News Archive

Trump could target ‘carried interest’ tax loophole: official

WASHINGTON The Trump administration’s push to overhaul tax laws might soon target a loophole used by some financial managers to lower their tax rates, White House Chief of Staff Reince Priebus said on Sunday.

President Donald Trump campaigned before the Nov. 8 election to eliminate the so-called “carried interest” loophole, which is used by many financial managers to lower tax obligations. But a rough outline for a major tax overhaul released last week failed to mention the loophole.

Priebus, however, hinted that carried-interest could be on the chopping block and warned against analysts taking the view that financial managers would keep on benefiting from it.

“That balloon is going to get popped pretty quick,” Priebus told ABC’s “This Week.”

“Carried interest is on the table,” he said. “The president wants to get rid of carried interest so that balloon is not going to stay inflated very long, I assure you of that.”

The carried interest rule allows financial managers at private equity, hedge fund and other firms to pay a capital gains tax rate on their income instead of the higher income tax rate.

Trump’s tax overhaul plan would slash rates for businesses. Vice President Mike Pence told NBC “Meet the Press” on Sunday the plan might widen budget deficits “in the short term,” but faster economic growth would eventually lead to higher revenue.

(Reporting by Jason Lange; Editing by Andrew Hay)

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UPS air maintenance workers threaten strike ahead of shareholders meeting

A union representing 1,200 U.S. air maintenance workers at United Parcel Service Inc (UPS.N) turned up pressure on the company on Sunday to settle a three-year contract dispute, saying it would seek clearance to strike.

The union is taking its grievances directly to UPS shareholders, running as an advertisement an open letter to David Abney, the company’s chief executive, ahead of a Thursday shareholders meeting.

The letter, which has been delivered to board members, was signed by nearly 78 percent of members of Local 2727 of the Teamsters union, asking the company to maintain air mechanics’ current health plan and not demand other concessions.

“We’re not willing to back off of this and we will strike over it,” said Tim Boyle, the local president.

The company said that it continues to negotiate in good faith with the union.

“Talks continue under the control of the National Mediation Board, which has scheduled sessions several months out,” said Mike Mangeot, a spokesman for UPS Airlines, in a statement.

“The union’s talk about a job action is simply posturing and a common union tactic designed to pressure talks. Our mechanics are good people who do a good job of keeping our aircraft flying safely and reliably, and UPS continues to negotiate in good faith for an agreement that’s good for them, the company and our stakeholders.”

Union members will also protest at the UPS shareholders’ meeting on Thursday in Wilmington, Delaware, with protests outside the meeting and, for union members who are also shareholders, questions to company officials inside.

The local plans additional protests on Tuesday in Atlanta, where the company is headquartered.

The union already voted in November to strike, but saw that request denied by federal authorities. The air maintenance workers are governed by the U.S. Railway Labor Act, which only allows strikes after it finds negotiations and mediation have failed.

But if the company does not agree to keep members’ health plans intact at the next bargaining session, on May 11 and May 12, Boyle said the union would ask again for permission to strike.

Even if the board grants permission, though, a strike would take at least another 30 days because of other procedural hurdles.

A strike could ground the package delivery company’s airplanes and disrupt packages sent by air, even as UPS and its rivals grapple with higher costs for surging e-commerce business.

(Reporting by Luciana Lopez in New York; Editing by Lisa Shumaker and Nick Zieminski)

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Siemens, SAP sign cooperation deals with Saudi Arabia: officials

JEDDAH Saudi Arabia wants German companies Siemens (SIEGn.DE) and SAP (SAPG.DE) to play an important role in furthering the kingdom’s “digital transformation”, company officials said on Sunday during German Chancellor Angela Merkel’s visit to the country.

Top executives at the engineering conglomerate and the business software company who were traveling with Merkel signed declarations of intent to work with the Saudi authorities, the officials said.

Saudi Arabia is pushing a long-term economic transformation dubbed “Vision 2030” to reduce the country’s reliance on oil, attract investment and improve the lives of its citizens.

Siemens signed a framework agreement with the Saudi National Industrial Clusters Development Program (NICDP) which the German group said could lead to equipping infrastructure projects worth at least a billion euros.

The company also wants to provide vocational training in Saudi Arabia, while SAP has agreed with the Saudi Ministry of Planning to cooperate on the country’s digitization efforts, officials said.

The German business delegation traveling with Merkel on her Gulf visit also includes the chief executives of Lufthansa (LHAG.DE), national railway operator Deutsche Bahn [DBN.UL] and industrial services group Bilfinger (GBFG.DE).

(Reporting by Andreas Rinke; Writing by Andreas Cremer; Editing by Greg Mahlich)

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Sudden collapse of Alitalia would be a shock to Italy’s economy-minister

ROME A sudden collapse of loss-making national airline Alitalia [CAITLA.UL] would be a great shock for Italy’s economy, Industry Minister Carlo Calenda said on Sunday.

Rome has thrown the crisis-hit airline a short-term lifeline, a bridging loan of up to 400 million euros ($436 million) to see it through a process whereby an administrator will decide if it can be sold as a going concern or should be liquidated.

“It (sudden closure) would be a shock for GDP (economic output) much greater than the scenario that we are looking at: a brief period of six months covered by a bridging loan from the government so as to find a buyer who could provide services that Italians need as travelers,” he said in an interview with Sky TG24 television.

Rival airlines have shown little interest in buying Alitalia and creditors have refused to lend more money after workers last Monday rejected a rescue plan that would have reduced pay and cut 1,700 jobs.

(Reporting By Philip Pullella; Editing by Greg Mahlich)

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Off target in 2016, global elite regroup at Milken conference

BEVERLY HILLS, Calif. Titans of U.S. industry and Wall Street gather in Beverly Hills this week to discuss how to navigate – and profit from – hot topics such as U.S. tax reform, the upcoming French election and Chinese economic growth.

U.S. President Donald Trump’s first 100 days and the next 1,000, as well as the outlook for liberal democracy in Europe in the wake of Brexit are also set for debate at the Milken Institute Global Conference.

The event aims to convene “the best minds in the world to tackle the most stubborn challenges,” but political and market surprises over the past year serve as a reminder that predictions made by its roster of elite speakers are far from certain.

Most attendees expected Hillary Clinton to beat Trump, as Carlyle Group LP (CG.O) co-founder David Rubenstein noted during a panel discussion in May 2016. And many did not predict a UK vote to leave the European Union. Former UK Prime Minister Tony Blair said in an interview at the event last year that voters were likely to do “do the sensible thing and stay.”

Jill Posnick, the Milken Institute’s executive director of communications, said it is natural that some calls will be off.

“We solicit multiple points of view and promote a free flow of ideas designed to solve world challenges, rather than making predictions about where the markets are going,” she said.


The four-day meeting this year at the Beverly Hilton hotel will once again mix big investment industry names such as billionaires Jamie Dimon, Stephen Schwarzman, Leon Black and Kenneth Griffin with political, business and entertainment celebrities, including U.S. Treasury Secretary Steven Mnuchin, former U.S. Vice President Joe Biden, Cisco Systems Inc (CSCO.O) Executive Chairman John Chambers and basketball great Kareem Abdul-Jabbar.

Total attendance is estimated to be the most ever: some 4,000 are registered, up from 3,500 last year. Most conference goers pay at least $12,500 if they are not from event sponsors such as Guggenheim Partners LLC, Goldman Sachs Group Inc (GS.N) and Two Sigma Investments LP.

Some repeat attendees told Reuters they come less for the investment advice and more for the chance to network, sell product and learn about far-flung topics.

“It’s about connections and to be seen,” said a staffer at a large money management firm who asked not to be named. “Are there a large number of people actually taking notes and implementing them? No.”

Last year, few money managers at Milken encouraged generic investment in U.S. stocks, instead recommending relatively conservative or idiosyncratic bets such as private loans or even holding cash. The SP 500 Index total return over the last 12 months was around 16.5 percent. Slowing growth in China was also a source of fear. Hedge fund manager Kyle Bass, for example, warned of a potential 30 percent or 40 percent loss on Chinese investments, especially the financial sector. Bass called the situation “precarious,” highlighting the point with a photo of an ignited bomb fuse. China’s economy expanded in line with expectations at 6.7 percent in 2016, according to the government, and the Global X China Financials ETF (CHIX.P) gained 16.5 percent over the last 12 months. To be sure, there were prescient market calls. Sarah Ketterer, CEO of Causeway Capital Management LLC, said financial and bank stocks were a bargain. David Harding, CEO of Winton Capital Management Ltd, recommended the bonds of beat-up coal companies. Steven Tananbaum, chief investment officer of GoldenTree Asset Management LP, also pitched selective emerging market plays, such as bonds of Mexican state oil company Pemex. All have rallied over the last year.

(Reporting by Lawrence Delevingne; Editing by Carmel Crimmins and Lisa Shumaker)

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China April manufacturing growth slows faster than expected

BEIJING Growth in China’s manufacturing sector slowed faster than expected in April, an official survey showed on Sunday, as producer price inflation cooled and policymakers’ efforts to reduce financial risks in the economy weighed on demand.

The National Bureau of Statistics’ official Purchasing Managers’ Index (PMI) fell to a six-month low of 51.2 in April from March’s near five-year high of 51.8.

Analysts polled by Reuters had predicted a reading of 51.6, the ninth straight month above the 50-point mark that separates growth from contraction on a monthly basis.

Demand weakened across the board with the biggest decline in the input price sub-index, which fell to 51.8, its slowest expansion since June last year, from 59.3 in March.

Zhou Hao, an economist at Commerzbank in Singapore, said recent sharp declines in iron ore and onshore steel prices point to some of the pressures the country’s manufacturers are facing.

“We believe that this on one hand reflects that there is little improvement in underlying demand,” Zhou wrote in a note.

“On the other hand, the de-leveraging effort by the Chinese authorities, has started to work.”

Chinese steel and iron ore futures tumbled to multi-month lows earlier this month as market sentiment turned bearish on demand outlook and worries mounted about a glut of steel later this year.

The employment sub-index slipped to 49.2 from 50.0 in March while the raw materials inventories sub-index was unchanged at 48.3.

Growth in China’s services sector slowed slightly to 54.0 in April, compared with the previous month’s reading of 55.1, which was the highest since May 2014.

China’s economy grew a faster-than-expected 6.9 percent in the first quarter, boosted by higher government infrastructure spending and the nation’s gravity-defying property boom.

But growth is expected to slow as authorities step up a battle to cool the property sector and as the central bank and banking regulator take steps to contain financial risks.

The People’s Bank of China is expected to guide short-term interest rates higher, and step up its oversight of the financial sector, amid a crackdown on banks’ shadow banking businesses.

Chinese leaders have pledged to shift the emphasis to addressing financial risks and asset bubbles, which analysts say pose a threat to the world’s second-largest economy if not managed properly.

President Xi Jinping last week called for increased efforts to ward off systemic risks to help maintain financial security, the official Xinhua news agency reported.

Some analysts believe China’s economic growth may have peaked in the first quarter but that it’s on track to hit a target of around 6.5 percent this year.

China’s producer price inflation cooled for the first time in seven months in March as iron ore and coal prices tumbled, while property sales growth slowed in the first quarter despite robust property investment.

The private sector Caixin/Markit PMI manufacturing survey, which focuses more on small and mid-sized firms, will be published on May 2. The Caixin/Markit PMI is expected to come in at 51.0 for April, according to a Reuters poll of economists, down from 51.2 in March.

(Reporting by Kevin Yao and Sue-Lin Wong; Editing by Sam Holmes)

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South Korea already working on reducing trade surplus with U.S.: finance minister

SEOUL South Korea’s finance minister said on Sunday the government was already working on downsizing its trade surplus with the United States, a reference to U.S. President Donald Trump’s comments Thursday that Washington will renegotiate or scrap the free trade pact the two countries have.

Finance Minister Yoo Il-ho added in televised comments he did not expect the free trade agreement will be terminated. It has been in effect since 2012.

“If one party requests for the trade deal to be terminated, it can be ended six months following the request. But we don’t feel that will happen yet,” said Yoo.

“We feel that there will be talks in any form to renegotiate the terms and we are preparing for them.”

Yoo reiterated his previous comments that Seoul has not yet received formal requests for talks to renegotiate the free trade deal from Washington yet. Trump’s threat to terminate the trade pact in a Reuters interview sent South Korea’s currency KRW= and shares .KS11 down on Friday.

(Reporting by Christine Kim and Se Young Lee; Editing by)

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British PM May sets out plans to protect pensions during takeovers

LONDON British Prime Minister Theresa May pledged to protect workers against irresponsible practices over pensions on Sunday, promising new regulations on how schemes are handled during corporate takeovers.

May’s Conservative party will give regulators power to examine takeover proposals that threaten the solvency of a company pension scheme, and the regulator could be empowered to block takeovers if it is not satisfied with the arrangements.

May set out the policy ahead of an election June 8. So far her pitch to voters has been based around trusting her to deliver Brexit, with parties yet to publish detailed policy plans.

“Today I am setting out our plans, if elected, to ensure the pensions of ordinary working people are protected against the actions of unscrupulous company bosses,” May said in a statement. “Safeguarding pensions to ensure dignity in retirement is about security for families.”

The pledge comes after high profile cases such as that of BHS, a retailer which was sold by billionaire Philip Green for one pound to a man who had been bankrupt before with no retail experience.

Green plugged a pension hole in the now-collapsed group with $451 million earlier this year, following severe criticism over his conduct and calls for his knighthood to be removed.

The Conservative’s plans could also see regulators block unsustainable dividend payments that threaten a pension scheme’s solvency, and directors who are found to have wilfully left a scheme under-funded could be fined or even suspended for a period of time.

(Reporting by Alistair Smout; Editing by Bernard Orr)

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Bailout or bust? Alitalia divides a nation, paralyzes Rome

ROME/MILAN Italians are watching their flag carrier Alitalia go into yet another financial tailspin, and a growing number of them believe it would be better for the country if it crashed.

Outraged at repeated state bailouts that have cost taxpayers more than 7 billion euros ($7.62 billion) over a decade, many Italians are taking to social media to urge the government to resist the political temptation to rush to its rescue again.

    “In electoral terms, Alitalia is worth nothing. It’s a dead weight,” Angelino Ghinelli tweeted into a social media storm that has not gone unnoticed in Rome, where ministers have so far shown a strong reluctance to make any guarantees.

    “Enough with saving Alitalia,” wrote Cinzia Briguglio, one of around 1,000 signatories to an online petition that sprang up this week, calling for the government not to get involved.

Consumer groups have also chimed in, including one, Codacons, which has threatened to ask Italy’s Corte dei Conti, a judicial auditor, to examine any state bailout. The court can fine officials, including ministers, for wasting public funds.

An opinion poll published on Friday, four days after Alitalia workers voted to reject a union-backed rescue plan proposed by management, shows that 77 percent of Italians believed the airline should be left to fail.

“It’s clear Italians are opposed to governments systematically running up deficits to deal with companies in crisis,” Natascia Turato, director of Index Research, said in a comment the firm posted online, along with its poll results.

Without state support, Alitalia appears headed for collapse. Rival airlines show little interest in buying it, and creditors refuse to lend more money after workers last Monday voted down a rescue plan that would have cut 1,700 jobs and trimmed salaries.

Rome has thrown Alitalia a short-term lifeline, a bridging loan of up to 400 million euros to see it through a bankruptcy process, under which an administrator will decide if it can be sold as a going concern or should be liquidated.

However, the government has ruled out renationalising the former state-owned business, once a symbol of Italy’s post-war economic boom but now struggling to compete at home against low-cost carriers Ryanair (RYA.I) and EasyJet (EZJ.L).

Italian Finance Minister Pier Carlo Padoan has gone a step further, saying the government is unwilling, directly or indirectly, to invest any capital in it.

But with a general election due by May 2018, few Italians believe the ruling Democratic Party will really stand by and watch Alitalia crash and its 12,500 workers lose their jobs.


Former prime minister Matteo Renzi, who is charting his way back to power, has said he will come up with a plan to rescue the airline by mid-May, assuming he emerges from this weekend’s Democratic Party primaries as its newly re-elected leader.

The hardening of public opinion against Alitalia, though, makes the political calculations difficult — and neither Renzi nor his party’s main political rival, the 5 Star Movement, has advanced any concrete proposals for Alitalia.

    Five Star’s leaders have refused to be drawn on whether they would be willing to see public money put into the company.

“This time around the public is very divided on the issue which makes things difficult,” said Andrea Giuricin, transport expert at Milan’s Bicocca university and author of  “The endless privatization of Alitalia”.

   “This is why political parties like Five Star or politicians like Renzi don’t yet have a clear position on the issue, are not yet certain what stand to take.” 

Opinions on the street are sharply divided.

“I haven’t flown Alitalia in years. Do we need a domestic flag carrier? I don’t think that’s necessary these days,” said Giulio Alesi, a Milan-based management student.

In Rome, where most of Alitalia’s employees live, it is easy to find people who want the government to mount another rescue.

“I am absolutely for Alitalia being nationalized so that workers can keep their jobs under decent contractual terms,” said Raffaele Di Giacomo, a salesman in a hardware store.

However, some trade unionists sense there is a strong current of public opinion against a state-funded bailout.

“I know people are against the state to jump in,” said Antonio Piras, leader of Fit-Cisl, one of the trade unions that backed the management rescue plan. “But an electoral campaign is already on and this is a moment when anything can happen.”

($1 = 0.9184 euros)

(Editing by Mark Bendeich and Ros Russell)

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