News Archive

Atlanta Fed sees U.S. economy seen expanding at 2.7 percent

NEW YORK The U.S. economy is on track to grow at a 2.7 percent annualized pace in the fourth quarter, the Atlanta Federal Reserve’s GDP Now forecast model showed on Monday.

The regional central bank said its final estimate on third-quarter GDP was 2.1 percent, which was well below the 2.9 percent the government reported on Friday,the Atlanta Fed said on its website.

(Reporting by Richard Leong)

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GE to merge oil and gas business with Baker Hughes

General Electric Co (GE.N), banking on a recovery in oil prices, said on Monday it would merge its oil and gas business with No. 3 oilfield services provider Baker Hughes Inc (BHI.N).

GE will own 62.5 percent of the new company, which will have combined revenue of $32 billion, while Baker Hughes shareholders will own 37.5 percent.

Baker Hughes shareholders will get a special one-time cash dividend of $17.50 per share after the deal closes.

(Reporting by Ankit Ajmera in Bengaluru; Editing by Ted Kerr)

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Dollar shakes off Clinton FBI scare, global stocks stay spooked

LONDON The dollar steadied but stock markets stayed spooked on Monday after news the FBI was investigating fresh e-mails linked to U.S presidential candidate Hillary Clinton’s private computer server.

The weakest German retail sales in two years, a fall in oil prices and one of the toughest month in years for bond markets all made for a shaky start in Europe where the STOXX 600 index dropped 0.4 percent. [.EU]

A lackluster day in Asia meant MSCI’s 47-country ‘All World’ was flat and, at 1.7 percent lower, on course for its first monthly fall since June and its worst since a global shake down in January.

The dollar saw a recovery however, rising against the yen, euro and sterling on the day and heading for its best month – up 3.2 percent – against the world’s top currencies in just under a year. [/FRX]

“The Clinton story of course has had an impact,” said Richard Benson, co-head of portfolio management at currency fund Millennium Global in London.

“The polls are now roughly 50-50, but the probabilities are still hugely in favor of Clinton, given how the votes are spread out (per state). The question is whether people decide to reduce risk ahead of the election.”

U.S. Federal investigators have secured a warrant to examine newly discovered emails, a source told Reuters on Sunday.

Clinton had opened a recent lead over her unpredictable Republican rival Donald Trump in national polls, but it had been narrowing even before the email controversy resurfaced. An ABC News/Washington Post poll released on Sunday showed Clinton with a statistically insignificant 1-point national lead.

The Mexican peso, which has become a market proxy for the Clinton/Trump race, also rebounded in European trading after being knocked back on Friday.

South Africa’s rand rallied too on hopes fraud charges would be dropped against its finance minister, though emerging market stocks were down on the day and facing the prospect of an end to their four-month winning streak. [EMRG/FRX]


The jittery mood nudged investors back towards safe-haven government bonds but it has been the opposite story for most of the month.

German government bond yields were on track to end October with their biggest monthly rise since 2013, with sentiment fragile ahead of central bank meetings this week and a first estimate of euro zone inflation due shortly.

U.S. Treasury yields, which hit five-month highs last week, were poised for the biggest monthly rise since February 2015, while for Britain’s gilts yields have risen almost 50 basis points, the biggest jump since Jan. 2009.

“Recent sharp falls in sterling’s value vis-à-vis the euro and the U.S. dollar could reduce confidence in sterling and eventually threaten its role as a global reserve currency,” said Standard and Poor’s, which reviewed the UK’s credit rating on Friday.

“We could lower the rating if we conclude that sterling will lose its status as a reserve currency.”

Oil prices extended their slide – driven by renewed oversupply concerns – and have surrendered most of the gains made in the first half of October. They are set to end the month with meager gains.

The latest oil woes came after non-OPEC producers failed to make any specific commitment to join the Organization of Petroleum Exporting Countries in limiting output to support prices on Saturday.

U.S. crude slid 0.4 percent to $48.52 a barrel on Monday, but looked set to edge up 0.6 percent for the month, while global benchmark Brent also retreated 0.4 percent to $49.50, up 0.9 percent in October.

“There was a lot of talk and nobody managed to agree on anything. That has been pushing the market down,” said Jeffrey Halley, senior market analyst at OANDA brokerage in Singapore.

Adding to the list of potential market-moving events this week is a raft of factory activity surveys on Tuesday for many economies. There are also central bank policy meetings including Japan and Australia on Tuesday, the U.S. Federal Reserve on Wednesday and the Bank of England on Thursday, as well as U.S. October non-farm payrolls on Friday.

(Reporting by Nichola Saminather; Additional reporting by Aaron Sheldrick; Editing by Tom Heneghan)

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Investors buy yen, shun risk in Asia as Clinton losing edge in U.S. polls

SINGAPORE Investors in Asia bought the Japanese yen, sold South Korean stocks and stayed away from volatile assets on Monday, reacting to opinion polls showing Democratic candidate Hillary Clinton’s lead over her Republican rival Donald Trump narrowing further in the U.S. presidential election.

The subtle shift in trading positions came after Friday’s unexpected revelation that Federal Bureau of Investigation Director James Comey had written to the U.S. Congress informing it that the agency is again reviewing emails related to the private server Clinton used when she was secretary of state.

Clinton’s lead over Trump had been narrowing even before the email controversy resurfaced. News of the fresh email discovery, coming in the final days of the White House race, caused investors to further pare their bets on a Clinton win and price for more volatility.

“The market doesn’t seem to be viewing James Comey’s letter as a big enough deal to install Trump in the White House, but is pricing in a little more risk,” said Sean Callow, a currency strategist with Westpac in Sydney.

“Our strategy this week would be to prepare for increased volatility over the next 10 days.”

As was the case with Britain’s Brexit vote in the middle of this year, investors were unsure how to trade the FBI’s review, and whether it would in any way change expected outcomes in the election.

That uncertainty played out in the U.S. dollar which fell initially on Friday but held its ground against the emerging Asian currencies.

An ABC News/Washington Post poll released on Sunday showed Clinton with a statistically insignificant 1-point national lead on Trump.

The dollar inched up against the yen JPY=, remaining just below Friday’s three-month high of 105.54.

But against the Mexican peso MXN=D2, which is seen as the best barometer on the markets’ view on the U.S. election, it was fractionally lower than Friday’s three-week low of 19.1005. The peso has become a proxy for bets on the U.S. election because Mexico is considered to be the most vulnerable to Trump’s protectionist policies as the country sends 80 percent of its exports to the United States.

Korean stocks .KS11, which are prone to volatility because of their high levels of foreign ownership, fell more than half a percent.

Westpac’s Callow said he would consider staying long on the yen, possibly through options. “The yen is a proven winner in turbulent times,” he said.

ANZ’s senior currency strategist Khoon Goh expects the Singapore dollar and Korean won KRW= to react the most in the coming days, given their open economies and the South Korean market’s exposure to foreign investment.

“The markets have been forced to revise somewhat the estimate of a possible Trump win, having spent most of the last one month pricing out that risk,” said Ray Attrill, global co-head of currency strategy at National Australia Bank. “We were almost at a point where the U.S. election was becoming a non-market factor.”

“My view is if we were to have an unexpected Trump victory and a significant short-term bout of global markets risk aversion, you’d still probably expect the U.S. dollar to strengthen on that. Because that’s been the case so far.”

(Additional reporting by Faith Hung in TAIPEI, Swati Pandey in SYDNEY, Nichola Saminather in SINGAPORE; Editing by Jacqueline Wong)

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Got bank? Election could create flood of marijuana cash with no place to go

October 31 Although the sale of marijuana is a federal crime, the number of U.S. banks working with pot businesses, now sanctioned in many states, is growing, up 45 percent in the last year alone.

Still, marijuana merchants say there are not nearly enough banks willing to take their cash. So many dispensaries resort to stashing cash in storage units, back offices and armored vans.

Proponents believe the Nov. 8 election could tip the balance in favor of liberalizing federal marijuana laws, a move seen as key to getting risk-averse banks off the sidelines.

Measures on ballots in California, Florida and seven other states would bring to 34 the number of states sanctioning pot for medical or recreational use, or both. That could push annual sales, by one estimate, to $23 billion.

The prospect for a market of such scale is adding urgency to calls for a national approach to marijuana that expands banking options. Law enforcement and Federal Reserve officials have expressed concern about the fraud and crime associated with un-bankable cash.

Nearly 600 dispensary robberies have been reported in Denver since recreational pot was legalized in Colorado three years ago.

“There’s not a single human being who thinks there is any benefit at all in forcing marijuana business to be conducted on an all-cash basis,” said Rep. Earl Blumenauer, a Democrat from Oregon who has called for the decriminalization of marijuana since coming to Congress in 1996.


The U.S. Justice Department said in 2014 it would not prosecute banks for serving state-sanctioned marijuana businesses. At the same time, the Treasury Department requires banks to report suspected drug crimes.

At last count, 301 banks were serving marijuana businesses, according to the Treasury Department. Many more have avoided the sector out of fear that making the wrong call could put them at risk, said Robert Rowe, a vice president at the American Bankers Association.

The National Cannabis Association is pressing Congress for a law that would hold banks harmless for handling pot cash, said Michael Correia, a lobbyist for the trade group. If California legalizes recreational use next week, the nation’s biggest Congressional delegation will have a big stake in the issue.

In lieu of federal action, some states have tried their own fixes. Colorado created a credit union system for state-sanctioned marijuana businesses. But it fell apart when the Kansas City Federal Reserve denied a Colorado pot credit union access to the national payments system, which distributes currency and clears checks and electronic payments.

California has no such plans, said Tom Dresslar, spokesman for the state’s Department of Business Oversight.

“This was a problem created by federal law,” Dresslar said, “and it needs a federal solution.”

In northern California, where growers serve state-sanctioned medical dispensaries as well as the black market, the Community Credit Union of Southern Humboldt stopped opening pot business accounts because of the red tape and uncertainty, said senior vice president Janet Sanchez.

“We’re not being asked to go over to the gun dealer and ask them if they’re making appropriate background checks,” she said.

Dispensary operators unable to find willing banks tell tales of subterfuge, recordkeeping nightmares and armies of security guards. Many open bank accounts and submit credit card charges in ways that obscure their true enterprise, such as “spa services.”

Susana de la Rionda has run a Los Angeles medical marijuana dispensary for 12 years and has had to find a new bank about once a year and submit to tax audits twice as often.

“I feel like a gangster,” she said.

Denver Relief dispensary founder Ean Seeb said operators always are trying workarounds to get cash into banks, including washing bills in fabric softener to hide the odor of pot. For a time, he said, one automated teller machine near a Denver mall drew lines every night of marijuana merchants, each depositing the maximum $500 in cash.


Partner Colorado Credit Union began working with state-sanctioned dispensaries two years ago and has developed elaborate protocols to minimize risk, including an initial vetting that can take three weeks. It uses armored trucks to take cash deposits directly from dispensaries to the Denver branch of the Federal Reserve Bank.

When the credit union spots a red flag, Chief Executive Sundie Seefried dispatches employees to pay the dispensary a visit, and she has closed two accounts for compliance problems. Seefried encourages operators to visit by keeping fine cigars in her office, and she stays in touch with regulators.

“Our program is designed with eyes on the business, eyes on the owner, eyes on the money,” she said.

With 95 dispensary members, Seefried said the credit union is at capacity, and she hopes more bankers will get involved. She fields calls for advice, speaks to industry groups and, earlier this year, shared what she’s learned in a book.

Despite the safeguards, Seefried said she takes nothing for granted. Every few months, she said she drills her staff to make sure they know what to do in the event of her arrest.

“What calls are you going to make?” she said she asks them.

“If you don’t have a little fear going into this because of the illegality at the federal level, you’re probably not the person to do this job,” she said.

(Reporting by Lisa Lambert; editing by Linda Stern and Lisa Girion)

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In big week for air expos, defense jets outlook rosy as civil aviation fragile

ZHUHAI, China From Zhuhai in southern China to Florida, hawkers of civil and military aircraft – and the money to finance them – will try to drum up new business at aerospace expos this week, conscious their high-risk industry is approaching a turning point.

After U.S. weapons makers beat profit forecasts, analysts say tensions in eastern Europe and Asia are reversing a post-Cold War slump in defense spending that until recently weighed on arms firms. At the same time, commercial aviation is faltering after a decade-long winning streak.

“Civil is weakening and turning very spotty in places, whereas defense is growing in U.S. and world markets,” said Teal Group consultant Richard Aboulafia. “It’s a combination of a re-armament cycle coupled with something of a ramp-up based on regional tensions and fears.”

China’s biggest aviation event – Airshow China, starting in Zhuhai on Tuesday – underlines the trend in what is a banner week for the industry. A defense trade show takes place in Jakarta and an air finance conference in Hong Kong, as well as the annual U.S. business jet jamboree in Orlando, Florida.

Topping Airshow China’s agenda is the last-minute public debut of the J-20 stealth fighter – a warplane China hopes will narrow a military gap with the United States. Ability to project air power is key for China as it flexes muscles on territorial disputes in the East China and South China seas.

It’s the second successive edition of the biennial Zhuhai show at which China has pulled the covers off a classified stealth jet, after displaying the export-oriented Shenyang J-31 in 2014. 

Western analysts say the J-20 moves up a gear in terms of China’s ability to punch beyond its territory, though it may lack the clout of its lookalike, the U.S. F-22 Raptor. The Xian Y-20 strategic cargo carrier, similar to the U.S. C-17 aircraft, will also be present.


Another hot topic at Zhuhai will be the outlook for the much-delayed maiden flight of state-owned Comac’s 150-seat C919 jetliner – Beijing’s effort to challenge the civil aerospace domination of Airbus Group (AIR.PA) and Boeing Co (BA.N). The C919 is currently scheduled to take flight this year, but industry sources say this will slip to 2017.

“When it was launched the C919 was supposed to fly in 2014. Now it is 2016 and it hasn’t flown, because developing a commercial jet has been much harder than they expected,” said China aerospace expert Bradley Perrett of Aviation Week.

The delays mean the jet is launching into a civil market looking softer due to slowing growth – a subject set to dominate discussion when 1,000 commercial jet financiers gather at the two-day Airline Economics conference this week in Hong Kong.

With more than a million millionaires and over 200 billionaires, China should also be among the most promising markets for private jets. But belt-tightening and Beijing’s corruption crackdown have hit demand for large models, which had resisted a post-financial crisis drop in industry sales.

The plight of the business jet trade will dominate the U.S. National Business Aviation Association’s Florida get-together this week. “Previous declines always rebounded,” said Daniel Hall, senior valuations analyst at Flight Ascend consultancy, referring to business jet sales. “This has clearly not.”

Those concerns deepened when parts supplier Honeywell (HON.N) predicted fewer deliveries next year.


Underlining the current divide between civilian and military aviation fortunes, foreign sellers are expected to flock to the Nov. 2-5 Indo Defense arms exhibition in Jakarta, just weeks after Indonesian jets staged exercises on the edge of a South China Sea area claimed by Beijing.

With Indonesia’s arms imports up threefold since 2010, according to the Stockholm International Peace Research Institute, competition between suppliers is brutal.

Delegates at the event will seek updates on a tentative decision by Indonesia to buy around 8 Sukhoi Su-35 fighters from Russia.

Rivals contractors are fighting to stay in contention for the deal to supply Jakarta with fighters, in what one Western source described as a test for efforts by President Joko Widodo to enforce more transparency in big-ticket deals.

Rivals Lockheed Martin (LMT.N), Sweden’s Saab (SAABb.ST) and owners of Europe’s Eurofighter will all attend Indo Defense.

(Additional reporting by Alwyn Scott in ORLANDO, Florida; Editing by Kenneth Maxwell)

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Oil falls, non-OPEC producers yet to pledge concrete output steps

TOKYO Oil prices extended declines on Monday after non-OPEC producers made no specific commitment to join the OPEC in limiting oil output levels to prop up prices, suggesting they wanted the oil producing group to solve its differences first.

Officials and experts from OPEC countries and non-OPEC nations including Azerbaijan, Brazil, Kazakhstan, Mexico, Oman and Russia met for consultations in Vienna on Saturday and only agreed to meet again in November before a scheduled regular OPEC meeting on Nov. 30, they said in a statement.

London Brent crude for December delivery LCOc1 was down 29 cents, or 0.6 percent, at $49.42 a barrel by 0750 GMT after settling down 76 cents on Friday.

NYMEX crude for December delivery CLc1 was trading down 29 cents, or 0.6 percent, at $48.41 a barrel, after closing down $1.02 on Friday.

“There was a lot of talk and nobody managed to agree on anything. That has been pushing the market down,” said Jeffrey Halley, senior market analyst at OANDA brokerage in Singapore.

The potential tightening of the U.S. presidential race after news of a renewed FBI probe of Democratic candidate Hilary Clinton was also affecting sentiment and putting investors off riskier assets, Halley said.

OPEC and non-OPEC said in a joint statement that Saturday’s meeting was a “positive development” towards reaching a global output limiting deal on November 30.

On Friday, OPEC members also failed to agree on how to put in place a global deal to limit production, following objections from Iran which has been reluctant to even freeze its output, sources said.

Russia expects to increase its oil output by 0.7 percent next year and a further 0.9 percent in 2018, the draft federal budget showed.

Crude production is expected to be a record-high 548 million tonnes in 2017 and 553 million tonnes in both 2018 and 2019, up from an estimated 544 million tonnes this year, the document showed.

In a bearish sign, money managers cut their net long U.S. crude futures and options positions for the first time in five weeks in the week ended Oct. 25, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

(Additional reporting by Osamu Tsukimori; Editing by Richard Pullin and Vyas Mohan)

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New York’s bitcoin hub dreams fade with licensing backlog

NEW YORK New York’s financial regulator had sights set on becoming a global hub for innovations like bitcoin when it adopted trailblazing virtual currency rules last year. But the state lost that momentum when the agency’s chief left, putting a licensing process in limbo and allowing rivals to catch up.

Since June 2015, New York has required virtual currency firms doing business there to get a “BitLicense” to hold customer funds and exchange virtual coins for dollars and other regular currencies.

Benjamin Lawsky headed the Department of Financial Services (DFS) when it developed those rules, acting as an early advocate of virtual currencies when other regulators were still skeptical.

Although it remains unclear whether such currencies will ever gain mainstream acceptance, they are now part of a broader, rapidly-growing industry that blends finance and technology, and which leading financial centers are keen to attract.

For companies, a stamp of approval from a tough regulator offered a chance to win over customers who remained dubious about the product. For New York, it was an opportunity to get ahead of rivals around the world that were also trying to woo “fintech” business.

Yet just after the regulations came into force, Lawsky left the agency. Some senior staffers with BitLicense expertise soon followed him out the door.

Since then, DFS has issued just two BitLicenses. Another 15 applications are still pending, with four others withdrawn and four denied, a spokesman said. Two more virtual currency companies have received trust charters, which treat them more like traditional banks.

“By putting the regulations together and having key staff members leaving almost thereafter, they really put the industry behind the eight-ball in terms of competing with traditional service providers,” said Patrick Murck, a lawyer and fellow at Harvard University’s Berkman Klein Center for Internet Society.

Most companies that were operating in New York when the regulations took effect can still do business there while waiting for a license. However, start-ups may face trouble raising money or expanding their business, Murck said.

The virtual-currency industry is miniscule compared to traditional finance, but it has grown rapidly since bitcoin’s launch in 2009. There are now other virtual currencies, and broader uses for underlying technologies that create and distribute them. (Graphic:

The bitcoin market is now worth about $10.7 billion, compared to less than $1 billion just three years ago, according to the information site CoinDesk.


As the market has grown, financial centers around the world have competed aggressively to attract new business. While some have relied on light-touch regulation, the appeal of New York’s BitLicense was that it offered a clear legal framework.

However, the slow licensing process and strict requirements are driving some companies away.

An application costs $5,000 to file, and once completed, can run 500 pages – including everything from compliance manuals to executives’ fingerprints, lawyers said. Regulators then drill deeper, asking for details of business models, organizational charts or ownership information.

BitLicense forces companies to “extract personal, private information” from users, creating a target for hackers, Erik Voorhees, chief executive of Switzerland-based virtual currency firm, said in an interview, explaining the company’s decision not to do business in New York.

GoCoin CEO Steve Beauregard told Reuters securing a New York license was not worth the effort: “It’s too overreaching and burdensome, especially for the smaller companies,” he said.

Marco Santori, who heads the digital currency practice of law firm Pillsbury Winthrop Shaw Pittman LLP, said at least 15 firms were shunning New York. He has advised clients to focus on states like California, where, he believes, regulators are unlikely to take aim at digital currency companies any time soon. State lawmakers there recently withdrew a second proposal to regulate digital currency companies.

Other states are developing rules and awarding licenses at a faster clip.

Washington State, for example, has issued seven licenses to virtual currency companies since 2013 under its longstanding law for money transfer businesses. North Carolina has licensed two. A uniform virtual currency law that any state can opt into is also in the works, and there has been talk of a possible federal charter.

Internationally, some countries, like Japan, have moved to regulate aspects of digital currency trading, while others, like Bolivia, have banned it. Still others have sought to adapt tax policies and existing laws on money laundering and other illicit activity to the new market. The BitLicense, however, remains a unique approach.

In September, Deloitte ranked New York City No. 3 as a financial-technology destination more broadly, behind London and Singapore.

People familiar with the BitLicense process say the delay in appointing Lawsky’s successor sapped some of the momentum.

The new superintendent, Maria Vullo, who took over in June 2016, told Reuters in an interview DFS is striving to clear the application backlog. The reviews had to be thorough, though, because of the risks involved, she said.

New York introduced its BitLicense after the collapse of Mt. Gox, a Tokyo-based exchange that lost an estimated $560 million worth of customers’ bitcoins.

“It’s not a video game,” she said. “It involves real money and taking deposits.”

Jerry Brito, executive director of Coin Center, a digital currency research and advocacy group in Washington, said the BitLicense’s roll-out did not live up to its promise. Still, New York’s leverage as a world financial center would make it hard for companies that want to grow to shun this market, he said.

“I think it’s going to be rare that companies say, ‘We’re not going to do business in New York.'”

(Reporting by Suzanne Barlyn; Editing by Lauren Tara LaCapra and Tomasz Janowski)

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Union rejects Lufthansa’s Eurowings arbitration offer

FRANKFURT Cabin crew trade union UFO has rejected an offer to mediate a dispute over pay and conditions with Lufthansa’s (LHAG.DE) budget flights unit Eurowings, Lufthansa said on Sunday, raising the probability of strike action.

“It is more obvious than ever that the union does not want to find a solution,” Eurowings human resources director Joerg Beissel said in a statement.

Eurowings put forward a new offer last week that includes an average pay increase of around 7 percent. At Germanwings, UFO said it has failed to reach an agreement on part-time contracts.

Lufthansa cabin crew and pilots have embarked on a series of strikes over the last few years as the airline battles to reduce costs in order to compete with low-cost rivals and long-haul carriers with leaner cost bases.

(Reporting by Georgina Prodhan; editing by Susan Thomas)

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