UK's Osborne takes his 'dangerous cocktail' warning to Davos

JAN 22, 20164:07 PM

[DAVOS] UK Chancellor of the Exchequer George Osborne warned that the global economy faces a "dangerous cocktail of risks" as China's growth slows and oil prices drop, underlining the need for countries to work together and push through economic reforms.

"My message today is one of confidence: we can meet these risks and overcome them if we stick to our plan," Mr Osborne said in the extracts of a speech prepared for delivery at the World Economic Forum in Davos, Switzerland on Friday.

While oil at under US$30 a barrell helps British consumers by making energy cheaper, Mr Osborne said it has also created volatility. Combined with a weak start to the corporate earnings season and higher interest rates in the US, this is creating a "hazardous mix" of factors underpinning the global economy, he said.

"2016 has been the worst start to a year for the financial markets in my lifetime," said Mr Osborne, 44.

The International Monetary Fund this week cut its world growth outlook, predicting 3.4 per cent expansion this year, down from a projected 3.6 per cent in October. Oil prices at 12-year lows and slowing growth in China have spurred a wave of volatility through global financial markets in 2016.

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'Corrupt' Chinese officials seized nearly US$1.4b: analysis

JAN 22, 20163:51 PM

[BEIJING] Chinese officials convicted in President Xi Jinping's sprawling anti-corruption drive have embezzled or misused more than 6.3 billion yuan (S$1.37 billion) in public funds, a new report has found.

Official graft causes widespread public anger in China, and since taking over as the ruling Communist Party's leader in 2012, Mr Xi has overseen a much-publicised campaign against the scourge.

But critics say there is a lack of transparency around the drive and that it has been used to settle political scores.

ChinaFile, a publication of the Asia Society in New York, has tallied nearly 1,500 publicly-announced targets of the campaign, and has released a searchable database.

It shows that 231 officials have been convicted and sentenced in Chinese courts - only a fraction of those put under investigation by the Communist Party, which operates its own discipline system outside judicial supervision.

Chinese courts - which are controlled by the party and have a conviction rate of more than 99.9 per cent - found that they embezzled or misused more than 6.3 billion yuan, according to the verdicts against them, the database shows.

The documents included details such as one official spending 200,000 yuan of public funds on jade jewellery, and another attempting to hide a stolen 30 million yuan in his mistress' gardening company.

Mr Xi pledged to target both high-ranking "tigers" and low-level "flies" in his drive.

But the database includes proportionately fewer fallen officials from President Mr Xi's provincial power bases of Fujian and Zhejiang, which ChinaFile said "are among those that appear to have been treated more leniently".

David Zweig, professor of Chinese politics at the Hong Kong University of Science and Technology, told AFP on Friday: "If you're a Xi guy, you don't get purged, everybody else, it's open season.

"When he was in those places, he was able to move people into positions of authority. People who are allied to him, therefore there's no need to use the crackdown to transfer out people."

AFP

    
 

ECB's Coeure says QE is working

JAN 22, 20169:09 PM

[DAVOS, Switzerland] The European Central Bank's quantitative easing programme is working and has helped bring about a "tremendous improvement" in eurozone capital markets, ECB executive board member Benoit Coeure said on Friday.

Speaking in Davos, Coeure said the ECB was determined to push inflation back towards its goal of close to 2 per cent, noting "we have not given up".

On the same panel, UBS chairman and former Bundesbank chief Axel Weber said central banks were tempting fate by pushing interest rates deep into negative territory and blamed recent market turbulence on easy monetary policy he said had distorted the risk calculus.

REUTERS

Jin says AIIB may lend US$2b, announce projects in June

JAN 22, 20166:11 PM

[DAVOS] Asian Infrastructure Investment Bank President Jin Liqun said the new China-led institution is planning to lend at least US$2 billion to different projects in 2016 and may announce the first batch of investments around June.

The AIIB will seek to raise US$300 million to US$500 million by selling bonds in April or May, Jin said in an interview Friday on the sidelines of the annual World Economic Forum in Davos, Switzerland.

There are 30 to 40 nations waiting to join the AIIB, which could push membership to about 100 countries from the founding 57, Jin said earlier in a Bloomberg Television interview. He added that it's not good to push countries to join the lender if they aren't ready.

Jin worked at the World Bank and the Asian Development Bank on China's behalf, and was a former monetary policy committee member and supervisory chairman of China's sovereign wealth fund. The AIIB formally opened its doors this month in Beijing, a key economic milestone for President Xi Jinping and his goal for China to achieve the same great-power status enjoyed by the US. The US and Japan haven't joined AIIB.

Jin said China's stock market, which is in a bear market for the second time in seven months, needs to be broader and deeper. He said the country is moving to a new stage of development and must deal with that challenge after 35 years of fast economic growth.

The US economy is "picking up," Jin said, and it wasn't a mistake for the Federal Reserve to raise interest rates last month after keeping them near zero for seven years.

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US: Wall St opens higher as oil prices jump

US stocks opened higher on Friday as a cold wave across the United States and Europe helped oil prices surge for a second day. 

PHOTO: REUTERS

JAN 22, 201610:47 PM

[NEW YORK] US stocks opened higher on Friday as a cold wave across the United States and Europe helped oil prices surge for a second day.

European Central Bank President Mario Draghi's remarks on Thursday suggesting the bank could ease its monetary policy in March also encouraged investors.

The Dow Jones industrial average rose 120.6 points, or 0.76 per cent, to 16,003.28, the S&P 500 gained 18.76 points, or 1 per cent, to 1,887.75 and the Nasdaq Composite index added 82.24 points, or 1.84 per cent, to 4,554.30.

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US existing home sales surge a record 14.7%

JAN 22, 201611:21 PM

[WASHINGTON] US home resales rebounded strongly in December from a 19-month low and prices surged, indicating the housing market recovery remained intact despite signs of a sharp moderation in economic growth in recent months.

The National Association of Realtors said on Friday existing home sales jumped a record 14.7 per cent to an annual rate of 5.46 million units, after being temporarily held back by the introduction of new mortgage disclosure rules, which had caused delays in the closing of contracts in November.

Sales were also boosted by unseasonably warm weather. November's sales pace was unrevised at 4.76 million units. Economists polled by Reuters had forecast home resales rebounding 8.9 per cent to a 5.20-million rate.

Sales rose 6.5 per cent to 5.26 million units in 2015, the strongest since 2006. Last month's snap-back suggests that November's slump was a blip and should offer some assurance that domestic demand remains fairly healthy, even as growth appears to have braked sharply at the end of 2015 because of a downturn in manufacturing and mining activity.

"While the carryover of November's delayed transactions into December contributed to the sharp increase, the overall pace taken together indicates sales these last two months maintained the healthy level of activity seen in most of 2015," said Lawrence Yun, NAR chief economist.

Housing is being supported by a strengthening labour market, which has resulted in an acceleration in household formation. Sales, however, remain constrained by a dearth of homes available for sale, which is limiting choice for buyers.

The economy has been hammered by a strong dollar, slowing global demand and deep spending cuts in the energy sector. Businesses are also placing fewer orders with factories while trying to reduce piles of unsold merchandise, which also is putting pressure on the economy.

REUTERS

    
 

Mortgage rates have tumbled to 3-month lows

• Sam Ro
 
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• Jan. 21, 2016, 10:44 AM
• 2,239

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One of the expected consequences of tighter Federal Reserve monetary policy was higher borrowing rates for consumers.

In December, the Fed tightened monetary policy by raising its target short-term interest rates. Interestingly, however, long-term interest rates have actually been coming down since that event. (This phenomenon where the difference between short-term and long-term rates decreases is referred to as a flattening yield curve.)

This has been good news people looking to secure long-term loans.

On Thursday, Freddie Mac reported that mortgage rates across the country have been tumbling in recent weeks.

"The 30-year mortgage rate dropped 11 basis points to 3.81%, the lowest rate in three months,"Freddie Mac's Sean Becketti said.

Freddie Mac

"This drop reflected weak inflation — 0.7 percent CPI inflation for all of 2015 — and nonstop financial market turbulence that is driving investors to the safe haven of Treasuries," Becketti added.

Indeed, the recent market activity suggests investors and traders have been dumping stocks and buying bonds. When bond prices go up, yields come down; this means interest rates are coming down.

Here's more color from Freddie Mac:

30-year fixed-rate mortgage (FRM) averaged 3.81 percent with an average 0.6 point for the week ending January 21, 2016, down from last week when it averaged 3.92 percent. A year ago at this time, the 30-year FRM averaged 3.63 percent.

15-year FRM this week averaged 3.10 percent with an average 0.5 point, down from 3.19 percent last week. A year ago at this time, the 15-year FRM averaged 2.93 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.91 percent this week with an average 0.5 point, down from last week when it averaged 3.01 percent. A year ago, the 5-year ARM averaged 2.83 percent.

This should ease concerns that tighter monetary policy will take the legs out of the housing market.

New York has a new top financial regulator

• Suzanne Barlyn and Karen Freifeld, Reuters

• 16h
• 610

Thomson ReutersNew York Governor Andrew Cuomo speaks at a press conference to announce major transportation initiatives in the Manhattan borough of New York

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(Reuters) - New York Governor Andrew Cuomo tapped Maria Vullo, a lawyer who represented banks and donated to Cuomo's campaigns, as the state's top financial regulator, his office said on Thursday.

Vullo's nomination as superintendent of the New York State Department of Financial Services (NYDFS) comes eight months after former superintendent Benjamin Lawsky left the agency. Under Lawsky the NYDFS earned a reputation as an aggressive regulatory body that used creative new tactics to extract hefty fines from global banks and other financial institutions.

Cuomo said in a statement he expected Vullo to be “tough and fair” in the role, a combination that could help repair relationships with other U.S. law enforcement authorities rankled by Lawsky’s go-it-alone actions.

Vullo, 55, a partner at law firm Paul, Weiss, Rifkind, Wharton & Garrison, where she has worked for 28 years, has represented many prominent companies, including home sharing service, Airbnb Inc, the life insurance unit of Prudential Financial Inc, and a biotechnology company, according to her firm profile and court records.

She has also represented financial institutions, some of which fall under the DFS’ regulatory purview. For example, she represented a Citigroup Inc mortgage unit in a 2013 whistleblower suit filed under the False Claims Act alleging that Citi and other mortgage lenders ran afoul of contracts with government-controlled mortgage-finance companies, according to court records.

In 2010, Vullo worked as executive deputy attorney general for economic justice for 11 months under Cuomo, a Democrat, who was then the state's attorney general. She was twice selected by a state commission as a judicial contender for the state’s highest court.

Her nomination drew praise from banking advocates. "She is really smart and a really excellent lawyer," said top Wall Street lawyer Rodgin Cohen, senior chairman at Sullivan & Cromwell LLP, a New York law firm that has long advised major banks in enforcement cases.

"DFS is the most important state financial regulator in the country and requires a leader who can balance the needs of the industry with public and consumer interests," said Kathryn Wylde, president and chief executive for the Partnership for New York City, a business group. "Maria is well qualified by her years in private practice and public service," Wylde said.

Her nomination must be confirmed by New York State's legislature.

Vullo, who did not return calls requesting comment, donated nearly $84,000 to Cuomo's campaigns between 2006 and 2013, according to the nonpartisan National Institute on Money in State Politics in Helena, Montana.

Vullo's donations were not a factor in the decision, a Cuomo administration official said.

"The fact that she was politically supportive of the governor, I don’t believe for one second that it’s going to translate to a lack of independence on Maria’s part," said Jim Walden, a New York white collar defense lawyer and former assistant U.S. Attorney in the Eastern District of New York.

Created in 2011 by consolidating the state’s banking and insurance agencies, the NYDFS has been in flux since Lawsky's departure, cycling through two acting superintendents.

Lawsky, the agency's first head, grabbed headlines in 2012 when he threatened to revoke Standard Chartered Plc's license to operate in New York after accusing the London-based bank of hiding $250 billion of Iran-linked transactions from regulators.

Using a banking license as public leverage was an unusual move, creating an uproar that swept across the Atlantic and paved the way for a quick $340 million settlement with Standard Chartered. Lawsky’s actions irked U.S. authorities who were conducting a joint probe into Standard Chartered's sanctions-related violations.

(Reporting by Suzanne Barlyn and Karen Freifeld in New York; Editing by Chizu Nomiyama, Matthew Lewis, Charles levinson and Andrew Hay)

Read the original article on Reuters. Copyright 2016. Follow Reuters on Twitter.

MORE FROM REUTERS:

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Oil services giant Schlumberger is buying $10 billion of itself

• Akin Oyedele
 
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• 18h
• 3,144
 
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Thomson Reuters

Schlumberger  $64.96

Sponsored by

SLB

Change+3.51

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Disclaimer

Oilfield services giant Schlumberger is spending $10 billion to buy its own shares.

The company reported fourth-quarter earnings after the closing bell on Thursday, and it beat on earnings with revenues virtually in line with expectations.

With the earnings results, Schlumberger announced its board's approval of the buybacks, in addition to the near-complete $10 billion program it started in Q3 2013.

The company reported adjusted earnings per share of 65 cents, and revenues of $7.7 billion, down 9% year-on-year. It recorded a net income loss from continuing operations of $1 billion.

Full-year revenues fell 27% to $35.5 billion year-on-year, following sharp cuts to its spending on drilling. 

"The decrease in land activity was the sharpest seen since 1986, as capex spending by North American customers declined by more than 40%," Schlumberger CEO Paal Kibsgaard said in the earnings release. 

Wall Street had been expecting adjusted earnings per share of $0.63, versus estimates for $7.78 billion, according to Bloomberg.  

Schlumberger is the first big oil company to report earnings for the fourth quarter, during which crude oil prices slid even lower.

Several of the company's clients in various regions cut their budgets, in turn impacting Schlumberger's revenues. The company laid off 10,000 people in the fourth quarter as it adjusted costs.

Shares rose by as much as 2.5% in after-hours trading.

Starbucks had its best holiday ever despite a major controversy

• Kate Taylor
 
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• 13h
• 886

Starbucks

Despite an anti-Starbucks social-media campaign with the Donald Trump stamp of approval, the coffee chain enjoyed a very happy holiday season.

The company had "by far" the strongest holiday in its history, CEO Howard Schultz said in a company earnings call on Thursday.

In the US, comparable store sales increased 9% in the first quarter of 2016, with a 4% increase in traffic.

More people were exchanging Starbucks Cards than ever before this holiday season, as 1 in 6 American adults received a Starbucks Card, compared to 1 in 7 last year. Users loaded a record figure of $1.9 billion onto Starbucks Cards in the US and Canada in the quarter.

In November, evangelist and internet personality Joshua Feuerstein posted a video on Facebook protesting Starbucks' minimalist red holiday cups. The outrage — and outrage at the outrage — quickly grew, with hundreds sharing their views on social media, with everyone from Donald Trump to Stephen Colbert adding their two cents.

Clearly, the so-called scandal didn't hurt Starbucks all that much.

NOW WATCH: People are outraged by Starbucks’ plain red holiday cups

More: Retail Starbucks Starbucks red cups

JPMorgan CEO Jamie Dimon made $27 million in 2015

• Portia Crowe
 
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• 18h
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AP ImagesJPMorgan CEO Jamie Dimon.

JPMorgan Chase  $56.70

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JPM

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JPMorgan's board of directors has approved CEO Jamie Dimon pay for 2015, and it's a pretty big number.

Dimon will receive $27 million in total compensation for the year. Broken down, it's $1.5 million in salary, $5 million in cash bonus and $20.5 million in performance share units, or PSUs, according to an SEC filing.

That works out to a 35% raise from his $20 million compensation for 2014.

JPMorgan reported fourth-quarter earnings last week that beat expectations. It reportedrecord net income of $24.4 billion.

To get the must-read guide to the key issues at every major Wall Street bank, click here.

Dimon joined the billionaire's clubin June, with a net worth of $1.1 billion at the time, according to the Bloomberg Billionaires Index.

The firm also granted $6.15 million in restricted stock units and PSUs to CFO Marianne Lake and $10.4 million in restricted stock units and PSUs to JPMorgan Asset Management CEO Mary Callahan Erdoes, according to the filing.

Corporate Investment Bank CEO Daniel Pinto received $11.6 million in restricted stock units and PSUs, andCOO Matthew Zames received $10.7 million in restricted stock units and PSUs.