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Pennsylvania Democrats raise concerns over CP’s Norfolk Southern bid

CHICAGO Democrats from Pennsylvania’s congressional delegation sent a letter to a federal rail regulator on Monday raising concerns over the possible negative impacts of a merger between Canadian Pacific and Norfolk Southern Corp.

The letter sent to the Surface Transportation Board raised concerns over the impact it could have on railroad jobs in Pennsylvania and said the merger could lead to “disinvestment” in rail infrastructure in the state.

Senator Bob Casey and five members of the U.S. House of Representatives, all Democrats, also wrote that they were deeply concerned about the voting trust structure Canadian Pacific has proposed in its bid for the No. 4 U.S. railroad.

The Canadian company in mid-November disclosed its $28 billion offer to buy the Norfolk, Virginia-based railroad.

Norfolk Southern has rejected Canadian Pacific’s advances, setting the stage for a possible proxy battle.

The Surface Transportation Board would have to review a merger of the two railroads, which would be a test case since the regulator rewrote the rules for approving takeovers in 2001. The review process would include public hearings where rail customers, labor groups and elected officials would be allowed to weigh in.

In their letter, the Pennsylvania Democrats wrote that they believe the acquisition could hurt thousands of rail shippers, manufacturers and local communities, as well as rail workers, in the state, and urged a thorough review of any proposed merger.

Canadian Pacific has said that a takeover of Norfolk Southern would lead to $1.8 billion in annual savings.

In early January, two senior Democrats in the U.S. House of Representatives urged the board to reject any merger of Canadian Pacific and Norfolk Southern.

A number of industry groups and rail customers, plus a couple of the unions representing workers at Norfolk Southern have also come out against any merger.

Last week, the board posted letters from some rail customers who argue that, on the contrary, a merger of Canadian Pacific and Norfolk Southern would create a transcontinental railroad that would result in better service.

(Reporting By Nick Carey; Editing by Jonathan Oatis)

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Wall Street cuts losses to close flat; Alphabet jumps after hours

Strong gains in Facebook (FB.O) and Alphabet (GOOGL.O) helped Wall Street cut losses and stage a late-day rally, with major indexes closing near the unchanged mark.

Alphabet rose up 1.2 percent at $770.77 ahead of its results. After the bell, the Internet giant’s stock jumped 9 percent and the company became the most valuable in the United States, surpassing the market cap of Apple (AAPL.O).

Twitter (TWTR.N) jumped 6.6 percent at $17.91 after talk of a private equity deal.

Stocks had been lower earlier in the day as weak Chinese economic data added to concerns about a global slowdown and oil prices resumed their slide. The manufacturing sector in the world’s second-largest economy contracted in January at the fastest pace since 2012.

“Maybe people were relieved that there wasn’t a selloff and that kind of brought some buyers into the market,” said Eric Kuby, chief investment officer, North Star Investment Management Corp in Chicago.

“I think people are starting to focus on upcoming earnings rather than lower oil and China news.”

The Dow Jones industrial average .DJI was down 17.12 points, or 0.1 percent, to 16,449.18, the SP 500 .SPX had lost 0.86 points, or 0.04 percent, to 1,939.38 and the Nasdaq Composite .IXIC had added 6.41 points, or 0.14 percent, to 4,620.37.

Slammed by collapsing oil prices, stocks have been volatile since the start of the year. Coming off the worst January since 2009, the SP 500 is down 5.1 percent for the year.

Traders now expect the Fed to scale back the number of rate hikes this year. They are pricing in only a 17-percent chance that the Fed will raise rates in March, according to CME Group’s FedWatch.

Fourth-quarter SP 500 earnings are expected to have fallen 4.1 percent from a year ago, though that percentage has improved since last week, according to Thomson Reuters data.

Chipotle Mexican Grill (CMG.N) was up 4.3 percent at $472.64. The U.S. Centers for Disease Control and Prevention (CDC) said E.coli outbreaks that affected the burrito chain’s customers last year appeared to be over.

Declining issues outnumbered advancing ones on the NYSE by 1,556 to 1,503, for a 1.04-to-1 ratio on the downside; on the Nasdaq, 1,418 issues fell and 1,410 advanced.

The SP 500 posted 29 new 52-week highs and 5 new lows; the Nasdaq recorded 26 new highs and 97 new lows.

About 8.0 billion shares changed hands on U.S. exchanges, compared with the 9.1 billion daily average for the past 20 trading days, according to Thomson Reuters data.

(additional reporting by Tanya Agrawal; Editing by Don Sebastian and Nick Zieminski)

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OPPO, Vivo snap at Apple’s heels in China mobile market

SINGAPORE/HONG KONG Beyond China few may have heard of OPPO or Vivo, but these local handset vendors are rising up the rankings in the world’s largest smartphone market, using local marketing savvy and strong retail networks in lower-tier cities.

Industry experts say these cities – there are more than 600 of them and some are bigger than many European capitals – are the next smartphone battlefield as China’s major cities are saturated.

International brands such as Apple (AAPL.O) and Samsung Electronics (005930.KS) have mostly not yet reached this part of the market – which accounts for more than 56 percent of China’s overall consumption, according to Beijing All China Marketing Research.

In an economy growing at its slowest pace in a quarter of a century, buyers in these smaller cities – with populations of up to 3 million – tend towards cheaper phones, which is good news for Guangzhou-based OPPO and Vivo, as well as Meizu Technology Co, an affiliate of Alibaba Group Holding Ltd (BABA.N).

“OPPO and Vivo have already overtaken Samsung and ZTE Corp (000063.SZ) in China, and are working to chase down the big three of Huawei [HWT.UL], Xiaomi [XTC.UL] and Apple in 2016,” said Strategy Analytics analyst Neil Mawston.


To be sure, these lower-priced newcomers lack the firepower of the premium brands, and operate on razor-thin margins or at losses. They need mass volume sales to keep going, the industry experts said.

OPPO sold 10.8 million smartphones, giving it a 9 percent market share and a top-5 ranking, in the fourth quarter of last year, according to Strategy Analytics – even as the overall China market slipped 4 percent.

OPPO’s R7 smartphone, priced at 1,999 yuan ($304), touts itself as a “selfie expert”, with a bigger screen than the iPhone 6S and competitive camera resolution.

Vivo ranked fourth with 10 percent market share, below Apple’s 13 percent.

The growth among these younger vendors comes as Apple, Xiaomi and others struggle to maintain momentum in a market swamped with smartphones and fading economic growth.

Analysts say the newcomers run eye-catching marketing gimmicks, including sponsorship with local TV shows, and have extensive retail networks in lower-tier cities.

“There’s only so much the international firms can do when it comes to localized marketing in China,” said Nicole Peng at Canalys. “For foreign companies like Samsung, their marketing strategies don’t really cater to the Chinese consumer.”

Sixth-ranked Samsung declined to comment.

Apple last week forecast a first revenue drop in 13 years and posted the slowest-ever increase in iPhone shipments as the Chinese market showed signs of weakening.


China has nine of the world’s top-12 smartphone brands, with nearly a quarter of the market share, according to CounterPoint Research, but turning that into volume sales beyond China will be a challenge.

Overseas, Chinese brands lack strong distribution networks and can run into intellectual property issues. OPPO is already in several Asian and Middle East markets, while Vivo is in Malaysia and India.

And at home, Chinese device buyers are notoriously fickle, switching between brands in a cut-throat market. Regular price wars have seen ZTE and Lenovo Group (0992.HK) frequently swap places in the sales rankings.

“The lines between ‘high-end’ and ‘low-end’ devices is blurring, which leaves price as the sole differentiator for most mass market buyers,” said Sameer Singh, an analyst who blogs at

“Brand image tends to be a lagging indicator of customer experience, i.e. as the latter improves, so does word-of-mouth and consequently brand image. I think that’s what we’re seeing with Chinese brands today.”

($1 = 6.5777 Chinese yuan renminbi)

(Reporting by Miyoung Kim; and Yimou Lee, with additional reporting by Rain Liang in HONG KONG and Jeremy Wagstaff in SINGAPORE; Editing by Ian Geoghegan)

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Exclusive: Global automakers wary of China certification shift

BEIJING Some global automakers are worried that China is pushing its weight around as the world’s biggest car market – by enforcing its own, often outdated, vehicle certification standards on foreign cars.

China previously allowed global brands to sell cars without local certification in many cases, as long they were approved under international standards. Chinese rules essentially apply older standards to features such as bumper strength, brake performance and the size and positioning of lamps and mirrors.

Global car makers say the move to enforce local standards more rigorously highlights the unpredictability of doing business in China, is a step back in technology and could mean costly re-designs and delayed new car launches.

In one instance, Chinese regulators made an issue of the position of a Nissan Motor (7201.T) car’s fog lamps – something that has since impacted other automakers, people with knowledge of the matter said.

Shifting a lamp by a few centimeters can mean re-designing exterior body panels, investing in stamping dies and lighting assemblies, and delaying planned launches by more than a year, said people close to the Japanese Automotive Manufacturers Association (JAMA).

“It’s an inconvenient and sudden departure from the status quo,” said an executive at a leading international automaker. “We’re essentially being asked to redo some aspects of new vehicles in China using outdated standards. This may cost us critical time and money.”

To be sure, compliance won’t break the bank, but car makers are concerned they may be sacrificing technical advances as China’s standards can lag global norms by as much as a decade.

“They can enforce whatever standards they want. The question is: are those standards high enough to protect consumers,” said Yale Zhang, head of Shanghai-based consultancy Automotive Foresight. “People think China does not have proper standards and that’s why the car quality here is lower.”


As European certification standards – the de facto global norm – have evolved in line with advances in technology, China’s have lagged behind. Foreign car makers say this is in part because China wanted to help protect its domestic automakers from competition.

Feng Yi, director of the China Automotive Technology and Research Center (CATARC), which oversees the National Technical Committee of Auto Standardization, said there was no aim to protect local producers or hinder foreign automakers. In emailed comments to Reuters, he said local standards had lagged those from Europe, though China was now speeding up setting its own standards, based on European rules.

“However, because it takes quite a long time to set up or update standards and prepare new auto products, new standards will still be one step behind compared with (Europe),” he said.

After a decade of double-digit growth, helped by subsidies and other policy measures, China’s light vehicle sales slowed to single-digit growth last year, and research firm JD Power predicts that will likely be the norm for the next few years.

“We’ll see more of this as the market slows … to make sure state-owned and domestic automakers will be solvent,” said John Humphrey, a JD Power consultant. “Without that, a lot of those companies won’t be able to withstand the raw market forces.”

A spokesman for Chinese automaker Zhejiang Geely [GEELY.UL] said he did not know if the shift was benefiting local car makers. “Geely Auto’s design, RD and production facilities fully comply with standards and certification in China and in overseas markets where our vehicles are sold,” he said.


In another case, Honda Motor (7267.T) was told by Chinese regulators that sensor frequencies in one of the on-board diagnostic systems monitoring engine and transmission performance and tire pressure on one of its new models did not meet their certification standards.

Spokespersons for Nissan and Honda declined direct comment, but said they support the JAMA playing a lead role on this issue. A Toyota spokesman declined to comment.

The JAMA sent a delegation to Beijing in November to voice its concern to the CNCA department that deals with automotive certification, three people close to the JAMA said. Feng at the CATARC said he was not aware of any such meeting.

The European Automobile Manufacturers Association (ACEA), which represents firms including Volkswagen (VOWG_p.DE), Daimler (DAIGn.DE) and BMW (BMWG.DE) as well as top U.S. manufacturers, says it prefers its car makers to try to resolve issues themselves case-by-case.

China representative Dominik Declercq said the ACEA welcomed signs of China embracing the rule of law, and “less arbitrarily” than before, but has concerns about the impact on future sales.

“It’s not hard to see how (this) might be harmful to the introduction of innovative products to China,” he said. “We do sense (global automakers) collectively may face new hurdles.”

(Reporting by Norihiko Shirouzu; Editing by Ian Geoghegan)

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U.S. factories show signs of stabilization; consumers hibernate

WASHINGTON U.S. manufacturing activity contracted in January for a fourth straight month as factories grappled with a strong dollar and lower oil prices forced energy firms to further cut spending, but the pace of the decline appeared to be slowing.

While other data on Monday showed consumer spending was flat in December, a jump in savings to a three-year high offered hope that consumption would rebound in the coming months.

“The bad news is manufacturing is still contracting, but the good news is there are some signs of stabilization. There are still some dark clouds hovering over the first quarter and we hope consumers will return as savings are high,” said Thomas Costerg, an economist at Standard Chartered Bank in New York.

The Institute for Supply Management (ISM) said its index of national factory activity increased 0.2 percentage point to a reading of 48.2 last month. A reading below 50 signals a contraction in factory activity.

The buoyant dollar has combined with tepid global demand to undermine U.S. exports. At the same time, businesses are working to reduce a huge pile of unsold merchandise clogging warehouses, which has left little scope to place new orders with factories.

But there are rays of hope for the sector, which accounts for 12 percent of the economy. Last month, more factories reported an increase in orders and production. In addition, inventory levels and order books appeared to be stabilizing.

However, manufacturing employment continued to decline and export orders weakened from the prior month. Factories with close links to the slumping oil and gas sector reported ongoing challenges. The survey showed some suppliers reported that “filing for bankruptcy and reducing their workforce is becoming an increasing risk.”

The signs of stabilization in manufacturing were also captured in a separate report from data firm Markit, which showed its U.S. manufacturing PMI rebounded last month from December’s 38-month low. That survey also reported faster growth in production and new orders.

“The contraction in manufacturing is ongoing but no longer getting worse,” said Steve Blitz, chief economist at ITG Investment Research in New York. “If, in fact, the recent stability in new orders follows with some improvement, inventory has been worked off enough for increased new orders to generate improved growth rates for production.”

In a third report, the Commerce Department said consumer spending was unchanged in December after increasing 0.5 percent in November. Spending on long-lasting manufactured goods such as autos dropped 0.9 percent. Purchases of nondurable goods, including apparel, also fell 0.9 percent.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 3.4 percent in 2015 after advancing 4.2 percent in 2014.

U.S. stocks were trading lower as weak Chinese data renewed fears about a global slowdown and oil prices resumed their slide. The dollar weakened against a basket of currencies. Prices for U.S. government debt also were lower.


Amid weak consumption, inflation retreated in December, with a price index for consumer spending slipping 0.1 percent after ticking up 0.1 percent in November.

In the 12 months through December, the personal consumption expenditures (PCE) price index, however, rose 0.6 percent – the largest increase since December 2014. Year-over-year inflation rates are rising as the weak readings during the year drop out of the calculation.

Excluding food and energy, prices were unchanged after rising 0.2 percent in November. The so-called core PCE price index, the Federal Reserve’s preferred inflation measure, increased 1.4 percent in the 12 months through December. Core PCE is below the U.S. central bank’s 2 percent target.

“The lack of inflationary pressure in the PCE deflator measures of prices is another reason why the Fed could stand pat in March,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto, referring to the Fed’s next interest rate-setting policy meeting.

The consumer spending data was included in last Friday’s fourth-quarter gross domestic product report, which showed consumer spending growth slowed to a 2.2 percent annual rate from the third quarter’s brisk 3 percent pace.

Moderate consumer spending, weak export growth and the ongoing efforts to reduce the inventory bloat helped restrict economic growth to a 0.7 percent pace in the fourth quarter.

However, that growth estimate could be lowered to about a 0.5 percent rate after another report from the Commerce Department showed construction spending rose only 0.1 percent in December. That is less than the government had assumed in its advance fourth-quarter GDP growth estimate.

Stoking hopes of a rebound in consumer spending, income rose 0.3 percent in December after a similar gain in November. Income at the disposal of households after accounting for inflation in 2015 recorded its biggest increase since 2006.

With income outpacing spending in December, savings surged to $753.3 billion, the highest level since December 2012, from $717.8 billion in November.

(Reporting by Lucia Mutikani; Additional reporting by Dan Burns in New York; Editing by Paul Simao)

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Fox to offer employees buyouts to save $250 million in costs

Twenty-First Century Fox said it would offer some of its employees voluntary exit options with “generous” benefit packages, with the aim of reducing costs by about $250 million.

“Some colleagues from Fox Networks Group and 20th Century Fox will be offered a generous benefit package if they opt to voluntarily leave the company,” a Fox spokesperson said in an e-mailed statement on Monday.

The Rupert Murdoch-controlled film and TV company is targeting $250 million in cost cuts in fiscal 2017, which starts in July, another company spokesman said by phone.

Fox had about 20,500 full-time employees as of June 30, 2015.

The news was first reported by the Wall Street Journal.

Fox’s shares were up about 0.6 percent at $27.12 in late afternoon trading.

(Reporting by Alan John Koshy in Bengaluru; Editing by Savio D’Souza)

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Volkswagen faces Tuesday U.S. deadline for SUV emission repair plan

WASHINGTON Volkswagen AG (VOWG_p.DE) faces a Feb. 2 deadline to submit a repair plan for 80,000 diesel SUVs and larger cars that emit excess pollution, even as it considers buying back some vehicles and a prior fix plan for smaller vehicles was rejected.

The second largest automaker still hasn’t announced any timetable for winning approval from U.S. and California regulators to address excess emissions in 575,000 2.0 and 3.0 liter U.S. vehicles. In September, VW first acknowledged installing software that allowed diesel vehicles to emit up to 40 times legally allowable pollution.

Last week, VW won approval to start fixing 8.5 million vehicles in Europe. VW says excess diesel emissions impact up to 11 million vehicles worldwide.

VW must submit a plan to the California Air Resources Board (ARB) to recall and fix about 80,000 3.0 liter SUVs, including the 2009-2016 VW Touareg, 2013-2016 Porsche Cayenne and 2014-2016 Audi A6 Quattro, Audi A7 Quattro, Audi A8, Audi A8L, Audi Q5 and 2009-2016 Audi Q7.

Unreported auxiliary vehicle software allowed those vehicles to emit up to nine times legally allowable pollution levels, the EPA said in November.

ARB on Nov. 25 gave VW until Feb. 2 to file the recall plan. A board spokesman, David Clegern, declined Monday to say if VW has met the deadline. “We expect to update the situation tomorrow,” Clegern said.

Audi of America spokesman Mark Clothier also declined Monday to say if the company had met the deadline.

A stop sale remains in place barring the U.S. sale of VW’s 2016 diesel vehicles. No progress has been reported after VW CEO Matthias Mueller met with Environmental Protection Agency chief Gina McCarthy on Jan. 13.

The Justice Department sued VW on Jan. 4 seeking up to $46 billion in damages for emissions violations. EPA spokeswoman Laura Allen said Monday the agency “continues ongoing technical discussions on potential solutions for the two-liter vehicles in parallel with the federal court action.”

Last month, California rejected VW’s proposal to fix 482,000 2.0 liter cars, calling it “substantially deficient.”

Clegern said after ARB rejected VW’s 2.0 liter proposal “we shifted the case onto a broader field; one where we can discuss settlement terms beyond a recall — buyback, mitigation, etc.”

At a Jan. 21 court hearing, VW lawyer Robert Giuffra said a buyback is possible “but that hasn’t been determined yet,” according to a court transcript.

(Reporting by David Shepardson; Editing by David Gregorio)

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U.S. vulnerable to global slowdown, volatility: Fed’s Fischer

NEW YORK The U.S. economy could suffer, with inflation remaining too low, if recent volatility in financial markets persists and signals a slowdown in the global economy, the Federal Reserve’s second-in-command said on Monday.

Fed Vice Chairman Stanley Fischer, however, warned about jumping to conclusions given that some past bouts of financial market turbulence have not harmed the world’s largest economy.

His speech, less than a week after the Fed held interest rates steady, appeared to reinforce the view that a month-long plunge in world stocks and oil prices could stay the U.S. central bank’s hand as it looks to continue raising rates this year.

“At this point, it is difficult to judge the likely implications of this volatility,” Fischer told the Council on Foreign Relations in New York.

“If these developments lead to a persistent tightening of financial conditions, they could signal a slowing in the global economy that could affect growth and inflation in the United States,” he added. “But we have seen similar periods of volatility in recent years that have left little permanent imprint on the economy.”


*Cheap oil won’t juice the U.S. economy

*Podcast: SpongeBob and the Super Bowl

The Fed hiked interest rates by a quarter of a percentage point in mid-December, its first tightening in nearly a decade. At the time it published forecasts suggesting four more hikes were to come in 2016.

Then, through much of January, markets were turbulent on weakness in China and elsewhere that raised concerns of a global economic slowdown. These worries grew on Monday when data showed monthly Chinese manufacturing activity shrank at its fastest pace in almost three-and-a-half years.

Over that time, Fischer said, oil price drops and the dollar’s rise suggested inflation “would likely remain low for somewhat longer than had been previously expected” before moving back to the Fed’s 2 percent target.

Fischer, a close ally of Fed Chair Janet Yellen, said he still expects inflation to hit its target over the “medium term” as pressures from oil and the dollar fade.

Traders in futures markets now expect the Fed to raise rates only once this year, most likely in November or December.

Though he is more of a centrist at the Fed, Fischer gave two other hints on Monday that his thinking has shifted dovish: he said there is “some benefit to maintaining a larger balance sheet for a time” to support the economy. The central bank’s portfolio of bonds is worth about $4.5 trillion after years of post-crisis stimulus.

Fischer also argued that a “modest” drop in unemployment below its current 5.0 percent level, which is around the Fed’s target, would be “appropriate” to help under-employed workers and to boost inflation, which is 1.4 percent by the Fed’s preferred measure.

Yet the central bank should avoid a “large” overshoot of its employment target, he said.


(Reporting by Jonathan Spicer; Additional reporting by Ann Saphir; Editing by Chizu Nomiyama)

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Obama likely to discuss TPP, Puerto Rico with Republican leaders: White House

WASHINGTON President Barack Obama is likely to discuss a range of issues from international trade to Puerto Rico’s fiscal crisis when he meets with House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell on Tuesday, White House spokesman Josh Earnest said.

Speaking to reporters at a press briefing on Monday, Earnest said the leaders will probably discuss the Trans-Pacific Partnership, earned income tax credit, and heroin addiction problem. He added that Obama and Ryan will meet privately for lunch at the White House following the meeting.

(Reporting by Roberta Rampton, Doina Chiacu and Mohammad Zargham; Writing by Susan Heavey; Editing by Chris Reese)

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