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Apollo Global to buy Rackspace Hosting in $4.3 billion deal

Hapag-Lloyd CEO says planned UASC merger benefits to show in 2017

HAMBURG German container shipping line Hapag-Lloyd expects to reap a third of targeted annual synergies of $400 million from its planned merger with Arab rival UASC next year, and realize them fully from 2019, its CEO said on Friday.

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Oil falls as Saudi Arabia douses expectations for output freeze

LONDON Oil fell on Friday and was set for its largest weekly decline in a month after the Saudi energy minister watered down expectations that the world’s largest producers might agree next month to limit their output.

Brent crude oil futures LCOc1 were down 32 cents at $49.35 per barrel by 1144 GMT, while U.S. West Texas Intermediate (WTI) crude CLc1 was down 22 cents at $47.11 a barrel.

Saudi Arabian Energy Minister Khalid Al-Falih told Reuters late on Thursday: “We don’t believe any significant intervention in the market is necessary other than to allow the forces of supply and demand to do the work for us.”

He said the “market is moving in the right direction” already.

Members of the Organization of the Petroleum Exporting Countries will meet on the sidelines of the International Energy Forum, which groups producers and consumers, in Algeria Sept. 26-28.

The Saudi minister’s comments dampened expectations of a meaningful intervention into the market, which has been dogged by oversupply for more than two years.

The price of crude oil has fallen by more than 3 percent so far this week, putting it on course for its largest one-week slide in a month.

“This week has clearly been a tug of war between fundamentals and this continued ‘verbal intervention’ that we’ve seen from various OPEC members,” Saxo Bank Senior Manager Ole Hansen said.

“All in all, it’s left the market relatively close to the $50 mark, which in my opinion, is probably as much as OPEC can ask for at this point.”

Iran said on Friday that it would cooperate with other producers to stabilize oil markets, but added that it expected others to respect its individual rights.

Many observers, however, interpreted that as Tehran saying it would continue to try to regain market share by raising output after the lifting of sanctions against it last January.

“I do not expect the OPEC meeting in September to agree any freeze or affect the oil market in any significant way. This is because it appears key OPEC members remain more concerned about market share,” said Oystein Berentsen, managing director for crude at oil trading firm Strong Petroleum in Singapore.

Regarding the current oversupply weighing on oil prices, he said that he saw oil stocks globally “falling too slowly to sustain a higher price above $50 per barrel”.

(Additional reporting by Henning Gloystein and Sarah Plattes in Singapore; editing by Jason Neely)

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Wall Street rises as traders count down to Yellen speech

Wall Street was higher on Friday morning, boosted by financial stocks, minutes before a speech by Federal Reserve Chair Janet Yellen that is expected to provide a clearer picture on when interest rates will be raised next.

Yellen speaks before a gathering of global central bankers in Jackson Hole, Wyoming, at 10:00 a.m. ET (1400 GMT).

Her language will be carefully scrutinized, especially after an increasing number Fed policymakers have pushed the case for raising rates by pointing at improving employment and inflation rates. At least three more Fed members on Friday added to the hawkish tone.

All 10 major SP 500 sectors were higher. Financials .SPSY, which stand to gain the most if rates are raised, increased 0.36 percent.

“I think today it’s going to be more about taking the temperature than a will-they-wont-they scenario,” said Paul Nolte, portfolio manager at Kingsview Asset Management.

At 9:35 a.m. ET the Dow Jones industrial average .DJI was up 54.05 points, or 0.29 percent, at 18,502.46.

The SP 500 .SPX was up 6.56 points, or 0.3 percent, at 2,179.03 and the Nasdaq Composite .IXIC was up 13.52 points, or 0.26 percent, at 5,225.72.

The markets have been on tenterhooks all of this week in the run-up to Yellen’s speech. Wall Street has dropped about 0.5 percent from Monday through Thursday.

The dollar index .DXY edged lower as traders refused to completely buy into the recent rhetoric on rates, while prices of gold XAU= a safe haven, rose after five days of losses.

Analysts have said it was more plausible that rates would be raised in December than next month, given that inflation rates remain below the Fed’s 2.0-percent target and the upcoming U.S. presidential elections.

Traders have priced in a 21 percent chance of a September rate hike, with the odds rising to 41.4 percent for a move in December, according to CME Group’s FedWatch tool.

A report on Friday showed the U.S. economy grew at a slower pace than previously estimated for the second quarter. However, consumer spending, which makes up more than two-thirds of economic activity, was revised up to show it increased at the fastest rate since the fourth quarter of 2014.

Shares of Herbalife (HLF.N) fell 6 percent to $58.25 after a report said Carl Icahn, the nutritional supplement maker’s top shareholder, was looking to sell his stake.

GameStop (GME.N) dropped 7.7 percent after quarterly revenue at the world’s largest retailer of video games missed analysts’ estimates.

Advancing issues outnumbered decliners on the NYSE by 1,754 to 735. On the Nasdaq, 1,242 issues rose and 830 fell.

The SP 500 index showed 10 new 52-week highs and no new lows, while the Nasdaq recorded 34 new highs and four new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D’Souza)

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Fed’s Mester: Makes sense for U.S. to start raising rates

The U.S. Federal Reserve should hike rates again so as not to fall behind in a strengthening economy, Cleveland Fed President Loretta Mester said on Friday.

“I see a gradual upward pace in interest rates as being appropriate,” Mester said in a television interview with CNBC from Jackson Hole, Wyoming. “That doesn’t mean we are behind the curve now but I do think that it makes sense to be starting to move interest rates up on that gradual path.”

The world’s top central bankers are meeting at Jackson Hole this week for an economics conference.

(Reporting by Lindsay Dunsmuir in Washington; Editing by Chizu Nomiyama)

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Declining inventories curb U.S. second-quarter growth; consumption surges

WASHINGTON U.S. economic growth was a bit more sluggish than initially thought in the second quarter as businesses aggressively ran down stocks of unsold goods, offsetting a spurt in consumer spending.

Gross domestic product expanded at a 1.1 percent annual rate, the Commerce Department said on Friday in its second estimate of GDP. That was slightly down from the 1.2 percent rate it reported last month.

The revision, which was in line with economists’ expectations, also reflected more imports than previously estimated as well as weak spending by state and local governments. The economy grew at a 0.8 percent pace in the first quarter. It grew 1.0 percent in the first half of 2016.

The economy has struggled to regain momentum since output started slowing in the last six months of 2015, which puts it in danger of stalling.

While data so far for the third quarter has been mixed, a buoyant labor market should continue to support consumer spending and underpin growth. Output will also likely get a boost as businesses restock warehouses after liquidating inventories in the second quarter.

The GDP data likely has no impact on the near-term outlook for monetary policy. Federal Reserve Chair Janet Yellen could offer guidance on interest rates on Friday when she addresses the annual global central bankers’ gathering in Jackson Hole, Wyoming.

The U.S. central bank hiked interest rates at the end of last year for the first time in nearly a decade, but has held them steady since amid concerns over persistently low inflation. Most economists expect another rate hike in December.

The dollar slightly trimmed losses against a basket of currencies after the data, while U.S. stock futures were little changed. U.S. Treasuries rose.

The government also reported that after-tax corporate profits fell at a 2.4 percent rate last quarter after increasing at an 8.1 percent pace in the first quarter. Weak profits could limit an anticipated rebound in business spending.

With profits declining, an alternative measure of growth, gross domestic income, or GDI, increased at only a 0.2 percent rate in the second quarter, the weakest since the first quarter of 2013. GDI measures the economy’s performance from the income side. It increased at a 0.8 percent pace in the first quarter.


Business inventories fell $12.4 billion in the second quarter, the first drop since the third quarter of 2011, instead of the $8.1 billion reported last month.

As a result inventories sliced off 1.26 percentage points from GDP growth, the largest drag in more than two years, and up from the 1.16 percentage points subtraction in last month’s estimate.

It was the fifth straight quarter that inventories weighed on output. Economists say some of the inventory drawdown could partially be attributed to robust consumption.

Consumer spending, which makes up more than two-thirds of U.S. economic activity, was revised up to show it increased at a 4.4 percent rate — the fastest since the fourth quarter of 2014. Consumer spending, which was previously reported to have advanced at a 4.2 percent rate, accounted for the bulk of the rise in output last quarter.

With consumption accelerating, imports were revised to show them growing at a 0.3 percent rate instead of declining at a 0.4 percent rate. There was also a modest downward revision to export growth. As a result, trade contributed one-tenth of a percentage point to GDP growth in the second quarter instead of 0.23 percentage point as reported last month.

Business spending on equipment fell at a 3.7 percent rate and not the 3.5 percent pace reported last month. Business spending on equipment contracted for a third consecutive quarter, the longest stretch since the 2007-2009 recession, though the pace of decline slowed.

Business spending has been hurt by cheap oil, which has squeezed profits in the energy sector, forcing companies to cut capital spending budgets. There are signs that the worst of the decline is probably over, with a report on Thursday showing demand for manufactured capital goods rising in July for a second straight month.

There were also downward revisions to investment in nonresidential structures, which include oil and gas wells. Residential construction spending estimates were also trimmed.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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Mazda recalling 190,000 CX-7 vehicles in U.S.

DETROIT Mazda Motor Corp (7261.T) will recall 190,000 of its CX-7 sport utility vehicles from model years 2007 to 2012 in the United States because of an issue that may cause a loss of steering control, U.S. safety regulators said on Friday.

“In the affected vehicles, water may enter the front suspension ball joint fittings,” the National Highway Traffic Safety Administration said in a statement on its website.

“If the water is contaminated with salt, such as from driving on snowy roads that have been treated, the ball joint may corrode and separate from the lower control arm, resulting in a loss of steering control.”

Mazda told regulators it will work to fix CX-7s in cold-weather U.S. states first.

In July 2015, Mazda recalled about 193,000 of its larger CX-9 SUVs from model years 2007 to 2014, for a similar issue.

Mazda said it has gotten no reports of injuries or crashes in the CX-7 SUVs.

Mazda did not immediately respond to an inquiry on whether any vehicles outside of the U.S. market will be recalled.

(Reporting by Bernie Woodall; Editing by Frances Kerry)

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Schooled in the short run, central banks struggle with a long-term role

JACKSON HOLE, Wyo. Schooled in economic thinking that confines monetary policy to the short run, central bankers gathering in Jackson Hole, Wyoming, are grappling with a singular change: whether they can take over as guardians of long-term growth with programs that may stay in place and influence markets for decades to come.

The debate, being carried out in technical research and policy forums like the annual meeting here, could herald a break with decades of central bank orthodoxy which has relied on short-term interest rates as the main policy lever in favor of a host of unconventional tools – from outright targeting a certain level of growth, to the permanent use of negative interest rates or massive cash infusions to stimulate inflation.

The discussion has already seen some Fed policymakers radically shift their view of monetary policy, and will be more broadly joined on Friday when Federal Reserve Chair Janet Yellen delivers the opening address to the Fed’s annual policy conference here.

Though watched for clues to whether the Fed is likely to raise rates in the near future, the announced subject of Yellen’s speech is the Fed’s policy “toolkit,” and may give insight into how deeply she feels policy should be overhauled in light of what has been learned since the 2007-2009 financial crisis and recession.

Policies put in place then have largely remained intact, much to the surprise — and chagrin — of officials including Yellen, who have expected the United States and world economies to return to a pre-crisis “normal” once various “headwinds” diminished.

Instead, the emerging vision is of a changed world where expected growth is lower, deflation remains more of a risk than rising prices, businesses hesitate to invest and individuals’ views of the future are so fully “anchored” it becomes hard to nudge them toward, for example, higher inflation.

With the impact of monetary policy muted in its short-run effect on growth, and governments globally leaving a vacuum on longer-term issues like better fiscal and productivity policies, central bankers are struggling over whether and how to step into a different, long-term role.

“When I left the Fed at the beginning of 2009 we talked about having interest rates at extraordinarily low levels for some time. I don’t think anyone thought ‘for some time’ was going to bring us six, seven, eight years later,” said Randy Kroszner, a former Fed governor and now an economics professor at the University of Chicago Booth School of Business.

“If central banks are being asked to do some longer-run kinds of things, what is the right framework…what is the balance sheet, what are your targets, what are the tools?”

It is a revolutionary question. Disagree as they might, central bankers have a rough consensus on one thing: that monetary policy works in the short run, and does not have an impact on long-term growth and productivity dynamics.


Negative interest rates have become part of crisis policy in Europe and Japan, but mainstream economists are beginning to pave the way for them to become permanent policy options.

Some $8 trillion of sovereign debt has negative yields and central banks across the globe own $25 trillion of financial assets – a sum larger than the economic output of Japan and the United States combined – according to Bank of America research.

Discussion has even turned to whether central banks should drastically scale back the amount of physical cash in circulation so mattress-stuffing and massive withdrawals can’t be used as a way to blunt the effectiveness of negative rates as a tool to stimulate investment or spending.

It’s uncertain how far the debate will go in terms of influencing policy. Fed and European officials have urged fiscal policymakers to do more precisely because they feel monetary policy is of limited long-run impact.

And Fed officials generally argue that they can even respond to another recession by relying on the same combination of quantitative easing and forward guidance they used last time.

But there’s also a sense that the good old days — when short-term interest rates were all that mattered and central bankers felt they knew what to do with them — may not come back.

Fathom Consulting deemed it “the end of monetary policy,” while Goldman Sachs analysts David Mericle and Daan Struyven said that as it stands the Fed may be painted into a corner.

Quantitative easing may not work in any future crisis, and if markets have lost faith in the Fed, forward guidance won’t either.

“These concerns might well be a key theme both at Jackson Hole and in Fed commentary in the coming year,” they wrote.

(Reporting by Howard Schneider; Editing by Andrea Ricci)

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Bullard agnostic on timing of Fed hike; cites tech stocks: CNBC

The Federal Reserve could hike U.S. interest rates this year, St. Louis Fed President James Bullard said on Friday, noting the central bank would have to watch out for risky financial bubbles emerging in technology stocks and elsewhere in the market.

“I’m agnostic on when we do that,” he said on CNBC from Jackson Hole, Wyoming, adding “we could” hike rates this year.

Asked about financial valuations, he said: “We’re fairly valued or on the high side of fairly valued, and I could see the process getting away from us, maybe tech stocks, maybe others.”

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)

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Icahn explored selling Herbalife stake to group that included Ackman: WSJ

Billionaire investor Carl Icahn was lately in talks to sell his stake in nutritional supplement maker Herbalife Ltd (HLF.N) to a group that included hedge fund manager Bill Ackman, the Wall Street Journal reported.

Investment bank Jefferies Group has been on the hunt for about a month to find buyers for Icahn’s 18.3 percent stake in Herbalife, the Journal said, citing people familiar with the matter. (

Ackman’s Pershing Square declined to comment. Jefferies and Herbalife were not immediately available for comment and Carl Icahn could not be immediately reached outside regular U.S. business hours.

Icahn and Ackman had placed opposing bets on Los Angeles-based Herbalife. Ackman for years has been betting against the company, accusing it of running a pyramid scheme.

The duo even became embroiled in a public war of words, with Icahn famously calling Ackman a “liar” and a “crybaby” in a CNBC interview in 2013. They have since made up.

Herbalife in mid July agreed to pay $200 million and change the way it does business to avoid being labeled a pyramid scheme by the U.S. Federal Trade Commission.

Following the settlement, the company said its board had cleared the way for Icahn to boost his stake in the company to as much as 35 percent.

(Reporting by Bhanu Pratap in Bengaluru; Editing by Gopakumar Warrier and Savio D’Souza)

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