News Archive

U.S. holiday retail sales grow a ‘solid’ 7.9 percent: MasterCard

Strong online sales and demand for furniture and women’s apparel helped U.S. retail sales grow by a “solid” 7.9 percent this holiday season, according to MasterCard Advisors SpendingPulse.

U.S. retail sales, excluding automobiles and gas, had grown 5.5 percent in the period between Black Friday and Christmas Eve last year.

Online sales grew 20 percent in the holiday season this year, MasterCard Advisors, which tracks customer spending, said in a report on Monday.

“The double-digit growth in furniture sales … shows that consumers are willing and able to splurge on big ticket items,” Sarah Quinlan, senior vice president of Market Insights at MasterCard Advisors, said in the report.

A delay in the onset of cold weather pushed back apparel buying this fall, so there was pent up demand that played out after Black Friday, she said.

Quinlan said consumers were spending the money they were saving from lower gas prices.

The National Retail Federation, a leading industry group, has forecast a 3.7 percent rise in store and online sales in November and December this year, with online sales expected to rise 6-8 percent.

(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Kirti Pandey)

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China central bank says to keep reasonable credit growth, yuan stable

BEIJING China’s central bank said on Monday that it would “flexibly” use various policy tools to maintain appropriate liquidity and reasonable growth in credit and social financing.

The People’s Bank of China will keep the yuan basically stable while forging ahead with reforms to help improve its currency regime, it said in a statement summarizing the fourth-quarter monetary policy committee meeting.

The PBOC said it would maintain a prudent monetary policy, keeping its stance “neither too tight nor too loose”. The prudent policy has been in place since 2011.

“We will improve and optimize financing and credit structures, increase the proportion of direct financing and reduce financing costs,” it said.

The central bank said it would closely watch changes in China’s economy and financial markets, as well as international capital flows.

Top leaders at the annual Central Economic Work Conference pledged to make China’s monetary policy more flexible and expand its budget deficit in 2016 to support a slowing economy as they seek to push forward “supply-side reform”.

The PBOC has cut interest rates six times since November 2014 and lowered banks’ reserve requirements, or the amount of cash that banks must set aside as reserves.

But such policy steps have yielded limited impact on the economy, as the government has been struggling to reach its growth target of about 7 percent this year.

President Xi Jinping has said China must keep annual average growth of no less than 6.5 percent over the next five years to hit a goal of doubling gross domestic product and per capita income by 2020 from 2010.

(Reporting by China Monitoring Desk and Kevin Yao; Editing by Jacqueline Wong)

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Volkswagen’s Audi tempers spending plans for 2016

FRANKFURT Volkswagen’s flagship Audi division reined in its spending plans for 2016 and delayed the construction of a new wind tunnel on Monday, after the German carmaking group was hit by a scandal over rigged emissions tests.

Audi, which made a higher operating profit than the VW group in the first nine months of 2015, said it would invest more than 3 billion euros ($3.3 billion) on plants and equipment in 2016.

A company source said the plan foresaw spending of 3.3 billion euros for next year. Under its previous budget drawn up a year ago, Audi announced investments of 17 billion euros over 2015-19, or an annual average of 3.4 billion euros.

“With the current investment program, we obviously want to enhance the brand’s strong position, but at the same time, we aim to achieve additional financial scope by means of further process and cost optimization,” Audi finance chief Axel Strotbek said in a statement.

The move comes after VW, Europe’s biggest automotive group, cut 1 billion euros from its 2016 investment plan in November, as its emissions cheating scandal expanded to include tens of thousands more U.S. vehicles.

Audi vowed not to save at the expense of future growth but rather to examine every investment decision individually.

“The Board of Management has therefore decided to postpone the construction of a new wind tunnel for one year,” it said.

The company did not comment on investment plans beyond 2016.

(Reporting by Maria Sheahan and Joern Poltz; Editing by Kirsti Knolle and Mark Potter)

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All about China and oil again as shares slip

NEW YORK Global equity markets were lower on Monday in light trading sandwiched by holidays in a number of markets, pressured by slumping oil prices and worries over growth in China’s economy.

Prices of both Brent and U.S. crude fell more than 3 percent, reversing a brief rebound and dragging U.S. energy shares down 2 percent as the worst performing of the major SP sectors.

Crude once again moved within sight of an 11-year low, with Brent at $36.71 and U.S. crude at $36.83 as excess supply continues to weigh on the commodity.

“The 3-percent dive in crude oil this morning shows you that the sellers are still in control of the energy market, and that’s leading jitters on Wall Street, coupled with just normal digestive action after last week’s strong gains,” said Adam Sarhan, chief executive of Sarhan Capital in New York.

The Dow Jones industrial average fell 90.24 points, or 0.51 percent, to 17,461.93, the SP 500 lost 13.18 points, or 0.64 percent, to 2,047.81 and the Nasdaq Composite dropped 33.51 points, or 0.66 percent, to 5,014.98.

A weak batch of industrial profits raised concerns about the slowing of China’s economy and sent Chinese stocks lower by almost 3 percent, their biggest drop in a month.

Profits at Chinese industrial companies in November fell 1.4 percent from a year earlier, the sixth consecutive month of decline and another sign that the world’s chief engine of growth for the past decade is sputtering.

With trading light in the United States and Europe due to the bookended holidays of Christmas and the upcoming New Year’s Day, as well as a holiday on Monday in the United Kingdom, markets could see exaggerated moves this week.

MSCI’s all-country world index lost 0.44 percent, while the pan-European FTSEurofirst 300 index shed 0.36 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan gave up early modest gains to fall half a percent, putting it on track for a 12-percent loss this year.

Yields on benchmark 10-year Treasury notes inched down to 2.2392 percent, up 1/32 in price.

The dollar was little changed against a basket of major currencies, off 0.06 percent at 97.922. But the drop in oil prices hurt currencies linked to the commodity, such as the Australian and Canadian dollars.

The Australian dollar fell 0.3 percent to $0.7264 while its Canadian counterpart fell 0.5 percent to $1.3887, heading back toward this month’s 11-year lows.

Spot gold was down 0.5 percent at $1,070.81 an ounce and was on track for its sixth straight quarterly decline, its longest run of quarterly losses since the mid-1970s.

(Additional reporting by Abhiram Nandakumar; Editing by Nick Zieminski)

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Russia says Saudi Arabia destabilized oil market: TASS

MOSCOW Saudi Arabia has destabilized the global oil market by increasing production, TASS news agency quoted Russian Energy Minister Alexander Novak as saying on Monday.

“Saudi Arabia has this year increased production by 1.5 million barrels per day, thus effectively destabilizing the situation on the market,” Novak was quoted as saying.

(Reporting by Polina Devitt; editing by Maria Kiselyova)

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Japan firms cold on Abe’s calls for wage hikes in 2016: survey

TOKYO Major Japanese firms plan to use their excess cash next year on capital investments and MAs rather than higher salaries, according to a Reuters poll, showing few businesses plan to heed Prime Minister Shinzo Abe’s call for wage hikes.

Abe has been putting pressure on Japanese companies, which have benefited from easy money and a weaker yen, to raise wages in addition to capital expenditure with the aim of ending decades of deflation and stagnant growth.

Only seven of 36 respondents representing Japanese blue chip companies said they would spend money to raise full-time employees’ wages in 2016. None said they would raise wages for part-time workers. The survey was taken around the week of Dec. 21.

Telecommunications company NTT (9432.T), seasoning maker Ajinomoto Co Inc (2802.T) and Asahi Kasei Corp (3407.T) were among the 21 firms which said they would increase capital expenditure next year.

Game maker Nintendo Co Ltd (7974.T), along with electronics maker Panasonic Corp (6752.T), which recently announced to buy U.S. refrigeration firm Hussmann, said they would boost capital spending and investment on MAs.

The survey, taken the week of Dec. 21, also showed that an economic slowdown in China and emerging markets remained a top concern for companies.

Respondents forecast the Japanese yen to trade between 127.4 yen and 116.9 yen per U.S. dollar JPY=EBS. It traded at around 120.40 to the dollar on Monday.

Forecasts for the benchmark Nikkei share average .N225 ranged between 22,100 and 18,500, compared with its close on Monday around 18,873.

(Reporting by Kaori Kaneko and Ritsuko Ando; Editing by Sam Holmes)

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End of easy money for mini-refiners splitting U.S. shale?

HOUSTON Energy companies and oil trading firms that teamed up to build several mini-refineries that convert a swelling surplus of ultra-light U.S. crude into fuels for export seemed like a pretty safe investment bet for a while.

The bet was built on several converging dynamics: an ever-rising supply of condensate; a U.S. refining system built to run heavier crudes; and a longstanding ban on crude exports that appeared unlikely to unwind amid partisan paralysis in Washington, D.C.

Now, as U.S. oil output reverses its five-year rise and after lawmakers ended the 40-year-old export ban this month, oil executives and analysts question the wisdom of nearly $1 billion worth of so-called condensate splitters built over the past year, and the future of another $1.2 billion planned.

Traders are wondering what will happen with existing splitters run by companies such as Kinder Morgan Inc. They also question how the new landscape will affect traders such as BP Plc and Trafigura, which signed long-term contracts to buy all the output from those facilities.

Other pending projects without guaranteed buyers could be abandoned, experts say.

The once-restricted domestic crude not only faces increased competition. It also is hurt by the inversion of the global oil market, where once-abundant U.S. production is declining while global supplies are rising. This has eliminated the price discount that underpinned their model.

“It’s a much different competitive environment now that we don’t have distressed condensate,” said Sandy Fielden, an analyst with RBN Energy.

While the same can be said of the nation’s larger, older fleet of full-scale refineries, splitters may be most exposed to the sudden changes, given their dependence on the most deeply discounted variety of oil.

“Why would you distill it here if you can distill it elsewhere? The only reason you want to do it here is when it’s cheaper, but now it doesn’t make sense,” said Nick Rados, global business director of feedstocks for IHS Chemical.

Still, many see a place for them to soak up the ongoing excess of condensate, the super light crude abundant in the shale patches of Texas and Ohio that standard refiners dislike.

Privately held Centurion Terminals is pressing ahead with construction of its storage terminal with two splitters in Brownsville, Texas, says Chief Executive Tom Ramsey, a former head of North American oil trading at giant Swiss firm Vitol. It has a 10-year deal with an undisclosed U.S. crude marketer to take 70 percent of the output, with a view to shipping fuel across the border to Mexico, where demand is growing.

“U.S. crude will continue to get lighter, and you have to do something with that product,” Ramsey said.


Until recently, splitters were a rare phenomenon in the United States. Simpler and less sophisticated than refineries, they convert condensate into unfinished distillates and naphtha, a building block for gasoline that also can dilute heavy crude. Such oil was uncommon in America, and thus the need for specialized equipment limited.

But the shale boom changed that and triggered a race to build such facilities, seen as the quickest way to profit from an export ban that kept cut-price crude at home while allowing refined fuels to be sold overseas.

Kinder Morgan announced the first such splitter in 2012, backed by a long-term contract with powerhouse trader BP Plc. It started up the second of the combined $436 million Houston plants in July.

Buckeye Partners LP built another in Corpus Christi that started up this year, supported by Trafigura Trading LLC. Trafigura also will buy all the output from Magellan Midstream Partners LP’s $250 million, 50,000 bpd Corpus Christi splitter now under construction. It is slated to be complete in 2016.

Other projects in earlier stages that lack a committed buyer for the output may not proceed, including Castleton Commodities International’s proposed 100,000 bpd splitter in Corpus Christi. The Port of Corpus Christi said Castleton remains slated to start construction in mid-2016, but Fielden said it may be too late with others already filling the condensate niche.

Castleton declined comment.

If shipments of splitter output are no longer profitable, it remains to be seen how operators and traders will share the financial fallout. Buckeye says its contract with Trafigura is “take or pay”, which typically means the customer must pay a certain fee at the facility regardless of whether they use it.

And even if the economics appear unattractive, trading firms may have other outlets. Trafigura, which stores and transports more than 1 million bpd of oil, supplies naphtha as a diluent for Colombia’s heavy crude exports.

BP and Trafigura declined comment on splitter output prospects.

“Probably the whole decision on whether to build another condensate splitter on the Gulf Coast comes down to how those guys make out,” said Fielden.

(Reporting By Kristen Hays; Editing by Jonathan Leff and Diane Craft)

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Japan business lobby head won’t commit to higher wages

TOKYO The head of an influential Japanese business lobby won’t pass on the government’s requests to its members to raise salaries next year, a worrying sign that real wages may not increase fast enough to boost consumption in the country.

Higher wages are crucial to policymakers’ efforts to break a decades-long cycle of weak growth and deflation. Prime Minister Shinzo Abe has won modest wage gains from the largest firms, but this has been slow to filter through the economy.

Renewed concern about a slowdown in emerging markets and weak overseas demand could make more companies reluctant to raise wages. This could in turn scupper the government’s efforts to increase consumption and put the Bank of Japan’s 2 percent inflation target out of reach.

“The government is hoping for higher wages, but the Keizai Doyukai, as an organization that corporate executives personally belong to, is not going to tell its members what to do,” said Yoshimitsu Kobayashi, chairman of the Keizai Doyukai, which regularly participates in the government’s corporate policy panels and is one of Japan’s top three business lobbies.

“Companies that don’t have money obviously won’t raise wages.”

Since taking office in late 2012, Abe has repeatedly asked big business lobbies to encourage their members to raise wages at annual spring salary negotiations with unions.

Abe will also raise the minimum wage by about 3 percent from next fiscal year to encourage salaries to rise more broadly throughout the economy.

Many companies have enjoyed record profits recently, so there is room for these companies to offer their workers higher pay, Kobayashi said.

Japanese companies also have the funds needed to increase domestic investment in plants, research and develop their workers’ skills, he said.

However, around 65 percent of people work at small and medium-sized enterprises, many of which are losing money and are therefore unlikely to raise salaries or spend extra money on training employees.

Another problem is Japanese labor unions tend to make very modest requests for higher pay and do not pressure management as much as labor unions in other countries.

Adding to these concerns was data for industrial output released Monday, which fell in November for the first time in three months in a sign that weak overseas demand could hurt Japan’s economy.

Government officials and members of the BOJ have said they want to see how much companies increase salaries by in the spring negotiations with labor unions next year.

A disappointing result could cast doubt over the government’s economic policies and feed into pessimism that consumer spending will not accelerate much next year.

(Editing by Sam Holmes)

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Japan output, retail sales slump, dampen recovery prospects

TOKYO Japan’s factory output fell for the first time in three months in November and retail sales slumped, suggesting that a clear recovery in the world’s third-largest economy will be delayed until early in 2016.

While manufacturers expect to increase output in coming months, the weak data casts doubt on the Bank of Japan’s view that an expected pick-up in exports and consumption will help jump-start growth and accelerate inflation toward its 2 percent target.

Industrial output fell 1.0 percent in November from the previous month, more than a median market forecast for a 0.6 percent decline, data by the trade ministry showed on Monday.

Separate data showed that retail sales fell 1.0 percent in November from a year earlier, more than a median forecast for a 0.6 percent drop, as warm weather hurt sales of winter clothing.

“We’re finally seeing signs of pick-up in exports, but the economy has yet to make a clear turnaround,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“There’s a risk consumption will remain sluggish and prevent economic growth from picking up,” he said.

Japan’s economy narrowly dodged recession in July-September and analysts expect only modest growth in the current quarter, as consumption and exports lack steam.

Some analysts warn the economy may suffer a contraction in October-December if household spending remains weak. Taro Saito, senior economist at NLI Research Institute, expects consumption in the current quarter to have risen less than a 0.4 percent quarter-on-quarter increase in July-September.


Wary of soft growth, the government plans nearly $800 billion in record spending in the budget for the fiscal year that will begin on April 1.

The BOJ has signalled readiness to expand stimulus if risks threaten Japan’s recovery prospects. The central bank fine-tuned its stimulus programme on Dec. 18 to ensure it can keep up or even accelerate its money-printing.

While sluggish emerging market demand dims the export outlook, analysts expect output to gradually increase early in 2016 as automakers ramp up production of new models.

Manufacturers surveyed by the trade ministry expect to increase production by 0.9 percent in December and raise it by 6.0 percent in January.

Many analysts share the BOJ’s view that output is bottoming out, though some doubt manufacturers will boost production as much as they now project.

“There may be expectations that factory output will improve early next year. But it’s uncertain whether the forecasts can be realized,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

(Additional reporting by Kaori Kaneko; Editing by Richard Borsuk)

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