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Bank of America targets wealthiest clients with more advisers

Bank of America Corp’s U.S. Trust business plans to add more than 100 financial advisers who cater to the super-rich as part of its strategy to grow wealth-management revenue, a U.S. Trust executive said on Tuesday.

The number of private client advisers will rise to more than 450 from 323 over the next three years, Keith Banks, president of U.S. Trust said at a financial services conference in New York.

The move is the latest indication that big banks are emphasizing wealth management as a strategy to grow revenue while putting relatively little capital at risk, and the number of financial advisers at U.S. Trust is already at an all-time high.

The growth will come from new hires and an internal training program, Banks said. U.S. Trust also plans to hire more portfolio managers and trust officers to support the advisers, he added.

U.S. Trust clients typically have assets of at least $3 million, according to the joint presentation by Banks and Merrill Lynch Wealth Management head John Thiel.

Despite growing competition, banks continue to cite demographic trends to justify their emphasis on wealth management. Wells Fargo Co, Morgan Stanley and UBS Group AG are among those competing with Bank of America for talent and customers in U.S. wealth management.

Wealth and investment management generated $4.4 billion in first quarter revenue for Bank of America, 21 percent of the total. Bank of America oversees $2.5 trillion in total assets, including $390 billion at U.S. Trust.

(Reporting by Dan Freed in New York; Editing by Cynthia Osterman)

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Boeing wins $3.2 billion U.S. defense contract: Pentagon

WASHINGTON Boeing Co (BA.N) was awarded a $3.2 billion contract modification to a previously awarded contract for Joint Direct Attack Munition (JDAM) tailkits, the Pentagon said on Tuesday.

The contract for the tailkits, which use GPS to boost accuracy for conventional bombs, was raised from an initial $1.75 billion contract awarded on Oct. 30, 2014, due to warfighter demand and to replenish depleted inventories, the Pentagon said in a statement.

(Reporting by Eric Walsh; Editing by Sandra Maler)

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U.S. consumer spending increase strongest in over six years

WASHINGTON U.S. consumer spending recorded its biggest increase in more than six years in April as households stepped up purchases of automobiles, suggesting an acceleration in economic growth that could persuade the Federal Reserve to raise interest rates soon.

Though other data on Tuesday showed an ebb in consumer confidence in May, spending is likely to remain supported by strong gains in house prices, as well as a strengthening labor market, which is steadily pushing up wages.

“This takes the Fed a step and a half closer to the next increase in interest rates,” said John Ryding, chief economist at RDQ Economics in New York. 

Fed Chair Janet Yellen said on Friday an interest rate hike would probably be appropriate in the “coming months,” if the economy continued to pick up and the labor market added jobs. Her views were similar to those expressed in minutes from the Fed’s April 26-27 policy meeting published recently.

The Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, surged 1.0 percent last month as households bought a range of goods and services.

Last month’s increase was the largest since August 2009 and beat economists’ expectations for a 0.7 percent rise.

Strong consumption lifted inflation last month. The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, rose 0.2 percent after edging up 0.1 percent in March. That left the increase in the year-on-year core PCE rate at 1.6 percent.

The core PCE is the Fed’s preferred inflation measure and is running below its 2 percent target. Economists expect inflation to continue creeping higher this year, citing the dollar’s fading rally and a gradual increase in oil prices and wages.

Financial markets are pricing in a roughly 61 percent chance of an interest rate increase at the July 26-27 Fed policy meeting, according to CME FedWatch. The dollar was trading higher against a basket of currencies, while U.S. stocks fell. Prices for U.S. government debt were little changed.


When adjusted for inflation, consumer spending shot up 0.6 percent, the biggest gain since February 2014, after being flat in March.

The strong consumer spending report joined data on goods exports, industrial production, housing starts and home sales in suggesting the economy was regaining momentum after growing at a lackluster 0.8 percent annualized rate in the first quarter.

The Atlanta Fed is currently forecasting gross domestic product rising at a 2.9 percent rate in the second quarter.

The brightening economic outlook was dimmed somewhat by a separate report from the Conference Board showing its consumer confidence index slipped to 92.6 this month from a reading of 94.7 April.

Households also had a less favorable view of the labor market. The share of respondents saying jobs were “plentiful” was little unchanged at 24.3 percent, while those reporting that jobs are “hard to get” increased to 24.4 percent from 22.8 percent in April.

Still, households continued to expect their incomes to increase.

In a third report, the Institute for Supply Management-Chicago said its business index fell 1.1 points to a reading of 49.3 in May, indicating a contraction in manufacturing activity in the Midwest. The decline mirrors other regional surveys and suggests national factory activity likely slumped in May after two straight months of growth.

Despite the retreat in consumer confidence and weakness in manufacturing, rising incomes and higher house price are likely to prop up consumption. A fourth report showed the SP/Case Shiller composite home price index of 20 metropolitan areas rose 5.4 percent in March from a year ago.

“Consumer spending will continue to lead economic growth in 2016, as more jobs, rising wages and house prices give households more money to spend,” said Gus Faucher, deputy chief economist at PNC Financial in Pittsburgh.

Last month, consumer spending was buoyed by a 2.3 percent jump in purchases of long-lasting manufactured goods, with automobiles accounting for most of the increase. Purchases of nondurable goods surged 1.4 percent and spending on services increased 0.6 percent.

Personal income increased 0.4 percent last month after rising by the same margin in March. Wages and salaries rose 0.5 percent after advancing 0.4 percent in March.

With spending outpacing income, savings fell to $751.1 billion last month from $809.4 billion in March.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

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U.S. home prices rise more than expected in March

NEW YORK Annualized U.S. single-family home prices rose more than expected in March, a survey showed on Tuesday.

The SP/Case Shiller composite index of 20 metropolitan areas rose 5.4 percent in March on a year-over-year basis, matching the increase the month before and beating the 5.2 percent estimate from a Reuters poll of economists.

“The economy is supporting the price increases with improving labor markets, falling unemployment rates and extremely low mortgage rates,” said David M. Blitzer, managing director and chairman of the index committee at SP Dow Jones Indices.

“Another factor behind rising home prices is the limited supply of homes on the market.”

Prices rose 0.9 percent in March from February on a seasonally adjusted basis, the survey showed, topping expectations for a rise of 0.8 percent.

On a non-seasonally adjusted basis, prices increased 0.9 percent from February versus expectations of a 0.5 percent increase.

Home prices in three U.S. cities, Denver, Seattle and Portland, Oregon, showed the highest year-over-year gains, the survey showed.

(Reporting by Chuck Mikolajczak; Editing by Meredith Mazzilli)

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Shares set for monthly gains, dollar buoyed by Fed outlook

LONDON Global shares steadied at one-month highs on Tuesday, on track for a third straight month of gain, while the dollar held strong near two-month peaks on expectations the U.S. interest rates could rise next month.

European shares were lower in early trade, although the region’s stock markets were set for their best monthly performance since late 2015, as the euro’s weakness on currency markets propped up export-driven companies.

The pan-European STOXX 600 and FTSEurofirst 300 indexes were in the red, having hit peaks in early trade. The broader MSCI world equity index, which tracks shares in 45 countries, was up a tad at 1,676.96 points, its highest since late April.

Earlier, Japan’s Nikkei stock index ended 1 percent higher, extending a 1.4 percent rally in the previous day. It is up 3.4 percent for May, thanks to a weaker yen.

The dollar index, which tracks the greenback against a basket of six major currencies, gained 0.3 percent to 95.795, not far from a two-month high of 95.968 and up nearly 2.9 percent for the month.

The dollar has risen recently on expectations of higher U.S. rates. Fed Chair Janet Yellen said on Friday that the central bank should hike rates “in the coming months” if economic growth picks up and the labour market continues to improve.

“The question for me here is whether the dollar can carry on rallying on the prospect of the Fed raising rates faster over the next 18 months than is priced in, as opposed to rallying only on expectations of a move in June or July,” said Kit Juckes, macro strategist at Societe Generale.

Investors are awaiting key data this week before taking fresh positions. May’s U.S. private-sector ISM manufacturing data, due on Wednesday, and non-farm payrolls report on Friday will be scrutinised and solid readings could further heighten expectations for a move as soon as the Federal Reserve’s next policy meeting on June 14-15.

Economists predict the jobs report will show that U.S. employers added 170,000 jobs, slightly more than they did in April. Hourly wages are expected to show a 0.2 percent increase from the previous month. [ECONUS]


Investors were also keeping an eye on the weakening Chinese yuan with worries about growth in the world’s second-largest economy creeping back. The yuan was on track for its second largest monthly fall on record after the central bank softened its midpoint to a 5-year low. [CNY/]

“The prospect of higher U.S. interest rates will, in due course, test both the global markets and China’s policy to manage its currency,” said Jade Fu, investment manager at Heartwood Investment Management.

“In an environment of dollar strength, the People’s Bank of China may well be forced to further depreciate the renminbi, risking the possibility of a one-off currency intervention.”

In the commodities sphere, moves in crude oil futures were limited before Thursday’s meeting of the Organization of the Petroleum Exporting Countries. Most analysts did not expect any changes in the group’s flat-out production.

There was no Monday settlement for U.S. crude futures because of the U.S. Memorial Day holiday. They were up 0.3 percent at $49.46 on Tuesday, lifted by the start of the peak demand summer driving season in the U.S. They are set for an 8.2 percent jump in May.

Brent crude futures were lower at $49.36 a barrel, but poised for a gain of nearly 3 percent for the month.

The recent recovery in risk sentiment in recent days pushed gold to its biggest monthly decline since November. Spot gold climbed 0.5 percent to 1,210.93 per ounce, but was headed for a slide of over 6 percent for the month.

(additional reporting by Sudip Kar-Gupta and Jemima Kelly; Editing by Tom Heneghan)

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Brent crude lower on strong Middle East oil output

LONDON Brent crude prices fell on Tuesday on rising output from the Middle East and ahead of an OPEC meeting on Thursday, while U.S. crude edged higher as the summer driving season began.

Brent crude oil futures LCOc1 were down 26 cents at $49.50 a barrel by 1056 GMT (6.56 a.m. ET), while U.S. West Texas Intermediate (WTI) crude oil futures CLc1 traded 9 cents higher at $49.42 a barrel.

Iraq will supply 5 million barrels of extra crude to its international oil company partners in June, industry sources familiar with the issue said, joining other Middle East producers by lifting market share.

Iraq, the second-largest producer in the Organization of the Petroleum Exporting Countries, had already been targeting record crude export volumes from southern terminals next month of 3.47 million barrels per day.

Asian imports of Iranian oil rose more than 13 percent in April from a year before as Tehran vies to recoup market share lost under international sanctions.

OPEC’s 13 members will meet in Vienna to set the group’s policy, which is expected to focus more on market share than on influencing prices.

“Anyone betting on a surprise outcome in Thursday’s meeting is brave in doing so,” Vienna-based JBC Energy said in a note on Tuesday.

JBC said that with oil prices trading near $50 a barrel and improving market sentiment on unplanned outages and expectations of draws on crude inventories in the second half of the year, OPEC is under less pressure to act.

“But of course, as with any base case assumption and with a new Saudi oil minister in town, there are alternative scenarios imaginable,” JBC said.

One topic on the group’s agenda is selecting a new secretary-general to replace Abdullah al-Badri, with Nigeria’s Mohammed Barkindo emerging as a front-runner, sources tell Reuters.

Demand in North America is set to pick up as the summer driving season boosts demand, triggering a cut in the amount of open short crude positions that would profit from falling prices.

The number of outstanding managed short crude positions of U.S. WTI crude futures 1067651MSHT on NYMEX fell last week to the lowest level this year.

“Since the start of the rally back in February … speculative length on the NYMEX have been growing by 0.6 percent per week, whereas speculative shorts have been falling by 8 percent per week,” the U.S.-based Schork Report said in a note to clients.

(Additional reporting by Henning Gloystein in Singapore; Editing by David Holmes and William Hardy)

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Audi, Porsche help VW limit damage from emissions scandal

BERLIN Volkswagen’s (VOWG_p.DE) underlying profit fell less than expected in the first quarter as demand for upmarket Audi and Porsche models helped to offset a hit to VW sales from its emissions test cheating scandal.

Europe’s biggest carmaker said on Tuesday operating profit before one-off items fell 5.9 percent to 3.1 billion euros ($3.5 billion) on a 3.4 percent drop in sales revenues.

While better than analysts’ average profit forecast of 2.8 billion euros, Volkswagen said it was still braced for a tough year as it battles to rebuild following the biggest business crisis in its 79 year history.

Volkswagen plunged to a record loss last year and ditched its long-standing CEO after it admitted in September to cheating diesel emissions tests in the United States.

It has set aside 16.2 billion euros to cover vehicle refits and a settlement with U.S. authorities, but still faces potential U.S. Justice Department fines and questions over who was responsible for the cheating, with investigations ongoing.

The company has been slashing costs, investing in electric vehicles and working on a new business structure aimed at improving accountability and speeding up model development.

First-quarter results showed some signs of improvement at the mass-market VW brand, which was struggling with high costs and weak sales even before the emissions scandal.

It swung to a 73 million euro profit, having made a loss in the previous quarter. But that was still well down on a profit of 514 million in the first quarter of 2015, with sales revenues down 4.6 percent and an operating margin of just 0.3 percent.

Volkswagen shares, which hit an 8-month high heading into the results, were down 2.65 percent at 134.3 euros at 1010 GMT (6.10 a.m. ET).

“The numbers are better than expected, people are taking profit on the positive news,” said NordLB analyst Frank Schwope, who has a “hold” rating on the stock.

Volkswagen has recently come under pressure from activist investor TCI to speed up and extend restructuring efforts.


Group results at the 12-brand company were supported by broadly flat sales at flagship luxury brand Audi and a big rise in both sales and profits at sports car maker Porsche.

Higher demand in western Europe and the Asia-Pacific also helped to offset declines in South America and eastern Europe.

However, Volkswagen reported a 25 percent plunge in operating profit at its two Chinese joint ventures – which are not included in quarterly results.

Analysts have said heightened competition in China has led the company to step up incentives for buyers ahead of the expiry of tax breaks for smaller cars at the end of this year.

Quarterly sales in China, Volkswagen’s biggest market, rose 6.4 percent after falling in 2015.

Including one-off items, group operating profit rose 3.4 percent to 3.4 billion euros. That was helped by 300 million euros of “currency-related adjustments” to provisions for the emissions crisis.

The company did not announce any further scandal-related provisions in its January-March results.

Volkswagen said net liquidity at its automotive division was 26 billion euros at the end of March, around 1.4 billion higher than at the end of 2015, bolstering its finances ahead of an expected bond issue to replace expensive bank loans and ahead of any further emissions scandal costs.

DZ Bank analysts said the prospect of additional costs led them to retain a “skeptical view” on Volkswagen.

However, Evercore ISI analyst Arndt Ellinghorst said the company represented a “huge restructuring opportunity” and kept a “buy” rating on the shares.

Volkswagen reiterated guidance issued in April for sales to fall this year by up to 5 percent and for a group underlying operating margin of 5-6 percent, versus 6 percent in 2015.

(Writing by Mark Potter; Editing by Alexander Smith)

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Goldman Sachs raises odds of China share inclusion in MSCI indexes to 70 percent

HONG KONG Goldman Sachs has increased the probability that MSCI will include mainland Chinese shares in its indexes to 70 percent,

citing recent steps taken by Beijing to remove obstacles for global money managers to invest in the country’s equity markets.

The U.S. bank joins a growing list of investors and brokers such as Blackrock and Franklin Templeton’s Mark Mobius who have given Beijing a thumbs up in recent weeks ahead of the MSCI’s decision on June 14.

Goldman said on Tuesday that measures taken by authorities with respect to beneficial ownership of shares and clarifying guidelines on stock suspensions has improved the chances of inclusion to 70 percent from a coin toss in April.

But inclusion is unlikely to trigger an avalanche of capital flows into China. Even a 5 percent weighting in the MSCI indexes will roughly translate into a net $15 billion in inflows into “A” shares, tiny in comparison to daily turnover or size.

Last June MSCI decided against including “A” shares in the index, which is a global benchmark for some $1.5 trillion of assets, due to investment restrictions.

Since then, China has addressed many of MSCI’s concerns by relaxing its $81 billion Qualified Foreign Institutional Investor (QFII) scheme, a quota-based foreign investment scheme, and clarifying foreign ownership rights, prompting MSCI to reconsider inclusion of “A” shares.

Chinese stocks plunged in mid-2015 after authorities tried to crack down on rampant speculation, and markets have yet to recover.

Despite Tuesday’s bounce, Chinese stocks are the worst performing in Asia so far this year with the Shanghai stock market down a fifth, while the Hong Kong index is down 5 percent, according to Thomson Reuters data.

(Reporting by Saikat Chatterjee and Michelle Price; Editing by Kim Coghill)

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Mondelez to create more apps, online videos in advertising shift

Oreo cookie maker Mondelez International Inc’s “Twist, Lick, Dunk” mobile application has been such a success that the snack company plans to roll out similar games in a move away from traditional advertising to create its own content.

The free game launched in November 2012 has helped Mondelez make twice as much money through in-app purchases and ads as it had invested in it, Laura Henderson, global head of content and media monetization, said in an interview ahead of the company’s announcement on Tuesday about the plans.

Players have downloaded the game, created by mobile game development studio PikPok, about 7 million times and virtually dunked over 5 billion cookies into a glass of milk, she said.

Mondelez said it was developing a Sour Patch Kids mobile app, and would change its product advertising by partnering with companies like Twenty-First Century Fox Inc and online publisher Buzzfeed to produce content including video and a live televised event.

Mondelez hopes that up to 10 percent of its global media investments will break even or make a profit by 2020, Henderson said. She declined to provide financial details.

A growing number of consumer goods makers are sidestepping conventional ad agencies to get their message directly to consumers who are increasingly skipping or blocking ads.

PepsiCo Inc opened an in-house Creators League content studio in Manhattan in May. Energy drink maker Red Bull, a leader in creating sponsored content, this week announced a partnership with action camera maker GoPro Inc.

Massive disruption in the ad industry prompted Mondelez to switch gears as audiences have become more difficult and expensive to reach, Henderson said. “Advertising is no longer a huge part of the content consumption experience.”

BuzzFeed will help Mondelez create branded content and, for the first time, unbranded content centered around health as the East Hanover, New Jersey-based snack maker pushes to make its products more appealing to health-conscious consumers.

FOX will live-broadcast a sky-diving stunt to support the July 30 launch of Mondelez’s “Mad Intense” flavor Stride gum.

Dave Morgan, chief executive of Simulmedia, a New York-based ad tech firm, said he expected all major consumer marketers to start producing more content in-house.

“In the digital world, it is essential to have a direct to consumer relationship,” he said.

(Reporting by Melissa Fares; Editing by Anna Driver and Richard Chang)

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