News Archive

Germany recalls Porsche Cayenne models over illegal emissions software

BERLIN (Reuters) – German Transport Minister Alexander Dobrindt on Thursday announced a recall of Porsche 3-litre Cayenne cars (VOWG_p.DE) after finding illegal emissions controlling software in the vehicles.

Dobrindt told reporters he was withdrawing certification for the vehicles, and Porsche would bear 100 percent of the cost of the recalls.

Porsche said it had discovered the software during an internal investigation, and that it had agreed to recall the vehicles to fix the problem.

“The producer will of course bear 100 percent of the costs,” Dobrindt said. “There is no explanation why this software was in this vehicle,” Dobrindt said.

“These vehicles are equipped with modern emissions controlling technology so we think these vehicles are technically able to stick to emissions limits and we therefore believe Porsche will quickly be in a position to bring the software into conformity (with the law),” Dobrindt said.

Volkswagen CFO Frank Witter had no immediate comment on an earnings call.

Reporting by Andrea Shalal; Editing by Victoria Bryan and Jane Merriman

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Wells Fargo sues insurance unit bidder over executives poaching

WILMINGTON, Del (Reuters) – Alliant Insurance Services Inc is using confidential information obtained during a failed bid for Wells Fargo Co’s (WFC.N) commercial insurance business to poach top sales executives, according to a lawsuit filed by a Wells Fargo unit.

The lawsuit, filed on Wednesday in Delaware’s Court of Chancery, alleges that Alliant launched an “aggressive campaign” to hire insurance sales executives from Wells Fargo shortly after the bank agreed to sell its business, known as WFIS, to USI Insurance Services in June.

The sale of WFIS, or Wells Fargo Insurance Services USA Inc, is expected to close later this year. The third-largest U.S. bank is focusing on core banking products and services as it tries to recover from a sales scandal last year.

“As a result of Alliant’s actions, WFIS has already suffered and will continue to suffer irreparable harm to its business, revenues, and employee retention at a uniquely vulnerable period of WFIS’ corporate existence,” said the complaint.

Alliant, which is based in Newport Beach, California, did not immediately respond to a request for comment.

WFIS is seeking an injunction to prevent Alliant from poaching its executives, disgorgement of any unjustified gains from the recruitment drive and unspecified damages.

Alliant joined the bidding for WFIS earlier this year and signed a non-disclosure agreement, which prevented it from soliciting WFIS staff for 18 months, according to the complaint.

Alliant had access to information about WFIS sales executives, their employment agreements and revenue generated by its 100 largest customers, among other details, according to the lawsuit.

In addition, Alliant in June hired a former WFIS executive vice president who is believed to be using confidential WFIS information to target and solicit top sales producers, according to the lawsuit, which did not identify the executive.

Alliant’s chairman and chief executive, Tom Corbett, is believed to be meeting with WFIS sales executives and directly participating in the recruitment drive, according to the lawsuit.

Reporting by Tom Hals; Editing by Dan Grebler

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Exclusive: Saudi Aramco advisers favor London for historic IPO

DUBAI/LONDON (Reuters) – Saudi Aramco’s advisers have recommended London for the historic listing of the oil company, with U.S. disclosure rules a concern for Saudi authorities, sources familiar with the matter told Reuters.

A final decision on the venue for what is expected to be the world’s biggest IPO and is targeted to raise $100 billion will be taken by Crown Prince Mohammad bin Salman, who is overseeing Saudi Arabia’s radical economic reforms, they said.

Listing five percent of Aramco is a centerpiece of Saudi Arabia’s Vision 2030 plan to diversify beyond oil and financial considerations will not be the only factor in its decision, with Saudi authorities also taking the interests of shareholders and the company into account, the sources added.

The advisers’ views on the relative merits of London and New York for the listing are being considered by Aramco and a final proposal could be presented to the government in the fourth quarter, the sources said.

London’s chances of winning the multi-billion deal were improved by a Financial Conduct Authority plan to create a new listing category for companies controlled by sovereign states.

This was a clear sign that London is ready to welcome Aramco and needs its IPO to attract more sovereign-held entities and prove that London remains a good place to do business after the country leaves the European Union, one of the sources said.

Changes proposed by the regulator, which declined to comment, are seen as making London more attractive to state-controlled firms such as Aramco as well as other Gulf countries, including Oman and Abu Dhabi, considering listing oil assets.

The FCA proposal will be reviewed until Oct. 13 and the regulator will publish new rules towards the end of the year.

Aramco is less enthusiastic about listing on a third exchange, possibly one in Asia, and may prefer to stick to a dual listing process that involves Riyadh’s Tadawul and London Stock Exchange (LSE.L), one of the sources said.

Aramco, London Stock Exchange and New York Stock Exchange all declined to comment, while there was no immediate comment from Saudi officials contacted by Reuters.

Bankers expect to get more clarity on Aramco’s listing plans at a conference organized by Saudi Arabia’s Public Investment Fund (PIF) on Oct. 24 to 26 in Riyadh, one source said.

Senior Saudi Aramco executives, including its chief executive, are scheduled to meet on Aug. 3 in London for a regular review of ongoing business activities, others said.

China Factor

A dual listing in London and Riyadh would be easier and faster to pursue, the sources said, adding that Aramco might miss its IPO window next year if it attempts to include a third stock market, which would add another layer of complexity.

But even if Saudi Aramco is not listed in Asia, Chinese investors and companies will still be offered a sizeable stake in a bid to satisfy key buyers of Saudi crude, one source said.

Reuters reported in April that China is creating a consortium, including state-owned oil giants and banks and its sovereign wealth fund, to act as a “cornerstone” IPO investor.

As well as New York and London, Hong Kong, Singapore, Tokyo, Hong Kong and Toronto are all seeking to have Saudi Aramco list on their respective markets.

But experts have long pointed to the amount of information public companies listed in the United States are required to disclose as a reason for a decline in IPOs in New York and Saudi Arabia will be cautious that it may be forced to reveal sensitive information relating to Aramco – which will still be largely government-owned after the IPO.

This includes details on how the kingdom controls its energy sector and manages money from the company’s earnings.

“The Saudis want to disclose as little as possible and this makes a New York listing very unattractive,” one source said.

But the U.S. Securities and Exchange Commission is also working on proposals to potentially scale back the scope and breadth of disclosure rules to get more companies to go public, its new chairman Jay Clayton said this month.

And although Aramco’s banks believe a London-listing is financially the best solution, there are other factors that the Saudis will take into account and the final outcome is far from decided, one of the sources said.

JPMorgan Chase Co (JPM.N), Morgan Stanley (MS.N) and HSBC (HSBA.L) have been hired as international financial advisers for its initial public offering, Reuters reported in March.

The trio joined Moelis Co (MC.N) and Evercore (EVR.N), who had already been appointed as independent financial advisers.

HSBC, JPMorgan and Moelis declined to comment, while Morgan Stanley and Evercore were not immediately available for comment.

Reporting by Saeed Azhar, Hadeel Al Sayegh in Dubai and Pamela Barbaglia in London; additional reporting by Reem Shamseddine in Khobar, Dasha Afanasieva in London, Tom Arnold in Dubai and John McCrank in New York; editing by Alexander Smith

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U.S. durable goods, trade data boost second-quarter growth estimate

WASHINGTON (Reuters) – New orders for key U.S.-made capital goods unexpectedly fell in June, but a fifth straight monthly increase in shipments suggested that business spending on equipment helped to boost economic growth in the second quarter.

Signs that the economy gathered speed in the last quarter were also bolstered by other data on Thursday showing a sharp narrowing in the goods trade deficit in June and increases in both retail and wholesale inventories.

The bullish reports came on the eve of the government’s advance second-quarter gross domestic product estimate on Friday, prompting economists to raise their forecasts to as high as a 3.5 percent annualized rate. The economy grew at a 1.4 percent pace in the first quarter.

“The economy still has legs in this long expansion from the end of the recession. The only risk we see is that the economy is running out of workers to do the heavy lifting and make us grow,” said Chris Rupkey, chief economist at MUFG in New York.

The Commerce Department said non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, slipped 0.1 percent last month. That was the first drop since December and followed a 0.7 percent jump in May, which was the biggest gain since January.

Economists had forecast core capital goods orders rising 0.3 percent last month. Shipments of core capital goods increased 0.2 percent after rising 0.4 percent in May.

Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement. They have risen for five consecutive months.

Prices for U.S. Treasuries were trading lower, while the dollar rose against a basket of currencies. U.S. stocks rose to new record highs, also cheered by better-than-expected profits from Facebook (FB.O) and Verizon (VZ.N).

Goods Trade Deficit Narrows

The increase in equipment spending has mostly been driven by the energy sector, where oil and gas drilling has increased significantly after declining in the aftermath of the collapse in crude oil prices.

Momentum is, however, slowing as drilling activity cools. The energy sector recovery is supporting manufacturing by offseting some of the drag from declining motor vehicle production. Manufacturing accounts for about 12 percent of the U.S. economy.

In other data on Thursday, the Commerce Department said the goods trade deficit fell 3.7 percent to $63.9 billion in June amid a rise in exports. Goods exports increased $1.8 billion to $128.6 billion last month.

Imports of goods fell $0.7 billion to $192.4 billion. Separately, both retail and wholesale inventories increased 0.6 percent in June. A smaller goods trade deficit and increased stock accumulation are a boost to GDP growth.

However, rising inventories could weigh on economic growth in the coming quarters.

“Stockpiling is not always good news for the economy. If the accumulation of inventories is in anticipation of a quickening demand environment, that is generally positive,” said Tim Quinlan, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

“If it is a result of product simply not moving because demand is drying up, that clearly is not a good signal.”

While another report from the Labor Department on Thursday showed initial claims for state unemployment benefits increased 10,000 to a seasonally adjusted 244,000 for the week ended July 22, layoffs remain low and are consistent with a tightening labor market.

Claims have now been below 300,000, a threshold associated with a robust labor market for 125 straight weeks. That is the longest such stretch since 1970, when the labor market was smaller. The labor market is near full employment, with the jobless rate at 4.4 percent.

Claims are volatile around this time of the year as automakers shut assembly plants for annual retooling. Some manufacturers like General Motors (GM.N) are extending their summer shutdowns to manage excess inventory from falling sales.

Economists say this could be throwing off the model used by the government to strip out seasonal fluctuations from the data, causing swings in the weekly numbers.

“The song remains the same. Companies are very reluctant to lay off workers, presumably because of the difficulty in replacing them, and the labor market is tight,” said John Ryding, chief economist at RDQ Economics in New York. 

Reporting By Lucia Mutikani; Editing by Andrea Ricci

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U.S. regulators to approve fix for more than 300,000 VW diesels: sources

WASHINGTON (Reuters) – The U.S. Environmental Protection Agency and California Air Resources Board will approve later on Thursday a fix for more than 300,000 older Volkswagen AG (VOWG_p.DE) diesel cars, two people briefed on the matter said.

The fix will include hardware and software upgrades, but will reduce vehicle fuel economy ratings by as much as 2 miles per gallon, said the persons, who could not speak for attribution because the decision was not yet public.

The world’s largest automaker will still need to obtain approval for a resale plan for the 2009-2014 model diesel vehicles after making repairs, but the fix is a significant milestone for the company that aims to move beyond its diesel emissions crisis. Volkswagen and EPA did not immediately comment.

In March, Volkswagen pleaded guilty to three felonies in a U.S. court and admitted it used secret software that allowed vehicles to emit pollution at up to 40 times the legal limit.

Volkswagen agreed last year to offer to buy back up to 475,000 2.0-liter diesel vehicles that had been sold in the United States, including the vehicles that won approval on Thursday for a fix. It can now offer hardware and software upgrades and compensation to owners.

As of the end of May, Volkswagen had 37 secure storage facilities around the United States housing close to 275,000 vehicles. Those places include a shuttered suburban Detroit football stadium and a field near a raceway in Colorado.

Gaining approval of a fix is a key step toward allowing Volkswagen to resell or potentially export tens of thousands of diesel cars it has repurchased and is storing all over the United States.

The automaker has spent more than $6.3 billion to repurchase 2.0-liter vehicles and compensate owners.

The vehicles winning approval for an upgrade are the oldest of the models that came under scrutiny in the company’s diesel cheating scandal, known as “Generation One.”

Volkswagen said previously that about 325,000 vehicles were in Generation One including diesel Jetta, Jetta SportWagen, Golf, Beetle, Beetle Convertible and Audi A3 cars.

Earlier this year, EPA approved fixes for two newer generations of diesel cars – including 84,000 2012-2014 Passat diesel vehicles with automatic transmissions in “Generation Two” and 67,000 2015 model diesels in “Generation 3.”

Volkswagen has agreed to spend up to $25 billion to address claims from U.S. owners, environmental regulators, states and dealers, and offered to buy back about 500,000 polluting U.S. vehicles, including some larger 3.0 liter vehicles.

Reporting by David Shepardson; Editing by Matthew Lewis

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Wall Street adds to record rally on strong earnings

(Reuters) – Wall Street continued its record run on Thursday, powered by a barrage of strong quarterly earnings, particularly from Facebook and Verizon.

Facebook (FB.O) jumped 5.49 percent, lifting both the SP 500 and the Nasdaq Composite indexes, after the social network’s results topped Wall Street estimates.

Verizon (VZ.N) surged 6.37 percent after the company reported quarterly subscriber additions that topped estimates. The stock was the second-biggest gainer on both the SP and the Dow, and put the SP telecommunications index on track to post its biggest one-day percentage gain in nearly six years.

Earnings of SP 500 companies are now expected to have climbed 9.9 percent in the second quarter, up from an 8 percent rise estimated at the start of the month, according to Thomson Reuters I/B/E/S.

With equity markets at record levels, investors have been counting on strong earnings to justify the relatively expensive stock valuations.

“While multiples are not cheap and are expected to grow further, strong earnings are justifying these levels,” said Aaron Clark, portfolio manager at GWK Investment Management.

“The dollar, which was a headwind earlier, is now looking like a tailwind. Interest rates are low and earnings are strong. Right now, the path of least resistance is higher.”

The Federal Reserve left interest rates unchanged on Wednesday and noted that both overall inflation and a measure of underlying price gains had declined.

The statement was perceived as dovish by investors, with rate futures pricing in a 38 percent chance of an interest rate hike by December, compared with a little over 50 percent chance priced in before the meeting.

That sent the dollar index .DXY to a 13-month low against a basket of major currencies. A weaker dollar help companies that have overseas operations.

At 10:47 a.m. ET (1447 GMT), the Dow Jones Industrial Average .DJI was up 69.93 points, or 0.32 percent, at 21,780.94 and the SP 500 .SPX was up 4.85 points, or 0.19 percent, at 2,482.68.

The Nasdaq Composite .IXIC was up 35.53 points, or 0.55 percent, at 6,458.28.

Five of the 11 major SP sectors were higher, with the telecommunication index’s .SPLRCL 3.89 percent rise leading the advancers.

However, losses in Amgen (AMGN.O), Johnson and Johnson (JNJ.N) and Celgene (CELG.O) led to a 0.34 percent drop in the healthcare sector .SPXHC.

Twitter (TWTR.N) was down 11.98 percent after the company’s quarterly results showed it failed to add users on a monthly basis in the second quarter, compared with the first quarter.

United Parcel Service (UPS.N) fell 2.73 percent, despite the U.S. package service posting a better-than-expected quarterly profit.

Amazon (AMZN.O), Intel (INTC.O), Starbucks (SBUX.O) and Mattel (MAT.O) are among those reporting results after the bell.

Advancing issues outnumbered decliners on the NYSE by 1,391 to 1,300. On the Nasdaq, 1,415 issues rose and 1,217 fell.

Reporting by Tanya Agrawal in Bengaluru; Editing by Anil D’Silva

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‘High Times’ ready to roll with public offering

(Reuters) – The publisher of marijuana enthusiast magazine, “High Times,” plans to take the company public, High Times Holding Corp announced Thursday, as an increasing number of U.S. states legalize the drug.

Oreva Capital, which in June announced it had bought a controlling stake in High Times for $70 million, is selling the company to special purpose acquisition company (SPAC), Origo Acquisition Corp (OACQU.O), for $250 million.

“High Times is one of few household names in the cannabis industry,” said High Times Chief Executive Adam Levin, who will continue to run the company post-merger.

SPACs like Origo have no assets but use IPO proceeds and bank financing to take companies public through acquisitions. High Times expects to list by October on Nasdaq, but it is unclear what the ticker will be, a source familiar with the situation told Reuters.

The source wished to remain anonymous because he is not allowed to speak to the media about the deal.

Nasdaq declined to comment. Reuters exclusively reported about the impending IPO on Thursday morning.

Origo is taking High Times public at a time when eight U.S. states and Washington, D.C. have legalized recreational use of marijuana by adults.

Investors have shied away from most companies that have direct ties to the marijuana industry because the drug remains illegal under U.S. federal law. However, this listing creates an opportunity for retail investors in a company that is close to the sale of cannabis, but not directly involved in it.

“This is a market that is growing at a 27 percent annual growth rate,” said Troy Dayton, chief executive officer of the Arcview Group, a cannabis investment and research firm. The market is expected to exceed $22.6 billion in revenue in 2021, up from $6.7 billion in 2016, according to Arcview.

That demand continues to grow despite efforts by U.S. Attorney General Jeff Sessions to roll back federal protections for medical marijuana, Dayton said.

“While there is some saber rattling at the federal level, more states keep passing laws,” Dayton said. In November, California, Massachusetts, Maine and Nevada passed laws to allow marijuana use for adults. “The train has left the station.”

“High Times” magazine has 336,000 print and digital subscribers, as well as events, such as its Cannabis Cup, a music and product festival with awards.

Reporting by Jessica Toonkel in New York; Editing by Lisa Shumaker and Frances Kerry

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Twitter shares tumble as flat user growth disappoints investors

(Reuters) – Twitter Inc (TWTR.N) shares opened more than 10 percent lower on Thursday after the social media platform disappointed investors with stagnant monthly active user growth in the second quarter.

Despite its appeal among celebrities and public figures, Twitter has struggled to sustain its closely watched user growth even as it invests in features and live content to help draw viewers and boost user engagement.

It is in stiff competition for advertising dollars with other platforms like larger rival Facebook Inc (FB.O) and Snap Inc’s (SNAP.N) messaging app Snapchat.

The company also reported a wider quarterly net loss and lower revenue, and said it did not expect its total revenue growth to pick up in the second half of the year.

Twitter had 328 million average monthly active users (MAU) in the three months through June 30, unchanged from the previous quarter. Analysts were expecting 328.8 million, according to financial data and analytics firm FactSet.

Shares had run up some 40 percent since mid-April as Twitter investors bet on another quarter of growth after the microblogging service reported adding 9 million more monthly active users than expected in the first quarter.

“If you really can’t accelerate MAU interest given the daily tweets from POTUS, not sure when you will,” said Michael Nathanson, senior research analyst of MoffettNathanson Research, referring to an acronym for the president of the United States.

Trump, one of the most active politicians on Twitter, has tweeted multiple times a day on average since his inauguration in January, according to social media analytics company Zoomph.

“The positive contributions to MAU growth from product improvements in the second quarter were offset by lower seasonal benefits and other factors, resulting in flat MAU quarter-over-quarter,” said Chief Operating Officer Anthony Noto during a conference call with analysts.

In the United States, Twitter’s average monthly active users fell to 68 million from 70 million in the first quarter.

Monthly active users, a key performance indicator for social networking services, is typically calculated by tabulating the number of users who have logged in and logged out during the 30-day period.

Twitter’s shares fell as much as 14.1 percent at one point after the open to $16.85, wiping out about $2 billion in market value.


Twitter’s second-quarter net loss widened as it took a $55 million impairment charge related to an investment writedown and revenue fell 4.7 percent.

The company has been trying to boost revenue through livestreaming deals, but had a setback in April when it lost a deal to stream U.S. National Football League games this year to Inc (AMZN.O).

Advertising revenue fell 8 percent to $489 million, but well exceeded the $458.1 million estimate.

Twitter’s net loss widened to $116.5 million, or 16 cents per share, in the second quarter ended June 30, from $107.2 million, or 15 cents per share, a year earlier.

Excluding items, the company earned 8 cents per share.

Revenue fell to $573.9 million, the second time it has fallen since Twitter’s market debut in 2013.

Analysts on average expected a profit of 5 cents per share, and revenue of $536.62 million, according to Thomson Reuters I/B/E/S.

“They (revenue and profit) are still unimpressive, and the ‘beat’ was because they set very low expectations,” said Michael Pachter, managing director at Wedbush Securities.

Twitter said in a letter to investors that the company does not expect its total revenue growth rate to improve in the second half of 2017 “due to headwinds in the second half (of approximately $75M) associated primarily with de-emphasized revenue products.”

But the social media platform said it is looking to data licensing, which it claims is its fastest-growing product area, to turn around revenue in the future.

Reporting by Angela Moon in New York, Pushkala A and Aishwarya Venugopal in Bengaluru; Editing by Bernadette Baum and Meredith Mazzilli

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Facebook shares surge as results quash fears of slowing growth

(Reuters) – Shares of Facebook Inc (FB.O) touched a record high on Thursday on the back of overwhelmingly positive quarterly results, adding more than $27 billion to its market value.

The world’s biggest online social network posted a 71 percent surge in second-quarter profit and a 50 percent jump in mobile ad sales, allaying investor concerns that ad revenue growth was peaking as it runs out of space to display ads.

Shares rose 6 percent to $175 in early trading, adding gains worth twice the market capitalization of rival Twitter Inc (TWTR.N).

Facebook’s stock slipped as much as 2 percent on May 4, a day after the company posted first-quarter results and said ad revenue growth was expected to come down significantly over the rest of 2017.

Ad sales growth did slow to 47 percent in the June quarter, after a 51 percent increase in the March quarter, but investors brushed it aside, looking ahead to new growth drivers – WhatsApp, Messenger and video.

At least eleven brokerages raised their price targets. Wedbush was the most bullish, lifting its target by $40 to $225. The median price target is $190.

“The strength of Facebook’s mind-boggling results continued to be a testament to the platform’s massive user base and unparalleled targeting abilities,” MoffettNathanson Research analyst Michael Nathanson said.

Facebook has more than 2 billion regular users. Its two messaging services, Messenger and WhatsApp, have more than 1 billion users each.

Mobile advertising accounted for 87 percent of the $9.16 billion in total ad revenue even as the average growth in ad price jumped 24 percent to a record high.

Advertisers will continue to buy ads despite an increase in prices given Facebook’s superior return on investment compared with other digital platforms, Credit Suisse analyst Stephen Ju said.

Facebook also cut its forecast for expense growth even as it said it was moving to diversify its revenue stream by investing in initiatives such as video and TV-style programming.

Chief Executive Mark Zuckerberg said he expected video to become the “primary driver” of revenue over the next few years.

Lack of details, however, left analysts cautious about the company’s video efforts, which would have to compete with Alphabet Inc’s (GOOGL.O) YouTube and Netflix Inc (NFLX.O).

“The biggest open-ended questions will be how successfully Facebook can monetize its video-only tab and TV extension product,” MoffettNathanson’s Nathanson said.

Reporting by Sweta Singh and Sruthi Ramakrishnan in Bengaluru; Editing by Sayantani Ghosh

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