News Archive

As Fed raises rates, aim is not to roil markets, Williams says

The U.S. economy is at or near the Federal Reserve’s goals of full employment and stable prices, San Francisco Fed President John Williams said, adding that the U.S. central bank wants to make sure markets stay calm as it slowly returns interest-rate policy to normal.

“If you remember nothing else I’ve shared with you today, I hope you’ll remember this: The last thing we want to do is to fuel unnecessary or avoidable volatility or disruption – whether we’re talking about domestic markets or international markets,” Williams said in remarks prepared for delivery Monday to the Symposium on Asian Banking and Finance, co-hosted with the Monetary Authority of Singapore.

With the economy at full employment and inflation expected to reach the Fed’s 2-percent goal by next year, the Fed needs to keep raising U.S. interest rates gradually or risk overheating the economy, Williams said.

The Fed raised rates in March, and at the time telegraphed a plan to lift them two more times this year, a pace that Williams last week told Reuters he thinks makes sense.

Policymakers meet again next month to decide their next move.

The Fed, Williams said Monday, is also committed to trimming its $4.5 trillion balance sheet, accumulated during years of bond-buying to stimulate investment and hiring after the Great Recession.

The process, which he said will likely start sometime later this year, will be “widely telegraphed, gradual, and – frankly – boring,” Williams said. “The more public understanding there is, the lesser the risk of market disruption and volatility.”

The last time the Fed shifted its policy on its balance sheet, domestic and international markets swooned in response. Fed officials this time around are keen to prevent another such incident.

(Writing by Ann Saphir; Editing by David Gregorio)

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Britain’s Heathrow says BA still experiencing some disruptions

London’s Heathrow Airport said early on Monday that there were still some disruptions to British Airways (ICAG.L) flights from the airport following a global computer system failure at the airline.

BA said on Twitter it would run a full schedule at London’s Gatwick on Monday and intended to operate a full long-haul schedule from Heathrow along with a high proportion of short-haul service.

The airline resumed some flights from Britain’s two biggest airports on Sunday, but hundreds of passengers were still waiting for hours at London Heathrow.

“We have mobilized additional Heathrow colleagues to assist passengers at the terminals and give out free water and snacks,” Heathrow said in a statement on Twitter.

The airport said earlier that further delays and cancellations of BA flights were expected on Sunday and told passengers not to travel to the airport unless they were rebooked on other flights.

BA canceled all its flights from Heathrow, Europe’s busiest airport, and Gatwick on Saturday after a power supply problem disrupted its flight operations worldwide and also hit its call centers and website.

(Reporting by Ismail Shakil in Bengaluru; Editing by Peter Cooney)

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Dollar steady, markets take North Korea missile test in stride

TOKYO The dollar was steady in early Asian trading on Monday, holding well above last week’s 6-1/2-month lows and taking news of Pyongyang’s latest missile test in stride.

The dollar index, which tracks the U.S. currency against a basket of six major rivals, was flat at 97.432, some distance from last week’s low of 96.797, its weakest since Nov. 9.

The greenback edged down slightly to 111.23 yen but mostly held its ground despite a cautious backdrop that usually gives Japan’s perceived safe-haven currency a lift.

North Korea fired what appeared to be a short-range ballistic missile on Monday that landed in the sea off its east coast, South Korea’s military said, the latest in a series of missile tests defying world pressure and threats of more sanctions.

“The markets are used to news of North Korea’s missile tests by now, and the dollar/yen is unlikely to move much unless there is some further escalation of the situation,” said Kumiko Ishikawa, FX market analyst at Sony Financial Holdings in Tokyo.

With U.S. markets closed on Monday for the Memorial Day holiday, major currency pairs were likely to tread water, with no incentive to take new positions.

Continuing political turmoil in Washington also kept investors cautious. U.S. President Donald Trump, returning to the White House after a nine-day trip to the Middle East and Europe, attacked the media and dismissed leaks as “fake news” on Sunday, following reports his son-in-law tried to set up a secret channel of communications with Moscow before Trump took office.

The euro was steady on the day at $1.1173, after notching a 6-1/2-month high of $1.1268 last week.

Net long positioning on the euro rose to its highest in more than three years in the week through May 23, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday.

Fading political risks in France and a stronger eurozone economy have led to heightened speculation that the European Central Bank may scale back its massive monetary stimulus.

ECB President Draghi is scheduled to speak at the European parliament later on Monday. Last week, Draghi said there was “no reason to deviate from the indications” that the central bank has already laid down.

Britain’s pound edged up 0.1 percent to $1.2811 after hitting a three-week low of $1.2775 on Friday in the wake of a poll showing a shrinking lead for the ruling Conservatives ahead of June 8 elections.

The latest weekend polls showed British Prime Minister Theresa May’s lead over the opposition Labour Party has narrowed sharply since last week’s terror attack in Manchester, suggesting she might not win the landslide predicted just a month ago.

Four opinion polls published on Saturday showed that May’s lead had contracted by a range of 2 to 6 percentage points, indicating the election could be much tighter than initially thought when she called the snap vote.

The South African rand, meanwhile, rose to a two-month high of 12.6300 per U.S. dollar, after South Africa President Jacob Zuma defeated a no-confidence motion against him at a meeting of top officials of the ruling African National Congress party on Sunday.

The greenback was last down 0.5 percent at 12.7925 rand.

(Reporting by Tokyo markets team; Editing by Shri Navaratnam)

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Lenovo’s struggling mobile business sets sight on high-end market

HONG KONG After a bruising fall from its spot as the world’s third-largest mobile phone maker following its acquisition of Motorola three years ago, China’s Lenovo Group Ltd (0992.HK) is counting on a push upmarket to stop the bleeding in its smartphone business.

While the company, which vies with HP as the world’s largest PC maker, returned to profit in the year to March, losses in its smartphone business worsened as marketing expenses for new products and key component costs increased.

The group’s phone problems started after it acquired Motorola Mobility from Google for $2.9 billion in 2014 but struggled to integrate the assets. That, combined with fierce competition from lower-end manufacturers in its home base of China such as Xiaomi and Oppo, saw its global position fall to eighth in 2016.

A recently announced reorganization of its China business aimed at sharpening the PC brand’s consumer focus comes amid an ongoing effort to tighten its mobile branding and shift the focus to pricier models under its Moto brand.

“Our strategy is to prioritize mature markets … which need brands and innovative products, whereas emerging markets need efficiency,” Chairman Yang Yuanqing said of Lenovo’s mobile business at a press conference in Hong Kong on Thursday.

“So we will have two teams catering to the two kinds of markets with different product lines.”

Lenovo faces its toughest battle in its home base of China, where it has slipped out of the top 10 smartphone vendors. Shipments domestically declined 80 percent year-on-year or 55 percent quarter-on-quarter in the first quarter of 2017, according to data from Canalys.

The company currently has three phone brands in China – the premium Moto brand, the cheaper Lenovo series, and an online-focused ZUK brand launched in 2015.

A Lenovo spokeswoman said its global mobile strategy would focus on the Motorola brand, although it would continue to support its other lines, such as ZUK.

Moto products, including a premium series of modular phones designed with detachable components that can be replaced or upgraded, helped propel Lenovo to be the second-biggest vendor in Brazil, after Samsung Electronics Co Ltd (005930.KS), Yang said.

Shipments in Brazil rose 56 percent in the first three months of the year according to Lenovo, overtaking India as its biggest market, where volume grew 34 percent.

The average selling prices of Lenovo’s mobile products rose 15.1 percent in the past year, according to its financial report.

Mature market competition, where Yang said Lenovo’s main rivals are Samsung and LG Electronics Inc (066570.KS), is less fierce than in emerging markets, where the low entry barrier allowed in “too many Chinese vendors, some of which compete irrationally”.

He added Lenovo will have three more telecom partners in the U.S. this year, while its performance in Western Europe is improving.


Yang said Lenovo is on track to meet its goal of turning around the mobile business by the second half of the fiscal year starting in April.

At the same time, some analysts say the company should cut its mobile losses in China and focus on building its strength in other markets.

“I think they should deep-six their China mobile business. Their non-China probably has a chance if it’s very narrowly geographic and product focused,” said Bernstein analyst Alberto Moel.

Lenovo is the fourth-biggest smartphone seller in India, with a 9.5 percent market share, which compares with Samsung in top place with 28.1, according to IDC.

While it faces increasing competition from new entrants Oppo and Vivo, it enjoys good brand loyalty.

“I like Lenovo phones for their good battery backup, smart looks and the overall experience,” said Bhaskar Kotian, a Mumbai businessman who has purchased at least six Lenovo smartphones for friends and family in the past two years.  

Despite calls to write off its China problems, Yang insists there are no plans to walk away from its domestic mobile business.

“We would never give up our China mobile business, because it is 30 percent of the world market,” he said.

(This story corrects to fix typographical error in headline.)

(Reporting by Sijia Jiang; Additional reporting by Sankalp Phartiyal; Editing by Sam Holmes)

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Supply problems hit production at BMW: Focus

FRANKFURT Problems at one of its suppliers has forced German carmaker BMW (BMWG.DE) to halt production in Leipzig and could hit its plants in China and South Africa, German magazine Focus reported in its online edition.

The magazine said problems at one of BMW’s Italian suppliers of parts for its steering technology was the reason for the disruption.

Citing a BMW spokesman, Focus reported that the carmaker has halted output at its plant in Leipzig, Germany since Friday and may have to reduce production in China and South Africa.

Production in Munich was also reduced for two days last week, the magazine reported.

Focus said the disruptions would cost BMW double-digit millions of euros a day, without saying where it got its information from.

BMW could not immediately be reached for comment outside regular business hours.

(Reporting by Harro ten Wolde; Editing by Susan Fenton)

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Beijing bling: Hyundai plots China branding reboot after missile row

SEOUL/BEIJING Bruised by anti-Korean sentiment in its biggest market and losing ground to local automakers, Hyundai Motor (005380.KS) will open its first Chinese brand store, and may locally assemble its premium Genesis cars and accelerate the launch of a sport-utility vehicle (SUV), people familiar with the plans said.

The measures are aimed at rebooting the South Korean firm’s branding in China, where many see Hyundai as a lower-end maker of city taxis.

Hyundai and its affiliate Kia Motors (000270.KS) were not long ago ranked third among foreign car brands in China, but recent sales have been hit by a consumer backlash over South Korea’s deployment of a U.S. anti-missile defense system which Beijing opposes.

Analysts say the diplomatic row masks broader problems for Hyundai/Kia in China: poor brand recognition and a model line-up struggling against local brands’ cheaper SUVs.

“Hyundai has an in-between brand that doesn’t have a clear identity in China, and there’s the backdrop of poor China-Korea relations,” said James Chao, Shanghai-based Asia-Pacific chief of consulting firm IHS Markit Automotive.

“Newly introduced SUVs should help, but they are late to the game.”

Even before the missile systems row, Hyundai/Kia’s China market share tumbled to 8.1 percent last year, the lowest in eight years. This year, it has slid further to 5 percent.

To help its identity crisis, Hyundai will in September open a brand experience center in Beijing’s 798 Art District, a trendy hub of refurbished factory buildings. Hyundai has three similar centers in Seoul and one in Moscow.

“We’re not going to show a real car. This space is only for focusing on brand building,” Xu Jing, the Hyundai executive in charge of the project, told Reuters.

The center was planned before the recent political tensions, but its completion is now a key plank in Hyundai’s efforts to regain a lost position in China as local automakers and European brands gain ground. Volvo-owner Geely (0175.HK) and Great Wall Motor (601633.SS) are also looking to move upmarket.

The branding store ventures into territory traditionally held by premium names such as Daimler’s (DAIGn.DE) “Mercedes me” stores and BMW’s (BMWG.DE) brand centers, already in China.


Hyundai is also considering using complete knock-down (CKD) kits shipped from South Korea to assemble Genesis cars in China – more than halving import tariffs to 10 percent – two people familiar with the matter said.

Building Genesis cars from kits in China would also prevent technology leaking to its local joint venture partner, BAIC (1958.HK), one of the people added.

The kits are a first step, said one Hyundai insider. “We are agonizing over how to source local parts and secure enough sales to build the Genesis cars.”

Hyundai launched its Genesis luxury sedan in 2008, and two years ago spun it off with the larger Equus sedan into a standalone premium brand. Brand chief Manfred Fitzgerald said last year Genesis would launch in China within 2-3 years.

Hyundai has not decided which Genesis model it will build in China first, but plans to have six models including a sports sedan and two SUVs under the premium marque by 2020.

“While the Genesis brand is reviewing a variety of strategies for the China market, no specific decisions have been made yet,” Hyundai said in a statement.

Hyundai sold 74 Genesis sedans in China last year, down from 1,016 in 2015. It sold a single Equus, down from 10 the previous year, according to export data seen by Reuters.


Hyundai may also bring forward by a month, to November, the launch of a small SUV, codenamed NU, to be built at its fourth factory in China, one of the people told Reuters.

And Kia is considering launching the Stinger, its first sports sedan, in China, people with direct knowledge of the matter said, though there are no plans to build the model there.

Hyundai said it also plans to apply new, cutting-edge technologies such as connectivity and advanced driver assistance systems (ADAS) to many products from the second half of this year, and soon introduce six new-energy vehicles.

Since starting to make cars in China in 2002, Hyundai has aggressively chased sales and market share by selling both older and new versions of models including the Elantra and Sonata sedans and Tucson SUV.

Among foreign car brands, Hyundai’s China sales lag only those of General Motors (GM.N) and Volkswagen (VOWG_p.DE), but it’s generally seen as more lower-end than American, German and Japanese rivals. Beijing Hyundai has supplied around a fifth of the capital’s taxis.

The volume sales model “did wonders for sales growth, but dented the Hyundai image in the minds of Chinese buyers,” said Michael Dunne, president of consultancy Dunne Automotive.

“(Having a) weaker brand … than Japanese automakers, I think it might take more time to restore the brand and sales,” said Han Sang-yun, director at SP, noting Japanese car makers took a year to bounce back in China after a 2012 consumer backlash over a territorial dispute between Beijing and Tokyo.

(Reporting by Hyunjoo Jin and Jake Spring, with additional reporting by Norihiko Shirouzu; Editing by Clara Ferreira-Marques and Ian Geoghegan)

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GM says ISS advises against Greenlight share plan, board nominees

General Motors Co(GM.N) said on Saturday that proxy advisory firm Institutional Shareholder Services has recommended that shareholders vote against a slate of directors proposed by hedge fund Greenlight Capital and reject the hedge fund’s plan to divide GM shares into two classes.

The advice from ISS is a setback for Greenlight and its manager David Einhorn. They have said GM shares are undervalued and would be more attractive if the company divided its common stock into shares that pay a dividend and shares that would reflect the automaker’s growth potential.

Greenlight also has proposed a slate of three candidates for GM’s board of directors.

On Friday, advisory firm Glass Lewis also advised against Greenlight’s nominees for the automaker’s board and its share split plan.

(Reporting By Joe White; Editing by W Simon)

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Switch it up this year: Buy in May, till November stay

NEW YORK “Sell in May and go away” is perhaps the oldest saw on Wall Street, but it appears there’s no shortage of U.S. mutual funds doing exactly that this year.

After all, the SP 500 .SPX has delivered a total return, including reinvested dividends, of 10.8 percent over the last six months, essentially capturing all of the average rolling 12-month total return on the index since 1990, so why not cash in?

Indeed, political drama and high valuations are clearly driving some investors to take profits. American fund investors have yanked more than $17 billion from U.S. stocks so far this month, data from fund tracker Lipper shows, with some $10.1 billion in withdrawals in the latest week alone, the second biggest outflow for the year.

Some hearty investors, however, stand ready to bet against that flow – and history – and are advocating a buy-in-May approach this year.

“If anything you might want to buy in May and sell in November,” said Chris Zaccarelli, Chief Investment Officer at Cornerstone Financial Partners, in Huntersville, North Carolina, who bases his bullishness on the healthy outlook for the global economy rather than expectations for a policy boost from the Trump administration.

While stocks appear to have priced in hope for a Trump stimulus this year, Zaccarelli says his expectations for progress on Trump’s agenda in 2017 has recently tumbled to 40/60 from 80/20 because he doesn’t see Trump gaining enough support from a severely divided Republican party, which suggests to him that selling will be more opportune a few months down the road.

“If we go the entire year and Washington does nothing, no tax reform, no repatriation, I think there will be a little disappointment,” he said. “Ironically enough, the disappointment will be in November or December because people will realize they went the whole year and got nothing done.”


The sell-in-May tactic has been kicked around Wall Street for decades and is premised on the historic outperformance of the November-May period over the other six months of the year. It works.

In the last 20 years, a $100 investment in the SP from November through April would have become $343 while a $100 investment in May through October in the same years would have slipped to $98.5, according to Bespoke Investment Group, in Harrison, New York.

From 1928 to 2017 the $100 would have become $4,270 from November through April but would only be worth $257 from investing from May through October, according to Bespoke.

In the summer months “things slow down so you tend to see the chances for a pickup in volatility. That’s usually accompanied by weakness in the market,” according to Paul Hickey, Co-founder of Bespoke Investment Group, LLC who is not selling now as he still has “a positive view toward equities.”

Other factors that can drive a summer lull include a corporate tendency to hold stock-boosting investor meetings early or late in the year, a reduction of over-optimistic analyst estimates around mid-year, and a boost just ahead of the end-of-year holiday shopping season, says Linda Bakhshian, portfolio manager at Federated Investors in Pittsburgh.

John Augustine, Chief Investment Officer at Huntington National Bank in Columbus, Ohio said he is “taking the opposite tack to “sell in May” and moving into U.S. small and mid cap stocks which have underperformed large caps so far this year.

The small cap Russell 2000 index has risen just 1.8 percent year-to-date compared with 7.8 percent for the SP 500, 6.6 percent for the Dow Jones Industrial Average .DJI and 15.3 percent for Nasdaq Composite .IXIC.

“To sell we’d need a Fed that’s more hawkish than expected mixed with economic data that’s weaker than expected. That combination could give us a domestic stock sell off this summer. But markets have discounted that this week based after Fed minutes, thinking the Fed would stay dovish this Summer,” said Augustine.

(Reporting by Sinead Carew; editing by Dan Burns and Andrew Hay)

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Wall St. drifts before long weekend; consumer stocks up

U.S. stocks ended little changed on Friday ahead of the long holiday weekend, though indexes ended a two-week streak of losses and consumer shares were strong for a second day.

The SP 500 and Nasdaq also eked out record closing highs, and the SP 500 posted a seventh straight session of gains, matching a winning streak from February.

Helping the consumer staples index, Costco Wholesale (COST.O) rose 1.8 percent to $177.86 and was among the biggest drivers of the SP and Nasdaq indexes. The warehouse club operator reported results Thursday.

Trading volume, with just about 5.2 billion shares changing hands on U.S. exchanges, was the lowest of the year. The U.S. market will be closed on Monday for Memorial Day.

“The market is almost eerily quiet. The only thing that tends to move the markets – at least recently – is political news,” said Tim Courtney, chief investment officer of Exencial Wealth Advisors, in Oklahoma City.

“For the most part, investors have come to a consensus that there’s not going to be recession in the U.S. in 2017, and Europe is strong enough where they’re not going to have a recession this year. So the big fear of a recession has been taken off the table.”

Earlier in the day, a report showed that the U.S. economy grew at a 1.2 percent pace in the first quarter, slightly more than the 0.7 percent estimated earlier. The higher reading was in line with economists’ expectations.

The Dow Jones Industrial Average .DJI ended down 2.67 points, or 0.01 percent, to 21,080.28, the SP 500 .SPX gained 0.75 points, or 0.03 percent, to 2,415.82 and the Nasdaq Composite .IXIC added 4.94 points, or 0.08 percent, to 6,210.19.

For the week, the Dow rose 1.3 percent, the SP 500 gained 1.4 percent and the Nasdaq added 2.1 percent.

The consumer staples index .SPLRCS and the consumer discretionary index .SPLRCD were both up 0.3 percent. The gains were mostly offset by declines in healthcare and real estate stocks.

Ulta Beauty (ULTA.O) jumped 3.2 percent, the second-biggest percentage gainer in the SP, after the company raised its full-year forecast.

Deckers Outdoor Corp (DECK.N) ended up 18.8 percent and hit a nine-month high during the session after reporting a surprise quarterly profit.

Among the laggards, GameStop (GME.N) fell 5.9 percent to $22.22. The videogame retailer left its full-year earnings forecast unchanged despite beating profit estimates.

Advancing issues outnumbered declining ones on the NYSE by a 1.14-to-1 ratio; on Nasdaq, a 1.12-to-1 ratio favored decliners.

The SP 500 posted 57 new 52-week highs and 8 new lows; the Nasdaq Composite recorded 97 new highs and 61 new lows.

(Additional reporting by Tanya Agrawal and Gayathree Ganesan; Editing by Bernadette Baum and Nick Zieminski)

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