US blocks Philips' US$3.3b sale of Lumileds to Asian buyers

JAN 22, 20166:52 PM

[AMSTERDAM] Philips's plan to shed its lighting businesses suffered a setback on Friday when a US$3.3 billion deal to offload the components division to Asian buyers was blocked by the United States on security grounds.

The agreement to sell an 80 per cent stake in the Lumileds division based in California ran into opposition from the Committee on Foreign Investment in the United States (CFIUS), Philips said in a statement.

The breakdown of the deal leaves the Dutch company under pressure as it tries to carry out several strategic operations at once.

It has been trying to spin off its lighting and lighting components businesses since 2014 to focus on its core businesses of medical scanners and healthcare technology.

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"I am very disappointed about this outcome as this was a very good deal for both Lumileds and the GO Scale Capital-led consortium," Philips CEO Frans van Houten said.

Philips is not permitted to disclose the nature of the concerns raised by the US committee, which vets deals for any national security issues.

The frustrated buyer, GO Scale Capital, is made up of GSR Ventures, Oak Investment Partners, Asia Pacific Resource Development and Nanchang Industrial Group.

The exact reason why the United States has blocked a Dutch company from selling a lighting division to Asian investors on national security grounds is not clear.

The involvement of Chinese firms in the consortium - and the fact that LEDs (light-emitting diodes) are semiconductors, an industry the US considers part of its critical infrastructure - may have played a role.

Lumileds makes lighting components used mostly in cars but also LEDs used for backlighting in consumer electronics such as smartphones and televisions.

The technology used by Lumileds is considered relatively mature and Philips was surprised by the US committee's initial opposition in October.

The final rejection came "despite the extensive efforts of Philips and GO Scale Capital to mitigate" the committee's concerns, Philips said.

Philips shares were trading 0.1 per cent higher at 22.70 in Amsterdam Friday.

LIGHTING SALE

Philips spokesman Steve Klink said the company was reviving talks with alternative buyers for the division, which had sales of US$2 billion in 2015. The company will press ahead with separate plans to spin off its main lighting division by June.

Earlier this month, Reuters reported that the company was soliciting bids for the main Philips Lighting business at a price of roughly 5 billion euros.

Philips Lighting's carve-out as an independent company within the overall group is due to be completed by Feb 1, with a decision to be taken shortly afterwards on whether to sell it, or go for a stock market listing.

"Philips has said the breakdown of the Lumileds deal won't impact the sale of Lighting, but it's not helping either," said ABN Amro analyst Marc Hesselink.

Mr Hesselink, who rates Philips shares a "hold", said it will probably receive a lower price for Lumileds now as GO Scale made the best offer the first time round and market conditions have worsened since the deal was announced in March 2015.

REUTERS

    
 

Yen, euro sag amid surge in stimulus expectations

The Japanese yen and euro fell on Friday amid increasing expectations that leading central banks will take steps to offset further deflationary pressures. 

PHOTO: BLOOMBERG

JAN 23, 20166:56 AM

[NEW YORK] The Japanese yen and euro fell on Friday amid increasing expectations that leading central banks will take steps to offset further deflationary pressures.

The euro fell to US$1.0797 and the yen slipped to 118.76 per US dollar and 128.23 per euro.

The moves came a day after the European Central Bank hinted strongly that it could add new stimulus in March, and ahead of meetings by the Federal Reserve and Bank of Japan next week in which deflation and global market turbulence will be key issues on the table.

Pressing down on the yen while giving a strong boost to Japanese stocks was a report in the Nikkei business daily on Friday, saying that the BoJ is considering whether to add stimulus to counter the risks of slumping oil prices and a stronger yen.

"The Fed and BoJ meetings will probably be positive ingredients for sentiment," Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank, told AFP.

However, she doubted the BoJ would add to its stimulus at this meeting. Bank of Japan chief Haruhiko Kuroda "isn't likely to announce fresh monetary easing or other bazooka-like steps."

After December's historic US rate hike, the first in more than nine years, the Fed is also not likely to take action.

But it could, in its policy statement, show how cautious it will be about future hikes given the low-inflation environment.

"It will be difficult for Federal Reserve officials to keep a brave face," said Kathy Lien of BK Asset Management.

"We would be surprised if the (Fed policy) statement did not contain a tinge of concern." With the ECB and Bank of England both worried about inflation and market swings, she added: "It is hard to believe that US policymakers haven't been unnerved by the volatility in equities and commodities."

AFP

    
 

Venezuela lawmakers reject economic crisis plan

Ja Venezuelan opposition lawmakers on Friday rejected President Nicolas Maduro's bid to decree a state of economic emergency, deepening a political crisis in the oil-rich nation. 

PHOTO: AFP

JAN 23, 20167:03 AM

[CARACAS] Ja Venezuelan opposition lawmakers on Friday rejected President Nicolas Maduro's bid to decree a state of economic emergency, deepening a political crisis in the oil-rich nation.

Friday was the deadline for the opposition-controlled National Assembly to vote on Maduro's decree, which would have given him special powers to intervene in the economic crisis.

But his rivals in the assembly refused to pass it, prolonging a tense political standoff in the volatile South American state, where citizens are suffering shortages of food and goods.

"We reject this decree because it means just more of the same," said Jose Guerra, head of the congressional commission that examined the decree before the vote.

"The cause of the problem is a failed economic model." Lawmakers voted by 107 votes to 53 to reject the measure.

The pro-government camp vowed to fight on to get its way.

"See you in the Supreme Court. Yes to the decree!" yelled deputy Diosdado Cabello, the second most senior figure in Maduro's leadership, during the vote.

The opposition accuses Mr Maduro of packing the court with his allies and fears he may use it to push through his measures.

The decree, issued a week ago, would give Mr Maduro 60 days of extraordinary powers to commandeer private companies' resources, impose currency controls and take other unspecified measures.

The opposition speaker of the congress, Henry Ramos Allup, accused Maduro's government of failing to give lawmakers the information they needed to properly debate the plan.

"It would be totally irresponsible for the National Assembly to blindly approve a decree of such magnitude, scope and implications, without having any information because the government itself refused to provide it," he said on television.

He said lawmakers suspended a session of the assembly in which the government was due to defend the decree because the ministers did not show up.

Mr Maduro's economic team pulled out at the last minute, saying they would only participate if it was closed to the media, Ramos said.

Mr Maduro accused the opposition of trying to turn the assembly into a "show".

"I very much regret that the majority which controls the National Assembly is turning its back on the country at this time," Mr Maduro said in a speech.

Announcing the decree last week, Mr Maduro admitted Venezuela was in a "catastrophic" economic state.

He called on the assembly to approve the decree and help him "navigate this crisis." But he vowed to resist any shift towards what he called "neoliberal" policies.

"You will have to come and overthrow me if you want to pass a privatization law. No, no and no!" The same day, Venezuela's central bank released its first economic growth and inflation statistics in more than a year.

The figures showed the economy shrank 4.5 per cent in the first nine months of 2015.

Annualized inflation in September hit a painful 141.5 per cent, fueled by crippling shortages.

Mr Maduro said his emergency plan would allow the government to shore up its health, housing, education and food services.

He vowed to overhaul the country's system of production to shift it away from the oil revenue on which his social spending programmes have relied.

Venezuela has the world's biggest known crude oil reserves but the price of oil has plunged over the past year and a half, slashing its revenues.

Analysts say the political deadlock threatens to worsen the hardship that drove voters to hand the opposition a landslide election victory last month.

They have warned of the risk of a repeat of violent street clashes that left 43 people dead in 2014.

AFP

    
 

Germany govt sees economy growing by 1.7% this year: report

JAN 23, 20167:26 AM

[FRANKFURT] The German government is pencilling in economic growth of 1.7 per cent this year in a forecast scheduled to be released next week, the weekly magazine Der Spiegel reported on Friday.

That represented a fractional downward revision from Berlin's previous forecast of 1.8 per cent that it made last autumn, the magazine said.

In its annual report, to published on Wednesday, the government said growth would continue to be driven by low oil prices, the weak euro and the interest rates that are close to zero.

At the same time, the German economy, Europe's biggest, would also feel the pinch from the slowdown in developing economies such as China, the report said.

According to a preliminary estimate by Destatis earlier this month, German gross domestic product (GDP) expanded by 1.7 per cent in 2015, fractionally faster than the 1.6 per cent recorded in 2014.

At the same time, Germany clocked up a surplus on its public budget of 16.4 billion euros (S$25.6 billion), equivalent to 0.5 per cent of GDP and the second year in a row that Germany's public finances have been firmly in the black, the office said.

Eurozone countries are not allowed to run up deficits in excess of 3.0 per cent of GDP and must aim for a balanced budget for even a surplus in the longer-term.

AFP

    
 

US: Stocks rise for second straight day; S&P 500 +2.0%

PHOTO: AFP

JAN 23, 20167:11 AM

[NEW YORK] US stocks rose for a second straight session Friday, joining a global rally propelled by higher oil prices and increased confidence further monetary stimulus is on the way.

The Dow Jones Industrial Average climbed 210.83 points (1.33 per cent) to 16,093.51.

The broad-based S&P 500 gained 37.91 (2.03 per cent) at 1,906.90, while the tech-rich Nasdaq Composite Index jumped 119.12 (2.66 per cent) to 4,591.18.

Sentiment was boosted by a nine percent leap in US oil prices to US$32.19 a barrel. Analysts also cited a report in the Nikkei business daily that the Bank of Japan was considering more economy-boosting measures to counter fears of deflation.

US stocks were solidly in positive territory the entire session, an improvement over Thursday when equities veered at times into the red.

Yet analysts said it was too soon to declare an all-clear after a bruising open to 2016 trade.

"We'd like to see a continuing improvement in corporate earnings as we get into the heart of the earnings season and we need to see a stabilization in oil prices, along with a quiet environment out of China for stocks to continue to recover from what has been a very challenging environment," said David Levy of Republic Wealth Advisors.

"Until we clearly break the bear market trends, there's still a lot of uncertainty, still a lot of doubt," said Chris Low, chief economist at FTN Financial Petroleum-linked shares were standouts on Wall Street, with Dow member ExxonMobil rising 3.3 per cent, Anadarko Petroleum 5.8 per cent and Halliburton 3.1 per cent.

Technology stocks were also strong. Apple jumped 5.3 per cent, Amazon 3.7 per cent and Microsoft 3.6 per cent.

Dow member American Express plunged 12.1 per cent after announcing plans to cut US$1 billion in spending in response to a dim profit outlook for the next two years. The credit card company said it faces tougher competition for its traditional base of affluent customers.

Dow member General Electric lost 1.2 per cent after reporting that industrial operating profits fell eight percent in the fourth quarter to US$5.5 billion. However, the company confirmed that it expects operating earnings per share of US$1.45-1.55 in 2016.

AFP

    
 

Stimulus hopes pump oil, stocks higher

      

PHOTO: AFP

JAN 23, 20166:52 AM

[NEW YORK] World stock markets and oil prices rallied on Friday, building on the previous day's recovery sparked by European Central Bank hints of more eurozone stimulus.

Tokyo's Nikkei 225 index got the markets off to a positive start, surging nearly six per cent following a report in the Nikkei business daily that the Bank of Japan was considering extra economy-boosting measures in response to worries about deflation.

The Japanese report allowed European and US markets to extend Thursday's upward climb following comments by ECB chief Mario Draghi suggesting more stimulus was likely in March.

Equity markets in Frankfurt, London, Paris and New York all rose two percent or more.

Oil prices also jumped for a second day in a row, gaining nine per cent in the US to finish at US$32.19 a barrel in New York.

"This stabilization in equities has been highly correlated to the price of oil," said David Levy of Republic Wealth Advisors. Oil prices "have moved up about nine per cent and brought equities along with them."

Analysts said both oil and stocks were oversold in the short run and primed for a bounce. Global stocks have been in steady retreat for almost all of January, cutting trillions of dollars in value amid worries of slowing Chinese growth, tanking oil prices and the potential for a global recession.

Yet analysts warned that it is too soon to declare an all-clear after a bruising open to 2016 trade. For one thing, oil prices have still not stabilised.

"Until we clearly break the bear market trends, there's still a lot of uncertainty, still a lot of doubt," said Chris Low, chief economist at FTN Financial.

"The stock market is oversold on a short-term basis and probably due for a snapback rally of some kind," said Briefing.com analyst Patrick O'Hare. "However, until there is a reversal in the earnings estimate and economic growth trends, the propensity to sell into strength is apt to persist." "We're not predicting a recession, but honestly, if one were to occur, could anyone say they'd be completely surprised?"

With oil prices rallying, energy companies saw their share prices rocket on Friday. Royal Dutch Shell jumped 5.4 per cent, BP won 3.1 per cent and ExxonMobil rose 3.3 per cent.

However shares in Italian oil exploration and engineering firm Saipem plunged 20 per cent in Milan after the company announced a 3.5 billion euro capital hike would be at a 37 per cent discount.

Technology stocks were strong. Apple jumped 5.3 per cent, Amazon 3.7 per cent and Microsoft 3.6 per cent.

But Dow member American Express plunged 12.1 per cent after announcing plans to cut US$1 billion in spending in response to a dim profit outlook for the next two years. The credit card company said it faces tougher competition for its traditional base of affluent customers.

Russia's battered ruble bounced back after the jump in crude oil prices, recovering ground a day after it slumped to an all-time low against the dollar. The nation's energy-reliant economy has been pushed into recession by tumbling oil prices and Western sanctions over Ukraine.

AFP

      

US oil surges 9% on stimulus hopes

Oil prices surged for a second straight day Friday amid an equities rally on hopes of extra stimulus for Japan and the eurozone.

PHOTO: AFP

JAN 23, 2016 7:16 AM

[ New York] Oil prices surged for a second straight day Friday amid an equities rally on hopes of extra stimulus for Japan and the eurozone.

US benchmark West Texas Intermediate (WTI) for March leaped US$2.66 (nine per cent) to US$32.19 a barrel on the New York Mercantile Exchange.

Brent North Sea crude for delivery in March, the European benchmark for crude oil, finished at US$32.18 a barrel in London, a 10 per cent jump over Thursday's settlement.

The gains over Thursday and Friday amounted to 13.5 per cent for WTI and 15.4 per cent for Brent. They capped a volatile week that pushed prices Wednesday to their lowest in more than 12 years.

Equities and crude oil prices began rebounding Thursday after European Central Bank chief Mario Draghi suggested further stimulus measures may be forthcoming in March to boost the eurozone economy.

Reinforcing optimism over potentially stronger growth was a report on Friday by the Nikkei business newspaper that the Bank of Japan is considering similar moves.

"We've seen a significant rally first off due to comments from Draghi and the market anticipating additional economic stimulus packages" aimed at kick-starting demand, said Andy Lipow of Lipow Oil Associates.

"We may not be totally out of the woods but I think we're seeing a return of confidence," said Price Futures Group analyst Phil Flynn.

"I don't think that the 30 per cent drop that we saw in the beginning of the year was really justified by the fundamentals, because most of the bearish arguments that apparently drove the market down should have been priced in," he said.

"What drove the market down was fear," Mr Flynn said.

"It's fear that demand is going to slow further because of the slowdown in China, but if you look at the Chinese demand numbers they haven't slowed yet, their imports are at a record high." Mr Lipow predicted the first quarter will be quite difficult as Iranian crude oil exports return to the market after international sanctions were lifted last weekend.

"Combined with refinery maintenance here and in Europe I expect that crude oil inventories will continue to rise over the next couple of months," he said.

"However as we make it through the first quarter, I expect crude oil prices to stabilize and begin rising during the balance of the year."

AFP