News Archive

Oil tumbles, weighs on energy shares; bank stocks rise

NEW YORK (Reuters) – Oil prices dropped about 5 percent on Monday, putting pressure on energy shares and keeping global stock markets in check, although financial shares rallied after upbeat news from Bank of America and Deutsche Bank.

Oil slumped as Libyan ports reopened and traders eyed potential supply increases by Russia and other producers.

U.S. crude CLcv1 fell 4.59 percent to $67.75 per barrel, while Brent LCOcv1 was last at $71.69, down 4.83 percent on the day, and touched a three-month low.

Wall Street’s main indexes were little changed following strong weeks as investors geared up for a big week of corporate earnings and awaited commentary on the impact of trade disputes between the United States and its trading partners.

“Trade and trade rhetoric will be a focus of the market,” said Mona Mahajan, U.S. investment strategist at Allianz Global Investors in New York.

  • Hong Kong’s bourse brushes off Chinese snub over dual-class shares

“As we get into earnings season in particular we are going to be watching for management teams to discuss their outlooks not only in the numbers but more generally anecdotally how trade could impact their businesses.”

The Dow Jones Industrial Average .DJI rose 17.35 points, or 0.07 percent, to 25,036.76, the SP 500 .SPX lost 1.93 points, or 0.07 percent, to 2,799.38 and the Nasdaq Composite .IXIC dropped 12.01 points, or 0.15 percent, to 7,813.97.

Major energy stocks such as Exxon Mobil (XOM.N), Chevron (CVX.N) and BP (BP.L) weighed on key indexes.

Financials in the U.S. .SPSY and Europe .SX7P were higher following Bank of America’s (BAC.N) better-than-expected quarterly profit and Deutsche Bank’s (DBKGn.DE) upbeat earnings preview.

Overall in Europe, the pan-European FTSEurofirst 300 index .FTEU3 lost 0.34 percent.

MSCI’s gauge of stocks across the globe .MIWD00000PUS shed 0.11 percent.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 16, 2018. REUTERS/Brendan McDermid

Markets looked ahead to U.S. Federal Reserve Chairman Jerome Powell’s semiannual testimony on the economy and monetary policy before the U.S. Senate Banking Committee on Tuesday.

The dollar fell after posting its largest weekly gain in a month, as investors pared back their long bets on the greenback.

The dollar index .DXY fell 0.24 percent, with the euro EUR= up 0.22 percent to $1.1711.

The rouble held gains after a meeting between Russian President Vladimir Putin and U.S. President Donald Trump helped offset a negative impact from the drop in oil prices.

U.S. Treasury yields increased with the two-year yield hitting a near decade peak as domestic retail sales recorded growth for a fifth straight month in June, supporting the view of solid economic growth in the second quarter.

Benchmark 10-year notes US10YT=RR last fell 7/32 in price to yield 2.8545 percent, from 2.831 percent late on Friday.

Editing by William Maclean, Dan Grebler and Frances Kerry

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FCC has enough votes for Sinclair draft order: official

WASHINGTON (Reuters) – The Federal Communications Commission has the three votes needed to approve a draft order sending Sinclair Broadcast Group Inc’s (SBGI.O) proposed $3.9 billion acquisition of Tribune Media Co (TRCO.N) to an administrative hearing, an official said on Monday.

Chairman Ajit Pai speaks ahead of the vote on the repeal of so called net neutrality rules at the Federal Communications Commission in Washington, U.S., December 14, 2017. REUTERS/Aaron P. Bernstein

FCC Chairman Ajit Pai said on Monday he has “serious concerns” about the planned deal.

Reporting by Diane Bartz; Editing by Susan Thomas

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Jetmakers see brisk start to air show as UK tries to soothe Brexit worries

FARNBOROUGH, England (Reuters) – Planemakers racked up more than $20 billion of deals on the opening day of the Farnborough Airshow on Monday, suggesting demand for new passenger jets remains in rude health despite worries over trade tensions and Brexit.

The deal-making came as host Britain tried to convince a skeptical aerospace industry about its plans to leave the European Union, saying supply chains would continue to run smoothly and pledging money for a new fighter jet program.

European jetmaker Airbus (AIR.PA) and U.S. rival Boeing (BA.N) have been enjoying an almost decade-long boom thanks to rising emerging markets growth and a need among Western airlines to upgrade their fleets, and order books are bulging.

Higher oil prices, rising interest rates, global trade tensions and uncertainty over Brexit have all raised concerns that demand may slow.

But business was brisk on the first day of the July 16-22 air show, though analysts will be watching closely to see how many of the deals are new, and how many involve adjusting earlier business or switching models – something not always easy to spot at first.

Even before the first displays had taken to the skies over a sun-baked southern England, Boeing said delivery firm DHL, part of Deutsche Post DHL Group (DPWGn.DE), had placed a $4.7 billion order for 14 777 freighters, and purchase rights for seven additional freighters.

It followed that up with a $3.5 billion deal for 30 of its hot-selling single-aisle 30 737 MAX 8 aircraft with U.S. aircraft leasing firm Jackson Square Aviation, while Qatar Airways finalised an order for five 777 freighters.

  • Boeing says Goshawk Aviation Limited orders 20 737 max 8 jetliners
  • Airbus says Europe, UK should work together on future fighter
  • Pratt Whitney promises to meet engine production demands

Meanwhile, Airbus announced a memorandum of understanding (MoU) for Taiwanese start-up StarLux Airlines to buy 17 of its A350 wide-body planes worth around $6 billion at list prices, and another MoU with an unidentified leasing firm for 80 A320neo single-aisle jets worth about $8.8 billion.

The Farnborough Airshow is the industry’s biggest event this year. It alternates with the Paris Airshow and collectively they account for over a quarter of industry order intake each year.


Opening the event south west of London, British Prime Minister Theresa May sought to reassure aviation bosses that her under-fire Brexit plan won’t disrupt their supply chains.

“We will take back control of our borders, our laws and our money. But we will do so in a way that is good for business and good for our future prosperity,” she said.

Businesses have been getting increasingly frustrated about the lack of clarity over future trading relations less than nine months before Brexit day on March 29, 2019.

Airbus, which employs around 15,000 people in Britain, warned earlier this month that if Britain left the EU without a deal – a so-called “hard” Brexit – it could result in production at its factories stopping and aircraft being grounded.

Also at the air show, Britain’s defense minister Gavin Williamson unveiled a model of a new fighter jet called “Tempest” that the country plans to build.

Slideshow (9 Images)

He announced 2 billion pounds ($2.7 billion) of funding for the project to 2025 and said he was looking for other countries to join, with a senior Royal Air Force official saying Sweden was the most likely partner.

The project faces competition from a rival European one after France announced in June that it would take a leading role on a new fighter program, saying it would start as a bilateral effort with Germany that could be expanded later.


On the civilian side, the air show is expected to confirm demand for narrowbody jets from airlines such as Mexico’s VivaAerobus, which is shopping for some 40 Airbuses, and lessors like Goshawk, which ordered 20 A320neo jets on Monday but is also expected to be interested in 737 MAX. Major lessors Air Lease and Avolon are also in town.

But both Airbus and Boeing are under pressure to increase orders for some of their wide-body jets due to a recent slowdown in that part of the market. One exception is the Boeing 787, after a multi-year effort to end delays and cost overruns.

Speaking after the deal for wide-body A350s with StarLux, Airbus chief commercial officer Eric Schulz said he was confident the market for such planes would pick up.

“What I have said consistently is that I see the wide-body market picking up within 18-24 months. I am quite confident.”

“There are explanations as to why this wave is now coming. We had a very massive wave 4-5 years ago with a lot of orders. I think the market had to pause a little bit until we could deliver consistently and get to ramp up and rate. I think this is behind us now.”

Reporting by Tim Hepher, Eric M. Johnson, Sarah Young, Mike Stone, Andrea Shalal and Victoria Bryan in Farnborough, and William James in London; Editing by Daniel Wallis and Mark Potter

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Pratt & Whitney promises to meet engine production demands

FARNBOROUGH, England (Reuters) – Pratt Whitney’s Chief Executive Greg Hayes said on Monday his company will be able to overcome supply chain problems to ramp up engine production next year as planemakers’ orders swell.

Europe’s Airbus SE (AIR.PA) has said it is aiming for output of 60 narrowbodies a month in 2019 with surge capacity of 63 a month.

Speaking at a roundtable on innovation at the Farnborough Airshow, Hayes said he was confident Pratt Whitney, part of United Technologies Corp (UTX.N), could meet its contractual obligations to Airbus.

“We will be able to ramp up and continue to work with both Boeing and Airbus on these ramps,” Hayes said. “The problem is always going to be capacity and supply chain and whether we can make the investments fast enough to satisfy their demand.”

“There’s no technological reason we can’t do it, it’s simply a supply chain constraint at this point,” Hayes added.

Reporting by Eric M. Johnson; Editing by Susan Fenton

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Exclusive: FCC order says Sinclair request on Tribune may ‘involve deception’

WASHINGTON (Reuters) – A draft Federal Communications Commission order seen by Reuters on Monday said that Sinclair Broadcast Group Inc’s (SBGI.O) application for approval to purchase Tribune Media Co (TRCO.N) may “involve deception.”

FILE PHOTO: Chairman of the Federal Communications Commission Ajit Pai speaks at the Conservative Political Action Conference (CPAC) at National Harbor, Maryland, U.S., February 23, 2018. REUTERS/Joshua Roberts

The order said that “Sinclair’s actions here potentially involve deception” and noted possible “misconduct.”

FCC Chairman Ajit Pai said on Monday he has “serious concerns” about Sinclair’s proposed $3.9 billion acquisition of Tribune, an announcement that could scuttle the deal.

Reporting by David Shepardson and Diane Bartz; Editing by Kevin Drawbaugh and Jonathan Oatis

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Strong U.S. retail sales lift second-quarter GDP estimates

WASHINGTON (Reuters) – U.S. retail sales rose solidly in June as households boosted purchases of automobiles and a range of other goods, cementing expectations for robust economic growth in the second quarter.

Signs of a strengthening economy, together with a tightening labor market and firming inflation, likely will keep the Federal Reserve on track to continue raising interest rates this year.

Fed Chairman Jerome Powell offered an upbeat assessment of the economy last Friday, telling lawmakers that “over the first half of this year, overall economic activity appears to have expanded at a solid pace.” The U.S. central bank raised interest rates in June for the second time this year and has forecast two more rate hikes by the end of 2018.

“This puts the economy in a very, very good position as it starts its 10th year of forward movement in July,” said Chris Rupkey, chief economist at MUFG in New York. “This strengthening economy gives the Federal Reserve the green light to raise rates a third time this year at their September meeting.”

The Commerce Department said on Monday retail sales increased 0.5 percent last month. Data for May was revised to show sales rising 1.3 percent, the largest since September 2017, instead of the previously reported 0.8 percent gain.

Economists had forecast retail sales rising 0.5 percent in June. Retail sales in June gained 6.6 percent from a year ago.

Excluding automobiles, gasoline, building materials and food services, retail sales were unchanged last month after an upwardly revised 0.8 percent increase in May.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product and were previously reported to have risen 0.5 percent in May.

Given the upward revision to May’s data, the unchanged reading in core retail sales last month did not change views consumer spending accelerated in the second quarter.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, braked in the January-March period, growing at its slowest pace in nearly five years.

The dollar slipped against a basket of currencies. Stocks on Wall Street were lower. U.S. Treasuries fell, with the yield on the interest rate-sensitive two-year note US2YT=RR rising to a near 10-year high.[L8N1UC4KW]

FILE PHOTO: A shopper carries Gap shopping bags at The Grove mall in Los Angeles November 26, 2013. REUTERS/Lucy Nicholson/File Photo


In addition to the solid retail sales data, a sharp narrowing of the trade deficit in April and May has also bolstered expectations of a strong GDP reading for the second quarter. Second-quarter growth expectations were supported by another report from the Commerce Department on Monday showing business inventories increased 0.4 percent in May.

Forecasting firm Macroeconomic Advisers raised its April-June quarter GDP growth estimate to a 5.1 percent annualized rate from 4.9 percent. The economy grew at a 2.0 percent pace in the first quarter. The government will publish its snapshot of second-quarter GDP later this month.

Escalating trade conflicts, however, pose a risk to the economy’s outlook. The United States is embroiled in tit-for-tat import tariffs with major trade partners, including China, Canada, Mexico and the European Union.

Concerns about trade tariffs are starting to have some impact on both consumer and business confidence.

Consumer sentiment dipped in early July and a survey by the New York Fed published on Monday showed a moderation in factory activity in New York state in July amid a pullback in new order growth and shipments. Firms were also less optimistic about business conditions over the next six months.

The survey’s measures of both planned capital expenditures and technology spending declined sharply this month.

The International Monetary Fund also warned on Monday that the trade wars threatened to derail the global economic recovery, adding that the United States was especially vulnerable to a slowdown in its exports.

“Depending on what portion of the tariff businesses pass onto buyers, the additional burden on each household in the U.S. is between $120 to $200 per year,” said Sung Won Sohn, chief economist at SS Economics in Los Angeles.

“While this may not sound large, some sectors of the economy like agriculture would be hit hard. Negative effects from financial markets could also add to consumer worries.”

In June, auto sales rose 0.9 percent after advancing 0.8 percent in May. There were increases in online sales as well as receipts at service stations, building materials stores, furniture shops and restaurants and bars.

But sales at clothing stores fell 2.5 percent, the biggest drop since February 2017. Sales at supermarkets, electronics and appliance stores and general merchandise shops also fell. Americans also cut back spending on hobbies.

FILE PHOTO: A shopper walks in the Old Town shopping area of Pasadena, California, U.S. June 27, 2017. REUTERS/Mario Anzuoni/File Photo

Reporting by Lucia Mutikani; Editing by Dan Grebler and Andrea Ricci

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IMF warns of growing damage from trade fight, says U.S. vulnerable

WASHINGTON (Reuters) – Escalating and sustained trade conflicts following U.S. tariff actions threaten to derail economic recovery and depress medium-term growth prospects, the International Monetary Fund warned on Monday.

FILE PHOTO: International Monetary Fund (IMF) logo is seen at the IMF headquarters building during the IMF/World Bank annual meetings in Washington, U.S., October 14, 2017. REUTERS/Yuri Gripas

Sketching out potential damage from the full brunt of U.S. President Donald Trump’s tariff threats and subsequent retaliation from trading partners, the IMF said that if realized, these could reduce annual global economic output by 0.5 percent from projections for 2020.

That translates to nearly $500 billion in lost annual output based on IMF projections, the equivalent of subtracting an economy the size of Thailand.

“The risk that current trade tensions escalate further with adverse effects on confidence, asset prices and investment is the greatest near-term risk to global growth,” IMF Chief Economist Maury Obstfeld told a news conference, noting that U.S. trade deficits are likely to grow due to high demand, possibly inflaming trade tensions further.

The reduction in output takes into account active U.S. global tariffs on steel and aluminum, as well as an initial $34 billion in Chinese goods, along with retaliatory measures. Other threatened actions, which include another round of tariffs on an additional $200 billion in Chinese goods and a 25 percent U.S. global tariff on car imports now under study, are also included.

“As the focus of global retaliation, the United States finds a relatively high share of its exports taxed in global markets in such a broader trade conflict, and it is therefore especially vulnerable,” Obstfeld added.

The IMF left unchanged its global economic growth forecasts at 3.9 percent for both 2018 and 2019, compared to its previous forecast issued in April. Obstfeld said these projections only take into account tariffs currently in force, so larger actions such as possible automotive tariffs were not included.

Still, he said that growth momentum was slowing. While the IMF in April rounded down growth projections to reach the 3.9 percent forecast, for the July update, the numbers were rounded up slightly to reach that same level.

Forecasts for the United States and China were both unchanged, with U.S. growth pegged at 2.9 percent in 2018 and 2.7 percent in 2019. China’s growth was forecast at 6.6 percent in 2018 and 6.4 percent in 2019.

But the fund cut its 2018 growth forecasts for euro zone countries and for Japan and Britain, citing a softer-than-expected first-quarter performance coupled with tighter financial conditions partly due to political uncertainty.

The euro zone’s 2018 growth forecast was cut to 2.2 percent from 2.4 percent, with Britain cut to 1.4 percent from 1.6 percent. Japan’s growth projection was cut to 1.0 percent from 1.2 percent.

The IMF also trimmed 2018 forecasts for some emerging market countries, notably a half percentage point cut for Brazil to 1.8 percent due to the lingering effects of labor strikes and political uncertainty.

The fund also cut India’s growth rate by a tenth of a point to 7.5 percent due to the negative effects of higher oil prices on domestic demand and faster-than-anticipated monetary policy tightening due to higher inflation.

The IMF revised slightly upward 2018 forecasts for Saudi Arabia and several Commonwealth of Independent States countries other than Russia.

Reporting by David Lawder; Editing by Chizu Nomiyama and James Dalgleish

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Qatar Airways adapts to blockade, may avoid making a loss

FARNBOROUGH, England (Reuters) – Qatar Airways chief executive said the airline was adapting to a regional blockade that has prevented it flying some routes, and that those restrictions would not necessarily push it into the red for the current financial year.

FILE PHOTO: Visitor passes by the Qatar Airways booth at the International Tourism Trade Fair ITB in Berlin, Germany, March 7, 2018. REUTERS/Fabrizio Bensch

“There is a possibility that we will post also a loss in our current financial year, but it’s only a possibility,” Chief Executive Akbar al-Baker told reporters at the Farnborough Airshow on Monday.

The airline lost access to 18 cities in Saudi Arabia, the United Arab Emirates (UAE), Egypt, and Bahrain in mid-2017, when those four countries cut ties with Qatar after accusing it of supporting terrorism. Qatar denies the charges.

The restrictions mean the company is set to post what al-Baker has said will be “a very large loss” for the financial year ended March 2018, but it has not been published yet. Al-Baker said this would be made public in the coming weeks.

But for the current year, he said the airline might be able to mitigate the impact of the blockade, which includes a ban on using airspace over the four countries, meaning some of its flights have to take much longer routes.

Qatar Airways is starting up to 18 new routes to offset the impact of the blockade, and said it could also make investments to help to boost its results.

“We will try to do investments which will give us returns to mitigate the negative impact on the bottom line of our company,” he said, without giving further details.

Qatar Airways is already an investor in British Airways-owner IAG (ICAG.L), for example, owning about a 20 percent stake, and last year bought a stake in Italian carrier Meridiana.

The CEO said he did not see the situation with the blockade improving any time soon.

He also said the airline was only moderately hedged on fuel and might need to hedge more in future as the price of oil rises.

“I am concerned about the oil prices. For the time being Qatar Airways is moderately hedged … well if it comes I may have to (hedge),” he told Reuters, referring to a potential rise in oil prices.

Reporting by Sarah Young; Editing by Victoria Bryan and Jane Merriman

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Northrop Grumman upbeat on talks for German drone contract

FARNBOROUGH, England (Reuters) – Northrop Grumman Corp (NOC.N) is upbeat about the prospects for the sale of its high-altitude Triton MQ-4C unmanned surveillance system to Germany, but says the deal could take several years to complete.

A UAV helicopter build by Northrop Gruman is on deck aboard the soon to be commissioned littoral combat ship USS Coronado during a media tour in Coronado, California April 3, 2014. REUTERS/Mike Blake/File Photo

Brian Chappel, sector vice president and general manager of autonomous systems at Northrop, said the German government was working closely with the U.S. Navy to move forward after the State Department in April authorized the sale of up to four drones worth up to $2.5 billion.

Northrop and Airbus Defense and Space, a unit of Airbus SE (AIR.PA), have teamed up on the program, to be called Pegasus in Germany, which will help Germany beef up its surveillance capabilities. The aircraft are launched from land and can be programed to fly autonomously as high as 60,000 feet to gather a wide array of intelligence data.

The German government plans to buy three of the drones, equipped with sensors and a mission system built by Airbus, with deliveries to start in 2025, according to government documents.

The decision came after the messy 2013 cancellation of plans to buy a version of Northrop’s Global Hawk drone, after it became it clear it could cost up to 600 million euros ($702 million) to get the new system approved for use in civil airspace.

Chappel said he was upbeat given that the entire process – including preparations for certifying the drones’ use in civil airspace – was moving forward more smoothly this time.

“The German government understands what they want,” Chappel told Reuters ahead of the Farnborough air show. “We’re going to be very careful and make sure we start a program that’s going to be successful because nobody wants to have a problem again.”

Airbus Defense and Space Chief Executive Dirk Hoke told Reuters his company looked forward to moving forward on the program after the demise of the predecessor Eurohawk.

“That is an important project for us,” Hoke said, adding that funding Pegasus would help preserve key signals intelligence capabilities in Europe, which would also play a role in a future Franco-German fighter jet program.

Chappel said the groundwork for a successful contract had been laid on both sides, and all the parties involved were closely aligned to get the deal done. Now the challenge was working through the contracting process.

Northrop developed the Triton, a marine-based variant of its Global Hawk, for the U.S. Navy under a contract awarded in 2008.

Australia last month said it would buy six Triton aircraft to beef up its maritime patrols, with an initial investment of A$1.4 billion ($1 billion).

Reporting by Andrea Shalal; Editing by Toby Chopra and Susan Fenton

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