News Archive


McDonald’s U.S. same-store sales miss estimates, shares drop

(Reuters) – McDonald’s Corp (MCD.N) missed quarterly U.S. same-store sales estimates for the first time in at least two years amid fierce competition in a slack restaurant market, sending its shares down as much as 2.3 percent in midday trading.

The burger giant has committed to a discount-value menu program and other specials — notably its $1, $2 and $3 menus — as it competes with long-time rivals and fast-growing chains like privately held Chick-fil-A, Yum Brands Inc’s (YUM.N) Taco Bell and Dunkin’ Brands Group Inc (DNKN.O).

“We don’t strive to win on value, but we won’t lose either,” said Chief Financial Officer Kevin Ozan, on the restaurant chain’s second-quarter earnings call.

The company’s stock, a component of the blue-chip Dow Jones Industrial index, fell to $155.31 in midday trading. Shares have dropped nearly 10 percent since the start of the year, underperforming the SP 500 Restaurants sub index .SPLRCREST, which is down about 6.4 percent in the year to date.

The company, which had said in the previous quarter it saw weakness in the highly competitive U.S breakfast category, said on Thursday that segment remained weak.

McDonald’s quarterly sales at its U.S. restaurants open for at least 13 months grew at its slowest pace in over a year, at just 2.6 percent. That missed the average analyst estimate of a 2.96 percent rise.

Outside of the United States, business was healthier, with same-store sales for the company’s international markets, including France and Britain, jumping 4.9 percent. Analysts had forecast a more modest growth of 3.94 percent.

This helped McDonald’s worldwide sales at stores open for at least 13 months to grow 4 percent, exceeding analyst estimates for 3.60 percent growth, according to Thomson Reuters I/B/E/S.

Net income rose to about $1.50 billion, or $1.90 per share, in the second quarter ended June 30, from $1.40 billion, or $1.70 per share, a year earlier. Excluding items, the company earned $1.99 per share, beating the estimate of $1.92.

Revenue fell 12 percent to $5.35 billion, but edged past expectations for $5.32 billion.

Reporting by Aishwarya Venugopal in Bengaluru and Alana Wise in New York; Editing by Arun Koyyur and Bernadette Baum

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U.S. touts EU trade deal, says others can also make progress

WASHINGTON (Reuters) – The United States signaled on Thursday it is set to push ahead on trade talks with Canada and Mexico after agreeing to suspend hostilities over tariffs with Europe in a fragile deal that may clear the way for renewed pressure on China.

A surprise deal struck on Wednesday will see Washington suspend the imposition of any new tariffs on the European Union, including a proposed 25 percent levy on auto imports, and hold talks over tariffs on imports of European steel and aluminum.

The deal boosted share markets initially, and U.S. industrial shares were stronger on Thursday as fears of a trade war with Europe ebbed.

Both sides claimed victory in the deal, reached by Trump and European Commission President Jean-Claude Juncker in Washington. In return for the talks and a suspension of auto tariffs, the EU will import more soybeans and energy from the United States.

It will also help the United States in its battle to stop Chinese theft of companies’ intellectual property. Trump has announced a series of punitive tariffs on Chinese imports in a bid to halt a Chinese surge in high-technology industries that threatens to displace U.S. dominance.

On the North American Free Trade Agreement talks with Canada and Mexico, Treasury Secretary Steve Mnuchin said he was “hopeful that we’ll have an agreement in principal in the near future.”

“Whether it’s one deal or two deals, so long as we get the right agreement, we’re indifferent,” Mnuchin told CNBC.

Trump and officials from his administration said the EU had given ground by agreeing to import more American goods and to hold talks on tariff reductions including on cars, an industry in which Trump has accused Europe of imposing heavy duties.

EU officials said little had been given away by Juncker and that they had emerged as the winners by deferring the threatened car tariffs, which would have hit European carmakers hard.

The deal was hailed by commentators in the United States and Europe for drawing back from an escalation in a trade war that had threatened to take the world back to the kind of protectionism not seen since the 1930s, although some cautioned the relief may be only temporary.

French President Emmanuel Macron appeared to challenge the deal, saying on Thursday he would not discuss agriculture in talks with the United States.

If it holds, the U.S.-EU pact could allow both to focus on China, whose economic rise threatens both. Lawmakers in Washington on Thursday passed legislation to slow Chinese investment in U.S. companies. In Europe, alarm bells have been sounded over China’s growing economic influence there.

“U.S. and EU will be allied in the fight against China, which has broken the world trading system, in effect,” Trump’s economic adviser Larry Kudlow said. “President Juncker made it very clear yesterday that he intended to help us, President Trump, on the China problem.”

CASUALTIES IN TRADE FIGHT

Since taking office last year, Trump has implemented policies to restrict what he sees as unfair competition from other countries. He tore up an agreement to join a Pacific trade pact, has threatened to pull out of NAFTA, and imposed steel and aluminum tariffs aimed at China.

In an effort to rein in China’s high-tech industries that he charges have stolen intellectual property from American companies, Trump has ramped up his tariff threats from $50 billion of imports from China to $450 billion after China retaliated with its own duties on imports from the United States.

The price has fallen mainly on U.S. farmers, and a move by Trump to offset their losses with a $12 billion aid package drew fire from farmers, who said they wanted access to markets rather than subsidies, and from Republican lawmakers.

U.S. Trade Representative Robert Lighthizer, a veteran of trade negotiations from former President Ronald Reagan’s administration in the 1980s who is Trump’s top trade official, told lawmakers in Washington that the United States could not afford to capitulate to China economically.

“I don’t think it’s a stupid fight,” Lighthizer said of the trade battle with China in heated exchanges in the Senate. “I don’t know a single person that has read this report that thinks it’s a stupid fight to say China should not be able to come in and steal the future of American industry.”

A more conciliatory tone emerged from Mnuchin, who told CNBC the United States was willing to reopen trade talks with China if Beijing was willing to make “serious changes,” as he said the EU had indicated it was willing to do.

In May, the United States and China initially appeared willing to strike a deal that would see China reduce its $350 billion goods trade surplus by buying more U.S. agriculture and energy products.

That deal fell apart quickly and has been replaced with a rising tally of tariff retaliation that has led to Trump threatening tariffs on almost everything the United States imports from China.

China has threatened to retaliate dollar for dollar, and its refusal to sign off on regulatory approval caused a $44 billion deal from Qualcomm Inc (QCOM.O) to buy NXP Semiconductors (NXPI.O) to fall apart, a move that showed U.S. companies were being targeted unfairly, Mnuchin said.

Reporting by Susan Heavey and Lindsay Dunsmuir in Washington, Alastair MacDonald in Brussels and Leigh Thomas in Paris; Writing by David Chance; Editing by Will Dunham

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White House’s Kudlow says EU will help Trump confront China

WASHINGTON (Reuters) – White House economic adviser Larry Kudlow said on Thursday that European Commission President Jean-Claude Juncker had pledged to U.S. President Donald Trump that he would help the United States confront China over its trade practices.

Kudlow also told Fox Business Network that the European Union would immediately begin work on increased purchases of American soybeans, beef and liquefied natural gas.

“U.S. and EU will be allied in the fight against China, which has broken the world trading system, in effect,” Kudlow said. “President Juncker made it very clear yesterday that he intended to help us, President Trump on the China problem.”

Reporting by David Lawder; Editing by Chizu Nomiyama

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Qualcomm ends $44 billion NXP bid after failing to win China approval

BEIJING/SAN FRANCISCO (Reuters) – Qualcomm Inc (QCOM.O) walked away from a $44 billion deal to buy NXP Semiconductors (NXPI.O) after failing to secure Chinese regulatory approval, becoming a high profile victim of a bitter Sino-U.S. trade spat.

The world’s biggest smartphone-chip maker and Netherlands-based NXP confirmed in separate statements on Thursday that the deal, which would have been the biggest semiconductor takeover globally, had been terminated.

The collapse of the deal is likely to aggravate tensions between Washington and Beijing, damage China’s image as an antitrust regulator and discourage deals that need Chinese approval to go through, sources have said.

“I’m very disappointed that they didn’t get regulatory approval,” U.S. Treasury Secretary Steve Mnuchin told CNBC in an interview. “Unfortunately, I think this is another example of where it was approved in every single other territory. We’re just looking for U.S. companies to be treated fairly.”

Qualcomm had said on Wednesday that it would drop the bid for NXP, unless a last minute reprieve from China was received. There was no word from China’s State Administration for Market Regulation (SAMR), the antitrust regulator reviewing the deal, after the deadline for the deal to expire passed.

“We obviously got caught up in something that was above us,” Qualcomm Chief Executive Steve Mollenkopf said in an interview after the announcement on Wednesday.

The deal was announced in October 2016, just days before the election of U.S. President Donald Trump and was awaiting Chinese approval even as a trade dispute between United States and China intensified and the two countries clashed on issues such as ownership of technology and patents.

The Trump administration played an outsized role in Qualcomm’s fate and there had been expectations that the lifting of a ban on U.S. chipmakers doing business with China’s ZTE Corp (000063.SZ) would clear the way for the NXP deal.

U.S. Senator Marco Rubio, a Republican who had been critical of ZTE, in a post on Twitter blasted China’s action against Qualcomm, saying: “We should reimpose ZTE ban.”

Qualcomm needed approval from China because the country accounted for nearly two-thirds of its revenue last year.

The Chinese Commerce Ministry declined on Thursday to comment on whether the deal was approved.

“According to my understanding, the case was an anti-monopoly issue, and not related to China-U.S. trade friction,” ministry spokesman Gao Feng said at a regular news conference.

He said that while China does not want a trade war, it is not afraid of one.

WHAT NEXT?

While the collapse of the deal will remove a big overhang from Qualcomm’s stock, it will leave it on the hook to find new ways to turbocharge growth as global phone sales slow.

The company said on Wednesday that it expects Apple Inc (AAPL.O) to solely use modems from a rival – likely Intel Corp (INTC.O) – amid an acrimonious battle between the two companies over pricing and licensing costs.

But it cited progress on one of two major patent royalty conflicts, thought to be with Chinese phonemaker Huawei Technologies Co Ltd [HWT.UL]. Of the $700 million due to Qualcomm as part of an interim agreement, $500 million was paid this quarter.

Intel and Apple declined to comment. A spokesman for Huawei said the company would not comment on speculation.

“We think moving on, reducing the amount of uncertainty in the business and increasing the focus is the right thing to do with the company,” Mollenkopf said.

For now, Qualcomm will buy back $30 billion in shares if the deal fails, making good on a promise to reassure investors. The San Diego chipmaker on Wednesday also delivered surprisingly strong third-quarter results and a rosy outlook for so-called 5G technology, the next generation of wireless data networks.

The company’s shares rose about 7 percent in premarket trading, while those of NXP fell 6.5 percent.

Qualcomm will pay NXP $2 billion in termination fee by 09:00 ET on July 26, as agreed.

“We believe ending the uncertainty of buying NXP is positive for Qualcomm shares,” Canaccord Genuity analyst Michael Walkley said in a note to clients.

He said he expects strong earnings growth over the next several years thanks to the share buyback, the likelihood that the disputes with Apple and Huawei will be settled over the next year, and that 5G will drive market share gains.

Additional reporting by Sonam Rai in Bengaluru, Se Young Lee, Ben Blanchard and Elias Glenn in Beijing, Adam Jourdan in Shanghai, Sijia Jiang in Hong Kong Greg Roumeliotis in New York; and Susan Heavey in Washington; Writing by Sayantani Ghosh; Editing by Richard Chang and Bill Trott

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Hedge funds hit by Qualcomm-NXP deal collapse

LONDON (Reuters) – Hedge funds betting Qualcomm (QCOM.O) would succeed in a $44 billion bid for NXP Semiconductors (NXPI.O) face steep losses after the deal fell through – taking the shine off a strong start to the year for many funds.

Qualcomm, the world’s biggest maker of chips for mobile phones, called off the deal on Thursday after the Chinese regulator failed to approve it by a Wednesday deadline.

Many funds bought into NXP months ago at an average of around $115 a share, well below the $127.5 a share offer price, a trader at a major investment bank told Reuters, but rising U.S. China trade tensions caused a steady slide in the value of the target.

After closing at $98.37 on Wednesday, ahead of the deadline, shares in NXP were down more than 7 percent early on Thursday. From Wednesday’s close to Thursday, the estimated paper loss based on the share price movement would be more than $700 million, based on available Thomson Reuters data.

“It’s a significant hit but it’s always more palatable for risk-arbitrage to lose money as a slow bleed,” said the trader at the bank. “The struggle is when you come in and the stock is down 30 percent in one day.”

Which funds held what position at when the deal was called off on Wednesday is hard to determine as U.S. securities filings data has a long lag. It is also impossible to show using publicly available data when they bought and sold, to determine precise losses.

The most recent Thomson Reuters data, however, showed hedge funds made up seven of the top 10 shareholders in NXP, and collectively they held more than 35 percent of its shares.

“A lot of hedge funds are involved in NXP-Qualcomm. We have about five to 10 event-driven managers involved in the trade,” said Ben Watson, senior investment manager, alternatives at Aberdeen Standard Investments.

Three of the seven hedge funds among the top-10 investors cut exposure to NXP ahead of Wednesday, including Soroban Capital Partners, Och-Ziff Capital Management and Pentwater Capital Management, Thomson Reuters data showed.

All of these funds declined to comment to Reuters.

“We cut our position from near-10 percent of our portfolio in February down to under 5 percent,” said a trader at one of the top-30 hedge funds with a position in NXP.

The losses marred what has been an otherwise strong start to the year for ‘event-driven’ funds that specialize in trading around deals.

Up 2.26 percent in the first half of 2018, the average fund outperformed average industry returns of 0.79 percent, industry tracker Hedge Fund Research showed.

One of the star contributors to portfolio performance has been Sky (SKYB.L), up 52 percent this year as Comcast Corp (CMCSA.O) and Walt Disney Co (DIS.N) compete to buy the company.

Also, a number of other China-U.S. deals had successfully completed or were expected to complete which has helped performance, investors said.

Among them were Marvell Technology (MRVL.O), which announced it had acquired Cavium on July 6, and Microchip Technology (MCHP.O), whose takeover of Microsemi Corp was finalised May 29.

Investors and analysts also pointed to reasons for funds not to sell out of NXP completely.

As a result of cancelling the deal, Qualcomm paid a $2 billion breakup fee to NXP – a fact that should help bolster the share price – while NXP also launched a share buy-back. Olivetree analysts suggested NXP could now hit a standalone price of $120 a share.

Reporting by Maiya Keidan. Editing by Jane Merriman

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Toyota plans to expand production, shrink cost of hydrogen fuel cell vehicles

TOYOTA CITY (Reuters) – Toyota Motor Corp (7203.T) is doubling down on its investment in hydrogen fuel cell vehicles, designing lower-cost, mass-market passenger cars and SUVs and pushing the technology into buses and trucks to build economies of scale.

As Toyota cranks up improvements for the next generation of its Mirai hydrogen fuel cell vehicle (FCV), expected in the early 2020s, it is hoping it can prove wrong rival automakers and industry experts who have mostly dismissed such plans as commercially unviable.

The maker of the Prius, the world’s first mass-produced “eco-friendly” gasoline-hybrid car in the 1990s, says it can popularize FCVs in part by making them cheaper.

“We’re going to shift from limited production to mass production, reduce the amount of expensive materials like platinum used in FCV components, and make the system more compact and powerful,” Yoshikazu Tanaka, chief engineer of the Mirai, said in an interview with Reuters.

It is planning a phased introduction of other FCV models, including a range of SUVs, pick-up trucks, and commercial trucks beginning around 2025, a source with knowledge of the automaker’s plans said.

The automaker declined to comment on specific future product plans. But it has developed FCV prototypes of small delivery vehicles and large transport trucks based on models already on the road, as Tesla Inc (TSLA.O) develops a battery-operated commercial semi-truck from the ground up.

“We’re going to use as many parts from existing passenger cars and other models as possible in fuel cell trucks,” said Ikuo Ota, manager of new business planning for fuel cell projects at Toyota. “Otherwise, we won’t see the benefits of mass production.”

The company is also betting on improved performance. Toyota wants to push the driving range of the next Mirai to 700-750 kilometers from around 500 kilometers, and to hit 1,000 kilometers by 2025, a separate source said.

Slideshow (20 Images)

Driven by the belief that hydrogen will become a key source of clean energy in the next 100 years, Toyota has been developing FCVs since the early 1990s.

Hydrogen is the most abundant element in the universe and stores more energy than a battery of equivalent weight.

The Mirai was the world’s first production FCV when it was launched in 2014. But its high cost, around $60,000 before government incentives, and lack of refueling infrastructure have limited its appeal. Fewer than 6,000 have been sold globally.

LMC Automotive forecasts FCVs to make up only 0.2 percent of global passenger car sales in 2027, compared with 11.7 percent for battery EVs. The International Energy Agency predicts fewer FCVs than battery-powered and plug-in hybrid electric vehicles through 2040.

Many automakers, including Nissan Motor Co (7201.T) and Tesla, see battery-powered cars as a better, zero-emission solution to gasoline engines. Only a handful, including Honda Motor Co (7267.T) and Hyundai Motor Co (005380.KS), produce FCVs.

But people familiar with Toyota’s plans said the automaker thinks demand will perk up as more countries, including China, warm to fuel cell technology. The company also sees FCVs as a hedge against a scarcity of key EV battery materials such as cobalt.

HAND BUILT

For now, Mirais are assembled by hand at a plant in Toyota City, where 13 technicians push partially constructed units into assembly bays for detailed inspections. This process yields just 6.5 cars a day, a sliver of Toyota’s average domestic daily production of about 13,400 vehicles.

Strategic Analysis Inc, which has analyzed costs of FCVs including the Mirai, estimates that it costs Toyota about $11,000 to produce each of its fuel cell stacks, by far the vehicles’ most expensive part.

Toyota has been building up production capacity to change that, as it expects global FCV sales climb to 30,000 units annually after 2020 from about 3,000. Strategic Analysis estimates that would allow Toyota to reduce costs to about $8,000 per stack.

It has already begun to use parts developed for the Mirai in other models, such as the fuel cell stack, which is used in Kenworth freight trucks being tested in California, the Sora FC bus it released in Japan in March and the delivery trucks it will test with Seven-Eleven stores in Japan next year.

“It will be difficult for Toyota to lower FCV production costs if it only produces the Mirai,” the first source told Reuters on condition of anonymity as he was not authorized to speak publicly about the issue.

“By using the FCV system in larger models, it is looking to lower costs by mass-producing and using common parts across vehicle classes,” he added.

The Mirai’s high production costs are largely due to expensive materials including platinum, titanium and carbon fiber used in the fuel cell and hydrogen storage systems.

Engineers have been reducing that by improving the platinum catalyst, a key component in the 370 layered cells in the fuel cell stack, which facilitates the reaction between hydrogen and oxygen that produces electricity.

“We’ve been able to decrease the platinum loading by 10 percent to 20 percent and deliver the same performance,” said Eri Ichikawa, a fuel cell engineer at Cataler Corp, a Toyota subsidiary that specializes in catalytic converters.

Strategic Analysis says using that much less of the precious metal would save up to $300 per fuel cell stack, based on an estimate that Toyota now uses about 30 grams of platinum per unit.

“By consistently focusing on these issues, we will be able to progressively lower the cost of FCVs in the future,” Tanaka said.

Reporting by Naomi Tajitsu and Maki Shiraki; Editing by Joe White, Ritsuko Ando and Gerry Doyle

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Exclusive: Mexico’s Banorte lays off more than half of acquisition’s staff

MEXICO CITY (Reuters) – Mexico’s second-largest bank Grupo Financiero Banorte has laid off some 500 employees from recently acquired Grupo Financiero Interacciones, or about half of the specialist government lender’s workforce, with more job cuts to come, two people with knowledge of the matter said.

Banorte (GFNORTEO.MX) recently closed the $1.4 billion half-cash, half-stock deal to buy Interacciones, whose loan portfolio was overwhelmingly comprised of loans backed by Mexico’s government.

The company plans to lay off around another 300 people, one of the people added.

Banorte said in a presentation about the deal that it would cut 65 percent of Interacciones’ costs, saving between 1.5 and 1.6 billion pesos a year. Earlier this month, the former CEO of Interacciones said there could be layoffs, but did not specify how many jobs would be lost.

Gerardo Salazar, who ran the group’s bank, Ignacio Zubiria, head of the institutional business, and Adolfo Herrera, head of the brokerage, are among the highest-profile who have left, the people said.

Salazar, Zubiria and Herrera did not respond to requests for comment. Banorte declined to comment, referring to the quiet period ahead of its quarterly results.

Yiming Qian, Associate Professor of Finance at the University of Iowa, said layoffs after acquisitions were commonplace, but usually were contained to 5 percent to 15 percent. Banorte’s reductions of Interacciones staff would reach about 80 percent if it eventually lays off 800 people, as one of the sources said was planned.

“Eighty percent is very unusual,” Qian said.

Mexican banks that focus on lending to states and municipalities have had to reconsider their business models in recent years as several states have become highly indebted and high-profile graft scandals involving their leaders surfaced.

Many businesses in Mexico are owned or controlled by families, however, the country’s banking sector is mostly owned by foreigners, including BBVA, Citi and Santander. Banorte and Carlos Slim’s Grupo Financiero Inbursa are notable exceptions.

Mexican regulators approved the deal, the largest in the sector in 17 years, three days before the July 1 election.

Banorte was already the largest Mexican-owned bank and its chairman Carlos Hank Gonzalez was also Interacciones’ chief executive until 2014, while his father was Interacciones’ chairman.

Banorte’s largest foreign institutional investors, including BlackRock and Aberdeen Standard Investments, opposed the deal, arguing that the acquisition was unnecessary and posed conflicts of interest because of family ties.

The bank said the family trust, which owns around 10 percent of the company, and others affiliated to the family, voted in line with the majority of shareholders, meaning that it did not sway the outcome.

Banorte said the deal was expected to gradually increase Banorte’s earnings per share while preserving capital strength and return on equity goals.

Reporting by Stefanie Eschenbacher and Christine Murray

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Trump relents on EU car tariffs, as U.S.-China fight derails Qualcomm deal

WASHINGTON (Reuters) – In what the EU chief called a “major concession,” U.S. President Donald Trump agreed on Wednesday to refrain from imposing car tariffs while the two sides launch negotiations to cut other trade barriers, easing the threat of a transatlantic trade war.

After a meeting at the White House, Trump and European Commission President Jean-Claude Juncker said the talks would also seek to “resolve” U.S. tariffs on steel and aluminum and Europe’s retaliatory duties – marking a step back from Trump’s signature import protections for American metals producers.

The breakthrough came as the bitter trade dispute between the United States and China appeared to claim a major casualty, with China not approving U.S. chipmaker Qualcomm Inc’s (QCOM.O) takeover of NXP Semiconductors (NXPI.O), likely shutting the door on the $44 billion deal.

Qualcomm needed Beijing’s okay because China accounts for nearly two-thirds of its revenue, but a deadline at midday on Thursday in Asia passed without word from China’s regulator. Qualcomm had said on Wednesday it was dropping the bid.

Trump said Europe agreed to increase purchases of U.S. liquefied natural gas and lower trade barriers to American soybeans, aiding U.S. farmers and the energy sector.

“Soybeans is a big deal. And the European Union is going to start, almost immediately, to buy a lot of soybeans,” Trump told reporters after the meeting.

Trump later tweeted that work on documents was “moving along quickly,” adding that the meeting with Juncker had “great warmth.”

“A breakthrough has been quickly made that nobody thought possible!” Trump wrote, marking a turnaround from July 15, when he called the 28-nation European Union a “foe” on trade.

Juncker said the two sides agreed that as long as they were negotiating on trade, they would hold off on further tariffs, including potential U.S. tariffs on cars and auto parts.

  • Germany hails U.S.-EU trade reprieve
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  • U.S. Commerce chief says EU trade talks to include all agricultural products

He later told reporters that was a “major concession” on Trump’s part and that he expected the U.S. president to follow through on it.

U.S. import tariffs of 25 percent on steel and 10 percent on aluminum imposed in March will remain in place during the talks, but Juncker added: “It is the first time that the Americans agreed to reassess the measure that they have taken in the steel and aluminum sector.”

European governments and EU officials hailed the Trump-Juncker agreement as a major success.

“Breakthrough achieved that can avoid trade war and save millions of jobs! Great for global economy,” tweeted German Chancellor Angela Merkel’s economy minister, Peter Altmaier.

DEAL BUOYS STOCKS

The late-afternoon news that the meeting had eased transatlantic trade tensions fed a powerful late rally on Wall Street.

U.S. stocks shot to their highs of the day, with the benchmark SP 500 Index .SPX rising by the most in nearly two months to close the day within 1 percent of an all-time high. The dollar .DXY fell, led by a surge in the euro EUR=, which has been pressured by the deteriorating trade relations with the EU’s largest trading partner.

U.S. Treasury prices also eased and the 10-year note’s yield US10YT=RR ended the day at a one-month high near 2.98 percent. Steelmakers’ shares fell, with United States Steel (X.N) falling more than 5 percent in extended trading, and AK Steel Holdings (AKS.N) sliding 2 percent.

The Alliance of Automobile manufacturers, a trade group representing both domestic and foreign-brand automakers, welcomed the agreement to hold talks instead of impose tariffs, saying the announcement “demonstrates that bilateral negotiations are a more effective approach to resolving trade barriers, not increasing tariffs.”

Slideshow (9 Images)

ZERO INDUSTRIAL GOODS TARIFFS

Trump and Juncker said the U.S.-EU talks would seek to eliminate tariffs, trade barriers and subsidies for non-automotive industrial goods, and cut barriers to transatlantic trade in services, chemicals, pharmaceuticals and medical products.

They also said they would cooperate to reform the rules of the World Trade Organization, which the Trump administration frequently criticizes for favoring U.S. trading partners.

Trump’s threat to impose tariffs on auto imports on national security grounds would hit European carmakers BMW (BMWG.DE) Daimler (DAIGn.DE) and Volkswagen (VOWG_p.DE) as well as Japanese and South Korean car companies.

The Commerce Department could recommend new tariffs as early as September after an investigation into whether car imports posed a risk to U.S. national security.

The two leaders did not specifically mention car tariffs in their statements, keeping the focus on other industrial products.

SOYBEAN PRESSURES

An EU official said there was significant pressure from Trump administration officials to increase EU soybean purchases as part of any trade deal.

U.S. farmers have been hurt by China’s retaliatory tariffs on American soybeans amid an escalating trade fight between Washington and Beijing, and Trump has been promising relief. On Tuesday, his administration said it would use a Depression-era program to pay farmers up to $12 billion, easing the pain for a politically important Trump constituency.

Juncker said the United States had agreed to build more LNG export terminals to increase supplies to Europe.

“They’re going to be a massive buyer of LNG, so they’ll be able to diversify their energy supply,” Trump said of Europe. “And we have plenty of it.”

Reporting by Steve Holland and David Lawder; Additional reporting by David Shepardson, Jason Lange and Dan Burns in Washington, Johan Ahlander in Stockholm, Alastair Macdonald in Brussels; Writing by David Lawder in Washington and Philip Blenkinsop in Brussels; Editing by Will Dunham, Peter Cooney and Richard Borsuk

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Qualcomm’s $44 billion NXP offer deadline passes, no word from China

SAN FRANCISCO/BEIJING (Reuters) – The deadline for Qualcomm Inc (QCOM.O) to buy NXP Semiconductors (NXPI.O) passed at midnight U.S. eastern time without any word on Chinese regulatory approval, likely shutting the door on a deal embroiled in a bitter U.S.-China spat.

Qualcomm had said earlier in the day that it would drop its $44 billion bid for NXP – the world’s biggest semiconductor takeover – unless it received a last minute reprieve. If the deal is terminated, Qualcomm will pay a $2 billion deal breakup fee to NXP no later than 09:00 ET on July 26.

There was no word from China’s State Administration for Market Regulation or Qualcomm after the time for the deal to expire passed. Qualcomm did not immediately respond to a request for comment.

Investors expressed relief at Qualcomm’s comments earlier in the day and the company’s shares rose nearly 7 percent in after market trading. The San Diego chipmaker delivered surprisingly strong third-quarter results and a rosy outlook for so-called 5G technology, the next generation of wireless data networks.

The company also said earlier on Wednesday that it will buy back $30 billion in shares if the deal ultimately failed, making good on a promise to reassure investors about its prospects.

Qualcomm still faces challenges, including expectations that its chips will not be in the next round of Apple’s iPhones and the need to find new markets beyond mobile phones without NXP’s help. But it cited progress on one of two major patent royalty conflicts, thought to be with Chinese phonemaker Huawei Technologies Co Ltd [HWT.UL], in the form of a $700 million interim agreement.

The collapse of the deal may discourage other U.S. firms hoping to buy into China’s huge developing markets and companies, although technology deals seemed the main concern.

“We obviously got caught up in something that was above us,” Qualcomm Chief Executive Steve Mollenkopf said in an interview after the announcement earlier in the day.

“We think moving on, reducing the amount of uncertainty in the business and increasing the focus is the right thing to do with the company.”

Qualcomm needed approval from China, the last of nine global regulators to be consulted, because the country accounted for nearly two-thirds of its revenue last year.

Barring a last-minute reprieve, the chipmaker said in its results release it would make good on a pledge with NXP to call off the merger if it had not won Chinese regulatory approval by 23:59 Eastern U.S. time on Wednesday.

NXP Semiconductors shares fell almost 4 percent to $94.50.

TRUMP’S ROLE

Moves by the Trump administration have played an outsized role in Qualcomm’s fate, and there had been expectations that the lifting of a ban on U.S. chipmakers doing business with China’s ZTE Corp (000063.SZ) would clear the way for the NXP deal.

Dealmakers advising on mergers and acquisitions hoped the fallout would be limited to the technology sector in which China is racing for primacy against the United States.

United Technologies Corp (UTX.N) chief Gregory Hayes said earlier this week that the industrial conglomerate was on track with regulatory approvals to close its $23 billion acquisition of U.S. airplane-parts maker Rockwell Collins Inc (COL.N), seeking to quell fears that China could delay its review.

No other major semiconductor deal is pending. Broadcom, whose $117 billion hostile bid for Qualcomm was blocked by the United States in March on national security grounds, says its $19 billion purchase of U.S. software company CA Technologies (CA.O) does not require China’s blessing.

For Qualcomm, the deal’s demise means it will have to focus on expanding beyond making mobile chips.

Qualcomm predicted on Wednesday that Apple would drop the company’s chips from its next-generation iPhones in favor of modems from Intel Corp (INTC.O), the latest sign of fallout from their acrimonious battle over pricing and licensing costs. Qualcomm’s revenue projections had already assumed it would gain no new revenue from Apple.

Intel and Apple both declined to comment.

Qualcomm sold $3 billion of chips last year for non-phone use, up 75 percent from two years ago. It has a $5 billion “backlog” of chip sales to the automotive industry, in which NXP is also a dominant player, it said.

Reporting by Michael Martina in Beijing and Greg Roumeliotis in New York; Additional reporting by Adam Jourdan and Ben Blanchard in Beijing; Writing by Patrick Graham and Sayantani Ghosh; Editing by Meredith Mazzilli, Richard Chang and Muralikumar Anantharaman

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/iNXqdiI8yz0/qualcomms-44-billion-nxp-offer-deadline-passes-no-word-from-china-idUSKBN1KF193