News Archive


Slim seeks to sell minority stake in tower company Telesites: sources


Billionaire Carlos Slim is looking to sell a minority stake in Telesites SAB de CV (SITESB1.MX), the Mexican wireless tower company that he controls, people familiar with the matter said on Friday.

The move comes 18 months after sweeping regulatory reforms forced Slim to spin off Telesites from telecommunications company America Movil SAB de CV (AMXL.MX). Telesites shares have risen only slightly since then, as the company struggles to diversify beyond America Movil as its main client.

Slim and family members own about 61 percent of the shares, according to Telesites’ annual report.

Slim is speaking to private equity firms, sovereign wealth funds and infrastructure funds about selling the stake without giving up control of Telesites, the people said this week.

The sources requested anonymity because the talks are confidential and cautioned that a deal was not certain.

Telesites declined to comment. A representative for Slim, whose net worth is pegged by Forbes at $65 billion, also declined to comment.

Since its spin-off in December 2015, Telesites has been unable to attract many tenants to the towers besides America Movil and its mobile unit, Telcel. It competes with American Tower Corporation (AMT.N) in Mexico.

“We see little progress in third-party usage of Telesites’ towers,” Itau BBA analyst Gregorio Tomassi said in a May 3 research note. It noted that ATT, another wireless player in Mexico, has not increased its demand for Telesites towers.

Private equity firms have traditionally invested in tower companies for their steady cash flows. Buyout firm KKR Co LP (KKR.N) bought a 40 percent stake in Spain’s Telefonica SA’s (TEF.MC) tower subsidiary Telxius earlier this year for 1.275 billion euros.

Telesites has a market capitalization of 38.52 billion Mexican pesos ($2 billion). The shares closed at 11.440 pesos on Friday on the Mexican stock exchange.

(Reporting by Liana B. Baker in San Francisco; Additional reporting by Anthony Esposito in Mexico City; Editing by Richard Chang)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/RXYl3dC_2M8/us-telesites-divestiture-idUSKBN18M2LL

PepsiCo in bid to acquire Vita Coco owner: sources


Soft drink maker PepsiCo Inc (PEP.N) is in talks to acquire All Market Inc, the owner of coconut water brand Vita Coco, whose celebrity investors include Madonna and Matthew McConaughey, people familiar with the matter said on Friday.

The acquisition would help PepsiCo diversify its offerings as it grapples with stagnant sales, amid a shift of many consumer tastes’ away from sugary drinks and snacks toward healthier options.

Purchase, New York-based PepsiCo has offered less than the $1 billion that All Market’s owners have been seeking to sell the company, and there is no certainty that negotiations will result in a deal, the people said.

The sources spoke on condition of anonymity because the negotiations are confidential. PepsiCo did not respond to a request for comment, while Vita Coco declined to comment.

Founded in 2004 by two childhood friends in New York, Vita Coco now has sales in 30 countries and is the global leader in coconut water, with a 26 percent share of a market worth $2.5 billion, according to data tracker Euromonitor International.

Extracted from young, green coconuts, coconut water now enjoys prime placement in coolers across North America and Europe.

Verlinvest, the family office of one of the Belgian families related to brewer Anheuser Busch InBev NV (ABI.BR), took a stake in All Market in 2007. Singer Madonna and actors McConaughey and Demi Moore are among other investors in the company.

In 2014, All Market sold a 25 percent stake to T.C. Pharma, the owner of Red Bull China, in a deal that brought the drink to the world’s most populous country. That deal valued All Market at $665 million.

As part of its healthy initiative program, Pepsi announced late last year that it aims to have sales of its “everyday nutrition” products, including grains, dairy and hydration, outpace the rest of its products by 2025.

PepsiCo, which also owns Quaker Oats oatmeal, Frito-Lay chips, energy drink Gatorade and orange juice Tropicana, has looked to acquisitions to boost its healthier offerings before.

Its latest acquisition in the healthy drinks sector was probiotic drinks maker KeVita Inc, which it agreed to buy last year. In January, PepsiCo competitor Dr Pepper Snapple Group Inc (DPS.N) acquired antioxidant beverages maker Bai Brands LLC for $1.7 billion.

(Reporting by Lauren Hirsch and Greg Roumeliotis in New York; Additional reporting from Martinne Geller in London; Editing by Jonathan Oatis)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/i_XqUCst2Fw/us-allmarket-m-a-pepsico-idUSKBN18M2JJ

In Aramco IPO pitch, Canada plays up its natural resources expertise


TORONTO The Toronto Stock Exchange’s efforts to win a slice of the massive Saudi Aramco public listing plays up the country’s deep experience in natural resources as part of a broader offer to help the kingdom with its shift away from oil dependence.

In pitch documents obtained by Reuters, the TSX talks up “a customized regulatory environment for resource issuers”, its leading position in oil and gas equity capital raising, and strong trading interest from outside the country.

The Canadian pitch is also broader than just for a slice of the Aramco IPO. On several trips to the kingdom, the most recent in late March, TMX executives have been joined by senior executives from some of the country’s biggest banks, brokerages and other financial players as Canada Inc seeks a role in delivering the kingdom’s broader Vision 2030 plan.

One source directly involved in the Canadian pitch told Reuters they are focused on convincing the Saudis that Canada excels in 10 of the 12 areas they have targeted for development under that plan, including in mining and infrastructure. The source declined to be named due to the sensitivity of the matter.

“We feel that we have put TMX and Canada’s best foot forward and we continue to promote our strengths in pursuit of business opportunities in the region and around the world,” TMX said in a statement.

But its best chance of winning a part of the biggest IPO ever, expected to raise about $100 billion as early as next year, may lie in its geography and geopolitics, securities lawyers say.

While the exchange, owned by the TMX Group Ltd (X.TO), is widely considered an underdog in a race that has also excited larger exchanges in London, New York, Tokyo, Hong Kong and Singapore its case could be bolstered by a recent change in U.S. law that allows those affected by the September 11, 2001 attacks to sue the Saudi government, they said.

“We are inoffensive from a political perspective,” said Sarah Gingrich, a Calgary-based partner at Fasken Martineau, who has previously worked in Dubai with Saudi clients for international law firm Freshfields.

That law, the Justice Against Sponsors of Terrorism Act, came into effect in September, after the U.S. Congress overrode a veto by former President Barack Obama.

A group of insurers has since renewed a $6-billion lawsuit against the kingdom, seeking to hold it responsible for business and property damage as a result of the attacks, in which Saudi has long denied involvement.

In a March 17 interview with the Wall Street Journal, the Saudi energy minister, Khalid al-Falih, said the so-called “terror law” is one consideration in the country’s decision on whether to list in the United States.

Falih, who is Aramco’s chairman, declined to comment on the IPO process when reached by Reuters.

It was not clear if the issue was discussed during U.S. President Donald Trump’s recent visit.

A spokeswoman for the NYSE, which sources have said planned to visit Saudi soon after Trump’s visit, declined to comment on their efforts to win Aramco’s business.

Nasdaq, which is a technology partner to Saudi Arabia’s exchange, is also pitching for the listing, while the London Stock Exchange (LSE.L) is working on a completely new type of listing structure to woo Aramco, Reuters has reported.

SMALL MARKET, BIG ENERGY FOCUS

Canada-listed oil and gas companies raised 22 percent of global energy financing over the past five years, the TMX pitch documents show, second behind the NYSE’s 44 percent.

The documents put Canada in third place behind Chinese and Hong Kong exchanges, and the United States for total capital raised in 2016, noting that TSX-listed companies raised 28 percent more than fourth-placed LSE.

They say more than 40 percent of TSX trading originates outside the country and that bid-ask spreads, a key measure of liquidity, are among the lowest in the world.

Still, while Canada boasts significant expertise in oil and gas financing and strong interest from both institutional and retail investors, it is dwarfed by the much larger U.S. market.

The oil and gas companies listed on its main TSX exchange and the junior TSXV have a total market capitalization of C$325 billion ($239 billion), TMX says.

By comparison, the New York Stock Exchange says its oil and gas companies – which include super majors ExxonMobil Corp (XOM.N), Chevron (CVX.N) and secondary listings for Royal Dutch Shell (RDSa.L) and Total (TOTF.PA) – are worth $3.3 trillion.

Neither the source in the TMX delegation nor the external lawyers said listing and regulatory requirements would prove much of an obstacle to a Canadian listing, especially if it were to be a third or fourth option.

But Canada would only find a way in to the action “if their (Aramco’s) bankers think they will get sufficient enough market interest here that it will help promote the stock price and give them some liquidity and trading,” said Darrell Peterson, a partner with Bennett Jones in Calgary.

(Reporting by Alastair Sharp; Additional reporting by John McCrank in NEW YORK, Reem Shamseddine in RIYADH; Editing by Denny Thomas and Nick Zieminski)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/ldLE23YfuYM/us-aramco-ipo-tmx-analysis-idUSKBN18M26F

Some investors bet Brazil has further room to fall


NEW YORK Some investors are betting the worst is yet to come for Brazil’s stock market, even after a brutal selloff last week.

Fund managers said troubles for Brazilian President Michel Temer, who was caught on tape discussing a hush-money arrangement to buy the silence of imprisoned former house speaker Eduardo Cunha, are likely just beginning, and could derail efforts to reform Brazil’s pension system, moves aimed at cutting public debt and boosting economic growth.

Brazil’s benchmark Bovespa stock index tumbled nearly 9 percent on May 18 after news of the tape surfaced, notching its biggest one-day drop since the depths of the financial crisis in October 2008.

Short sellers descended on funds containing Brazilian shares on the belief they have further to fall.

About 12 percent of shares of the $5.6 billion U.S.-listed iShares MSCI Brazil Capped ETF are being shorted, according to S3 Partners, a financial analytics firm. The fund ranks as the second most-shorted country ETF in the United States by dollar value of short interest.

Investors who take short positions sell borrowed stock they hope to buy back later at lower prices to reimburse the lenders, pocketing the difference.

The Brazil ETF pulled in $526 million of new money in the week ended on Wednesday, according to Thomson Reuters’ Lipper research unit, but those figures include shares created so they could be sold short.

“As EWZ’s stock price dropped, short sellers needed to short more stock in order to keep their risk positions at the same levels,” said S3 Partners managing director of research Ihor Dusaniwsky.

EWZ’s short sellers have a 9 percent profit since last Thursday, he said, with most of that made the day of the big selloff.

To be sure, some of the fund’s inflows could also be from investors betting that the recent selloff does not reflect fundamentals underpinning the market.

Mohit Bajaj, director of ETF trading solutions at WallachBeth Capital LLC, said he has seen demand for EWZ over the past week from both short-sellers and bargain-hunting “value” investors.

SELLING OUT

Robert Marshall Lee, investment leader and portfolio manager at BNY Mellon subsidiary Newton Investment Management, has sold all Brazilian assets in his company’s $136 million Newton Global Emerging Markets Fund.

Even if Temer stays in power his position has been significantly weakened, Lee said, and with much of Brazil’s population opposed to fiscal restructuring measures like pension reform it would be difficult to pass them.

“What you end up doing is a very watered-down version,” he said. “So the market has optimism and then gets disappointed and I think that’s the likely path ahead.”

Brazil and broader emerging markets are likely to end the year with lower equity prices and weaker currencies, Capital Economics senior emerging markets economist William Jackson said.

Yet Brazil’s problems have so far shown little sign of leaking into the broader emerging markets sphere. The average U.S.-based emerging market fund tracked by Lipper sank by just 0.4 percent over the most recent week and pulled in $1.1 billion in new cash.

Economists warn that Brazil’s social security system is one of the main threats to government finances there, with pension expenditures accounting for nearly half of its spending before debt payments. Temer’s plans to streamline Brazil’s pension system cleared another hurdle in Congress on Tuesday.

Current House speaker Rodrigo Maia said a vote in the full lower house could take place between June 5 and June 12, clearing the way for a final Senate vote, but many lawmakers have said they will not vote until the political crisis is resolved.

Meanwhile, some investors are moving in on what they see as a buying opportunity in Brazil. The Bovespa was last up 1.2 percent on Friday.

“If you are a patient long-term investor able and willing to stomach significant volatility, current valuations offer an attractive opportunity to gradually build both bond and equity positions,” said Mohamed El-Erian, chief economic adviser at Allianz SE. “There is value but the road will be very choppy.”

Ivo Luiten, a portfolio manager at the emerging markets boutique firm NN Investment Partners, in the Hague, Netherlands, said he had taken the opportunity to add to his holdings in telecommunications, education and healthcare stocks, which he said fell 10 percent to 15 percent in the selloff.

“We’re not selling out of Brazil,” he said. “We’re adding.”

(Reporting by Dion Rabouin and Trevor Hunnicutt; Editing by Jennifer Ablan and Meredith Mazzilli)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/DwJ5ZYaI3wU/us-investment-funds-brazil-analysis-idUSKBN18M230

Exclusive: China’s COFCO overhauls Brazil business after accounting crisis


LONDON/SAO PAULO Chinese food commodities trader COFCO [CNCOF.UL] is overhauling its operations in Brazil, including a management reshuffle, as it restructures its Nidera Sementes Ltda business following accounting irregularities reported last year, according to company documents and sources.

Since first investing in Dutch-based trader Nidera in 2014, COFCO has had several setbacks including a $150 million financial hole in its Latin American operations and $200 million in unauthorized trading losses on its biofuels desk.

COFCO completed its takeover of Nidera this year.

Company documents seen by Reuters and interviews with industry sources show the resignation of three top Nidera Sementes executives in Brazil this year. The firm is also spinning off its ports unit known as Cereal Sul – Terminal Marítimo SA, valued at 130 million reais ($40 million).

A source with direct knowledge confirmed job cuts as part of COFCO’s integration of Nidera in Brazil. The cuts affected less than 1 percent of COFCO’S workforce, currently 8,400 people.

A COFCO media representative declined to comment.

In an annual company filing, Nidera Capital BV – Nidera’s holding company owned by COFCO – recorded a full-year loss of $266.6 million in 2016 versus a loss of $65.9 million in the 15 months ended in December 2015.

Profitability for the world’s biggest agricultural players including U.S. agri-business group Archer Daniels Midland Co (ADM.N) and rivals such as Bunge Ltd (BG.N) has been battered by thinning margins due to a global grain glut.

Together with Cargill Inc [CARG.UL] and Louis Dreyfus Corp [LOUDR.UL], the firms are collectively known as the ABCDs and dominate global grain trading.

TRYING TO INTEGRATE

After investing over $3 billion to buy Noble Group of Singapore’s agri-business and Nidera, COFCO in recent months has tried to integrate the units into a cohesive structure. The acquisitions gave the Chinese company assets in some of the world’s top grain, vegetable oil, sugar and coffee-producing regions.

On April 24, COFCO unveiled its new division COFCO International, which brings together its Swiss-based grain arm COFCO Agri and Nidera, led by new chief executive Johnny Chi.

COFCO’s efforts to consolidate its legacy empire include Brazil, a vital provider of commodities to world markets and among its biggest activities in South America.

According to documents seen by Reuters at least eight directors were appointed in Brazil at the same time that the top three decision-makers for the country resigned.

Marina Alves de Souza, previously Nidera’s executive director in Brazil, is now chief executive.

The reshuffle affected areas ranging from grains origination to logistics to tax and risk and strategy.

Minutes from a February shareholders’ meeting showed the ports unit would be absorbed by Nidera Portos Participações Ltda, a logistics subsidiary, and is subject to approval by regulators and Nidera Sementes’ creditors.

Minutes from a subsequent meeting in April showed that shareholders replaced board members with top officials including Valmor Schaffer, who is now in charge of South America, and also Eduardo Augusto Gradiz Filho, named executive director.

The source added that apart from the Cereal Sul port unit, another terminal called T12A would also be kept within the COFCO group for the export of grains. The terminals have capacity to handle almost 6 million tonnes of grains.

The accounting issues in Brazil relate to a significant overstatement of prepaid expenses and mark-to-market measurements of forward contracts between 2014 and 2015.

According to Nidera Capital BV’s 2016 financial statement, the company recognized a $54.8 million impact on equity in each of the years when the inconsistencies were found.

(Reporting by Jonathan Saul and Ana Mano; Additional reporting by Gus Trompiz in Paris, Toby Sterling in Amsterdam and Roberto Samora in São Paulo; Editing by Daniel Flynn and James Dalgleish)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/6qXiI4sDSIo/us-nidera-brazil-cofco-idUSKBN18M27N

U.S. economy slowed less than expected in first quarter; outlook cloudier


WASHINGTON The U.S. economy slowed less than initially thought in the first quarter, but softening business investment and moderate consumer spending are clouding expectations of a sharp acceleration in the second quarter.

Gross domestic product increased at a 1.2 percent annual rate instead of the 0.7 percent pace reported last month, the Commerce Department said on Friday in its second GDP estimate for the first three months of the year.

That was the worst performance in a year and followed a 2.1 percent growth rate in the fourth quarter.

“Economic indicators so far aren’t entirely convincing on a second-quarter bounce in activity and show a U.S. economy struggling to surprise on the upside,” said Scott Anderson, chief economist at Bank of the West in San Francisco.

The first-quarter weakness is a blow to President Donald Trump’s ambitious goal to sharply boost economic growth.

During the 2016 presidential campaign Trump had vowed to lift annual GDP growth to 4 percent, though administration officials now see 3 percent as more realistic.

Trump has proposed a range of measures to spur faster growth, including corporate and individual tax cuts. But analysts are skeptical that fiscal stimulus, if it materializes, will fire up the economy given weak productivity and labor shortages in some areas.

“If the economy is going to grow at 3 percent for as long as the eye can see, businesses better spend lots of money on capital goods. That is not happening,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

The economy’s sluggishness, however, is probably not a true reflection of its health, as first-quarter GDP tends to underperform because of difficulties with the calculation of data that the government is working to resolve.

The government raised its initial estimate of consumer spending growth for the first quarter, but said inventory investment was far smaller than previously reported. The trade deficit also was a bit smaller than estimated last month.

Economists had expected that GDP growth would be revised up to a 0.9 percent rate. Despite the tepid growth, the Federal Reserve is expected to raise interest rates next month.

The dollar was trading slightly higher against a basket of currencies on Friday, while U.S. stocks were flat after six straight days of gains. Prices for longer-dated U.S. government bonds rose.

APRIL DATA DISAPPOINTING

Though the economy appears to have regained some speed early in the second quarter, hopes of a sharp rebound have been tempered by weak business spending, a modest increase in retail sales last month, a widening of the goods trade deficit and decreases in inventory investment.

In a second report on Friday, the Commerce Department said non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, were unchanged in April for a second straight month.

Shipments of these so-called core capital goods dipped 0.1 percent after rising 0.2 percent in March. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement.

Second-quarter GDP growth estimates range between a rate of 2.0 percent and 3.7 percent rate.

“It looks instead that many companies may be delaying their equipment purchases for now to see if they get a better tax deal later on down the road,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

The GDP report also showed an acceleration in business spending equipment was not as fast as previously estimated. Spending on equipment rose at a 7.2 percent rate in the first quarter rather than the 9.1 percent reported last month.

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose at a 0.6 percent rate instead of the previously reported 0.3 percent pace. That was still the slowest pace since the fourth quarter of 2009 and followed the fourth quarter’s robust 3.5 percent growth rate.

With consumer sentiment hovering at lofty levels, consumer spending could pick up. But there are worries that surging household debt could cut into spending as monthly repayments squeeze paychecks.

Businesses accumulated inventories at a rate of $4.3 billion in the last quarter, rather than the $10.3 billion reported last month. Inventory investment increased at a $49.6 billion rate in the October-December period.

Inventories subtracted 1.07 percentage point from GDP growth instead of the previously estimated 0.93 percentage point.

The government also reported that corporate profits after tax with inventory valuation and capital consumption adjustments fell at an annual rate of 2.5 percent in the first quarter, hurt by legal settlements, after rising at a 2.3 percent pace in the previous three months.

Penalties imposed by the government on the U.S. subsidiaries of Credit Suisse and Deutsche Bank related to the sale of mortgage-backed securities reduced financial corporate profits by $5.6 billion in the first quarter.

In addition, a fine levied on the U.S. subsidiary of Volkswagen (VOWG_p.DE) related to violations of U.S. environmental regulations cut $4.3 billion from non-financial corporate profits.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/dkxX70OCLAc/us-usa-economy-idUSKBN18M1GP

OPEC ponders how to co-exist with U.S. shale oil


VIENNA First, they ignored each other. Then, they went into a bruising fight. Finally, they are talking, albeit with opposing agendas.

The history of the relationship between OPEC and the U.S. shale oil industry has evolved a great deal since the cartel discovered it had a surprise rival emerging in a core market for its oil around five years ago.

U.S. shale bankers came to Vienna this week and OPEC is readying a trip for its top officials to Texas in a bid to understand whether the two industries can co-exist or are poised to embark on another major fight in the near future.

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“We have to coexist,” said Khalid al-Falih, Saudi Arabia’s energy minister, who pushed through OPEC production cuts in December, reversing Riyadh’s previous strategy to pump as much as possible and try to kill off U.S. shale with low oil prices.

OPEC and non-OPEC countries led by Russia agreed on Thursday to extend oil output curbs by nine months to March 2018, keeping roughly 2 percent of global production off the market in an attempt to boost prices.

But OPEC now realizes supply cuts and higher prices only make it easier for the shale industry to deliver higher profit after it found ways of slashing costs when Saudi Arabia turned up the taps three years ago.

In the Permian Basin – the largest U.S. oilfield – Parsley Energy Inc (PE.N), Diamondback Energy Inc (FANG.O) and others are pumping at the fastest rate in years, taking advantage of new technology, low costs and steady oil prices CLc1LCOc1 to reap profits at OPEC’s expense.

OPEC’s latest calculus acknowledges the global clout of shale but seeks to hinder its growth by keeping just enough supply on the market to hold prices below $60 per barrel.

“All shale companies in the U.S. are small companies,” said Noureddine Boutarfa, who represented Algeria at the meeting. “The reality is that at $50 to $60 a barrel, (the U.S. oil industry) can’t break beyond 10 million barrels per day.”

That is the level many analysts estimate U.S. oil production will reach next year, in what would be a 1 million bpd rise, a staggering jump for an industry marked during 2015 and 2016 by scores of bankruptcies and thousands of layoffs after a two-year price war with OPEC.

Still, that extra volume may not be enough to meet rising global demand or offset natural declines in traditional oilfields, which OPEC is banking on.

“For all OPEC members, $55 (per barrel) and a maximum of $60 is the goal at this stage,” said Bijan Zanganeh, Iran’s oil minister. “So is that price level not high enough to encourage too much shale? It seems it is good for both.”

Some OPEC members seem keen to show they have shed any prior naivete about shale, making it a key topic during Thursday’s meeting after barely mentioning it before. Shale’s limitations, including rising service costs, also were discussed.

“We had a discussion on (shale) and how much that has an impact,” said Ecuador Oil Minister Carlos Pérez. “But we have no control over what the U.S. does and it’s up to them to decide to continue or not.”

Mark Papa, chief executive of Permian oil producer Centennial Resource Development Inc (CDEV.O), was asked by OPEC delegates to give a presentation on shale’s potential last week. He appeared to have played his cards close to his chest.

“In terms of the threat, we still don’t know how much (U.S. shale) will be producing in the near future,” Nelson Martinez, Venezuela’s oil minister said after the talk.

 

WARNING FOR SHALE

By the same token, some U.S. shale leaders may also want a better insight into OPEC thinking and help OPEC understand that shale is not a flash in the pan.

“OPEC looks at shale and it scoffs,” said Dave Purcell of Tudor, Pickering, Holt Co, a U.S. shale investment bank that attended the OPEC meeting for the first time. “There’s a rational skepticism globally, but it misses the mark.”

For example, the UAE Energy Minister Suhail bin Mohammed al-Mazroui said he did not believe U.S. oil production would rise by 1 million bpd next year.

Some of OPEC’s customers are happy to see an alternative. India, the world’s third-largest oil consumer, said this week it is looking to the United States for greater supply.

“The new normal has to be accepted,” Dharmendra Pradhan, India’s energy minister said this week ahead of the OPEC meeting.

OPEC meets again in November to reconsider output policy. While most in the group now appear to believe that shale has to be accommodated, there are still those in OPEC who think another fight is around the corner.

“If we get to a point where we feel frustrated by a deliberate action of shale producers to just sabotage the market, OPEC will sit down again and look at what process it is we need to do,” said Nigerian Oil Minister Emmanuel Kachikwu.

 

(Additional reporting by Rania El Gamal, Ahmad Ghaddar, Dmitry Zhannikov, Alex Lawler, Shadia Nasralla; editing by Dale Hudson and Philippa Fletcher)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/EMPLLXw0JrY/us-opec-oil-shale-analysis-idUSKBN18M1Q4

Wall St. flat as consumer stocks’ gains offset by tech, financials


Wall Street opened little changed on Friday, coming off six straight days of gains, as investors took to the sidelines ahead of a three-day holiday weekend.


The Dow Jones Industrial Average .DJI dipped 8.56 points, or 0.04 percent, to 21,074.39. The SP 500 .SPX edged lower by 1.38 points, or 0.05 percent, to 2,413.69. The Nasdaq Composite .IXIC eked out a gain of 1.64 points, or 0.03 percent, to 6,206.90.

(Reporting by Tanya Agrawal; Editing by Savio D’Souza)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/dX0P3Sm_WzA/us-usa-stocks-idUSKBN18M18R

U.S. economy grows at tepid 1.2 percent; business spending softens


WASHINGTON The U.S. economy slowed less than initially thought in the first quarter, but there are signs it could struggle to rebound sharply in the second quarter amid slowing business investment and moderate consumer spending.

Gross domestic product increased at a 1.2 percent annual rate instead of the 0.7 percent pace reported last month, the Commerce Department said on Friday in its second GDP estimate for the first three months of the year.

“The second estimate paints a better picture about the degree of slowing in activity at the start of the year, but the main concern about soft growth in private consumption remains,” said Michael Gapen, chief economist at Barclays in New York.

That was the worst performance since the first quarter of 2016 and followed a 2.1 percent rate of expansion in the fourth quarter. The government revised up its initial estimate of consumer spending growth, but said inventory investment was far smaller than previously reported.

The first-quarter weakness is a blow to President Donald Trump’s ambitious goal to sharply boost economic growth rates. During the 2016 presidential campaign Trump had vowed to lift annual GDP growth to 4 percent, though administration officials now see 3 percent as more realistic.

Trump has proposed a range of measures to spur faster economic growth, including corporate and individual tax cuts. But analysts are skeptical that fiscal stimulus, if it materializes, will fire up the economy given weak productivity and labor shortages in some areas.

The economy’s sluggishness, however, is probably not a true reflection of its health. GDP for the first three months of the year tends to underperform because of difficulties with the calculation of data.

Economists polled by Reuters had expected GDP growth would be revised up to a 0.9 percent rate.

Prices of U.S. Treasuries trimmed gains and U.S. stock indexes slightly pared losses after the data. The dollar gained modestly against a basket of currencies.

While GDP growth appears to have regained speed early in the second quarter, hopes of a sharp rebound have been tempered by weak business spending, a modest increase in retail sales last month, a widening of the goods trade deficit and decreases in inventory investment.

EQUIPMENT SPENDING SLOWING

In a second report on Friday, the Commerce Department said non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, were unchanged in April for a second straight month.

Shipments of these so-called core capital goods dipped 0.1 percent after rising 0.2 percent in March. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement.

The GDP report also showed an acceleration in business spending equipment was not as fast as previously estimated. Spending on equipment rose at a 7.2 percent rate in the first quarter rather than the 9.1 percent reported last month.

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose at a 0.6 percent rate instead of the previously reported 0.3 percent pace. That was still the slowest pace since the fourth quarter of 2009 and followed the fourth quarter’s robust 3.5 percent growth rate.

Businesses accumulated inventories at a rate of $4.3 billion in the last quarter, rather than the $10.3 billion reported last month. Inventory investment increased at a $49.6 billion rate in the October-December period.

Inventories subtracted 1.07 percentage point from GDP growth instead of the 0.93 percentage point estimated last month.

The government also reported that corporate profits after tax with inventory valuation and capital consumption adjustments fell at an annual rate of 2.5 percent in the first quarter, hurt by legal settlements, after rising at a 2.3 percent pace in the previous three months.

Penalties imposed by the government on the U.S. subsidiaries of Credit Suisse and Deutsche Bank related to the sale of mortgage-backed securities reduced financial corporate profits by $5.6 billion in the first quarter.

In addition, a fine levied on the U.S. subsidiary of Volkswagen (VOWG_p.DE) related to violations of U.S. environmental regulations cut $4.3 billion from nonfinancial corporate profits.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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