News Archive

LSE, Deutsche Boerse deal in jeopardy as EU set to block

London Stock Exchange (LSE.L) said its proposed merger with Deutsche Boerse AG (DB1Gn.DE) was unlikely to be approved by the European Commission, leaving the stock market operators’ third attempt at combining on the brink of failure.

The LSE said in a statement late on Sunday that the commission had asked it to sell its 60 percent stake in fixed-income trading platform MTS to satisfy antitrust concerns over the merger of Europe’s two largest market operators.

Calling the request “disproportionate,” the British exchange said it believed that it would struggle to sell MTS and that such a sale would be detrimental to its ongoing business.

“Based on the commission’s current position, LSE believes that the commission is unlikely to provide clearance for the merger,” it said.

The exchange added that it would still work to make the merger with Deutsche Boerse succeed, but that would be impossible unless the commission changed its position.

In a separate statement, Deutsche Boerse attributed the decision to LSE alone. LSE “resolved tonight to not commit to the required divestment of LSEG’s majority stake in MTS,” Deutsche Boerse said, adding that it expected a final decision from the commission by the end of March.

The commission declined to comment.

The two exchanges announced plans to merge in a 29 million euro deal just over a year ago, aiming to create a giant trading powerhouse that would better compete against U.S. rivals that were starting to encroach on the pair’s turf.

The exchanges had already agreed to sell part of LSE’s clearing business, LCH SA, in order to satisfy antitrust requirements.

LSE said the commission had also raised concerns this month about the impact on the European market landscape of access to bond and repo trading feeds were the two exchanges to merge. LSE said it had offered certain proposals to address this but that the commission had requested they sell all of MTS instead.

The commission had given the exchanges until Monday to come up with a proposal to meet that demand.

MTS is a relatively small part of LSE’s business, but it is a major platform for trading European government bonds, particularly in Italy, where it is classified as a “systemically important regulated business.”

LSE said that such a sale would need regulatory approval from several governments in Europe, and it would be detrimental to its wider Italian business.

“Taking all relevant factors into account, and acting in the best interests of shareholders, the LSE Board today concluded that it could not commit to the divestment of MTS,” the exchange said.

(Story refiles to clarify speaker in the sixth paragraph.)

(Reporting by Ismail Shakil in Bengaluru; Additional reporting by Rachel Armstrong, Andreas Kroener and Foo Yun Chee; editing by Jason Neely and Cynthia Osterman)

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Funds prepare $2 billion oil market play as supply tightens

NEW YORK Passive investment funds are poised to shift an estimated $2 billion from far-term to near-term crude futures over the next week, anticipating an energy market rally as a historic OPEC output cut slashes supply.

The switch may foreshadow the end of a global oil glut that built up during a two-year price war.

On Friday – for the first time in six years – a rule in one of the most popular commodity market indices was triggered, requiring funds tracking the index to sell Brent crude futures contracts for December LCOZ7 and to buy contracts for June LCOM7.

The SP GSCI Enhanced Commodity Index rule aims to ensure that investors are positioned to cash in when oil market fundamentals change – in this case, when supply becomes so tight that the current price of oil becomes higher than the price of oil for delivery many months or years into the future. That structure is called backwardation.

When markets are oversupplied, the opposite is true: It is cheaper to buy crude now than to buy it for delivery later. That structure is called contango.

An SP bulletin late Friday confirmed the rule had been triggered for Brent contracts. It stipulates that the funds must bring their money forward if the second and third month contract settles at a difference of less than 0.5 percent on the third to the last day of any given trading month.

On Friday, the Brent May contract LCOK7 price settled at $56.31 a barrel, while the June LCOM7 price settled at $56.55 a barrel. That would make the difference about 0.4 percent.

The threshold was not breached for West Texas Intermediate crude.

Investors will need to start the shift on March 1 and complete it over the next five business days, moving 20 percent of their money each day. Two traders with knowledge of the indices told Reuters that they estimated that rule impacts between 35,000 and 45,000 Brent contracts.

Each contract represents 1,000 barrels. So if those predictions prove true, about 40 million barrels – worth about $2 billion – will change hands.

“This is just another reason to be very bullish” about oil prices, said one trader involved with the deals, who spoke on condition of anonymity.


When the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers agreed in November to cut output, they wanted to stem a flood of supply that had left the contango so deep that traders found it profitable to buy crude and store it for sale later.

That dynamic pushed worldwide inventories to record levels and helped drive oil prices to multi-year lows.

OPEC’s output cut, however, has tightened supply and narrowed contango, prompting traders from the United States to Asia to start selling oil from more expensive storage facilities because the contango is no longer enough for them to make a profit by holding oil.

If contango narrows further, tens of millions more barrels could flood out of storage.

That could put downward pressure on prices in the short term, but the move to unleash stored oil is viewed by analysts as a first step toward rebalancing global markets after a period of oversupply.

The fast flow of capital into front-month contracts will make it uneconomical for traders to store physical barrels, said Michael Tran, director of energy strategy at RBC Capital Markets.

“The unintended consequence” of the trading shift, he added, “is helping OPEC in its objective to draw barrels from storage.”

It’s not clear exactly how much money is managed by firms that benchmark off the indices, but exchange-traded funds linked to them, such as the iShares SP GSCI Commodity-Indexed Trust (GSG), have more than $1.1 billion in assets, according to ETF Securities LLC.


Since the OPEC output cut, the spread between the front month and second month Brent contracts LCOc1-LCOc2 has tightened to as little as 5 cents from 79 cents. June and December contracts LCOM7-Z7 traded near parity on Friday.

To make money by holding crude, the spread between oil prices for future months needs to be wide enough to cover the cost of leasing tank space and borrowing the money to buy the fuel to fill it.

For the last two years, U.S. traders have rushed to that opportunity as those price spreads widened. Now, they may be forced to rush out of it.

“When there’s a shortage, there’s no value to storage. So, there’s a premium put on having the oil right now,” said Jodie Gunzberg, global head of commodities and real assets at SP Dow Jones Indices. “That’s where you want to be sitting up front in the near contract.”

(Reporting by Catherine Ngai, additional reporting by Trevor Hunnicutt; Editing by Simon Webb and Brian Thevenot)

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Trump administration re-evaluating self-driving car guidance

WASHINGTON U.S. Transportation Secretary Elaine Chao said on Sunday she was reviewing self-driving vehicle guidance issued by the Obama administration and urged companies to explain the benefits of automated vehicles to a skeptical public.

The guidelines, which were issued in September, call on automakers to voluntarily submit details of self-driving vehicle systems to regulators in a 15-point “safety assessment” and urge states to defer to the federal government on most vehicle regulations.

Automakers have raised numerous concerns about the guidance, including that it requires them to turn over significant data, could delay testing by months and lead to states making the voluntary guidelines mandatory.

In November, major automakers urged the then-incoming Trump administration to re-evaluate the guidelines and some have called for significant changes. Automakers called on Congress earlier this month to make legislative changes to speed self-driving cars to U.S. roads.

Chao, in her first major public remarks since taking office last month, told the National Governors Association: “This administration is evaluating this guidance and will consult with you and other stakeholders as we update it and amend it, to ensure that it strikes the right balance.”

She said self-driving cars could dramatically improve safety.

In 2015, 35,092 people died in U.S. traffic crashes, up 7 percent and the highest full-year increase since 1966. In the first nine months of 2016, fatalities were up 8 percent.

Chao, noting research that 94 percent of traffic crashes were due to human error, said: “There’s a lot at stake in getting this technology right.”

She said the Trump administration wanted to ensure it “is a catalyst for safe, efficient technologies, not an impediment. In particular, I want to challenge Silicon Valley, Detroit, and all other auto industry hubs to step up and help educate a skeptical public about the benefits of automated technology.”

Companies including Alphabet Inc’s self-driving car Waymo unit, General Motors Co, Ford Motor Co, Uber Technologies Inc [UBER.UL], Tesla Inc and other are aggressively pursuing automated vehicle technologies.

Chao said she was “very concerned” about the potential impact of automated vehicles on employment. There are 3.5 million U.S. truck drivers alone and millions of others employed in driving-related occupations.

She also said she would seek input from states as regulators develops rules on drones. “We will ask for your input as the (Federal Aviation Administration) develops standards and regulations to ensure that drones can be safely integrated into our country’s airspace,” she said.

(Reporting by David Shepardson; Editing by Peter Cooney)

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Phonemakers pile in to exploit Samsung weakness

BARCELONA Phonemakers are piling in to fill a gap in the market left by Samsung (005930.KS), still licking its wounds from a costly recall of its flagship Note 7 and with no key device of its own to launch at the telecom industry’s biggest annual fair.

China’s Huawei [HWT.UL], the most likely contender to fill the hole in the premium end of the market, took the wraps off a new phone in its quest to displace Samsung as the world’s no. 2 smartphone maker after Apple (AAPL.O), during a rush of new product releases on Sunday ahead of this week’s World Mobile Congress.

Chinese challengers Xiaomi [XTC.UL], Vivo, Oppo and Gionee are in hot pursuit, while BlackBerry (BB.TO) and Nokia (NOKIA.HE) announced models exploiting their retro appeal.

Samsung itself presented two new tablets pending the launch of its next flagship device, the Galaxy S8, expected now at the end of March rather than at Mobile World Congress, its usual showcase.

“The past six months have undoubtedly been one of the most challenging periods of our history,” Samsung’s European marketing chief David Lowes told a news conference in Barcelona. “We’re determined to learn every possible lesson.”

Samsung withdrew the Galaxy Note 7 last October after faulty batteries led some devices to catch fire, leading to a loss of consumer trust, wiping out more than $5 billion of operating profit, and allowing the iPhone to overtake it in sales.

“The competition is feisty but I think we have a good chance,” Richard Yu, chief executive of Huawei’s consumer business group, told Reuters in an interview.

Samsung’s smartphone market share dropped to 17.7 percent in the fourth quarter, while Apple’s rose to 17.8 percent, according to market research firm Strategy Analytics.

Independent research analyst Richard Windsor of Radio Free Mobile doubts whether Samsung can quickly regain its position.

“Samsung has taken a massive $5.4 billion hit to profits, apologized profusely for the recall and admitted shortcomings in its quality and assurance process but I don’t think that the full effects of this issue have fully hit home,” he wrote in a blog post. He pointed to a survey from Harris Poll which shows that Samsung’s reputation has fallen from No. 7 in the United States to No. 42, just one position above the U.S. Postal Service.

Huawei has aggressively expanded its mid- to high-end phones and is going head to head in Asia and Europe with Apple and Samsung in the premium phone market.

Its new high-end P10 phone will go on sale from March at 649 euros ($685) in Europe, its key target market, likely ahead of the expected Samsung S8 launch.

Huawei, which made its name as a builder of telecom networks and only entered the phone market this decade, has made no secret of its ambition to be the world’s number two.

But fortunes can change rapidly in the smartphone market, with little-known names in the West pushing established Asian players such as ZTE (000063.SZ), LG Electronics (066570.KS) and Lenovo-Motorola 0992.HK into the second tier.

Oppo, Vivo and Xiaomi are now the fourth, fifth and sixth-biggest smartphone makers in the world, according to Strategy Analytics, with Sony (6758.T) number 16, and HTC (2498.TW) in 20th place.

“The long game in smartphones simply is a marketing game,” said Tim Coulling, an analyst at research firm Canalys.

($1 = 0.9468 euros)

(Editing by Georgina Prodhan and Jason Neely)

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Huawei seeks to exploit Samsung gap with new smartphone

BARCELONA Huawei [HWT.UL] is introducing a mass-market version of its premium business phone, to take advantage of a gap created by the withdrawal of Samsung’s flagship Galaxy Note 7 after a crisis with its batteries catching fire.

Huawei has aggressively expanded its mid- to high-end phones and is going head to head in Asia and Europe with Apple and Samsung in the premium phone market.

Huawei’s new P10 line is expected to be cheaper than the business-oriented Mate 9, with new features including facial detection that can tell whether a user is taking a selfie or a picture with more people and select its camera mode accordingly.

Huawei, the world’s third-largest phone maker after Apple and Samsung, is seen by industry analysts as having the best hope among rival Android smartphone makers of capitalizing on Samsung’s woes.

Richard Yu, chief executive of Huawei’s consumer business, said last year he wanted to make Huawei the world’s No. 2 phone maker within two years even before Samsung’s Note 7 meltdown.

Huawei unveiled the P10 and larger P10 Plus at the annual Mobile World Congress in the Spanish city of Barcelona on Sunday. They feature dual Leica rear camera lenses, a 40 percent boost in battery life and software automation improvements.

While these features are similar to those found in the company’s top-of-line Mate 9 smartphone, launched in November, the new models are expected to sell for as much as $100 less per device, if Huawei follows its traditional pricing strategy.

The company has yet to disclose the actual price of the P10 line, which can also learn about users’ habits and automatically put the most frequently used apps in easy reach.

Samsung withdrew the Galaxy Note 7 last October after faulty batteries led some devices to catch fire, leading to a loss of consumer trust, wiping out $5.3 billion of operating profit, and allowing Apple’s iPhone to overtake it in sales.

It has not launched new models since then and is expected to reintroduce its flagship S8 phone in April.

Samsung’s smartphone market share dropped to 17.7 percent in the fourth quarter, while Apple’s rose to 17.8 percent, according to market research firm Strategy Analytics.

Huawei, which made its name as a builder of telecom networks and only entered the phone market this decade, narrowed the gap, expanding its market share to 10.2 percent from 8.1 percent in the last quarter of 2015.

Huawei also presented a new smartwatch, two years after it entered the market. The Watch 2 has a sporty look and targets fitness users.

(Reporting by Harro ten Wolde; Editing by Georgina Prodhan and Elaine Hardcastle)

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Nokia sees growth opportunities in networks market

BARCELONA Nokia (NOKIA.HE) sees demand for higher speed 4G network equipment starting to recover this year, led by Japan, the company’s chief executive Rajeev Suri said on Sunday as he announced a series of contracts with telecom operators.

Speaking at a news conference ahead of the Mobile World Congress in Barcelona, Suri also predicted a new wave of industry consolidation among telecom operators in the U.S. and Indian markets in the course of 2017.

“Noise about carrier MA will heat up dramatically in United States and India. The pent-up demand for action is there,” Suri said.

Nokia and its rivals, Sweden’s Ericsson (ERICb.ST) and China’s Huawei [HWT.UL], have struggled lately as telecom operators’ demand for faster 4G mobile broadband equipment has peaked, and upgrades to next-generation 5G equipment are still years away.

Nokia repeated that while it expected the global networks market to fall around 2 percent in 2017, it spotted growth opportunities in markets such as North America, India and Japan.

“We believe that the (overall) primary market in which we compete will be down again… but to be considerably better than last year,” Suri said, anticipating a slower rate of decline.

“Investments in 4G, particularly in advanced 4G technology, will pick back up in some key markets, such as Japan.”

Earlier this month, Nokia reported its profits for the final quarter of last year fell less than expected, helped by cost cuts and the acquisition of Alcatel-Lucent.

The Finnish company has reached a “landmark”, 3-year deal with Telefonica (TEF.MC) to build networks in London, Suri said on Sunday, adding that the contract propels Nokia to overcome Ericsson as the leading network supplier in Britain.

Nokia also announced that it was working with U.S. telecoms carrier Verizon and semiconductor giant Intel to supply equipment for pre-commmercial 5G services in U.S. markets, including Dallas.

Suntrust analyst Georgios Kyriakopoulos cautioned that global weakness in operator spending will likely remain for a long time and that projected consolidation will likely serve as a further drag on results for equipment vendors such as Nokia.

“The fact Suri predicted more MA in that space means Nokia’s core business faces some challenges, he said.

ATT (T.N) is seeking regulatory approval for its $85.4 billion acquisition of media giant Time Warner (TWX.N).

Meanwhile, Japan’s SoftBank Group Corp (9984.T) is prepared to cede control of Sprint Corp (S.N) to Deutsche Telekom AG’s (DTEGn.DE) T-Mobile US Inc (TMUS.O) to clinch a merger of the two U.S. mobile carriers, sources told Reuters earlier this month.

(Additional reporting by Sophie Sassard in Barcelona, editing by Jussi Rosendahl and Keith Weir)

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Deutsche Bank board member says staff not quitting over bonus cuts-paper

FRANKFURT Bonus cuts at German flagship lender Deutsche Bank (DBKGn.DE), announced in January, have so far not led to a mass exodus of employees, one of its board members told a German weekly newspaper.

“Fluctuation is normal and within the usual boundaries and was even lower in January compared to the previous year,” Chief Administrative Officer Karl von Rohr told Frankfurter Allgemeine Sonntagszeitung (FAS) when asked if the bank had lost staff.

The cuts will see the bank’s bonus pool shrink by about 80 percent and hit about a quarter of Deutsche’s roughly 100,000 staff.

Carmaker Volkswagen (VOWG_p.DE) on Friday announced major changes to executive pay with a cap on earnings, looking to quell widespread anger over bonuses paid even as the carmaker suffered record losses after the emissions scandal.

Deutsche Bank, Germany’s flagship lender, posted a net loss of 1.9 billion euros ($2.01 billion) in the final quarter of 2016 as legal costs for past misdeeds weighed heavily on results.

While Deutsche Bank has drawn a line under some major legal headaches, earmarking 4.7 billion of total litigation reserves of 7.6 billion euros for settlements such as over the sale of toxic mortgages and sham Russian trades, it is not yet out of the woods.

About 20 large cases account for 90 percent of the bank’s legal provisions, von Rohr said, adding half of those had either been concluded already or were about to be completed. “The rest will hopefully be largely dealt with by the end of the year.”

(Reporting by Christoph Steitz; Editing by Elaine Hardcastle)

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Euro zone economy: real recovery or another Sirens’ song?

LONDON Over the years, euro zone economic growth has been a bit like the Sirens in Homer’s Odyssey: singing a song of promise, only to end up pulling you onto the rocks. Will it be different this time?

The strong growth registered in numerous data releases and surveys at the beginning of this year has surprised many.

One eye-opening example was the release of flash purchasing managers indices for France, Germany and the euro zone on Feb 21. Of nine indexes, eight registered growth and six did so at a higher level than any economist polled by Reuters had imagined.

Not surprisingly, economists and policy-makers are now looking for firm proof that the euro zone’s apparent rebound this year is sustainable, as well as noting a variety of potentially destructive economic and political hazards ahead.

There has not been, they say, a specific inflexion point at which it can be said that the euro zone has recovered and is off on a growth tear. Rather it has been a slow simmer.

“The euro zone has been recovering steadily for three years now, helped by monetary policy stimulus, an end to fiscal austerity and a healthier financial sector,” said James McCann, OECD economist at Standard Life Investments.

“(It’s) a steady recovery which has been trundling on.”

The numbers confirm this. The European Commission notes that real GDP in the euro zone has grown for 15 consecutive quarters – a sign of steady improvement.

But putting aside some of the latest data, it has been steady rather than spectacular. Economic growth is still running at only around 1.6 percent annually, and most forecasters – from economists polled by Reuters to the Commission itself, reckon it will be about the same this year.

So the question is whether the recent data has turned this on its head. Even before considering whether Greece’s debt problems will come back to bite the euro zone, there are two main strands: inflation and elections.


While the repetition of positive January and February data in the month ahead – for example, German industrial orders soaring again – would fuel the euro zone takeoff story, inflation may hold the key.

“The risk of disappointment is that higher headline inflation decelerates real income growth and consumption,” said Paul Mortimer-Lee, global head of market economics at BNP Paribas.

The preliminary reading of February euro zone inflation, to be reported on Wednesday, is expected to come in at 2.0 percent year-on-year, rising to the European Central Bank’s target on the back of monetary stimulus and economic growth.

While far from hyper, such a level has not been seen for four years, and there has been a strong inverse path taken between inflation and retail sales over the last five years.

In other words, rising prices can hurt consumer spending, which in turn drives economies.

Unemployment during the financial crisis accounts for some of the dive in retail sales seen on and off since 2008. But joblessness, though improved, is still twice that of, say, the United States.

So if euro zone inflation were to overshoot in the coming year, it may well stifle the very growth that engendered it.

Economists, however, also see a growth killer in the bloc’s politics.

Many have long argued that the euro zone cannot compete as a leading economy without substantial structural reform – particularly in the number two and three economies after Germany.

“It comes down to France and Italy stepping up a gear,” said Florian Hense, European economist at Berenberg private bank.

But it is exactly in those two countries where politics is threatening to delay or derail the type of pro-growth structural reforms advocated by the European Central Bank and many private sector economists.

In Italy, the chances of an election this year have diminished, but the political turmoil surrounding the resignation of prime minister Matteo Renzi is likely to set back major reforms until an election takes place.

It is France, however, that is seen providing the biggest risk. Two of the top three candidates are viewed as economic reformists, but they are up against Marine Le Pen, the far-right National Front candidate whose pledge to put France’s EU membership to a referendum could de-stabilize the region’s economy for years.

Le Pen is not supposed to win, according to polls. But neither was U.S. President Donald Trump or those in Britain wanting to leave the Europe Union.

“If a rising France joins a still strong Germany at the core of Europe, the economic and political outlook for the euro zone as a whole could improve considerably,” Berenberg economists told clients.

“(But) a President Le Pen would spell the end of reform hopes for France and the EU for the next five years.”

Click for graphic on Euro zone economy.

(Editing by Mark John)

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Google’s digital assistant comes to new Android phones

Alphabet Inc’s Google announced on Sunday that it will bring its digital assistant to smartphones running the latest versions of its Android operating system, vastly expanding its reach.

The Google Assistant was limited to the technology company’s own products when it was released last fall, but it has steadily been expanding to a broader range of devices.

Smartphones running Android accounted for 85 percent of the global market last year, according to tech research firm IDC, compared to 15 percent for Apple Inc’s iOS.

The Google Assistant will roll out this week to English speakers in the United States with phones running Android 7.0 Nougat and Android 6.0 Marshmallow, the company said.

English speakers in Australia, Canada and the United Kingdom will gain access to the assistant next, followed by German speakers in Germany, and the company is working on support for additional languages.

Voice-powered digital assistants have been largely a novelty for consumers since Apple’s Siri introduced the technology to the masses in 2011. But many in the industry believe the technology will soon become one of the main ways users interact with devices, and Apple, Google and Inc are racing to present their assistants to as many people as possible.

“Our goal is to make the Assistant available anywhere you need it,” Gummi Hafsteinsson, product lead for the Google Assistant, wrote in a blog post published on Sunday. “With this update, hundreds of millions of Android users will now be able to try out the Google Assistant.”

Companies ranging from appliance maker Whirlpool Corp to Ford Motor Co announced products featuring Amazon’s Alexa assistant at the Consumer Electronics Show in Las Vegas earlier this year, leading some analysts to conclude the online retailer had gained an early lead over Google.

What is more, Android manufacturer Huawei Technologies Co [HWT.UL] announced it would support Alexa, highlighting the cost of Google’s decision to feature the assistant on its own hardware before opening it up to partners, said analyst Jan Dawson of Jackdaw Research.

“Clearly Google needs to move forward because their battle in the future is not going to be over the operating system, it’s going to be about assistant platforms,” said analyst Bob O’Donnell of TECHnalysis Research.

Google cannot trust that its assistant will be the default on all devices in the Android ecosystem. Leading manufacturer Samsung Electronics has announced plans for an assistant, and other companies are reportedly working on the technology.

“Some big manufacturers have decided to go their own way,” Dawson said. “But a lot of manufacturers simply can’t afford to develop their own.”

(Reporting by Julia Love; Editing by Bill Rigby)

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