News Archive

Airbus says no further cracks found in A400M transport engines

BERLIN All A400M transport plane engines affected by an order from European safety regulators have been inspected and no further cracks were found in their combustion chambers, a spokesman for the European planemaker Airbus (AIR.PA) said on Friday.

“All the engines affected have been inspected and this is a unique incident,” Airbus spokesman Florian Taitsch told Reuters.

Taitsch said the European Aviation Safety Agency ordered the inspections and follow-up checks after unexplained cracks were discovered in the combustion chamber of an A400M engine owned by Malaysia.

No problems had been found in any of the other affected engines, which belong to the first 31 delivered A400M aircraft, Taitsch said.

(Reporting by Andrea Shalal; Editing by Michael Nienaber)

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J.C. Penney reports comp sales drop, to shut 130-140 stores

Department store operator J.C. Penney Co Inc (JCP.N) reported a bigger-than-expected drop in same-store sales for the holiday quarter citing weak demand and competition from online retailers, sending shares down to more than a year low.

The company on Friday also said it would shutter 130-140 underperforming stores over the next few months to focus on more profitable ones.

Penney’s results underscored the brick-and-mortar retail industry’s struggles to overcome a drop in traffic in malls and a shift toward online shopping.

To save cash, retailers have been cutting costs and looking to make more money from their sprawling real estate assets. Rival Macy’s Inc (M.N) said it was closing 100 stores and exploring deals with other retailers to lease parts of its stores.

Penney’s comparable store sales fell 0.7 percent in the fourth quarter ended Jan. 28, steeper than the 0.5 percent drop analysts polled by research firm Consensus Metrix had expected.

The sales drop was the company’s third quarterly decline this year.

Penney also said that increased promotional activity and handing out more coupons weighed on its margins, which fell 1 percentage point to 33.1 percent.

Costs related to rolling out its low-margin appliances business to more stores also hit margins during the quarter.

In contrast Kohl’s Corp (KSS.N) and Nordstrom Inc (JWN.N) managed to keep a grasp on their margins by stocking less and reining back on promotions.

“(Q4) store gross margin was negatively impacted by actions we took with couponing and increased promotional activity… These were poor decisions that will not be repeated,” Chief Executive Marvin Ellison said on a conference call.

Shares of the company, which operates more than 1,000 stores in the United States, fell 10 percent to more than a year low of $6.18 in morning trading on Friday.


Penney on Friday said the stores being closed represent less than 5 percent of annual sales.

The retailer also said it would sell a supply chain facility in Buena Park, California to “monetize a lucrative real estate asset” and close a distribution center in Lakeland, Florida.

Along with the closures, the company will also offer voluntary retirement for about 6,000 employees in its headquarters, stores and supply chain.

The company expects annual savings of about $200 million from the cost cuts, but would incur a pre-tax charge of about $225 million in the first half of the current year.

(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Sriraj Kalluvila and Shounak Dasgupta)

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China says no intention of using currency devaluation to its advantage

BEIJING China said on Friday it had no intention of using currency devaluation to its advantage in trade, responding to U.S. President Donald Trump’s description of the Asian giant as the “grand champions” of currency manipulation.

Trump said in an interview with Reuters on Thursday he had not “held back” in his assessment that China manipulates its yuan currency, just hours after his new treasury secretary pledged a more methodical approach to analysing Beijing’s foreign exchange practices.

Chinese Foreign Ministry spokesman Geng Shuang said he hoped the United States could “fully and correctly” view the exchange rate issue.

“China has no intention of seeking foreign trade advantages via an intentional devaluation of the renminbi. There is no basis for the continued devaluation of the renminbi,” he told a daily media briefing in Beijing.

“If you must attach the label ‘grand champion’ to China, then I think China is a grand champion. But we are the grand champions of economic development,” Geng added.

The Foreign Ministry has no say in currency policy, but it is the only Chinese government department that holds a daily briefing that foreign reporters attend.

The central People’s Bank of China did not respond to a request for comment.

In a commentary, the official Xinhua news agency said criticising China for manipulating its currency to prop up trade was a “major myth that has been circulating in Washington for quite a long time”.

“Since July 2005, China has decided to unpeg the yuan against the U.S. dollar, and allow it to fluctuate against a basket of currencies so as to better reflect the market changes. Over the years, the renminbi has appreciated substantially against the dollar,” it said.

Trump has frequently accused China of keeping its currency artificially low against the dollar to make Chinese exports cheaper, “stealing” American manufacturing jobs.

But he did not act on a campaign promise to declare China a currency manipulator on his first day in office.

The yuan fell 6.6 percent against the dollar in 2016, its biggest annual drop since 1994, as it was pressured by worries about slowing Chinese growth and more recently by a resurgent dollar, which has spurred capital outflows from many emerging markets.

Chinese authorities have taken numerous steps in recent months to curb capital flight to support the weakening yuan currency, while trying to bring in more foreign investment.

Geng said there was no basis for the continued devaluation of the Chinese currency and he hoped “the relevant side can fully and correctly view the renminbi exchange rate issue”.

But China’s foreign exchange regulator said this month the economy still faced weak global demand and financial market volatility caused by expectations of further interest rate rises by the U.S. Federal Reserve.

(Reporting by Ben Blanchard; Writing by Philip Wen; Editing by Robert Birsel)

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Exclusive: Trump says Republican border tax could boost U.S. jobs

WASHINGTON U.S. President Donald Trump on Thursday spoke positively about a border adjustment tax being pushed by Republicans in Congress as a way to boost exports, but he did not specifically endorse the proposal.

Trump, who has lashed out at U.S. companies for moving operations and jobs to countries such as Mexico, had previously sent mixed signals on the proposal at the heart of a sweeping Republican plan to overhaul the tax code.

“It could lead to a lot more jobs in the United States,” Trump told Reuters in an interview, using his most approving language to date on the proposal.

Trump sent conflicting signals about his position on the border adjustment tax in separate media interviews in January, saying in one interview that it was “too complicated” and in another that it was still on the table.

The proposal has divided American businesses. Critics say the planned 20 percent tax on imports could be passed along in higher prices to consumers, including manufacturers that rely on imported goods to make their products.

Some critics have warned of a potential global trade war which would sharply curtail U.S. and world economic growth.

Advocates say U.S. exporters will gain as their revenues will be excluded from federal taxes. They say the tax on imports will encourage domestic production and cause the already strong dollar to rise, offsetting upward pressure on import prices.


Trump has also called for a 35-percent border tax on U.S. companies that move jobs abroad and import products back into the U.S. market. It has been unclear in the past if those references referred to the border adjustment proposal.

“I certainly support a form of tax on the border,” he told Reuters on Thursday. “What is going to happen is companies are going to come back here, they’re going to build their factories and they’re going to create a lot of jobs and there’s no tax.”

White House spokesman Sean Spicer also came to the defense of border adjustment on Thursday, disputing the claim that it could lead to higher consumer prices. “That benefits our economy, it helps American workers, it grows the manufacturing base,” Spicer told reporters at a White House briefing.

The Mexican peso MXN= weakened slightly against the U.S. dollar immediately after Trump’s comments and was last trading at 19.68 per dollar. Earlier on Thursday, the Mexican currency hit its strongest level since Trump’s Nov. 8 election victory.

Stocks of retailers, which could be hurt by border adjustment, weakened on Wall Street after Trump’s remarks. The SP 500 retailing index .SPXRT ended down 1 percent. Shares of Wal-Mart Stores (WMT.N) slipped and closed down 0.6 percent. Trump said his administration will tackle tax reform legislation after dealing with Obamacare, the health insurance system that his fellow Republicans have bashed since it was put in place in 2010 by his predecessor, President Barack Obama.

Earlier on Thursday, Treasury Secretary Steven Mnuchin told CNBC the Trump administration aimed to formulate a tax plan with support from the Republican-controlled House of Representatives and Senate and pass it before August.


Lawmakers and corporate lobbyists say the border adjustment tax could die in Congress, potentially jeopardizing the prospects for tax reform, mainly because of opposition from a handful of Senate Republicans.

But experts say Trump’s endorsement could change the political climate. “If Trump supports it, that makes it considerably more likely,” Harvard Business School professor Mihir Desai told Reuters.

Trump’s comments were followed by dueling statements from lobbying groups.

A statement from the pro-border adjustment American Made Coalition said the White House was “sending its strongest signals yet that it’s leaning toward supporting the House blueprint with border adjustability.”

The Americans for Affordable Products coalition that opposes the border adjustment tax issued a statement saying Trump’s remarks were “consistent with what he’s already said” and that it was “impossible” to know if they were specific to any individual legislative policy.

Trump spoke to Reuters after meeting with more than 20 chief executives of major U.S. companies to discuss ways to return manufacturing jobs to the United States, one of the linchpins of his 2016 presidential campaign.

Many CEOs of large multinationals back the border adjustment tax. The chiefs of 16 companies, including Boeing Co (BA.N), Caterpillar Inc (CAT.N) and General Electric Co (GE.N), sent a letter to Congress on Tuesday urging support for it.

A border adjustment has emerged as the most controversial segment of the House Republican tax reform blueprint. Under the House plan, it would raise more than $1 trillion in revenues to help pay for a corporate tax cut.

(Reporting by Steve Holland; Additional reporting by David Morgan, David Shepardson and Ginger Gibson in Washington and by Lewis Krauskopf in New York; Editing by Kevin Drawbaugh, Paul Simao and Howard Goller)

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Oil futures suggest bullish funds’ big bet on price may pay off

LONDON Oil investors have placed the biggest bet in history that prices will rise, as the world’s largest exporters cut output to reduce a glut in supply, and the futures market is suggesting for the first time in a year that they could be onto a winner.

Fund managers now hold more Brent oil futures and options contracts than at any time on record, equivalent to some 480 million barrels of oil and nearly double the amount held just two months ago.

The pace of the increase in the benchmark April Brent futures contract LCOc1 price in that time hasn’t been as intense. The price is some 15 percent higher, around $57 a barrel, but for the first time since April last year this front-month contract is on the verge of trading above the price of longer-dated futures.

This phenomenon, known as backwardation, only tends to take place when investors and traders expect prompt demand for oil to improve to the point where it overtakes supply.

Total world demand averaged 97.3 million barrels per day in the fourth quarter of 2016, while supply was running at 97.9 million bpd, according to the International Energy Agency (IEA).

“We estimate that the physical oil market is now in deficit, and that oil inventory levels should be falling,” Investec Asset Management portfolio manager Tom Nelson, who helps manage a part of the company’s $114 billion in assets.

“With approximately $1 trillion of lost investment through the recent downward trend and more constrained access to capital, we expect oil markets to remain structurally tighter for several years, suggesting a more positive period for oil prices,” he said.

For almost three years the world has been awash with billions of barrels of unwanted oil, after the explosion in U.S. shale production and OPEC’s strategy of producing as much crude as possible to drive out less profitable rivals.

But the agreement in late November between the Organization of the Petroleum Exporting Countries and some of its competitors such as Russia to cut oil output by up to 1.2 million barrels per day in the first half of this year, and possibly beyond, has pushed benchmark Brent futures near 18-month highs.

The Brent April contract now commands a premium of $1.50 over the December 2018 contract LCOZ8 and is within a few cents of trading above the second-position May contract LCOc2, something which has not happened in nearly a year, aside from contract-expiry days when these price gaps can fluctuate.


With the cutting of production by OPEC, a major supplier to the ever-hungry Asian refineries, exports of crude from the North Sea hit a record of over 10 million barrels in January, and although West African exports eased that month, they held within sight of 17-month highs.

When the market is in contango and near-dated prices are below those for future delivery, it becomes profitable to store oil, rather than sell it on the spot market. When this structure inverts into backwardation, stocks of oil are more likely to find their way into the market as their owners can achieve a higher selling price.

Crude inventories held in the world’s richest nations are still high, but they have begun to drain, according to the IEA, which said stocks fell below the 3-billion barrel mark in December for the first time in a year. [IEA/M]

“It does clearly show the market is seeing the light at the end of the tunnel,” Saxo Bank senior manager Ole Hansen said.

“U.S. production increases are unlikely to outweigh cuts that we’re seeing from OPEC and then adding expectations for a continued strong rise in global demand we have a market that is moving toward balance, but it is going to be uneven.”

The funds are betting that OPEC and its allies will be successful in forcing oil out of storage, although with crude demand growth expected to moderate to around 1.4 million bpd this year, from 1.6 million bpd in 2016, and non-OPEC production, including U.S. shale, picking up rapidly, it is far from a done deal.

Considering some of the headwinds, it’s not so much the size of the total position that bothers some market watchers, but rather the percentage of all Brent futures and options that are concentrated in investors’ hands, rather than those of traders or producers and consumers.

Investors now hold a record 17 percent of the total 2.85 million lots of Brent futures and options 3ICELCOOI, each equivalent to 1,000 barrels of oil, compared with a historical average of closer to 9 percent.

Consultant JBC Energy is less optimistic on the outlook for inventories and estimates stocks will continue to build.

“In other words, the longs out there better believe that OPEC/non-OPEC alliance will continue the cuts through the second half as well if they want to avoid a rude awakening,” JBC said in a note.

(Editing by Greg Mahlich)

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Asian shares slip from 1-1/2-year high, Trump’s yuan remarks in focus

TOKYO Asian shares took a breather on Friday, slipping from 1-1/2-year highs as material shares were hit by sudden falls in copper and other commodity prices while investors assessed Washington’s stance on tax and currency policies.

U.S. President Donald Trump called China “grand champions” of currency manipulation, doing little to raise confidence on trade relations between the world’s two biggest economies.

Markets appeared to take his comments in stride, as they were made just hours after his new Treasury secretary pledged a more methodical approach to analyzing Beijing’s foreign exchange practices.

“With Mnuchin officially sworn in, from now on, I suspect most comments on foreign exchange policies come from him. And he has said a strong dollar is in U.S. interests,” said Shuji Shirota, head of macroeconomic strategy group in Tokyo at HSBC Securities.

The offshore yuan stood little changed at 6.8545 per dollar CNH=D4. The yuan was emerging Asia’s worst performer last year, even as Beijing tried to stem its fall, sliding around 6.6 percent in its biggest drop in over 20 years onshore.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.5 percent, giving back part of this week’s gains, though it is likely to log its fifth straight week of gains.

Australian material shares were the biggest drag as they were spooked by big falls in the price of copper CMCU3, iron ore DCIOv1 and other commodities.

Hong Kong’s Hang Seng .HSI dropped 0.5 percent while China’s mainland shares .SSEC fell 0.4 percent.

Japan’s yen-sensitive Nikkei .N225 was off 0.2 percent.

The MSCI world equity index .MIWD00000PUS, which tracks shares in 46 nations, rose 0.15 percent to 446.69 on Thursday, touching a record peak at 447.67 at one point and extending its gains so far this year to almost six percent.

Leading the gains were emerging markets .MSCIEF, which have rallied more than 10 percent since the start of the year, thanks to signs of a pick-up in global economic activity and a rebound in commodity prices.

On Wall Street, the Dow .DJI managed to notch a record high for a tenth straight session, the longest streak since 1987. The streak of gains is the longest for the index since March 2013.

Traders have bet on tax cuts, less regulation and more infrastructure spending from Trump and the Republican-controlled Congress to bolster the U.S. economy.

“There are strong expectations on tax cuts in the U.S. markets. On the other hand, the chance of a Fed rate hike in March seems limited, which is also helping shares,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

U.S. Treasury Secretary Steven Mnuchin on Thursday laid out an ambitious schedule to enact tax relief for the middle class and businesses by August, but added the Trump administration was still studying a border tax.

As Trump has promised a “phenomenal” plan by early March to cut business taxes, many investors expect more clarity when he delivers a speech to Congress on Tuesday.

Wednesday’s Federal Reserve minutes, which showed that there was less urgency among voting members to raise interest rates, have helped to drive down U.S. Treasury yields and the dollar.

The yield on 10-year U.S. Treasuries hit a two-week low of 2.372 percent US10YT=RR.

The dollar slipped to 112.55 yen JPY=, also a two-week low, on Thursday and last stood at 112.85 yen.

The euro fetched $1.0574 EUR=, off Wednesday’s six-week low of $1.0494.

Oil prices held firm near the top of their trading ranges, thanks to high compliance among the OPEC countries to curb output.

U.S. crude futures CLc1 traded at $54.33 per barrel, down 0.2 percent on the day.

(Editing by Shri Navaratnam and Jacqueline Wong)

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Toshiba says it is considering sale of majority stake in chip unit

TOKYO Toshiba Corp (6502.T) said on Friday it is looking to sell a majority stake in its prized flash memory chip business to plug a hole in its finances from a $6.3 billion writedown of its U.S. nuclear unit.

The beleaguered conglomerate is “aiming to make a final decision in early fiscal 2017,” which starts in April, it said in a regulatory filing.

Toshiba will outline terms of the sale by the end of February, conduct a first round of bids in March and aim to have chosen a preferred bidder or bidders by the end of May, a person with knowledge of the matter told Reuters earlier this week.

A separate source said Toshiba wants to raise at least 1 trillion yen ($8.8 billion) to create a buffer for any fresh financial problems, with interest already received from investment funds, other chipmakers and client companies.

(Reporting by Makiko Yamazaki; Editing by Edwina Gibbs)

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Early Uber investors call on company to change ‘destructive culture’

SAN FRANCISCO Early investors in Uber Technologies Inc [UBER.UL] wrote to the ride-hailing company on Thursday to criticize it for failing to end a toxic culture of harassment.

Mitch and Freada Kapor publicly rebuked the company after former Uber employee Susan Fowler described in a blog how she was sexually harassed by a manager and that human resources and upper management refused to punish the offender and even threatened her with a bad performance review.

“Uber’s outsize success in terms of growth of market share, revenues and valuation are impressive, but can never excuse a culture plagued by disrespect, exclusionary cliques, lack of diversity, and tolerance for bullying and harassment of every form,” the Kapors wrote in an online letter.

The Kapors are the only investors to have publicly commented on the recent allegations against Uber. The couple runs the Oakland-based Kapor Center, which works to promote diversity and inclusion in technology.

“Uber has had countless opportunities to do the right thing ,” they wrote. “We feel we have hit a dead end.”

Several other Uber investors and board members did not immediately respond to requests for comment. Menlo Ventures, which led Uber’s Series B financing in 2011, declined to comment.

Uber did not directly address the Kapors’ letter but repeated its commitment to investigate Fowler’s claims. Uber has hired former U.S. Attorney General Eric Holder to lead the investigation alongside attorney Tammy Albarran.

“We will be thorough, impartial and objective, and we are conducting this review with the highest degree of integrity and professionalism,” Holder and Albarran said in a statement on Thursday in response to the Kapors’ letter.

The Kapors, though, called out conflicts of interest that may hinder the investigation. Holder has been working for Uber since June to dissuade lawmakers from requiring fingerprint background checks for drivers. He will be joined by Uber board member Arianna Huffington and the company’s HR chief.

“We are disappointed to see that Uber has selected a team of insiders to investigate its destructive culture and make recommendations for change,” they wrote.

The Kapors’ letter raised eyebrows in Silicon Valley where investors usually defend their startups.

“I applaud the honesty of the Kapors for commenting on these highly sensitive issues and highlighting the importance of culture in the workplace,” said Susan Lucas-Conwell, former CEO of Great Place to Work and adviser to technology companies on diversity and inclusion. “I can’t think of when I’ve see such a statement from an investor of a company such as Uber.”

(Reporting by Heather Somerville; Editing by Lisa Shumaker)

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Confident Mexico says will not rush to negotiate NAFTA with Trump

MEXICO CITY Mexico is increasingly confident that U.S. President Donald Trump will not be able to impose harsh barriers on imports anytime soon, and officials signaled they may hit their northern neighbor’s most trade-sensitive districts in case he does.

Trump wants to renegotiate the North American Free Trade Agreement with Mexico and Canada, but talks cannot begin until he triggers a 90-day notice period by informing Congress. Nominees for several important U.S. posts including trade representative and agriculture secretary have not yet been confirmed.

“As long as our counterparts in Washington don’t define their objectives … today NAFTA regulates trade, so we are not in a hurry to change anything,” Economy Minister Ildefonso Guajardo said at an event on Thursday.

The view of some Mexican officials and business leaders that the U.S. Congress, Supreme Court and some state governors are counterweights to Trump has also been reflected in markets, with the peso rallying in recent days to its strongest since Trump’s election in November.

“Time has in some way meant that the pumpkins have fallen in place in our favor,” Guajardo later told local radio, using an expression in Spanish.

In an interview with Reuters on Thursday, Trump said he supported some form of border tax to boost jobs. But such a tax would meet resistance in Congress from fiscally conservative Republicans and Democrats.

Moises Kalach, from the business group CCE and one of the lead private-sector NAFTA negotiators with the Mexican government, told Reuters that such hurdles could temper Trump’s plans.

“They balance it out so that this will be done with an institutional methodology, and not through social media,” he said. “At home, we’re ready, we’re ready for what’s coming.”

Foreign Minister Luis Videgaray said if the United States taxed Mexican imports, Mexico would “hit them where it hurts,” two Mexican newspapers reported, based on recordings they obtained of a closed meeting with lawmakers on Wednesday.

Videgaray warned of tariffs targeting congressional districts and states most reliant on exports to Mexico, giving as examples Iowa, Texas and Wisconsin.

Mexico’s Foreign Ministry did not respond to a request for comment about the reports.

Videgaray referred to a strategy Mexico used in 2009, slapping locally focused tariffs on 90 U.S. products in a dispute over trucks using U.S. roads. Mexico’s trucks were eventually allowed back and the tariffs lifted.

Comments by U.S. Treasury Secretary Steve Mnuchin to Fox Business Network that the NAFTA renegotiation could be win-win and would not change anything soon calmed nerves in Mexico on Thursday, where Videgaray met with U.S. Secretary of State Rex Tillerson and Homeland Security Secretary John Kelly.

(Additional reporting by Natalie Schachar; Editing by Peter Cooney)

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