News Archive

American Airlines’ fourth-quarter profit beats expectations

American Airlines Group Inc (AAL.O) on Friday reported a fourth-quarter profit above analysts’ estimates as tumbling oil prices continued to add to its bottom line.

American, the world’s largest airline, earned $3.28 billion, benefiting from a more than 40 percent drop in its fuel bill from a year earlier.

Excluding special items such as a noncash $3 billion boost from a change in accounting for tax allowances, earnings rose by 16.5 percent to $1.29 billion, or $2.00 per share. Analysts on average expected $1.97 per share, according to Thomson Reuters I/B/E/S.

Shares of American rose 1.3 percent to $38.65 in premarket trading.

The Fort Worth, Texas-based airline said it had repurchased $1.1 billion worth of shares in the quarter as part of a previously announced buyback program.

Sterne Agee CRT analyst Adam Hackel called the buybacks “remarkable” because the company has repurchased about 10 percent of its stock in the last two quarters.

However, intense competition from low-cost rivals as well as weak demand in Latin America and growing fears of a rapidly spreading Zika virus in the region cast some concern about American’s top line.

Hackel said the airline’s 17 percent drop in passenger unit revenue from Latin America far exceeded the 10 percent decline that Sterne Agee CRT forecast.

For all flights, passenger unit revenue, which compares ticket sales with capacity, fell 6 percent in the quarter.

(Reporting by Jeffrey Dastin in New York; Editing by Lisa Von Ahn)

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World stocks heat up as Bank of Japan goes sub-zero

NEW YORK Global equities jumped and the yen slumped against the dollar after the Bank of Japan stunned markets by introducing negative interest rates, while hopes the U.S. Federal Reserve will slow the pace of future rate hikes also underpinned stock gains.

The BOJ unexpectedly cut a benchmark rate below zero in another bold move to stimulate the Japanese economy as volatile markets and slowing global growth threaten the central bank’s efforts to overcome deflation.

Global equities surged, the yen tumbled and sovereign debt rallied after the BOJ said it would charge 0.1 percent for excess reserves and may cut rates further if necessary, an aggressive policy pioneered by the European Central Bank.

The yield on benchmark 10-year Japanese government bonds JP10YTN=JBTC plunged to a record low of 0.09 percent, and the yen fell 2.32 percent to 121.57, on track for its biggest daily fall against the dollar in over a year.

The Nikkei share index .N225 whipsawed, but closed 2.8 percent higher. Shares on Wall Street and in Europe rose more than 1 percent, as did MSCI’s all-country world stock index .MIWD00000PUS, which gained 1.15 percent.

“The BOJ decision was a massive surprise. It’s further money printing from Japan on a massive scale after having told the markets that they’re not doing it. That triggered European investors to push the risk-on button,” said Will Hamlyn, investment analyst at Manulife Asset Management.

Weak U.S. gross domestic product data raised expectations that the U.S. Federal Reserve would go slow on future interest rate hikes, helping lift equity markets.

U.S. GDP rose at an annualized 0.7 percent in the fourth quarter, below an expected 0.8 percent gain, as a strong dollar and tepid global demand hurt exports.

The pan-European FTSEurofirst 300 .FTEU3 index rose 1.76 percent to 1,341.41.

The Dow Jones industrial average .DJI rose 211.21 points, or 1.31 percent, to 16,280.85. The SP 500 .SPX gained 22.25 points, or 1.18 percent, to 1,915.61 and the Nasdaq Composite .IXIC added 51.85 points, or 1.15 percent, to 4,558.52.

Euro zone bond yields tumbled, with German yields set for their biggest monthly fall in two years following the BOJ’s surprise move. U.S. Treasury yields fell to four-month lows.

Germany’s 10-year Bund yield DE10YT=TWEB fell 6.5 basis points to 0.26 percent, its lowest level since late April 2015.

Benchmark 10-year notes US10YT=RR were last up 17/32 in price, pushing their yield down to 1.9244 percent after earlier sliding to 1.91 percent, the lowest since Oct. 2.

The euro EUR= fell to a session low against the dollar after the GDP report, dropping 1.16 percent to $1.0810.

The dollar index .DXY, tracking the dollar against a basket of major currencies, rose 1.276 percent to 99.756.

Oil rose to $35 a barrel, a gain of about 25 percent from the 12-year lows seen earlier in January, on prospects that a deal between major exporters to cut production could help reduce one of the worst oil gluts in history.

Brent futures LCOc1 rose 51 cents to $34.40 a barrel, while U.S. futures CLc1 rose 18 cents to $33.40 a barrel.

(Reporting by Herbert Lash; Editing by Nick Zieminski)

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Japan fund undecided on Sharp; Foxconn reportedly ups offer

TOKYO A Japanese state-backed fund said on Friday it had yet to decide on its potential rescue plan for Sharp Corp, while a media report said Taiwan’s Foxconn had raised its offer in a rival move for the struggling electronics maker.

Innovation Network Corp of Japan (INCJ) officials have been discussing a capital injection of more than 300 billion yen ($1.7 billion) into Sharp and up to 350 billion yen of financial assistance from the company’s two main lenders, sources have told Reuters.

The fund had been expected to agree on a basic bailout plan on Friday, but INCJ Executive Director Tetsuya Hamabe told reporters after a meeting of the fund’s executives that “no formal decision has been made”.

Sharp is weighing the INCJ plan against a rival proposal from Foxconn, formally known as Hon Hai Precision Industry. The Wall Street Journal reported Foxconn had raised its offer to 659 billion yen from an earlier offer of around 625 billion.

Sharp declined to comment on the report, while Foxconn officials were not immediately available for comment.

Sources have said the INCJ offer had been favored as the government would like to keep its technology in Japanese hands.

But Foxconn recently offered more details about its offer including a promise to not slash jobs, and its plan was being carefully considered by Sharp and its bankers, a person with direct knowledge of the talks said this week.

INCJ aims to merge Sharp’s liquid-crystal display business with rival Japan Display Inc, in which the fund is the top shareholder. Japan Display and Sharp supply high-resolution smartphone screens to Apple. Both face stiff competition from Asian rivals such as South Korea’s LG Display Co Ltd.

The fund also hopes to integrate Sharp’s white goods unit with that of Toshiba Corp, which is struggling to recover from a $1.3 billion accounting scandal, sources have told Reuters.

Sharp was once known as a major supplier of high-end TV and smartphone displays, but has come under heavy pricing pressure from Asian rivals. It is seeking its third rescue in less than four years, after a bank-led plan in May failed to turn it around.

(Reporting by Makiko Yamazaki and Ritsuko Ando; Editing by Miral Fahmy and Mark Potter)

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Foxconn raises offer for Sharp to $5.44 billion: WSJ

Taiwan’s Foxconn Technology Co Ltd (2354.TW) has raised its offer for troubled Japanese electronics maker Sharp Corp (6753.T) to 659 billion yen ($5.44 billion), a deal that would dilute existing stockholders, the Wall Street Journal reported citing people familiar with the matter.

Foxconn is not looking to buy out Sharp shareholders. Rather, the company would inject 389 billion yen into Sharp in exchange for new shares, after which it would hold a roughly two-thirds stake, one of the sources told the Journal. (

Foxconn has also offered to buy 225 billion yen worth of preferred shares held by Sharp’s two main banks, Mitsubishi UFJ Financial Group Inc (8306.T) and Mizuho Financial Group Inc (8411.T), people familiar with the matter told the Journal.

(Reporting By Lehar Maan in Bengaluru)

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Colgate-Palmolive sales miss on strong dollar, weak LatAm demand

Colgate-Palmolive Co (CL.N) reported lower-than-expected sales for the last quarter of 2015, hurt by a strong dollar and weak demand in Latin America.

The company, which gets more than three-fourths of its revenue from outside the United States, has been raising prices to counter the impact of the stronger dollar.

But that has taken a hit on volumes in regions such as Latin America, the company’s biggest market by sales.

The average value of the dollar rose 11.7 percent against a basket of currencies in the quarter, compared with a year earlier.

The company raised prices by 13 percent in Latin America in the three months ended Dec.31, pushing down volumes by 4 percent.

Total net sales fell 7.6 percent to $3.90 billion.

Analysts on average had expected revenue of $3.93 billion, according to Thomson Reuters I/B/E/S.

The company reported a loss of $458 million, or 51 cents per share, compared with a profit of $628 million, or 68 cents per share.

Colgate took a $1.08 billion charge in the quarter related to a change in the way it accounts for its business in Venezuela.

The company said it would no longer include the assets and liabilities of its Venezuelan operations in its balance sheet.

Venezuela’s crumbling economy has forced many major U.S. corporations with significant presence to either exit, or reduce their operations in the country.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Maju Samuel and Sriraj Kalluvila)

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Whirlpool forecasts 2016 profit largely below estimates

Whirlpool Corp (WHR.N) reported a better-than-expected quarterly profit and said consumer demand is likely to remain resilient in North America, its biggest market, this year.

Shares of the world’s largest maker of home appliances rose as much as 5.3 percent on Friday.

An improving U.S. economy has helped boost consumer spending in the country, even as economic uncertainty plagues emerging markets, particularly China and Brazil.

“Every piece of the drivers of demand – new housing, existing homes sales and discretionary (spending) – are going in the right direction. So, we view it as a very positive spot,” Chief Executive Jeff Fettig said on a conference call.

Whirlpool’s sales in North America rose about 4 percent to $2.9 billion in the quarter ended Dec. 31, accounting for about 52 percent of total sales.

The company also forecast shipments to rise by 5 percent in the region this year.

“The region, which was the subject of most investor angst, was improved and better than expected, with margins up sequentially despite holiday promotions,” Raymond James Equity Research analyst Sam Darkatsh wrote in a note.

However, Whirlpool’s outlook for emerging markets was less than encouraging.

Shipments in Europe, Middle East and Africa are expected to be flat to up 2 percent this year and fall 10 percent in Brazil, the company said.

Shipments in Asia are expected to remain flat.

The company said it expected 2016 adjusted earnings of $14.00-$14.75 per share, compared with the average analyst estimate of $14.42 per share, according to Thomson Reuters I/B/E/S.

Whirlpool said its net earnings rose to $180 million, or $2.28 per share, in the fourth quarter, from $81 million, or $1.02 per share, a year earlier.

Adjusted earnings came in at $4.10 per share, while net sales fell 7.4 percent to $5.56 billion.

Analysts on average had expected fourth-quarter earnings of $3.91 per share on revenue $5.74 billion.

Up to Thursday’s close, Whirlpool’s shares lost more than a third of their value in the past 12 months, underperforming the SP 500 index .SPX, which declined 6.3 percent.

(Reporting by Ankit Ajmera in Bengaluru; Editing by Maju Samuel and Saumyadeb Chakrabarty)

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Global funds cut U.S. equity holdings, raise cash: poll

LONDON Global investors cut their U.S. equity and bond holdings in January, a Reuters poll of fund managers showed on Friday, as the SP 500 .SPX suffered its worst January since 2009 and after the U.S. Fed began tightening.

U.S. stocks shrank 1 percentage point to 37 percent of asset managers’ global equity portfolios, the lowest level in at least five years, against a backdrop of falling share prices that saw over $8 trillion wiped off global stock indexes.

Investors also cut their U.S. bonds allocation by 2.4 percentage points to 35.8 percent of their global fixed income portfolios, the lowest since June 2014.

The move followed a rate rise by the Federal Reserve in December and a spike in U.S. high yield credit spreads as concerns mounted over the finances of energy companies.

The survey of 46 fund managers and chief investment officers in the United States, Europe, Britain and Japan was conducted between Jan. 15 and 27.

During this period, a collapse in oil prices to 12-year lows, heightened Chinese market volatility and worries about structurally low growth and high global debt sent investors stampeding for cover, pushing stocks deeper into bear market territory.

“Clearly, global equity markets have been driven by panic and anxiety so far this year,” said Peter Lowman, chief investment officer at UK-based wealth manager Investment Quorum.

Perhaps not surprisingly given this backdrop, investors raised their cash levels to 6.5 percent of their global balanced portfolios, the highest since June.

Overall equity holdings fell only slightly to 47.6 percent, but this was the lowest level since September.

But managers raised their exposure to alternatives, which include hedge funds, private equity and infrastructure, to 7.1 percent, the highest ever, in a search for less correlated returns.


Many investors expressed concern about the murky outlook for China. Policymakers there have unnerved markets due to perceived poor communication, and the implementation of measures intended to curb market volatility that had the opposite effect.

“China is likely to continue to provide investors with intermittent cause for concern,” said Boris Willems, a strategist at UBS Global Asset Management.

“Differentiating between developments in China’s real economy and its often erratically moving domestic stock market – and assessing their potential impact on global asset prices -will remain key, however.”

Raphael Gallardo, an asset allocation strategist at Natixis, said a hard landing in China remained a risk, as this could force a big devaluation of the yuan CNY=, sending deflationary shockwaves across the globe.

Other worries focused on central banks, with the U.S. Federal Reserve on a tightening path. This is expected to reduce liquidity and add to dollar strength.

“Such an environment could lead to bouts of heightened market volatility, particularly if investments are crowded in a few popular trades, as was frequently the case in 2015,” said Willems.

While the European Central Bank and Bank of Japan remain in easing mode, some asset managers thought they were losing effectiveness in the face of very weak inflation.

“They may fail to effectively curb market volatility in the medium term, as they did after the Great Financial Crisis,” said Giordano Lombardo, chief executive and group chief investment officer at Pioneer Investments. “Financial markets have started to price in a very negative scenario.”

However, given the extent of the selling, some managers said pockets of value were appearing in the more bombed out segments.

“Now that the world’s equity markets are officially in ‘bear market territory’ the opportunity for investors to buy quality stocks at much cheaper levels has arrived,” Lowman said.

Within their global equity portfolios, investors raised their UK equity allocation to 12.1 percent, the highest since December 2014, and their euro zone allocation to 18.8 percent.

They also raised their allocation to Asia ex-Japan stocks to 6.2 percent, suggesting that some emerging markets were beginning to look attractive due to their extremely depressed valuations.

“If China does not derail in its transition process (and) developed markets remain resilient and avoid deflationary spirals, we believe the market over-reaction can open up value opportunities for long-term investors,” said Lombardo.

(Additional reporting by Maria Pia Quaglia Regondi; Editing by Toby Chopra and Robin Pomeroy)

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Worried analysts question Amazon’s logistics plans

SAN FRANCISCO In the wake of Inc’s disappointing financial results that sent shares plunging Thursday, analysts blamed rising costs to deliver goods, which increased to $4.5 billion in the quarter, up 24.4 percent from the same quarter last year.

And they sharply questioned the company’s plans to continue to make heavy investments in logistics, even at the expense of profits.

They wondered why it was planning to buy more assets like trucks, and reportedly to lease jets, and worried it planned to spend the money to take on shippers like United Parcel Service Inc.

“The so-called (earnings) miss was half fulfillment and half marketing,” said Michael Pachter, a managing director of equity research at Wedbush Securities.

The growing popularity of Prime, which promises free, two-day deliveries for millions of online orders, was one of the factors driving up shipping costs at the online retailer.

Rising shipping costs are of particular concern to Amazon, which is the world’s largest online retailer.

To handle increased orders and speed up delivery, Amazon has opened more warehouses and is building its own delivery system.

But Amazon executives asserted on Thursday that they do not intend to compete against carriers like United Parcel Service and FedEx Corp.

Analysts have speculated that the online retailer might one day become a logistics player itself, offering storage and delivery of items for other industries. Some have expressed worries about the costs involved in that endeavor.

UPS and FedEx handle the bulk of Amazon’s deliveries but Amazon has tried to take more control over its supply chain after a mixture of bad weather and a last-minute surge in e-commerce orders delayed deliveries during the crucial holiday season in 2013.

“Those carriers are just not able to handle all of the capacity that we need at peak,” Amazon Chief Financial Officer Brian Olsavsky said. “We’ve had to add more of our own logistics to supplement our partners, not to replace them.”

But he stopped short of ruling out the possibility of offering shipping to third parties, and did not address an analyst’s question about building its logistics arm into a separate business.

(Reporting by Mari Saito; Editing by Steven Trousdale and Stephen Coates)

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McDonald’s to launch 150 customized burger stores in China in 2016

HONG KONG McDonald’s Corp (MCD.N) plans to launch in China this year 150 outlets where clients can customize burgers to suit their tastes, as the world’s top restaurant chain aims to grow sales in the country after being hit by a fast-food scandal in 2014.

The U.S. burger chain currently has 11 such outlets on the mainland, including in Shanghai, Guangzhou, Shenzhen and Beijing, Regina Hui, senior director of communications for McDonald’s China said in an email received late on Thursday, in which she also disclosed the plans for the 150 restaurants.

McDonald’s beat analyst forecasts for quarterly same-restaurant sales this week, adding momentum to a global recovery for the chain as demand picked up in China.

Its same-store sales in China rose 4 percent in the fourth quarter of 2015, the second straight quarter of growth after four quarters of falling sales.

McDonald’s and Yum Brands Inc (YUM.N), the parent of KFC and Pizza Hut, are slowly turning things around in China, although same-restaurant sales for both firms remain below pre-scandal levels, according to a Reuters analysis of available data.

The so-called ‘Create Your Taste’ outlets allow customers to build customized burgers from a wide selection of ingredients.

Hui said the chain had seen “very positive feedback” from local diners, who analysts say are increasingly tough to win over due to greater health awareness and a boom in the range of available dining options.

“They like the taste of burgers, the digital experience and the table service,” said Hui.

McDonald’s Chief Executive Steve Easterbrook launched a turnaround plan last year that involved making the menu simpler, improving service times and raising worker wages.

(Reporting by Donny Kwok and Adam Jourdan; Editing by Muralikumar Anantharaman)

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