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Euro dips as price data further dampens ECB hike expectations

LONDON The euro dipped and bond yields hit multi-week lows on Thursday as easing inflation in Spain and Germany led investors to row back further on expectations of when the European Central Bank might tighten monetary policy.

The single currency EUR= dipped 0.3 percent against the dollar and the yield on Germany’s 10-year government bond DE10YT=TWEB, the benchmark security for the region, hit a three-week low.

Signs of economic strength and strong inflation data – and an acknowledgement of these factors by policymakers – fueled talk that the ECB might soon switch out of stimulus mode and follow in the footsteps of the U.S. Federal Reserve, which has embarked on a rate hike cycle.

But annual consumer inflation in Spain eased to 2.1 percent in March, missing Reuters poll forecasts of 2.7 percent, and regional German data pointed to a similar downturn in Europe’s biggest economy.

“The Spanish numbers (are) pretty weak… and German regional numbers have also seen a fair bit of slowing… I suspect that’s another reason you have a weakening euro,” said Investec economist Ryan Djajasaputra.

On Wednesday six sources in and close to the ECB governing council told Reuters euro zone policymakers were keen to reassure investors that their easy money policy was far from ending.

Prior to that report, money markets were pricing in the possibility of an ECB rate hike in December and fully pricing one in for next March. Both were seen as less likely on Thursday. ECBWATCH

Euro may have also come under pressure after British Prime Minister Theresa May formally began Britain’s exit from the European Union on Wednesday, launching a two-year negotiation process before the divorce comes into effect in late March 2019.

Sterling was down 0.13 percent at $1.2415 GBP=, having skidded to a one-week low of $1.2377 overnight after British Prime Minister Theresa May formally launched Britain’s divorce proceedings from the European Union.

Oil prices, up on disruptions in Libya, buoyed European stocks .FTEU3, which were up 0.8 percent while the broader Euro STOXX 600 was up 0.1 percent.

Earlier, Asian stocks came off two-year highs on a strengthening dollar, up 0.14 percent against a basket of six currencies on Thursday morning. .DXY


Reassurance overnight from U.S. policymakers went some way towards bolstering faith in the economic and policy direction of the world’s richest country, giving support to the dollar.

The greenback edged up against a basket of six major currencies and stayed off four-month lows hit against the Japanese yen earlier this week. .DXY .JPY

It fell last week after the failure of President Donald Trump’s U.S. healthcare reform bill brought the “Trumpflation” trade into doubt.

Chicago Federal Reserve President Charles Evans, a voter on the policy-setting Federal Open Market Committee, said on Wednesday he supported further interest rate hikes this year given progress on the Fed’s goals of full employment and stable inflation.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=

(editing by John Stonestreet)

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Corporate America’s top shareholder referee gets tougher on activists

NEW YORK Institutional Shareholder Services Inc, the world’s top proxy advisory firm, is making activist investors work harder than ever to earn its backing in corporate control battles in a shift being led by the new man in charge of its recommendations.

Since Cristiano Guerra formally took over in January as the head of ISS’s special situations research team, the firm’s support for activists in proxy fights has fallen to 50 percent of the cases, compared with 60 percent last year, according to data from FactSet and Proxy Insight. (Graphic: became acting head on Sept. 1 of last year.

While it is still early in his tenure, Guerra has indicated a greater willingness to challenge activist funds pushing for changes in corporate boards and strategies, according interviews with advisors, investors, and current and former colleagues.

“I think (Guerra) is fair and has no obvious sympathy for one side or the other,” said Bruce Goldfarb, CEO of proxy solicitation firm Okapi Partners.

“There will be a more significant burden, more so than in the past, for activists to explain why ISS should support them.”

Bought by private equity firm Vestar Capital Partners in 2014, ISS has a staff of 900 covering each year 40,000 meetings of publicly traded companies worldwide, offering recommendations on everything from CEO pay to a board’s bylaws. Guerra’s team – which also issues recommendations on mergers and acquisitions – wields significant influence over the outcome of proxy fights and contested transactions.

Signs that ISS’s stance is evolving from one perceived as more sympathetic towards activist shareholders comes at a time when activist targets are thinning out and smaller in size after a six-year surge in campaigns against corporate boards.

Guerra’s most telling decision so far came on March 16, when ISS recommended shareholders for Cypress Semiconductor Corp (CY.O), which was facing a proxy fight, vote for management’s proposal to eliminate cumulative voting. The structure favors minority shareholders because it gives them more power when deciding the fate of individual board members. ISS had rarely recommended to eliminate such a shareholder right in the face of a contested election. Guerra played a key role in ISS adopting the position that by eliminating the cumulative voting bylaw, and adopting other measures, it would the playing field for all shareholders, according to people familiar with the matter. “I don’t think ISS would have made that kind of decision five years ago,” said one of Guerra’s former colleagues, who offered to be interviewed only on condition of anonymity.

Guerra, 44, was an executive at an aviation security company before he joined ISS in 2009. Quiet and deliberate, sources say, he has kept a low profile since his appointment and declined to be interviewed. ISS spokesman Subodh Mishra also declined to comment on the company’s behalf for the story.

One of the biggest challenges facing ISS and Guerra’s team is defending its position as the go to source for shareholder recommendations. Big asset managers, such as BlackRock Inc (BLK.N) and Vanguard Group Inc, are building up their in-house proxy voting arms. Advisory firms such as Camberview Partners LLC and Sard Verbinnen Co are hiring former ISS staffers and corporate governance experts to expand into proxy advisory work.

The Maryland-based company is under constant pressure to demonstrate its impartiality given it gets paid by institutional funds for its research and recommendations. ISS has increased its reach to companies as well in recent years, which use its consulting arm for corporate governance advisory services.    

The U.S. Chamber of Commerce has criticized ISS for siding with shareholders at the expense of CEOs and company directors, and has called for more regulatory oversight, which resulted in a Congressional bill last year that never made it to a vote.

ISS’s special situations research team has yet to be tested by a major, high-profile proxy contest under Guerra’s leadership. That will come later in this year’s proxy season, when it rules on activist hedge fund Elliott Management LP’s attempt to overthrow board directors and the CEO of Arconic Inc (ARNC.N), the $10 billion specialty metals company.

(Reporting by Michael Flaherty; Editing by Greg Roumeliotis and Tomasz Janowski)

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Toyota recalls 2.9 million vehicles globally over airbags

TOKYO Toyota Motor Corp (7203.T) on Thursday said it was recalling a total of about 2.9 million vehicles in Japan, China, Oceania and other regions including its Corolla Axio sedan and RAV4 SUV crossover due to potentially faulty airbag inflators.

Fuji Heavy Industries (7270.T), the maker of Subaru cars, Mitsubishi Motors Corp (7211.T) and truck maker Hino Motors (7205.T) also recalled a total of about 240,000 vehicles in the domestic market over inflators made by Takata Corp (7312.T) which can explode after prolonged exposure to hot conditions.

At least 16 deaths have been linked to exploding Takata inflators, mainly in the United States, prompting the auto industry’s biggest-ever global recall.

Global transport authorities consider Takata inflators containing the chemical compound ammonium nitrate to be unsafe if used without a drying agent, and have ordered all of the about 100 million on the market to be withdrawn.

The Japanese automakers said that the latest recalls were part of a wider recall of Takata inflators ordered by global transport authorities last year.

Toyota said that recalls were issued for about 1.16 million vehicles sold in Oceania, the Middle East and the automaker’s smaller markets, nearly one-third of total, while about 750,000 vehicles had been recalled in Japan.

Vehicles sold in North America, Toyota’s biggest market, were exempt from the latest recall, it added.

Takata is currently seeking a financial sponsor to help pay for the costs related to the recalls. Last month, it pleaded guilty to a U.S. felony charge as part of a $1 billion settlement over its faulty inflators.

(Reporting by Naomi Tajitsu; Editing by STephen Coates)

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Ackman apologizes for Valeant losses, calls bet a mistake

BOSTON Billionaire hedge fund manager William Ackman has apologized to clients for betting on Valeant Pharmaceuticals International Inc (VRX.TO), telling them he was “deeply and profoundly sorry” for losing so much of their money on the investment.

Ackman decided to sell his entire Valeant position earlier this month, suffering a roughly $4 billion loss since having bought the stake in early 2015.. He called the investment a “huge mistake.”

“My approach to mistakes is that I personally assume 100 percent of the responsibility on behalf of the firm,” he wrote in the firm’s annual letter released to clients on Tuesday evening and seen by Reuters on Wednesday.

The 50-year-old manager acknowledged the toll the bad bet has taken on his image and said he misjudged the management team in place when he bought the stock.

“We deeply regret this mistake, which has cost all of us a tremendous amount,” he wrote.

Thanks largely to Valeant’s tumble, Ackman’s hedge fund Pershing Square Capital Management suffered back-to-back losses in 2015 and 2016 as his reputation as one of the hedge fund industry’s most talented investors dimmed.

Since launching the firm in 2004, Ackman has delivered a compound annual net return of 14.8 percent. He tends to take concentrated bets and often pushes management to perform better by urging spin-offs or other measures.

Nonetheless the board of Pershing Square Holdings, Ackman’s publicly traded investment vehicle, decided after a review of his performance that he should continue to manage the investments, Anne Farlow, the chair, wrote in a separate letter.

She welcomed Ackman’s openness in analyzing what led to the Valeant failure.

In his letter, Ackman laid some blame at the feet of Valeant’s former management team, which he had thought was building the next Berkshire Hathaway (BRKa.N), once of the most profitable companies in the country.

Ackman met former Valeant Chief Executive Michael Pearson in 2014, when Pearson enlisted Ackman’s help to try and buy Allergan and Pershing Square bought up Allergan shares to try and push that company’s management into selling to Valeant.

Allergan ended up selling to a Actavis, netting Ackman his best-ever returns with his Pershing Square LP fund gaining 36.9 percent in 2014.

Ackman fired Pearson in 2016, however, after he got a seat on Valeant’s board.

“Prior management substantially overpaid for the company’s largest acquisition – its acquisition of Salix – which occurred contemporaneously with the substantial majority of our investment in the company,” Ackman wrote.

Pershing Square Holdings has swung to losses of 2.5 percent after starting the year with gains, but Ackman promised a quick recovery in the letter to clients.

(Reporting by Svea Herbst-Bayliss; Editing by Lisa Shumaker and Tom Brown)

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Samsung launches Galaxy S8 and dreams of recovery from Note 7

SEOUL/NEW YORK – Samsung Electronics Co Ltd (005930.KS) unveiled its Galaxy S8 flagship smartphone as it battles to regain the market leadership it lost to Apple Inc (AAPL.O) after the embarrassing withdrawal of the fire-prone Note 7s.

Boasting some of the largest wrap-around screens ever made, the long-awaited S8 is the South Korean technology company’s first new premium phone since its September recall of all Galaxy Note 7 smartphones equipped with fire-prone batteries. Samsung halted their sales in 10 markets, and the phones were banned from aircraft in the United States, denting a revival of the firm’s mobile business.

Two versions of the Galaxy S8, code-named Dream internally, were launched at a media event in New York on Wednesday, with 6.2-inch (15.75 cm) and 5.8-inch curved screens – the largest to date for Samsung’s premium smartphones. They will go on sale on April 21.

“We must be bold enough to step into the unknown and humble enough to learn from our mistakes,” D.J. Koh, the company’s mobile chief, said at the event after acknowledging that it had been a challenging year for Samsung.

U.S. carriers T-Mobile US Inc (TMUS.O) and Verizon Communications Inc (VZ.N) announced retail pricing for the smaller S8 around $700. The larger phone will sell for $840 at Verizon and $850 at T-Mobile.

The S8 features Samsung’s new artificial intelligence service, Bixby, with functions including a voice-commanded assistant system similar to Apple’s Siri. There is also a new facial recognition application that lets users unlock their phones by looking at them.

Samsung is hoping the design update and the new features, focused on making life easier for consumers, will be enough to revive sales in a year Apple is expected to introduce major changes to its iPhones, including the very curved screens that have become staples of the Galaxy brand.

The S8 is also crucial for Samsung’s image as a maker of reliable mobile devices. The self-combusting Galaxy Note 7s had to be scrapped in October just two months after their launch, and the recall was particularly damaging, investors and analysts say.

“The Galaxy S8 is the most important phone for Samsung in a decade and every aspect will be under the microscope following the Note 7 recall,” said Ben Wood, a veteran smartphone industry analyst with UK-based CCS Insight.

(Additional reporting by Eric Auchard in London; editing by David Clarke and Richard Chang)

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Ford to announce Ontario engine program in boost to Canada automaking: sources

MONTREAL, DETROIT Ford Motor Co (F.N) will announce on Thursday production of a new engine in the Canadian province of Ontario, two sources familiar with the matter said, in an investment that would boost Canada’s auto industry after years of job losses to Mexico and the United States.

The sources said the 7X engine, for large pickup trucks, is to be announced with Prime Minister Justin Trudeau at the Ford Essex Engine Plant in Windsor, Ontario, on Thursday morning.

It is part of the C$700 million ($525.05 million) in new investments secured during a 2016 agreement between Ford and its 7,000 unionized Canadian workers, the sources said. Investments in Windsor’s two engine plants are expected to account for about C$600 million ($450.05 million).

Spokesmen for Ford and Trudeau declined to comment.

Brian Maxim, a vice president at AutoForecast Solutions, said in a telephone interview that the 7.0-litre, V8 engine would have more torque and be more fuel efficient than the 6.8-litre V10 engine now built in Windsor and used in Ford’s super- duty trucks, such as its F-250s.

Maxim said he expected Ford to produce about 125,000 units of the new engine per year, starting in 2019.

Ford’s F-Series pickup trucks have been the best-selling model in the United States since 1982.

New investment in engine production in Canada was seen as vital because the large V8 and V10 motors now built by Ford in Windsor were expected to end production in four years.

Between 2001 and 2013, some 14,300 jobs were lost in vehicle manufacturing in Canada, according to Hamilton’s Automotive Policy Research Center.

(Reporting By Allison Lampert in Montreal and Nick Carey in Detroit; Additional reporting by David Ljunggren in Ottawa)

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Mexico’s governors tap investors in China, elsewhere

MEXICO CITY Mexico’s states are turning to Asia and beyond as some U.S. companies put investment plans on hold south of the border following President Donald Trump’s calls to bring jobs back home.

A delegation of three Mexican state leaders, headed by the National Confederation of Governors (Conago), traveled to China this week to meet with business leaders and discuss investment opportunities.

“Conago is developing an agenda with China’s provinces to build investment projects in our country,” Conago tweeted on Wednesday. “China and Conago agree on building bridges for business, not walls.”

Fears of a hit to foreign investment ran high when Ford Motor Co (F.N) canceled a $1.6 billion plant in Mexico’s central state of San Luis Potosi in January.

Trump, who had railed against U.S. manufacturers investing in Mexico, hailed the decision as a major victory, but Ford put it down to declining demand for small cars.

“We’re not going to sit here with our arms crossed. We’re going to turn to Asia, like we’ve been doing. We want the Chinese to come invest in Hidalgo,” state Governor Omar Fayad said in an interview. “We want the Japanese to invest here.”

Fayad was speaking on the sidelines of an event organized by China’s Anhui Jianghuai Automobile Group Co Ltd (JAC Motors) (600418.SS) and Mexico’s Giant Motors, which presented a new line of passenger vehicles that will be assembled in Mexico.

The Hidalgo government is also reaching out to European, Canadian, South American and Middle Eastern companies, and expects to announce several more investments this year, he said.

Fayad said the Hidalgo investment plans of some U.S. companies, which he declined to name, had recently been suspended indefinitely. “Obviously other countries are seeing this as an opportunity in Mexico,” he said.

In February, JAC Motors and Giant Motors, along with distributor Chori Co Ltd (8014.T), said they would invest some $210 million in an existing plant to build SUVs in Hidalgo. [nL1N1FM26F]

“Mexico is a strategic market for JAC,” David Zhang, head of international markets for JAC, said on the sidelines of the company’s event. “If the products and service are accepted by customers and there is a lot of market demand of course we will increase production capacity.”

JAC, which aims to produce 10,000 commercial and passenger vehicles in Mexico over the next three years, will initially concentrate on selling in the local market, Zhang said.

(Reporting by Anthony Esposito; Editing by Richard Chang)

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Waymo self-driving unit sought arbitration over engineer now at Uber

SAN FRANCISCO Alphabet Inc’s (GOOGL.O) Waymo self-driving unit sought to arbitrate claims last year against a former employee at the center of its lawsuit against Uber, court records released on Wednesday showed, in what Uber said strengthened its bid to get the case out of court and into arbitration.

Waymo’s lawsuit, filed last month, set in motion what could be a long and acrimonious trade-secrets battle between the two tech rivals. Both companies are vying to be first to bring self-driving cars to the masses, which is considered one of the biggest opportunities for both the tech and auto sectors.

But arbitration, which is a private process to resolve disputes, could keep the battle out of the public eye.

Court documents filed by Uber Technologies [UBER.UL] on Wednesday said that Waymo sought arbitration on Oct. 28 for two claims against its former employee, engineer Anthony Levandowski. Those claims involved allegations that Levandowski used confidential information to recruit co-workers to his new rival company, the court records showed.

Levandowski was a long-time employee of Google’s self-driving division – whose name later changed to Waymo – before leaving to co-found Otto, an autonomous driving start-up later acquired by Uber. Otto is also a defendant in the case.

In its lawsuit, Waymo alleges that Levandowski downloaded and stole more than 14,000 confidential files, including details on light detection and ranging sensor technology, known as Lidar, a crucial element in most self-driving car systems, before leaving the company.

Uber is seeking to get the high-profile case sent to arbitration, arguing that Waymo’s allegations against Uber are “inextricably bound up” with Levandowski’s employment agreement with Waymo.

Uber said the revelation that Waymo itself sought arbitration bolstered its own case for arbitration.

“There should be no dispute concerning the validity of the arbitration agreements themselves in view of Waymo’s arbitration demand against Levandowski based on those agreements,” wrote Uber in its motion filed in federal court in San Francisco.

Waymo has not yet replied in court to Uber’s motion to compel arbitration.

(Reporting by Alexandria Sage and Dan Levine in San Francisco; Writing by Alexandria Sage; Editing by Matthew Lewis)

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Energy, consumer shares lift S&P 500 to slight gain

The benchmark SP 500 eked out a gain on Wednesday as strength in the energy and consumer sectors offset declines in financial shares and investors began looking ahead to first-quarter earnings season.

The Dow Jones Industrial Average ended slightly lower, falling for the ninth session out of the past 10, while the Nasdaq rose for a fourth straight day.

Investors have been assessing what the Republicans’ failure to pass a healthcare bill means for tax reform and the rest of President Donald Trump’s agenda, hopes for which have helped drive stocks to record highs.

They are looking to first-quarter earnings to support lofty valuations for stocks, with the SP 500 trading at nearly 18 times earnings estimates for the next 12 months against its long-term average of 15 times.

First-quarter earnings for SP 500 companies are expected to rise 10.1 percent, according to Thomson Reuters I/B/E/S.

“The policy risk has increased … but economic data still remains solid and therefore earnings should be good,” said Walter Todd, chief investment officer of Greenwood Capital in Greenwood, South Carolina. “Absent some revelation on the policy front, I think that’s the next catalyst for the market, is when we start seeing companies report.”

The Dow Jones Industrial Average .DJI fell 42.18 points, or 0.2 percent, to 20,659.32, the SP 500 .SPX gained 2.56 points, or 0.11 percent, to 2,361.13 and the Nasdaq Composite .IXIC added 22.41 points, or 0.38 percent, to 5,897.55.

The energy sector .SPNY gained 1.2 percent, leading all sectors, supported by stronger oil prices CLc1.

The consumer discretionary sector .SPLRCD rose 0.6 percent as retailers such as Nordstrom (JWN.N) and Kohl’s (KSS.N) surged. (AMZN.O) rose 2.1 percent and hit an all-time high, giving the biggest boost to the SP 500 and Nasdaq.

Financial shares .SPSY fell back 0.5 percent a day after leading a rally.

Investors also digested comments from Federal Reserve officials. Chicago Fed President Charles Evans said he favors further interest rate hikes this year, while Boston Fed President Eric Rosengren said the Fed should raise rates three more times in 2017.

“The market seems to be unfazed by the fact that the Fed is looking to be somewhat aggressive in raising rates,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

The stock rally fueled by optimism President Donald Trump will boost the economy may be near its peak, according to a Reuters poll of strategists, who forecast U.S. shares will gain less than 3 percent between now and year-end.

In corporate news, Vertex Pharmaceuticals (VRTX.O) soared 20.5 percent after the company’s cystic fibrosis treatment succeeded in a late-stage study. The stock boosted the SP and helped drive the Nasdaq Biotechnology index .NBI up 0.9 percent.

About 5.8 billion shares changed hands in U.S. exchanges, well below the 6.9 billion daily average over the last 20 sessions and among the lightest volume days in 2017.

Advancing issues outnumbered declining ones on the NYSE by a 1.88-to-1 ratio; on Nasdaq, a 1.59-to-1 ratio favored advancers.

The SP 500 posted 14 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 86 new highs and 24 new lows.

(Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D’Silva and Nick Zieminski)

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