News Archive

Wall Street slips on weak GDP data, but indexes rise in April

NEW YORK Stocks edged lower on Wall Street on Friday after data showing the U.S. economy grew at its weakest pace in three years in the first quarter gave traders a reason to cash recent gains.

Major indexes closed up for April, however, with the Nasdaq up for six consecutive months, the longest streak in nearly four years.

Gross domestic product grew at a 0.7 percent annual rate, below the 1.2 percent rise estimated by economists, as consumer spending barely increased and businesses invested less in inventories. The economy grew at a 2.1 percent pace in the fourth quarter.

“GDP was a little bit light and that may be the cause of some weakness today,” said Gary Bradshaw, portfolio manager at Hodges Capital Management in Dallas.

Citi Research’s gauge on U.S. economic data surprises .CESIUSD turned negative for the first time since November.

The soft growth data is bad news for the Trump administration after campaign promises to significantly boost growth and adds to concerns among some in the market that lower taxes, deregulation and increased government spending – the main reasons for a post-election rally – will be, at the least, delayed.

“We saw the rally fade quite a bit into the last part of the first quarter,” said Bradshaw. “I think you’re going to have to see some (legislation) within the next couple of months, otherwise the market will become disenchanted. So far it’s been all talk, no show.”

The Dow Jones Industrial Average .DJI fell 40.82 points, or 0.19 percent, to close at 20,940.51, the SP 500 .SPX lost 4.57 points, or 0.19 percent, to 2,384.2 and the Nasdaq Composite .IXIC dropped 1.33 points, or 0.02 percent, to 6,047.61.

For the week, the Dow rose 1.9 percent, the SP gained 1.5 percent and the Nasdaq rose 2.3 percent. During April, the Dow gained 1.3 percent, the SP rose 0.9 percent and the Nasdaq jumped 2.3 percent.

The Nasdaq was buoyed Friday by gains in Amazon and Google’s parent Alphabet.

Amazon (AMZN.O) rose as much as 3.4 percent to a life high of $949.59, and ended up 0.7 percent at $924.99, while Alphabet (GOOGL.O) gained as much as 5 percent to a record of $935.90 and closed up 3.7 percent at $924.52 after their quarterly results beat estimates.

Combined earnings reports and expectations for SP 500 companies show profits are estimated to have risen 13.6 percent in the first quarter, the most since 2011, according to Thomson Reuters I/B/E/S.

While strong earnings have kept the market at or near record levels, persistent geopolitical tensions have weighed on investors’ minds.

Intel (INTC.O) fell 3.4 percent to $36.15 after the company reported lower-than-expected quarterly revenue.

Baidu (BIDU.O) ended down 4.1 percent at $180.23 after the Chinese internet company forecast second-quarter revenue largely below estimates.

Declining issues outnumbered advancing ones on the NYSE by a 1.59-to-1 ratio; on Nasdaq, a 1.76-to-1 ratio favored decliners.

The SP 500 posted 39 new 52-week highs and six new lows; the Nasdaq Composite recorded 103 new highs and 44 new lows.

About 6.94 billion shares changed hands in U.S. exchanges on Friday, above the 6.55 billion daily average over the last 20 sessions.

(Reporting by Rodrigo Campos; Additional reporting by Tanya Agrawal in Bengaluru; Editing by James Dalgleish)

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U.S. first quarter growth weakest in three years as consumer spending falters

WASHINGTON The U.S. economy grew at its weakest pace in three years in the first quarter as consumer spending almost stalled, but a surge in business investment and wage growth suggested activity would regain momentum as the year progresses.

The soft patch at the start of the year is bad news for the Trump administration’s ambitions to significantly boost growth.

“It marks a rough start to the administration’s high hopes of achieving 3 percent or better growth; this is not the kind of news it was looking for to cap its first 100 days in office,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.

Gross domestic product increased at a 0.7 percent annual rate also as the government further cut defense spending and businesses spent less on inventories, the Commerce Department said on Friday in its advance estimate. That was the weakest performance since the first quarter of 2014.

The pedestrian first-quarter growth pace is, however, not a true picture of the economy’s health. Wage growth in the first quarter was the fastest in 10 years as the labor market nears full employment and business investment on equipment was the strongest since the third quarter of 2015.

Also underscoring the economy’s underlying strength, consumer and business confidence are near multi-year highs. First-quarter GDP tends to underperform because of difficulties with the calculation of data that the government has acknowledged and is working to rectify.

Prices for U.S. Treasuries were narrowly mixed. The dollar was little changed while U.S. stocks were trading marginally lower.

President Donald Trump has pledged to raise annual growth to 4 percent through infrastructure spending, tax cuts and deregulation. On Wednesday, the White House proposed a tax plan that includes cutting the corporate income tax rate to 15 percent from 35 percent, but offered no details.


Economists are skeptical that fiscal stimulus, if it materializes, will fire up the economy given weak productivity and labor shortages in some areas. They see growth just above 2 percent this year.

“The cupboard is bare when companies need to hire skilled labor. You can’t build American if you can’t find any American workers to put on your shop floor,” said Christopher Rupkey, chief economist at MUFG Union Bank in New York.

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, braked to a 0.3 percent rate, the slowest pace since the fourth quarter of 2009. That followed the fourth quarter’s robust 3.5 percent growth rate.

A mild winter undercut demand for heating and utilities production. Higher inflation, with the personal consumption expenditures price index averaging 2.4 percent – the highest since the second quarter of 2011 – was also a drag.

Spending also took a hit from government delays issuing income tax refunds to combat fraud.

In a separate report on Friday, the Labor Department said private sector wages jumped 0.9 percent in the first quarter, the largest increase in a 10 years, after rising 0.5 percent in the fourth quarter.

With wage growth, business investment and inflation firming, economists believe Federal Reserve officials will look past the weak first-quarter GDP when they meet next week.

Fed Chair Janet Yellen has previously described quarterly GDP as “noisy.” The U.S. central bank lifted its overnight interest rate by a quarter of a percentage point in March and has forecast two more hikes this year. It is not expected to raise interest rates next Wednesday.

“There is enough reason to doubt the growth slowdown for the Fed to stay the course on tightening, especially with a bigger-than-expected pop in employment costs,” said Chris Low, chief economist at FTN Financial in New York. 

Businesses accumulated inventories at a rate of $10.3 billion in the last quarter, down from $49.6 billion in the October-December period. Inventories subtracted 0.93 percentage point from GDP growth.

Government spending on defense declined at a 4.0 percent pace, the biggest fall since the fourth quarter of 2014 and second quarterly drop.

Business spending on equipment accelerated at a 9.1 percent rate in the first quarter thanks to rising oil prices. Spending on mining exploration, wells and shafts surged at a record 449 percent rate. That led to spending on nonresidential structures rebounding at a 22.1 percent pace, the fastest in three years.

Investment in home building increased for a second quarter while rising exports narrowed the trade deficit.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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Weekahead: Hot earnings to keep fire under growth-stock rally

NEW YORK Don’t look for the outperformance of growth stocks to fade any time soon, as long as corporate earnings continue to improve and hopes remain for stronger economic growth.

The Russell 1000 Growth index .RLG, which tracks such shares, is up 10.9 percent so far this year, outpacing the U.S. benchmark SP 500 stock index’s 6.6 percent rise and the 2.8 percent advance of the Russell 1000 Value index .RLV.

And it’s not just a U.S. phenomenon. Growth stocks – whose profits are expected to grow at a faster pace than the broader market – are also outperforming their value counterparts in Asia and Europe. Still, the appeal of riskier stocks perceived as better positioned to ride an accelerating global earnings tailwind, as opposed to those with a greater cushion of safety, is nowhere as far ahead as it is on Wall Street.

In the United States, an improving outlook for corporate earnings should help keep growth names in vogue, according to John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey.

The average estimate of analysts for earnings per share growth this year of SP 500 companies has risen to 11.3 percent from 10.9 percent at the start of the month, according to Thomson Reuters data, a trend that should continue to blunt concerns about lofty growth valuations.

“When you have an earnings recovery, growth stocks will outperform. When you don’t have good earnings, that’s when people are looking for value,” said Praveen.

Hopes for pro-business U.S. policy changes under the administration of President Donald Trump will likely also keep expectations for economic growth elevated, helping to maintain the case for growth stocks.

“The value stocks have done okay but growth has done so much better in the anticipation we’ll see a pickup in economic growth,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago. “Companies that are going to be more levered to economic growth tend to be growth stocks.”

“Right now I don’t see a long term condition for value stocks to outperform growth,” said Nolte.

To be sure, some strategists are less convinced that growth stock outperformance will continue indefinitely.

While value stocks, which are cheaper relative to their earnings potential, have tended to do better in slower growth environments historically, JP Morgan Asset Management’s global market strategist David Lebovitz says that trend has been changing.

“It’s not going to be smooth sailing for one or the other. We think there’ll be times people are more optimistic about the economy and in those cases, value can rally. Then you’ll see periods where people are less optimistic about the economy, as we’ve seen over the course of the first quarter,” he said.

If economic trends look better in the second quarter, value stocks will do better, Lebovitz said.

In Asia, the MSCI AC Asia ex Japan growth index .MIAX0000GPUS, is up 18.5 percent so far this year, compared with a 12.6 percent gain for the comparable MSCI value index .MIAX0000VPUS.

Investment in India, traditionally a growth-driven market, has adjusted in recent years as value stocks have narrowed the gap with growth, which still lead, said Jayesh Shroff, co-founder of investment advisory Cask Capital in Mumbai.

“That is because people were paying a premium for growth and somehow the growth did not materialize. That’s why value came back and growth has taken a slight back seat,” said Shroff. Still, he said as soon as growth returns, he expects investors to switch their focus back from value.

In China, between 2009 and the 2015 stock market crash, small-cap growth stocks were the market’s darlings, but “a new rotation into value blue-chip investments started in 2016,” according to Zhou Liang, fund manager at Shanghai Minority Asset Management Co.

“In 2017, money will flow into blue-chips, as small-caps weaken and lose their luster,” said Zhou.

In Europe, the best outlook for corporate profits in seven years has ignited investor appetite for growth stocks, which are now up twice as much as their value counterparts so far this year, a reversal of the trend seen last year.

As a result the MSCI International Europe growth Index .MIEUOOOOGPEU has jumped 8.9 percent this year so far, compared with a 4.5 percent gain for the MSCI International Europe Value index .MIEUOOOOVPEU.

With such a big gap between U.S. growth and value stocks, some investors are eying overseas investments.

“The entire U.S. market is very expensive. Value investors definitely don’t like to chase expensive valuations,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut. “I wouldn’t expect to see a rotation until you saw a correction where both stock types are lower.”

(Additional reporting by Abhirup Roy in Mumbai, Samuel Shen in Shanghai, Helen Reid in London; Editing by Dan Burns and Bernadette Baum)

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In first 100 days, a reversal of fortune for Trump favorites on Wall Street

SAN FRANCISCO A funny thing happened on Wall Street in Donald Trump’s first 100 days in the White House: Shares of companies that got closest to the president lagged the market’s march higher.

Meanwhile, stocks from sectors that have had less access, and have faced occasional bluster from Trump, such as media and technology, have hopped into the driver seat.

Banks, industrials and other companies expected to win from Trump’s policies surged following his unexpected election victory in November. Valuations for many grew stretched.

But Wall Street’s change in focus in recent months also reflects concerns among investors that Trump may struggle to enact deep tax cuts and stimulate economic growth as quickly as previously expected. Indeed, the economy grew just 0.7 percent on an annualized basis in the first quarter, the first of Trump’s presidency, as consumer spending stalled.

Many of the industries Trump singled out for special attention, like coalminers, steelmakers and oil companies, face major market trends and commodity price fluctuations that he can do little to change.

Since Trump’s inauguration on Jan. 20, representatives from nearly 100 publicly-listed companies have visited the White House, with carmakers, healthcare companies, banks and industrials getting more face time than technology companies, retailers and media firms.

Shares of companies that have visited the White House since the inauguration have enjoyed a median increase of 3.7 percent, trailing the benchmark Standard Poor’s 500 Index’s gain of 5.5 percent.

But Trump’s recent failure to push a healthcare overhaul through Congress, as well as other miscues, now have investors a little less sure he will be able to make good on his promises.

The SP 500 is near record highs after the administration unveiled a long-awaited proposal Wednesday to steeply cut corporate tax rates. But the plan may be unpalatable to Republican fiscal hawks since it lacks proposals for raising new revenue and would potentially add billions of dollars to the federal deficit.

“The stability of the market and its ability to rise is still based on the feeling that the administration may be getting its act together,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York. “But at some point investors will ask if any of this stuff is going to happen or if it’s all talk.”

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Since the election, the financial sector .SPSY has risen 19 percent, more than any other. But its gain since the inauguration has been among the weakest, at 3 percent.

An investor buying a basket of banks and selling utilities immediately after Trump’s election would have made as much as 29 percent by mid-February. But that gain has since shrunk to 17 percent, according to Vincent Deluard, Vice President, Global Macro Strategy at INTL FCStone Financial Inc.

Other “Trump trades” have lost momentum.

Investors bet big on steel right out of the gate after Election Day, with the industry seen as a poster child for Trump’s focus on “unfair” trade deals that hurt U.S. producers. The SP 1500 steel industry group index .SPCOMSTEEL had gained 36 percent by the first week of December.

The group is down by more than 13 percent since then, however, and even last week’s executive order to investigate whether U.S. steel companies need additional trade protections under the auspices of national security delivered only a short-lived rebound. Poor earnings from sector heavyweight United States Steel Corp (X.N) ruined the party.

Trump this month signed an executive order sweeping away Obama-era climate change regulations, saying it would end America’s “war on coal.” But reflecting an abundance of cheap natural gas and falling costs of wind and solar power, coal miners CONSOL Energy (CNX.N) and Cloud Peak Energy (CLD.N) have dropped 16 percent and 32 percent, respectively, in Trump’s first 100 days.

Meanwhile, tech stocks that were left out of the early Trump rally have surged recently as investors shift out of low-valuation stocks favored immediately after the election and back into high-growth stocks like Alphabet (GOOGL.O) and Facebook (FB.O) that delivered much of the market’s momentum in recent years.

In the absence of concrete results from Trump, corporate earnings have taken center stage, with first-quarter profits of SP 500 companies expected to surge 13.6 percent, helped by strong international growth.

“Earnings are through-the-roof good. Companies are very profitable, and potentially are going to be more profitable with tax-cut legislation,” said Stephen Massocca, Senior Vice President at Wedbush Securities in San Francisco.

Other stocks seen as out of favor under Trump have also outperformed during his first 100 days.

Tesla (TSLA.O), which some investors feared could be hurt by the removal of tax incentives for the purchase of its electric vehicles, has surged 27 percent to record highs.

And perhaps most telling of all, the media sector – regularly lambasted by Trump for its coverage of him – is up 7 percent since he took office.

Even New York Times Co (NYT.N), publisher of what Trump has repeatedly disparaged as “the failed New York Times” newspaper, hit a three-year high after the inauguration and is up 10 percent since he moved into the White House.

(Reporting by Noel Randewich; Editing by Dan Burns and Nick Zieminski)

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U.S. gasoline demand falls for second straight month: EIA

NEW YORK U.S. gasoline demand fell 2.4 percent in February from a year earlier, the second straight monthly decline, according to data released on Friday by the U.S. Energy Information Administration that suggested the market may have trouble repeating last year’s record volumes.

Gasoline demand fell 218,000 barrels per day to 8.988 million bpd in February, according to the EIA’s petroleum supply monthly report.

January demand for gasoline fell 1.9 percent from last year, EIA data showed.

U.S. refiners have said weather issues cut demand early this year. They still expect gasoline demand will rise modestly from last year’s record levels, executives said in an earnings calls this week.

U.S. total oil demand in February fell 2.5 percent, or 492,000 bpd from a year ago, to 19.18 million bpd, EIA data showed.

The growth in total oil demand was also hurt by weaker February distillate demand, which fell by 1.4 percent, or 54,000 bpd, to 3.905 million bpd compared with last year, the data showed.

(Reporting By Jarrett Renshaw; Editing by David Gregorio)

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Next battleground: An aging Great Lakes pipeline stirs new protest

CALGARY, Alberta The growing protest movement against U.S. oil and gas pipelines has so far focused on stopping or delaying new construction, with some high-profile successes.

Now, in Michigan, a broad coalition of opponents is entering a new frontier: Pushing to rip out and reroute an existing pipeline – Enbridge Inc.’s aging Line 5, which crosses the Straits of Mackinac.

They fear the pipeline will leak into the Great Lakes, which contain about a fifth of the world’s fresh water and sustain the state’s second- and third-largest industries, agriculture and tourism.

Those concerns – which are shared by two likely candidates for governor – also have far-reaching implications for energy firms and consumers.

Spanning 645 miles, Line 5 carries 540,000 barrels per day of light Canadian crude and refined products between Wisconsin and Ontario, making it a key link in Enbridge’s network transporting western Canadian oil to eastern refineries. It also delivers about half the propane used to heat Michigan homes.

Moving the pipeline, built in 1953, would cost Enbridge $4.2 million per mile – or about $2.7 billion total, according to an estimate from IHS Markit analyst Phil Hopkins.

Enbridge spokesman Ryan Duffy said that the line is structurally sound and constantly monitored, tested and inspected to prevent leaks. The firm plans to add 18 additional supports in the Straits this summer, he said.

The unprecedented demands to move an existing pipeline present steep political and regulatory challenges, said Dirk Lever, an analyst with AltaCorp Capital in Calgary.

“Move it? The question is where,” he said. “And good luck with building a new pipeline.”

The Michigan controversy is only the latest pipeline fight.

Last year, protests by North Dakota’s Standing Rock Sioux, a Native American tribe, garnered national attention and delayed the opening of Energy Transfer Partners’ Dakota Access Pipeline, which finally won approval in February.

Another ETP pipeline proposed in Louisiana has drawn protests from flood protection advocates and commercial fishermen.

The Keystone XL pipeline, planned by TransCanada Corp, now faces a political showdown over route approval in Nebraska amid protests from farmers and ranchers.


In Michigan, pipeline opponents include regional businesses and churches, as well as local and national environmental groups.

State officials have ordered two independent reports, expected in June – one on the pipeline’s reliability and another on potential alternatives if the state moves to revoke easements that allow Line 5 to operate. The reports could fuel a debate that is expected to intensify in the 2018 governor’s race.

Many opponents argue the 64-year-old Enbridge pipeline has already outlived its predicted life span. They cite a 2015 interview with an engineer on the original project, Bruce Trudgen, who said that, at the time of construction, the pipeline was expected to last 50 years.

“Common sense dictates that a pipeline which is already 28 percent past its viable life will eventually be decommissioned,” said Gretchen Whitmer, a former Michigan senator now campaigning for the Democratic nomination for governor. “Government would be wise to plan for that proactively – before disaster strikes.”

Michigan Attorney General Bill Schuette, widely expected to run for governor as a Republican, has also expressed concerns about pipeline.

Enbridge, which operates more than 17,000 miles (28,000 kilometres) of oil and gas pipeline across North America, disputes the assertion that Line 5 has any specific life expectancy.

Regardless of initial predications, Duffy said, new technology developed since the 1950s can now keep pipelines in better condition for longer.


Michigan’s debate over whether Line 5’s age equates to a safety hazard could resonate across a nation crisscrossed with decades-old pipelines. More than half of U.S. pipelines were built in the 1950s or 1960s, according the U.S. Department of Transportation.

When the Enbridge line reaches the Straits of Mackinac, which connect lakes Huron and Michigan, it splits into twin 20-inch diameter steel pipes, hailed as a feat of modern engineering when they were installed in 1953.

Now, opponents here view them as the product of an era in which the damage from oil spills was not well-understood.

Enbridge is still working to overcome public concern over the 2010 failure of its Line 6B pipeline, which leaked 20,000 barrels of crude into Michigan’s Kalamazoo River in one of the largest inland spills in U.S. history.

The Straits – five miles wide and 120 feet deep – swirl with strong currents that would disperse contaminants from an oil spill faster than anywhere else in the Great Lakes, according to the National Oceanic and Atmospheric Administration.

The line has never spilled under the Straits, but has leaked at least eight times at other points between 1980 and October 2015, according to the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA). None of the leaks were larger than 100 barrels.

The leak that raised the most concern was a February 2012 incident in central Michigan that environmentalists contend exposed a flaw in the original construction.

The leak of about 20 barrels was traced to a tear in the pipeline that was estimated to have originated at about the time the line was constructed, according to a PHMSA report on the spill. The tear later spread into a larger crack, causing the leak.

“The nature of the problem is a defect in the pipeline traced to the entire construction period in 1953, so that raised a lot of doubts,” said David Holtz, a member of environmental group Sierra Club.

Enbridge declined to comment on the leaks.

The pipeline’s age is only one factor in considering whether it poses an environmental hazard, said Jim Feather, a former president of the National Association of Corrosion Experts and a retired ExxonMobil Corp engineering advisor.

Line 5 has done well in its regular in-line inspections, he said, and has ample protections in place.

“Just because something is old does not mean it’s at much greater risk of failure,” Feather said.

(Editing by David Gaffen and Brian Thevenot)

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Tech firms race to spot video violence

SINAGPORE Companies from Singapore to Finland are racing to improve artificial intelligence so software can automatically spot and block videos of grisly murders and mayhem before they go viral on social media.

None, so far, claim to have cracked the problem completely.

A Thai man who broadcast himself killing his 11-month-old daughter in a live video on Facebook this week, was the latest in a string of violent crimes shown live on the social media company. The incidents have prompted questions about how Facebook’s reporting system works and how violent content can be flagged faster.

A dozen or more companies are wrestling with the problem, those in the industry say. Google – which faces similar problems with its YouTube service – and Facebook are working on their own solutions.

Most are focusing on deep learning: a type of artificial intelligence that makes use of computerized neural networks. It is an approach that David Lissmyr, founder of Paris-based image and video analysis company Sightengine, says goes back to efforts in the 1950s to mimic the way neurons work and interact in the brain.

Teaching computers to learn with deep layers of artificial neurons has really only taken off in the past few years, said Matt Zeiler, founder and CEO of New York-based Clarifai, another video analysis company.

It’s only been relatively recently that there has been enough computing power and data available for teaching these systems, enabling “exponential leaps in the accuracy and efficacy of machine learning”, Zeiler said.


The teaching system begins with images fed through the computer’s neural layers, which then “learn” to identify a street sign, say, or a violent scene in a video.

Violent acts might include hacking actions, or blood, says Abhijit Shanbhag, CEO of Singapore-based Graymatics. If his engineers can’t find a suitable scene, they film it themselves in the office.

Zeiler says Clarifai’s algorithms can also recognize objects in a video that could be precursors to violence — a knife or gun, for instance.

But there are limits.

One is the software is only as good as the examples it is trained on. When someone decides to hang a child from a building, it’s not necessarily something the software has been programmed to watch for.

“As people get more innovative about such gruesome activity, the system needs to be trained on that,” said Shanbhag, whose company filters video and image content on behalf of several social media clients in Asia and elsewhere.

Another limitation is that violence can be subjective. A fast-moving scene with lots of gore should be easy enough to spot, says Junle Wang, head of RD at France-based PicPurify. But the company is still working on identifying violent scenes that don’t involve blood or weapons. Psychological torture, too, is hard to spot, says his colleague, CEO Yann Mareschal.

And then there’s content that could be deemed offensive without being intrinsically violent — an ISIS flag, for example — says Graymatics’s Shanbhag. That could require the system to be tweaked depending on the client.


Yet another limitation is that while automation may help, humans must still be involved to verify the authenticity of content that has been flagged as offensive or dangerous, said Mika Rautiainen, founder and CEO of Valossa, a Finnish company which finds undesirable content for media, entertainment and advertising companies.

Indeed, likely solutions would involve looking beyond the images themselves to incorporate other cues. PicPurify’s Wang says using algorithms to monitor the reaction of viewers — a sharp increase in reposts of a video, for example — might be an indicator.

Michael Pogrebnyak, CEO of Kuznech, said his Russian-U.S. company has added to its arsenal of pornographic image-spotting algorithms – which mostly focus on skin detection and camera motion — to include others that detect the logos of studios and warning text screens.

Facebook says it is using similar techniques to spot nudity, violence or other topics that don’t comply with its policies. A spokesperson didn’t respond to questions about whether the software was used in the Thai and other recent cases.

Some of the companies said industry adoption was slower than it could be, in part because of the added expense. That, they say, will change. Companies that manage user-generated content could increasingly come under regulatory pressure, says Valossa’s Rautiainen.

“Even without tightening regulation, not being able to deliver proper curation will increasingly lead to negative effects in online brand identity,” Rautiainen says.

(Reporting By Jeremy Wagstaff; Editing by Bill Tarrant)

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Westinghouse says will operate normally in Asia, Europe despite Chapter 11

BEIJING Toshiba Corp’s Westinghouse Electric Co unit will continue operating normally in Asia and Europe, despite the ongoing Chapter 11 restructuring, an executive at the troubled company said on Friday.

Westinghouse filed for bankruptcy last month, hit by billions of dollars of cost overruns at four nuclear reactors under construction in the United States.

Despite the filing, the company will continue existing projects in China and pursue others, focusing on engineering and procurement rather than construction, said Gavin Liu, Westinghouse’s president for Asia, at an industry event.

The plan was to decouple the U.S. AP1000 nuclear reactors from the rest of Westinghouse’s operations, which he said was “very healthy and profitable.”

“The rest of the Westinghouse business, the healthy part, which is new plant construction, fuel, service, decommissioning – we anticipate an ownership change,” Liu said, adding that there has been “high interest from the financial community”.

A source with knowledge of the issue told Reuters that about 10 potential bidders had shown interest, including Western Digital Corp, rival Micron Technology Inc, South Korean chipmaker SK Hynix Inc and financial investors.

The Trump administration and Japanese government are in discussions to ensure that its bankruptcy does not lead to U.S. technology secrets and infrastructure falling into Chinese hands.

Four 1,000 megawatt medium-sized nuclear reactor designed by Westinghouse are under construction in China, which is increasing its use of the energy form as it seeks to limit the country’s reliance on other power sources such as dirty coal.

Liu said that the first AP1000 units in Sanmen and Haiyang were moving into the final stage of fuel loading and the Sanmen unit was on track to be put in commercial operation by the end of this year.

“As long as the first unit is on line commercially, that is the foundation for the industry and the government to approve future AP1000 units,” he said.

He added that Westinghouse was not concerned about competition from China’s domestically-developed third-generation reactor, Hualong One.

“Hualong is a Chinese indigenous design based on China’s early years experience in the nuclear area. It reflects the Chinese industry’s own capabilities,” he said.

“The future market will tell.”

(Reporting by David Stanway; Writing by Brenda Goh in SHANGHAI; Editing by Kim Coghill and Randy Fabi)

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Exclusive: Tesla’s Klaus Grohmann ousted after clash with CEO Musk

FRANKFURT Tesla executive Klaus Grohmann was ousted last month after a clash with Chief Executive Elon Musk over the strategy of Grohmann’s firm, which Tesla had acquired in November, a source familiar with the matter told Reuters.

The Silicon Valley luxury electric carmaker is counting on Grohmann Engineering’s automation and engineering expertise to help it ramp up production to 500,000 cars per year by 2018.

At the time of the purchase, it described Klaus Grohmann and the company he founded as a “world leader in highly automated manufacturing”.

Tesla planned to keep Grohmann on, and Grohmann wanted to stay, but the clash with Musk over how to treat existing clients resulted in his departure, the source said.

Grohmann disagreed with Musk’s demands to focus management attention on Tesla projects to the detriment of Grohmann Engineering’s legacy clients, which included Tesla’s direct German-based rivals Daimler and BMW, two sources familiar with the matter said.

Reached by phone, Klaus Grohmann declined to comment on the circumstances of his leaving, citing confidentiality clauses.

“I definitely did not depart because I had lost interest in working,” Grohmann said, without elaborating.

A Tesla spokesman, asked about Grohmann’s departure, praised him for building an “incredible company” and said:

“Part of Mr Grohmann’s decision to work with Tesla was to prepare for his retirement and leave the company in capable hands for the future. Given the change in focus to Tesla projects, we mutually decided that it was the right time for the next generation of management to lead.”

Two sources familiar with the matter said Tesla’s plans to ramp up production with the help of the company now renamed Tesla Grohmann Automation remain on track.

The management layer below Klaus Grohmann is continuing his work, they told Reuters. But they said parts of the workforce felt insecure about becoming so dependent on one client after the founder’s departure.

Last year, Tesla had said: “Under the continued leadership of Mr Grohmann, several critical elements of Tesla’s automated manufacturing systems will be designed and produced in Pruem, to help make our factories the most advanced in the world.”

“Our factories are so important that we believe they will ultimately deserve an order of magnitude more attention in engineering than what they produce. At very high production volumes, the factory becomes more of a product than the product itself,” Tesla said at the time.

Tesla started out as a client of Grohmann Engineering, a small unlisted company based in Pruem, near the Luxembourg border, that helped companies design highly automated factories, a source familiar with the company told Reuters.

As pressure grew to increase production volumes at Tesla, Musk decided to buy Grohmann Engineering and make Pruem a base for Tesla Advanced Automation.

As well as BMW and Daimler, Grohmann counted the auto parts maker Bosch [ROBG.UL], chip maker Intel, and pharmaceutical firms Abbott Laboratories and Roche among its clients.

Negotiations have started with some of the clients about how to compensate them for lack of resources devoted to their projects, one of the sources said.

The German labor union IG Metall has demanded that Tesla’s management formalize multi-year job guarantees and increase salaries as a way to provide assurance amid management turmoil.

(Reporting by Edward Taylor; Editing by Kevin Liffey)

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