News Archive

Fed, China fears force investors to check out of Asia

SINGAPORE Having dumped Asian shares on resurgent worries about China’s economy, the specter of more aggressive U.S. interest rate rises is now forcing global investors to sell the region’s bonds and currencies.

A net $3.2 billion left Asian equity markets, excluding Japan, during the period May 1 to 24, the largest outflow since January, data from HSBC showed. Indonesia’s and South Korea’s bond markets, heavy recipients of foreign investment until March, are now seeing chunks of inflows reverse while Asia’s currencies have also fallen quite sharply.

Some market participants see foreign investment outflows across Asian asset classes as an overreaction, given the strides policymakers have made in shoring up capital flight defenses since the “Fed taper tantrum” in 2013.

But for others, the unease around the Fed’s policy deliberations twins increasing concerns around currency volatility with broader worries about the health of the China’s real economy.

“If the Fed hikes rates in June, it might come at a time when the Chinese economy weakens, and that could also mean that the Chinese currency starts to weaken again,” said Herald van der Linde, head of Asia-Pacific equity strategy at HSBC in Hong Kong.

“And that could lead to a scenario where everybody’s up and down and markets fall five to 10 percent.”

MSCI’s Asia Pacific ex-Japan index .MIAPJ0000PUS rose 19 percent between late January and end-April on the tailwinds of a dovish Fed, stabilization in commodity prices and hopes China’s economy will recover.

The fall – the index is down 5 percent since and touched a 12-week low on May 24 – is reminiscent of the selloff that followed the Fed’s first rate rise in a decade in December.

It also comes as a surprise for some, given the relative health of Asia’s economies compared with other emerging market blocs, such as Latin America.

And the downside could be limited given the broad dollar trade-weighted index .DXY has climbed 20 percent over the past two years, suggesting Asian currencies may have already priced in higher U.S. rates.

Despite this, plenty of asset managers expect further weakness in emerging markets and are positioned accordingly.

Deutsche Asset Management, for instance, expects another dip in emerging markets in the second half of the year and is holding off buying Asia.

“The market is split between those who think it’s time to buy emerging markets and those who think the China data is not sustainable and U.S. rates will go up and emerging markets are overvalued,” said Sean Taylor, chief investment officer at Deutsche Asset Management. Deutsche had $846 billion of assets under management at the end of December.

Soft Chinese economic data in April has raised doubts about the effectiveness and sustainability of the fiscal stimulus being doled out in the world’s second-largest economy.

Chinese stocks .SSEC, the region’s worst performers, are down almost 20 percent this year.

For bond investors, Asia’s weakening currencies aren’t the only concern: subdued inflation and already low central bank rates mean the scope for gains is more limited than it is in other emerging markets.

Indonesia’s rupiah government bond market, for example, received about $5 billion of foreign investment in the year to April, but about $670 million has left so far in May.

While investors expect Indonesia’s central bank could cut rates by a further 125 basis points, the currency’s 3 percent swift decline since last week may give authorities reason to pause and investors a reason to hold back.

“There’s still quite a lot of fear out there,” said Oliver Lee, investment director at Old Mutual Global Investors, which has $37.3 billion of assets under management.

“The renewed U.S. dollar strength and concerns around slowing stimulus in China could potentially be short-term headwinds.”

(Reporting By Nichola Saminather; Editing by Sam Holmes)

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Viacom’s independent directors vow to fight ouster attempt

NEW YORK Viacom Inc’s (VIAB.O) six independent directors will fight any attempt to oust them from the U.S. media company’s 11-member board, Lead Independent Director Fred Salerno said in a letter to shareholders on Monday.

Salerno said the independent directors are facing a removal attempt “as a result of a chain of actions said to have been legally put in motion by the controlling shareholder of Viacom, Sumner Redstone.”

The directors find the assertion “inexplicable” that Redstone was “acting of his own free will and with the mental competency to do so,” Salerno said.

He added that they intend to continue with plans to “explore strategic options that might include a minority investment in Paramount,” Viacom’s movie studio.

The letter came three days after a statement from Redstone, issued by his spokesman, that said the 93-year-old media mogul was considering ousting Viacom Chief Executive Philippe Dauman and the board of directors..

Redstone, who holds 80 percent of the voting shares in Viacom and CBS Corp (CBS.N), earlier this month removed Dauman and Viacom board member George Abrams from the seven-person trust that will control the shares after Redstone exits.

Dauman, 62, has filed a legal challenge to stop his removal from the trust, arguing that Redstone was being manipulated by his daughter, Shari. She has called that allegation “absurd” and said her father made his own decisions.

A hearing on whether the case should be expedited is scheduled in Massachusetts on June 7 after Dauman filed a petition to have the trial date moved up.

A spokesman for Sumner Redstone and a spokeswoman for Shari Redstone were not immediately available for comment on the letter from Salerno.

(Reporting by Chuck Mikolajczak and Jessica Toonkel; Editing by Tiffany Wu)

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Verizon, unions agree to pay raises, new jobs to end strike

An agreement between Verizon Communications Inc (VZ.N) and unions potentially ending a nearly seven-week strike includes 1,400 new jobs and pay raises topping 10 percent, the company and unions representing about 40,000 workers said on Monday.

The deal, which one analyst called “very rich” for Verizon workers, could be a prelude to the company exiting the wireline telecommunications business, transforming into a wireless internet business.

Verizon, the No. 1 U.S. wireless provider, and the Communications Workers of America (CWA) had reached a tentative deal on Friday. Details for the new four-year contract were disclosed on Monday.

The CWA said Verizon agreed to provide a 10.9 percent raise over four years while Verizon put the increase at 10.5 percent. According to the CWA, both numbers are correct, with the calculation done by the union including compounded interest that workers would receive as subsequent raises are determined from a new base salary.

“They needed to end the strike and they bit the bullet,” said Roger Entner of Recon Analytics. “In my opinion, it reinforced their commitment to basically exiting the least profitable, most problematic part of the business.”

The new contract “gives Verizon four years basically to get rid of the unit. Let it be somebody else’s problem,” Entner said.

Nearly 40,000 network technicians and customer service representatives of the company’s Fios internet, telephone and television services units walked off the job on April 13.

Striking workers will be back on the job on Wednesday, the CWA said.

Joshua B. Freeman, labor historian and CUNY professor at Queens College in New York said he would call the contract a win for the union, while noting the increasing rarity of a strike of that size and length.

“These guys not only struck and survived but actually came out of it with a pretty good contract,” he said. “These days, that is a very unusual thing, to see that kind of walkout.”


The workers have been without a contract since the agreement expired in August; healthcare coverage ran out at the end of April. In 2011, Verizon workers went on strike for two weeks after negotiations deadlocked.

The latest work stoppage stretched across states including New York, Massachusetts and Virginia. Verizon brought in thousands of temporary workers.

New York-based Verizon will add 1,300 call center jobs on the East Coast, and 100 new network technician jobs, Verizon spokesman Richard Young said.

It will withdraw proposed cuts to pensions as well as reductions in accident and disability benefits. The company, however, won cost savings through changes in healthcare plans and limits on post-retirement health benefits.

If union members ratify the agreement, the new contract would run until August 2019.

Members of local unions will vote by mail, at mass membership meetings, and at walk-in balloting meetings and all results are due back to the CWA by June 17, according to Bob Master, assistant to the vice president at the CWA.

Master said, “We’re pretty confident the members will be supportive of the agreement,” citing the closeness between the leadership and its members.

Verizon worker Fitzgerald Boyce, 45, said he was likely to vote in favor.

“I am extremely relieved that we have a good contract from what I am reading,” said Boyce, a field technician who lives in Brooklyn, New York. “To be able to keep our benefits and actually increase the number of union jobs is a great thing.”

Verizon and the two striking unions were in contract discussions with the help of the U.S. Department of Labor. In mid-May, U.S. Labor Secretary Thomas Perez brought the parties back to the negotiating table.

The strike, one of the largest in recent years in the United States, drew support from Democratic U.S. Presidential candidates Bernie Sanders and Hillary Clinton.


Verizon has shifted its focus in recent years to mobile video and advertising, while scaling back its Fios television and internet services. To tap new revenue, it is boosting its advertising-supported internet business and acquired AOL for $4.4 billion.

Verizon, which claims a high-quality cell network, is locked in a battle for subscribers with ATT Inc (T.N), Sprint Corp (S.N) and T-Mobile US Inc TMUS.N in a saturated U.S. wireless market.

Verizon’s legacy wireline business generated about 29 percent of company revenue in 2015, down about 60 percent since 2000, and less than 7 percent of operating income.

Verizon Chief Executive Officer Lowell McAdam said last week the strike could hurt second-quarter results.

Verizon shares closed up 1 percent at $50.62 on Friday and are up 9.5 percent for the year, near its 52-week high of $54.49. U.S. markets were closed on Monday for the U.S. Memorial Day holiday.

(Reporting by Amrutha Gayathri in Bengaluru, Daniel Trotta and Chuck Mikolajczak in New York; Editing by Jeffrey Benkoe and Nick Zieminski)

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Airbus sales chief sees room to raise A320 production

HAMBURG Airbus’ (AIR.PA) sales chief says production rates of the best-selling A320 jet could be raised further, depending on demand, but no decision needed to be taken soon.

“My opinion based on the orders we have is that there could be room to go above 60 (per month), as high as 63, but we don’t need to make a decision now and possibly not for a couple of years,” John Leahy told reporters on Monday evening.

He was speaking after Chief Operating Officer Tom Williams earlier on Monday cast doubt on further increases beyond a targeted rate of 60 narrow body jets a month.

Airbus aims to reach the 60-per-month production rate by mid-2019 after stepping up to 50 a month in the first half of 2017. It produces 46 A320 family jets a month now.

(Reporting by Tim Hepher; Writing by Victoria Bryan; Editing by Andrew Roche)

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European shares climb, dollar firms on Fed hike expectations

NEW YORK European shares reached a four-week high on Monday and the dollar index touched a two-month peak as investors braced for an interest rate hike from the U.S. Federal Reserve.

The Fed should raise rates “in the coming months” if growth picks up and the labor market continues to improve, Fed Chair Yellen said on Friday. St. Louis Fed President James Bullard chimed in, saying on Monday global markets appear to be “well-prepared” for a summer rate hike, although he did not specify a date for the policy move.

The possibility of a rate increase at the Federal Open Market Committee’s June 14-15 meeting was 28 percent, according to CME’s Fedwatch program. Bets on an increase at the July 26-27 policy meeting edged up to 61 percent, more than double the level of a month ago.

“The stage is set, markets are ready for the curtain to be drawn back,” said Peter Kenny, senior market strategist at Global Markets Advisory Group, in Berkeley Heights, New Jersey.

“The bottom line is, with relatively hawkish commentary out of Bullard, which has been consistent, clear messaging by Chair Yellen that we should expecting a move in the next few months, markets are now well prepared and ready to embrace that.”

Against a basket of currencies, the dollar was up 0.14 percent at 95.656 .DXY after climbing as high as 95.968, its highest level since March 28.

The euro zone’s blue-chip Euro STOXX 50 index .STOXX50E was 0.38 percent higher at 3,125.43, while Germany’s DAX .GDAXI was up 0.46 percent after hitting a one-month high.

Trading volumes were thin as the London and New York markets are closed for a public holiday.

MSCI’s index of world shares .MIWD00000PUS edged up 0.03 percent. SP 500 e-minis ESc1 were up 4.75 points, or 0.23 percent.

While higher U.S. interest rates would sap global liquidity, Wall Street and European investors took Yellen’s comments in their stride, as they suggested the world’s largest economy was strong enough to weather another rate hike, following from the December hike.

This week investors will keep an eye on the all-important U.S. non-farm payrolls and the Institute for Supply Management surveys. The May jobs report is due on Friday and a solid reading could heighten expectations for a June move.

Economists expect U.S. employers to have added 161,000 jobs this month, slightly more than they did in April. Hourly wages are expected to show a 0.2 percent increase from the previous month.

Crude oil futures remained shy of the $50 per barrel level after marking weekly gains, feeling some pressure from the stronger U.S. dollar that made it more expensive for holders of other currencies.

Brent crude LCOc1 was last up to $49.72 a barrel, after climbing above $50 for the first time in six months last week. U.S. crude CLc1 was up 0.55 percent at $49.60.

The dollar’s strength took a toll on spot gold XAU=, which dropped 0.6 percent to $1,205.20 an ounce. It fell to $1,199.60 earlier in the day, its lowest since late February.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)

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Oil prices edge higher in thin trade; OPEC eyed

Oil prices inched up toward $50 a barrel on Monday, although uncertainty ahead of an OPEC producer-group meeting later in the week was expected to cap gains.

The Organization of the Petroleum Exporting Countries meets in Vienna on Thursday and most analysts did not expect any changes in the group’s production.

While OPEC has been unable to agree on an output freeze to support prices, Iraq was the latest Middle East producer to raise its export quota ahead of the meeting, supplying 5 million barrels of extra crude to its partners in June.

“So far there’s pretty much a consensus that nothing will happen and that the same strategies will continue, which are basically produce as much as you want and go for market share,” said energy economist James L. Williams of WTRG Economics in Arkansas.

Price moves will be choppy in the run-up to the meeting, Williams added.

Brent crude futures LCOc1 settled up 44 cents at $49.76 a barrel, reversing losses from earlier in the day. There was no settlement in U.S. West Texas Intermediate, or WTI, crude futures CLc1 because of the U.S. Memorial Day holiday, but at 1839 GMT WTI was up 27 cents at $49.60.

Trade was subdued because of public holidays in Britain and the United States, where Memorial Day is seen as the traditional start of U.S. summer driving season.

Vienna-based consultancy JBC Energy said global oil demand rose by 1.5 million barrels per day in January-April. That was stronger than many forecasts and stemmed from strong consumption in the United States, China and India.

U.S. crude output also dropped to its lowest since September 2014 after drillers cut rigs for the ninth week in 10 despite the recent rally in oil prices.

However, an expected rise in Canadian oil sands production could weigh on WTI. Suncor Energy (SU.TO) is planning to ramp up output at its fields in Alberta this week after it was forced to shut them down earlier in May because of massive wildfires.

Outages because of wildfires in Canada and unrest in Libya and Nigeria helped to push oil prices to a seven-month high in recent weeks.

(Additional reporting by Ron Bousso in London and Henning Gloystein in Singapore; Editing by Lisa Von Ahn and Nick Zieminski)

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LVMH appoints Luxottica executive as Loro Piana CEO

MILAN French luxury goods group LVMH (LVMH.PA) has appointed Fabio d’Angelantonio as the next chief executive of high-end textile and clothing company Loro Piana, it said on Monday.

D’Angelantonio, a former marketing director at eyewear company Luxottica (LUX.MI), will start on Sept. 1. He takes over from Matthieu Brisset, who has finished the integration of Loro Piana less than three years after LVMH acquired a majority stake in the former family business.

“He (d’Angelantonio) has a great track record in developing brands … He also brings a warm personality and Italian touch to continue the development of Loro Piana,” Chairman Antoine Arnault said in a company statement.

That D’Angelantonio is Italian played a significant role in the decision, said a source close to the matter.

Brisset will be given a new position within LVMH, the statement added.

(Reporting by Giulia Segreti; Editing by David Goodman)

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Boeing set to win $2.9 billion contract from UK MoD: The Telegraph

Boeing Co (BA.N) is set to win a 2-billion-pound ($2.92 billion) contract from the UK Ministry of Defence (MoD) for new Apache helicopters, The Telegraph reported.

The MoD has decided to give Boeing a 50-aircraft contract, including servicing, and the announcement could come as early as July, the newspaper said. (

Italian aerospace manufacturer Leonardo Finmeccanica SpA (LDOF.MI) had been a contender for the contract, the Telegraph said.

U.S. planemaker Boeing is offering the helicopters at a lower price by tacking them on to the end of a larger Apache order from the US military, the paper added.

The British government has committed to NATO’s defense spending pledge of 2 percent of GDP for the next five years, but the MoD will be under pressure to opt for the most cost effective option as it juggles spending on a number of big projects.

Boeing and the MoD could not be immediately reached for comment.

(Reporting by Abinaya Vijayaraghavan in Bengaluru; Editing by Sunil Nair)

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Former Zurich Insurance boss Martin Senn kills himself

ZURICH Former Zurich Insurance (ZURN.S) boss Martin Senn has committed suicide six months after leaving the company under a cloud, a tragedy that comes less than three years after Zurich’s finance chief took his own life.

Senn, 59, shot himself at his family’s Alpine resort home in Klosters, Swiss newspaper Blick reported. He had quit as chief executive of Zurich in December following a series of profit warnings and a botched takeover of British rival RSA (RSA.L).

“Martin Senn’s family has informed us that Martin committed suicide last Friday,” the company said in a statement on Monday, adding it was “stunned and deeply shaken”.

His death follows the suicide of Zurich’s finance chief Pierre Wauthier in August 2013, which brought into sharp focus the pressures facing senior corporate executives in Switzerland and elsewhere.

Wauthier, 53, killed himself after writing a suicide note addressed “To whom it may concern” in which he described becoming demoralized by what he called a new, more aggressive tone at Zurich under then-Chairman Josef Ackermann.

Ackermann, a former head of Deutsche Bank (DBKGn.DE), denied any wrongdoing but quit soon after Wauthier’s death.

Weeks before Wauthier’s death, Swisscom (SCMN.S) Chief Executive Carsten Schloter had taken his own life.

Senn had been CEO since 2010 at Zurich, which he joined after stints with Swiss banks in Asia. He was married to a Korean musician and had two grown children.

Acquaintances, who asked not to be named given the sensitivity of the situation, described him as withdrawn and reclusive following his departure from the company, which Zurich said at the time was by mutual agreement.

“He wasn’t doing so well,” a former colleague said, but added that Senn had not given the impression of being suicidal.

One person close to Senn said he had taken Wauthier’s death hard.

The rate of suicide has been falling in most countries in Europe since 2000, according to Ulrich Hegerl of the German Depression Foundation, a charity to prevent suicide.

He said a suicide sometimes encourages other people to do the same. “If someone you know and respect commits suicide, then there is a risk in depression of a copycat suicide,” he added.

Zurich Insurance paid Senn 2.5 million Swiss francs in 2015, its annual report showed in March.

His failure to meet performance targets, in an insurance sector that has struggled since the financial crisis, meant he missed out on an extra stock payout.

(Additional reporting by Angelika Gruber, John Miller and Oliver Hirt in Zurich; Editing by John O’Donnell and Pravin Char)

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