News Archive

Oil rebounds but still threatened by growing U.S. supply

NEW YORK Oil prices rebounded on Monday after last week’s seven-month lows, but were hemmed in by a relentless rise in U.S. supply and a surge in demand for short sale contracts that signal investors see potential for a price fall.

Brent crude futures were up 25 cent, or 0.6 percent, at $45.79 a barrel by 12:03 p.m. (1603 GMT), still set for a near 20 percent drop in the first half of the year.

U.S. crude futures were up 35 cents, or 0.8 percent, at $43.36 a barrel.

Investors in U.S. crude futures and options, however, increased their bets against any future further rise in prices, as the number of U.S. oil rigs in operation hit its highest in over three years. [CFTC/] [RIG/U]

“U.S. production could jump to 10, maybe 10.5 million barrels a day by the end of the year, and when you add Libya, Nigeria and North Sea production that will negate the Saudi-led cuts,” said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut, referring to U.S. output which has steadily grown to around 9.35 million bpd.

The rise in supplies threatens efforts by the Organization of the Petroleum Exporting Countries and its partners to reduce global oil inventories with production cuts.

OPEC states and 11 other exporters agreed in May to extend cuts of 1.8 million barrels per day (bpd) until March, in the hope that it would force global supply and demand to align.

However U.S. shale oil output is up around 10 percent since last year, while Nigeria and Libya, who are exempt from the OPEC cuts, have also hiked output.

Iran, which was given a small increase so it could recover market share lost while under Western sanctions, said its production has surpassed 3.8 million bpd and is expected output to reach 4 million bpd by March.

U.S. drillers have added rigs for 23 straight weeks, energy service company Baker Hughes said on Friday. [RIG/U]

“The perception is that we’re going to have slower exploration activity, but the amount of drilling that we’ve been doing is going to guarantee production growth for at least another four or five months,” said James Williams, president of energy consultant WTRG Economics in London, Arkansas, “So you’ve still got the downward pressure there.”

Analysts at Bank of America-Merrill Lynch said demand had not grown quickly enough to mop up any excess output.

“Looking into the second half of 2017, we now doubt that demand growth will accelerate sufficiently,” they wrote.

(Additional reporting by Amanda Cooper in London, Jane Chung in Seoul; Editing by Marguerita Choy and Edmund Blair)

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Wall St. pares gains as recovery in tech, oil pauses

U.S. stocks pared gains in late morning trading on Monday, as a recovery in technology stocks and oil prices stalled.

Oil prices hovered near last week’s seven-month lows, hemmed in by a relentless rise in U.S. supply, bloated global inventories and a surge in demand for short sale contracts that signals investors see potential for a price fall. [O/R]

The SP energy .SPNY fell 0.37 percent and was the biggest laggard among the major SP sectors.

Oil majors Exxon (XOM.N) and Chevron (CVX.N) were down about 0.6 percent and were among the biggest drags on the three major indexes.

The recent drop in oil prices has spurred concerns about low inflation, which stubbornly remains below the Federal Reserve’s 2 percent target rate.

The central bank raised rates this month for the second time this year and is expected to raise it again. Futures imply only a 50 percent chance of another rate hike by December.

Also dampening sentiment was a fall in technology stocks, as investors, worried about stretched valuations, switch to defensive sectors.

The SP utilities .SPLRCU and telecommunications .SPLRCL sectors led the gainers.

At 11:03 a.m. ET (1503 GMT), the Dow Jones Industrial Average .DJI was up 1.85 points, or 0.01 percent, at 21,396.61, the SP 500 .SPX was up 1.06 points, or 0.04 percent, at 2,439.36.

The Nasdaq Composite .IXIC was down 18.40 points, or 0.29 percent, at 6,246.85.

The financial index .SPNY rose 0.59 percent after a string of Federal Reserve policymakers appeared to back another rate hike this year despite a patch of recent weak economic data.

San Francisco Fed President John Williams said the Fed needs to raise rates gradually or the economy runs the risk of overheating.

New York Fed chief William Dudley said recent narrowing of credit spreads, record stock prices and falling bond yields could encourage the Fed to continue tightening U.S. policy.

“We’re seeing a very fast rotation that’s been typical of the past month or so and it’s not necessarily based on what’s happening on the yield curve,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.

“It’s based more on the economic conversations that we’ve been seeing from a parade of Fed speakers who continue to tell that same story that we’ll see another rate hike this year.”

The spread between the U.S. two-year and 10-year bond yield curve flattened to its lowest since September.

Data on Monday showed new orders for key U.S.-made capital goods unexpectedly fell in May, with non-defense orders excluding aircraft – a closely watched proxy for business spending plans – dropping 0.2 percent.

Economists polled by Reuters had expected a rise of 0.3 percent.

Micron (MU.O) was up 1.7 percent at $32.28 after Cowen Co increased its price target on the chipmaker’s stock.

Advancing issues outnumbered decliners on the NYSE by 1,681 to 1,113. On the Nasdaq, 1,415 issues fell and 1,302 advanced.

(Reporting by Tanya Agrawal; Editing by Arun Koyyur)

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U.S. top court buries CalPERS suit over Lehman collapse

Japanese airbag maker Takata files for bankruptcy, gets Chinese backing

TOKYO/WASHINGTON Japan’s Takata Corp , at the center of the auto industry’s biggest-ever product recall, filed for bankruptcy protection in the United States and Japan, and said it had agreed to be largely acquired for $1.6 billion by the Chinese-owned U.S.-based Key Safety Systems.

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U.S. core capital goods orders, shipments decline in May

WASHINGTON New orders for key U.S.-made capital goods unexpectedly fell in May and shipments also declined, suggesting a loss of momentum in the manufacturing sector halfway through the second quarter.

The Commerce Department said on Monday that non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dropped 0.2 percent, the largest decline since December.

These so-called core capital goods orders were revised up to show an increase of 0.2 percent for April. They were previously reported to have risen 0.1 percent.

Shipments of core capital goods fell 0.2 percent last month after rising 0.1 percent in April. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement.

Economists polled by Reuters had forecast core capital goods orders rising 0.3 percent in May.

“We see the core data as consistent with soft business investment in the second quarter” said Blerina Uruci, an economist with Barclays.

U.S. Treasury yields fell and the dollar .DXY was trading lower against a basket of currencies after the release of the data. U.S. stocks shrugged off the report to open higher as technology shares rallied and oil prices climbed from last week’s seven-month lows.

The report added to growing worries that an acceleration in economic growth in the second quarter may not be as robust as expected. Recent data on retail sales, manufacturing production and inflation have given pause and housing data has been mixed.

The weakness comes despite a continuing strong job market. The unemployment rate fell to a 16-year low of 4.3 percent in May.

Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or longer, fell 1.1 percent in May, the biggest decline since November. They dropped 0.9 percent in April.

Last month, orders for machinery rose 0.6 percent while shipments decreased 0.3 percent. Civilian aircraft orders declined 11.7 percent and bookings for defense aircraft and parts plummeted 30.8 percent. Orders for motor vehicles and parts increased 1.2 percent.

(Reporting by Lindsay Dunsmuir; Editing by Paul Simao)

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‘Pharma bro’ Martin Shkreli heads into fraud trial

NEW YORK Martin Shkreli, the pharmaceutical entrepreneur vilified as the “pharma bro” for raising the price of a life-saving drug by 5,000 percent, will go on trial on Monday for what U.S. prosecutors called a Ponzi-like scheme at his former hedge fund and a drug company he once ran.

Prosecutors have accused Shkreli of lying to investors in the hedge fund and siphoning millions of dollars in assets from biopharmaceutical company Retrophin Inc to repay them. He has pleaded not guilty.

The trial, which will be heard by U.S. District Judge Kiyo Matsumoto in Brooklyn, is expected to last four to six weeks.

Shkreli, a boyish-looking 34, outraged patients and U.S. lawmakers by raising the price of anti-parisitic drug Daraprim to $750 a pill, from $13.50, in 2015, when he was chief executive of Turing Pharmaceuticals.

The charges that led to his arrest in December 2015 are not related to Turing but focus on Shkreli’s management at Retrophin and the hedge fund MSMB Capital Management between 2009 and 2012.

Prosecutors said Shkreli lied about MSMB’s finances to lure investors and concealed devastating trading losses from them. They said he paid the investors back with money stolen from Retrophin, which he founded in 2011.

The criminal case has drawn attention in part because of Shkreli’s refusal to lay low. He has continued to court the public eye, especially through social media, sometimes complicating his defense.

At a hearing last Monday, prosecutors refused to agree to Shkreli’s request to reduce his bail by $3 million, which he said he needs to pay taxes and legal bills, pointing to his own public boasts about his wealth.

Since his arrest, Shkreli has flaunted purchases including a World War II-era Enigma code breaking machine, a Picasso painting and unreleased albums by Wu-Tang Clan and Lil Wayne.

In April, he offered $40,000 to a Princeton University student who solved a mathematical proof. In May, he pledged on Facebook to pay $100,000 for tips leading to the arrest of the person who killed former Democratic National Committee employee Seth Rich.

Shkreli was banned from Twitter in January for harassing a female journalist who wrote an op-ed piece for Teen Vogue criticizing President Donald Trump, whom Shkreli has supported.

Shkreli’s attention-seeking has at times exasperated his lawyer, Benjamin Brafman, who urged Matsumoto last week not to give much weight to his client’s “preposterous statements.”

(Reporting By Brendan Pierson; Editing by Bill Trott)

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U.S. auto sales seen down 2 percent in June: JD Power and LMC

DETROIT U.S. auto sales in June likely fell 2 percent from a year earlier despite large discounts for consumers, presenting a fresh sign that automakers are heading into a downturn, industry consultants J.D. Power and LMC Automotive said on Monday.

LMC also cut its full-year 2017 forecast for new vehicle sales for the third consecutive month, to 17.1 million units from its previous forecast of 17.2 million.

June U.S. new vehicle sales will be about 1.48 million units, a drop of 2 percent from 1.51 million units a year earlier, the consultancies said.

The forecast was based on the first 15 selling days of the month. Automakers will release June U.S. sales results on July 3.

The seasonally adjusted annualized rate for the month will be 16.5 million vehicles, down nearly 2 percent from 16.8 million units in the same month in 2016.

Retail sales to consumers, which do not include multiple fleet sales to rental agencies, businesses and government, were set to decline more than 1.3 percent in June.

U.S. sales of new cars and trucks hit a record high of 17.55 million units in 2016. But the market has begun to saturate thanks partly to a glut of nearly-new used vehicles, forcing automakers to hike incentives to entice consumers to buy.

Fears of a downturn were heightened earlier this month when automakers posted their third consecutive month of declining sales. Annualized sales fell to 16.66 million cars and light trucks in May from 17.17 million vehicles a year earlier.

“As the U.S. auto market enters the fourth month in a row of a sub-17 million unit selling rate, nerves are being tested,” Jeff Schuster, senior vice president of forecasting at LMC Automotive, said in a release. “It will be challenging in the second half of the year to keep pace with 2016 … but a year still expected above 17 million units should not be considered a poor performance.”

The consultancies said consumer discounts averaged $3,661 per vehicle, a record for the month.

But the average transaction price also hit a record for the month of $31,720.

Discounts as a percentage of the manufacturer’s recommended sale price remained at 10 percent in June, a level industry experts say is unsustainable.

Inventory levels at major automakers have also raised concerns.

The average number of days a new vehicle sits on a dealer’s lot before sale remained at 70 through the first 15 days of June.

(Reporting By Nick Carey; Editing by Phil Berlowitz)

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Pharmacy executive tied to 2012 U.S. meningitis outbreak to be sentenced

BOSTON A former Massachusetts pharmacy executive who was convicted of racketeering and fraud charges for his role in a deadly U.S. meningitis outbreak in 2012 is scheduled to be sentenced on Monday.

Barry Cadden, the co-founder and former president of the now-defunct New England Compounding Center, was convicted in March of those crimes by a federal jury in Boston but cleared of the harshest charges he faced, second-degree murder.

Prosecutors are seeking at least 35 years in prison for Cadden, whose conduct they said led to 778 patients nationwide being harmed after receiving contaminated steroids injections. That includes 76 people who died, they said.

His lawyers counter that prosecutors are seeking to demonize Cadden, who they said was not convicted of knowing the drugs were contaminated, just of misrepresenting how they were made. They say Cadden, 50, deserves around only three years in prison.

Cadden was one of 14 people tied to Framingham, Massachusetts-based New England Compounding Center (NECC) indicted in 2014 following the outbreak. He was one of only two people to face second-degree murder charges.

Prosecutors said Cadden, NECC’s head pharmacist, ran the company as a criminal enterprise that sold substandard and non-sterile drugs produced in filthy conditions and shipped to medical facilities nationally for use on unsuspecting patients.

They said Cadden directed the shipment of 17,600 vials of contaminated steroids often prescribed for back pain despite knowing they were made in unsafe conditions, leading to the outbreak.

(Reporting by Nate Raymond; Editing by Scott Malone and Diane Craft)

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Australians among 19 on trial as Crown Resorts case opens in China

SHANGHAI Three Australians went on trial in China on Monday along with a dozen other Crown Resorts Ltd (CWN.AX) employees and former employees accused of gambling crimes, following a lengthy probe into how the firm lured Chinese high-rollers to its casinos.

The 19 defendants were formally charged earlier this month, having been first detained late last year, and the trial at Baoshan District Court in the north of Shanghai is expected to reach a fairly swift conclusion.

Melbourne-based Crown is 49 percent owned by billionaire James Packer, and the most senior employee on trial is its Australia-based head of international VIP gambling Jason O’Connor.

Three of the accused, believed to have been junior staff, had been released on bail.

Family members were ushered into the courthouse as they arrived with lawyers in a convoy of cars on Monday morning, and some wore masks. Journalists were barred from attending proceedings.

The case has forced Crown to tear up its strategy of luring wealthy Chinese to the casino hub in the Chinese territory of Macau and instead shift its focus back home.

Crown does not directly run casinos in China. But it relies heavily on Chinese gamblers at its Australian operations, as it had done in Macau until last month when it sold its remaining stake in Macau-focused Melco Resorts Entertainment Ltd (MLCO.O) for $1.16 billion.

China has been cracking down on attempts by casinos to woo high-spending Chinese gamblers within China. In 2015 thirteen South Korean casino managers were arrested in China for offering Chinese gamblers free tours, free hotels and sexual services.

The trial is the latest in a series of high-profile cases in China involving foreign firms. British drugmaker GlaxoSmithKline PLC (GSK.L) was fined nearly $500 million in 2014 and food maker OSI saw employees jailed last year.

(Reporting by Winni Zhou and Engen Tham; Writing by Adam Jourdan; Editing by Simon Cameron-Moore)

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Loeb’s Third Point targets ‘staid’ Nestle for change

Activist investor Daniel Loeb’s Third Point LLC on Sunday unveiled a stake of more than 1 percent in Switzerland’s Nestle SA (NESN.S) and urged the world’s largest packaged foods maker to improve its margins, buy back stock and shed non-core businesses.

The 3.28 billion Swiss francs ($3.4 billion) stake is the largest ever taken by the hedge fund, which pressed for change in recent years at U.S. internet firm Yahoo and Japan’s Sony Corp (6758.T).

Third Point disclosed the Nestle position in a letter to the hedge fund’s investors, in which it argued the food company should sell its 23 percent stake in French cosmetics firm L’Oreal SA (OREP.PA). It said in the letter that it has already had productive conversations with Nestle management.

Nestle could not be immediately reached for comment.

Nestle is the biggest player in a packaged food industry struggling with a slowdown in emerging markets, falling prices in developed markets and consumers demanding fresher, healthier products.

Mark Schneider, the company’s new chief executive, has been trying to reignite growth at the company since joining Nestle in January from German healthcare group Fresenius (FREG.DE).

In February, he scrapped Nestle’s longstanding sales target as it reported disappointing annual results, echoing rivals by striking a cautious tone.

“We feel strongly that in order to succeed, Dr. Schneider will need to articulate a decisive and bold action plan that addresses the staid culture and tendency towards incrementalism that has typified the company’s prior leadership and resulted in its long-term underperformance,” Third Point wrote in the letter.

The hedge fund said that Nestle should set a formal margin target of 18 percent to 20 percent by 2020 in order to help improve productivity. It also recommended it more than double its debt load, as well as sell the L’Oreal stake, in order to generate the capital to buy back stock.

Third Point’s roughly 40 million shares in Nestle would make it the company’s eighth-largest shareholder, according to Thomson Reuters data. Third Point’s stake was first reported by Bloomberg.

Jan Bennink, former CEO of baby food maker Royal Numico, is advising Third Point on its Nestle investment and has also invested personally alongside the fund, Third Point said.

Nestle said earlier this month that it might sell its $900 million-a-year U.S. confectionery business in its latest effort to improve the health profile of its sprawling portfolio.

Nestle’s shares closed at 82.10 Swiss francs on Friday.

(Additional reporting by Parikshit Mishra in Bengaluru; Editing by Adrian Croft, Andrew Hay and Bill Rigby)

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