigroup, Bank of America, BNP Paribas, Credit Suisse and Royal Bank of Scotland declined to comment.

JP Morgan, Barclays, Deutsche Bank and UBS were not immediately available to comment.

The suit was brought by The Public School Teachers’ Pension and Retirement Fund of Chicago, which purchased interest rate swaps from multiple banks to help the fund hedge against interest rate risk on debt. The plaintiffs are represented by the law firm of Quinn, Emanuel, Urquhart, Sullivan LLP, which has taken the lead in a string of antitrust suits against banks.

As a result of the banks’ collusion, the suit alleges, the Chicago teachers’ pension and retirement fund overpaid for those swaps.

The suit alleged that since at least 2007 the banks “have jointly threatened, boycotted, coerced, and otherwise eliminated any entity or practice that had the potential to bring exchange trading to buyside investors.”

“Defendants did this for one simple reason: to preserve an extraordinary profit center,” the lawsuit said.

The banks masked their collusion by using code-names for joint projects such as “Lily”, “Fusion,” and “Valkyrie,” according to the suit. 

    The suit also accused broking platforms ICAP and Tradeweb, which control key cogs in the infrastructure of the swaps market, of facilitating the antitrust violations by acting as a forum for collusion and making business decisions on the banks’ behalf.

    Nine of the ten defendant banks own equity stakes in Tradeweb and hold positions on the company’s board and governance committees. Tradeweb is majority owned by Thomson Reuters. Thomson Reuters is not named as a defendant in the suit.

Tradeweb, ICAP and Thomson Reuters declined to comment.

    Bankers used those positions to control the direction of the Tradeweb and collectively blocked the development of more investor friendly swaps exchanges by firms such as the CME Group, TrueEX, Javelin Capital Markets, and TeraExchange, according to the suit.

    “During the time period relevant here, Tradeweb board and governance committees… were organized specifically for the purpose of protecting the ‘dealer community’ from the growth of exchange trading,” reads the suit.

     Similar allegations of bank collusion in the market for another type of derivative known as credit default swaps, have been the subject of investigations by the United States Department of Justice and the European Commission, as well as a separate class action lawsuit brought by investors.

In September, twelve banks and two industry groups settled that lawsuit by agreeing to pay $1.87 billion, making it one of the largest antitrust class action lawsuits in U.S. history.

(Additional reporting by Dan Freed; Editing by Charles Levinson and Cynthia Osterman)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/ZrQYR9FXKF0/story01.htm

Asian shares edge up, euro under pressure as ECB looms


TOKYO Asian shares advanced in early trade on Thursday, while growing bets the European Central Bank was gearing up to deliver further stimulus steps kept the euro under pressure.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up about 0.4 percent, after Wall Street put in a nearly flat performance ahead of the U.S. Thanksgiving holiday.

U.S. markets will be closed Thursday and most of Friday afternoon.

Japan’s Nikkei .N225 added 0.5 percent in early trade.

The euro nursed its losses following a drop to a more than seven month low of $1.0565 EUR=, after ECB officials told Reuters that they are considering options such as whether to stagger charges on banks hoarding cash or to buy more debt ahead of next week’s policy meeting, according to officials.

The common currency was steady from late North American trade at $1.0622.

Against the yen, the dollar was nearly flat at 122.65 JPY=.

The dollar index .DXY, which tracks the greenback against a basket of six rivals, touched an eight-month high of 100.170 overnight after a spate of U.S. economic data reinforced views that the Federal Reserve will raise interest rates next month for the first time in nearly a decade.

Better-than-forecast durable goods data and jobless claims offset somewhat weaker-than-expected readings on consumer inflation and sentiment, and gave investors no reason to believe the U.S. central bank would not raise rates.

“We see very little to upset or upend the December rate hike,” said Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management in Kansas City, Missouri.

“Cumulatively, we think there’s no reason for the Fed not to act,” he said.

U.S. crude oil futures extended overnight gains, after they erased early losses on Wednesday following data showing a smaller-than-expected supply build in the United States and a drop in the number of U.S. rigs actively drilling for oil. [O/R]

U.S. crude CLc1 added about 0.1 percent to $43.08 a barrel.

(Editing by Shri Navaratnam)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/dcZsmvdooZ0/story01.htm

FanDuel, DraftKings fight threatened shutdown in New York


NEW YORK Daily fantasy sports companies DraftKings and FanDuel urged a New York judge on Wednesday to spare them from a potentially crippling shutdown in one of their top markets by ruling that their contests do not constitute illegal gambling.

But Assistant Attorney General Kathleen McGee, speaking in a packed courtroom, said factors outside of contestants’ control including player performance proved that daily fantasy sports materially involved chance, making them illegal forms of gambling under New York law.

“Chance pervades fantasy sports,” McGee said.

The hearing in New York Supreme Court came after the state’s attorney general, Eric Schneiderman, went to court last week seeking to halt DraftKings and FanDuel from offering the highly popular online games in New York, which has more daily fantasy sports players than any other state, according to Eilers Research.

John Kiernan, FanDuel’s lawyer, said just because factors like weather or a bad call can impact a game it does not mean the games’ results are not largely influenced by the contestants’ skills.

“What we have here is clearly a skills-based endeavor,” he said.

New York Supreme Court Justice Manuel Mendez said he would rule “very soon.”

The hearing comes amid nationwide scrutiny, at the state and federal level, as to whether the games amount to gambling.

Modern fantasy sports started in 1980 and surged in popularity online.

In the daily games, participants pay to compete for cash prizes against others in online leagues based on imaginary teams assembled from rosters of real players, which accumulate points based on how those players perform in actual games.

This has enabled fans to spend money on the games, including American football, baseball, basketball and hockey, with a frequency that critics say is akin to sports betting.

DraftKings and FanDuel, the privately-held industry leaders which both boast billion dollar valuations, have been aggressive in advertising at the start of the National Football League season with promised large winnings.

They have been at the center of controversy since early October when a DraftKings employee won $350,000 from a $25 entry in an American football contest on the rival FanDuel site.

The two companies subsequently banned their employees from playing.

FanDuel stopped taking new deposits from New Yorkers two weeks ago and last week blocked them from playing in the contests. DraftKings continues taking money in the state.

During Wednesday’s hearing, Mendez asked few questions, but pushed McGee to address why Schneiderman’s office was taking the stance that seasonal fantasy sports were legal unlike the daily version. 

“What’s the difference?”

McGee said the seasonal form often just involved “bragging rights” and not always entry fees or prizes.

But David Boies, DraftKings’ lawyer, said the daily contests were no more reliant on chance than their seasonal counterparts, as both are dependent on how players perform on the field.

“They cannot have it both ways,” he said.

(Additional reporting by Michael Erman)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/EK-inwt-Uuo/story01.htm

HP Inc plunges after printer business underwhelms


Shares of HP Inc, which houses former Hewlett-Packard Co’s legacy hardware business, plunged 16.3 percent on Wednesday after the company’s lackluster results fueled concerns about its ability to weather a slowdown in the printer and PC markets.

HP Inc’s revenue from both its printer and PC businesses fell 14 percent each in the fourth quarter, their worst performance in the year ended Oct. 31, and forecast current-quarter profit below market expectations.

“Things got worse. Not only did they not get better – they got worse,” said Shebly Seyrafi, an analyst at FBN Securities.

HP Inc Chief Executive Dion Weisler called the printing business a “much greater challenge” than the PC business.

The company has been cutting printer prices to tackle stiff competition, particularly from Japanese printer makers Canon and Epson.

However, the price cuts, coupled with the effect of a stronger dollar, have reduced the value of income from overseas markets.

“The unintended result is that we are not getting the yield per unit we would have expected,” Weisler said.

Revenue from HP Inc’s printer supplies such as ink cartridges and laser toner fell 10 percent this quarter. Supplies account for most of the profits for HP Inc.

HP Inc’s PC unit has been suffering as sales have been falling worldwide for several quarters and the launch of Windows 10 has so far failed to rekindle the industry.

Meg Whitman, who heads Hewlett Packard Enterprise Co, told CNBC on Thursday that the PC business will rebound in the next year or year-and-a-half.

Whitman, who previously headed the 76-year-old Hewlett-Packard Co, engineered the split of the faster growing corporate hardware and services businesses from the PC and printer business in October 2014.

“Ultimately I think (HP Inc), the way it’s structured, it’s going to be more of a sort of dividend yield play,” said Jeffrey Fidacaro, an analyst at Monness, Crespi, Hardt, Co Inc.

HP Inc’s sibling, Hewlett Packard Enterprise, saw its shares rise as much as 8.5 percent on Wednesday, after it maintained its profit forecast for fiscal 2016.

(Reporting by Anya George Tharakan and Sai Sachin R in Bengaluru; Editing by Anil D’Silva)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/Wly1Wzs31rY/story01.htm

Big banks accused of interest rate-swap fixing in class action suit


NEW YORK (IFR/Reuters) – A class action lawsuit, filed Wednesday, accuses 10 of Wall Street’s biggest banks and two trading platforms of conspiring to limit competition in the $320 trillion market for interest rate swaps.

The class action lawsuit, filed in U.S. District Court in Manhattan, accuses Goldman Sachs, Bank of America Merrill Lynch, JPMorgan Chase, Citigroup, Credit Suisse, Barclays, BNP Paribas, UBS, Deutsche Bank, and the Royal Bank of Scotland of colluding to prevent the trading of interest rate swaps on electronic exchanges, like the ones on which stocks are traded.

As a result, the lawsuit alleges, banks have successfully prevented new competition from non-banks in the lucrative market for dealing interest rate swaps, the world’s most commonly traded derivative.

The banks “have been able to extract billions of dollars in monopoly rents, year after year, from the class members in this case,” the lawsuit alleged.

The suit was brought by The Public School Teachers’ Pension and Retirement Fund of Chicago, which purchased interest rate swaps from multiple banks to help the fund hedge against interest rate risk on debt. The plaintiffs are represented by the law firm of Quinn, Emanuel, Urquhart, Sullivan LLP, which has taken the lead in a string of antitrust suits against banks.

As a result of the banks’ collusion, the suit alleges, the Chicago teachers’ pension and retirement fund overpaid for those swaps.

The suit alleged that since at least 2007 the banks “have jointly threatened, boycotted, coerced, and otherwise eliminated any entity or practice that had the potential to bring exchange trading to buyside investors.”

“Defendants did this for one simple reason: to preserve an extraordinary profit center,” the lawsuit said.

The banks masked their collusion by using code-names for joint projects such as “Lily”, “Fusion,” and “Valkyrie,” according to the suit. 

    The suit also accused broking platforms ICAP and Tradeweb, which control key cogs in the infrastructure of the swaps market, of facilitating the antitrust violations by acting as a forum for collusion and making business decisions on the banks’ behalf.

    Nine of the ten defendant banks own equity stakes in Tradeweb and hold positions on the company’s board and governance committees. Tradeweb is 40 percent owned by Thomson Reuters. Thomson Reuters is not named as a defendant in the suit.

    Bankers used those positions to control the direction of the Tradeweb and collectively blocked the development of more investor friendly swaps exchanges by firms such as the CME Group, TrueEX, Javelin Capital Markets, and TeraExchange, according to the suit.

    “During the time period relevant here, Tradeweb board and governance committees… were organized specifically for the purpose of protecting the ‘dealer community’ from the growth of exchange trading,” reads the suit.

     Similar allegations of bank collusion in the market for another type of derivative known as credit default swaps, have been the subject of investigations by the United States Department of Justice and the European Commission, as well as a separate class action lawsuit brought by investors.

In September, twelve banks and two industry groups settled that lawsuit by agreeing to pay $1.87 billion, making it one of the largest antitrust class action lawsuits in U.S. history.

(Editing by Charles Levinson)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/9naeeMJ94Xo/story01.htm

Deere sees weak equipment sales in 2016 as farm economy remains soft


Deere Co (DE.N) on Wednesday reported a drop in quarterly earnings that was not as steep as Wall Street expected and gave a less dire outlook than analysts had feared, saying it was well-positioned to weather a worsening slump in demand for its farm equipment.

Shares of the maker of John Deere tractors were up 4 percent at $79.40 in afternoon trading.

Chief Financial Officer Raj Kalathur told analysts on a conference call that while the company forecasts its third straight year of declines in sales of agricultural equipment, its main business, in fiscal 2016, it also expects to remain “solidly profitable.”

“We are forecasting a very healthy level of cash flow of over $2.5 billion in 2016,” Kalathur said. “Our actions and proactively controlling expenses, costs, and managing assets have enabled us to deliver substantially better results than in any of the past downturns.”

Deere expects total equipment sales to drop about 11 percent in its first quarter, which began on Nov. 1, and fall about 7 percent for the year.

Deere also forecast net income attributable to the company at about $1.4 billion for fiscal 2016, down from $1.94 billion in 2015. Analysts on average were expecting about $1.31 billion, according to Thomson Reuters I/B/E/S.

While Deere has managed to beat analysts’ expectations, market fundamentals largely remain weak.

The company relies on the United States and Canada for the bulk of its sales and revenue. But industry sales of high-powered two-wheeled drive tractors in those countries fell 34 percent in October, the Association of Equipment Manufacturers said.

The U.S. Department of Agriculture expects U.S. net farm income to show a 38 percent drop to $55.9 billion in 2015.

In Europe, the agriculture market is also under pressure due to lower farm income. And in South America, Brazil has gone further into a recession.

Deere also faces a glut of used equipment, which could force it to slow production or cut jobs, said Argus Research analyst Bill Selesky.

Used equipment, especially large tractors in the United States and Canada, remain a challenge, Tony Huegel, Deere director of investor relations, said on the call, but moving them out of inventory stocks will be a focus in 2016.

In the fourth quarter ended Oct. 31, net income attributable to Deere fell 45.9 percent to $351.2 million, or $1.08 per share, from a year earlier.

Analysts on average expected 75 cents per share, according to Thomson Reuters I/B/E/S.

(Reporting by Meredith Davis in Detroit; Editing by Lisa Von Ahn)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/NwfAkHT-t-I/story01.htm

Wall Street indexes flat in pre-holiday lull; health, consumer up


The major U.S. indexes were virtually unchanged at the close of a quiet trading day on Wednesday with gains in healthcare and consumer stocks after data showed U.S. modest economic growth.

Trading volume was low as many market participants were away in the last session before the U.S. Thanksgiving holiday. Markets will be closed Thursday and most of Friday afternoon.

“The news this morning was a little better than worse, so the market went up,” said Peter Costa, president of Empire Executions Inc, citing mixed economic data.

The Dow Jones industrial average .DJI rose 1.2 points, or 0.01 percent, to 17,813.39, the SP 500 .SPX lost 0.27 points, or 0.01 percent, to 2,088.87 and the Nasdaq Composite .IXIC added 13.34 points, or 0.26 percent, to 5,116.14.

Data showed claims for jobless benefits fell more than expected to 260,000 last week, while durable goods orders for October, excluding aircraft, increased 1.3 percent, far more than the 0.4 percent expected.

However, other reports suggested consumers were not in a spending mood, with consumer spending increasing just 0.1 percent in October compared with the 0.3 percent expected.

The University of Michigan’s final index of consumer sentiment for November also fell short of estimates.

While investors cited good conditions for consumers, they were cautious about global security issues and the impact from the first U.S. interest rate hike since 2006, which is widely expected to happen in December.

“With market valuations where they’re at right now, there’s potential downside if the next data point or global political event is negative,” said Jeff Morris, head of U.S. equities at Standard Life Investments in Boston.

Traders turned their focus to the crucial U.S. holiday shopping season, which starts around Thanksgiving.

“That’s going to be the key, the swing factor for the next couple of weeks – how holiday sales shape up,” said Michael Baele, senior portfolio manager at U.S. Bank Private Client Reserve in Portland, Oregon.

“When you consider the job market, low energy costs (and) low interest rates, the consumer’s in pretty good shape.”

Four of the 10 major SP sectors were higher, with gains in the healthcare .SPXHC and consumer discretionary .SPLRCD sectors leading the way, while the energy .SPNY and utilities .SPLRCU sectors were lower.

HP Inc (HPQ.N), the new company that houses the former Hewlett-Packard Co’s printer and PC businesses, dropped 13.7 percent after its profit forecast missed estimates.

Hewlett-Packard Enterprise (HPE.N), HP’s corporate hardware and services businesses, rose 3 percent after it maintained its full-year profit forecast.

NYSE advancing issues outnumbered decliners 1,852 to 1,185, for a 1.56-to-1 ratio on the upside; on the Nasdaq, 1,853 issues rose and 947 fell for a 1.96-to-1 ratio favoring advancers.

The SP 500 posted 17 new 52-week highs and no new lows; the Nasdaq recorded 91 new highs and 42 new lows.

Just under 5.2 million shares changed hands on U.S. exchanges on Wednesday, well below the 7.19 billion average for the last 20 sessions.

(Additional reporting by Abhiram Nandakumar in Bengaluru; Editing by Ted Kerr and Nick Zieminski)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/fuVk-PAGEIQ/story01.htm