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German bosses urge government to stop EU proposal on connected cars

Krueger, CEO of German luxury carmaker BMW, addresses the company's annual news conference in Munich
FILE PHOTO: Harald Krueger, Chief Executive of German luxury carmaker BMW, addresses the company's annual news conference in Munich, Germany, March 20, 2019. REUTERS/Michael Dalder

April 15, 2019

FRANKFURT (Reuters) – The bosses of BMW and Deutsche Telekom have urged the German government to take action to block a European Commission proposal that would set a Wi-Fi-based standard for connected cars.

In a letter, BMW CEO Harald Krueger and Telekom’s Tim Hoettges warned that ruling out an alternative approach based on 5G mobile networks would leave Europe lagging rivals like China when it comes to the future of mobility.

“We are convinced that mandating Wi-Fi technology will cause significant delay to the European rollout of car-to-car and car-to-infrastructure communication,” the CEOs said in the letter to Transport Minister Andreas Scheuer, a copy of which was seen by Reuters.

Asked for comment, the German Transport Ministry said it was reviewing reservations raised by legal advisers to the European Council – the intergovernmental part of the EU decision process – after a working group meeting on April 5.

These would have to be examined before the government takes a final position on the issue, the ministry said.

The EU executive is seeking to set benchmarks for internet-connected cars, a market for carmakers, telecoms operators and equipment makers expected to be worth billions of euros a year.

The Commission’s preference for the Wi-Fi-based ITS-G5 standard would give Volkswagen and Renault an edge over BMW, Daimler, Ford and PSA Group which endorse the rival 5G standard called C-V2X.

Advocates of C-V2X, which could for example enable cars to ‘talk’ directly to each other to avoid colliding, say the technology works on existing 4G LTE networks and would be enhanced by the rollout of next-generation 5G services.

“C-V2X is a game-changer for safety,” an alliance of groups representing the European information technology and automotive industries said in a separate statement on Monday.

A key committee of EU lawmakers rejected the Commission’s proposal last week. The European parliament will vote this Wednesday in a plenary session in which a simple majority would be needed to block it.

The European Council also has a say in the issue and would also need a blocking majority to derail the proposal, say officials in Brussels.

(Reporting by Douglas Busvine and Foo-Yun Chee; editing by Emelia Sithole-Matarise and David Evans)

Source: OANN

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Mutual funds start to put their mouth where their money is

FILE PHOTO: Logo of global biopharmaceutical company Bristol-Myers Squibb is pictured at the headquarters in Le Passage
FILE PHOTO: Logo of global biopharmaceutical company Bristol-Myers Squibb is pictured at the headquarters in Le Passage, near Agen, France March 29, 2018. REUTERS/Regis Duvignau/File Photo

March 15, 2019

By Svea Herbst-Bayliss

(Reuters) – Corporate America’s biggest shareholders have traditionally been content with sharing their views on a company’s strategy privately with management.

But now some mutual funds are beginning to rethink their stance, amid pressure from investors for them to justify the fees they charge and a push to boost the performance of their holdings.

Wellington Management Company LLP’s decision last month to speak out against drug maker Bristol-Myers Squibb Co’s proposed $74 billion acquisition of Celgene Corp, calling what would be the largest-ever pharmaceutical takeover too risky and expensive, sent ripples across the investment world.

This is because these tactics have typically been the purview of activist hedge funds like Starboard Value LP and Elliott Management Corp, not a large institutional money manager like Wellington, with $1 trillion in assets under management.

But in the case of Bristol-Myers, Starboard spoke out publicly against the deal one day after Wellington unveiled its stance publicly.

Wellington’s vocal opposition to the deal is the culmination of some mutual funds gradually feeling more emboldened to publicly challenge a company’s strategy, asset management executives and corporate governance experts say.

“There has been a growing chorus among investors who want these firms to speak up. With Wellington speaking up, it is going to put pressure on the others to do the same,” said Lawrence Glazer, managing partner at Mayflower Advisors, which invests with Wellington funds.

In January, chemicals company Ashland Global Holdings Inc agreed to changes to its board after pressure from asset manager Neuberger Berman Group LLC, which has about $300 billion in assets under management.

T. Rowe Price Group Inc, which manages close to $1 trillion in assets, has opposed several acquisitions, including Michael Dell’s offer to take his eponymous computer maker private, because it felt the proposed deal undervalued the company.

Spurring on these funds to challenge companies publicly is the need to show their worth as so-called active money managers, picking stocks rather than just betting on indexes.

At a time their performance has been lackluster and many have struggled to keep up with their benchmark index, they are under pressure from index-tracking funds who are gaining more market share in asset management. These “passive” money managers charge investors far less, in part because they do not need the army of analysts and portfolio managers to make investments.

“More funds are willing to agitate in search of returns,” Mark Shafir, Citigroup Inc’s co-head of global mergers and acquisitions, said on Thursday at the corporate law institute conference organized in New Orleans by the Tulane School of Law.

RAMPING UP PRESSURE

Despite their deep pockets, taking a public stance on corporate strategy does not come easily to many of these funds, in part because they are unaccustomed to readying the kind of presentations aimed at swaying other shareholders.

For example, Wellington’s statement on Bristol-Myers Squibb’s Celgene deal was just four sentences long. By contrast, Bristol-Myers published a 46-page document defending its deal.

The world’s biggest active mutual fund managers, including Fidelity Investments and Capital Group, have preferred to use their influence discretely, taking advantage of their access to management to gain insight into a company’s strategy and offer feedback behind closed doors.

To stay on good terms with corporate management, large mutual funds have often been happy letting activist hedge funds agitate over a company’s perceived problems.

To be sure, even passive investors have started to pressure companies behind the scenes, especially on social, governance or climate change issues that a younger generation of investors cares more about.

For example, BlackRock Inc and Vanguard Group voted against management at oil major Exxon Mobil Corp in 2017 over its reluctance to disclose the risks it faced from climate change, and pressured weapons manufacturer Sturm Ruger last year over its refusal to publish a report about the safety of its products.

“Corporate America had better take note because the folks who actually pick stocks have finally decided to flex their muscles,” wrote Don Bilson, head of Event Driven Research at Gordon Haskett Research Advisors.

(Reporting by Svea Herbst-Bayliss in New Orleans; Additional reporting by Ross Kerber in Boston and Mike Erman in New York; Editing by Greg Roumeliotis and Matthew Lewis)

Source: OANN

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Indonesia says cyber attacks won’t disrupt elections

FILE PHOTO - Indonesia's presidential candidate Joko Widodo shakes hands with his opponent Prabowo Subianto as their running mates Ma'ruf Amin and Sandiaga Uno smile after a televised debate in Jakarta
FILE PHOTO - Indonesia's presidential candidate Joko Widodo shakes hands with his opponent Prabowo Subianto as their running mates Ma'ruf Amin and Sandiaga Uno smile after a televised debate in Jakarta, Indonesia January 17, 2019. REUTERS/Willy Kurniawan/File Photo

March 13, 2019

JAKARTA (Reuters) – Presidential and legislative polls in Indonesia next month are not at risk of disruption from cyber attacks, the head of the election commission said on Wednesday, even though regular hacking attempts had been detected on the agency’s website.

Arief Budiman, head of the National Election Commission (KPU), was earlier cited in a media report as saying Chinese and Russian hackers were attacking Indonesia’s voter database “to manipulate and modify” content and create ghost voters.

“The election process will not be disturbed because we can handle (the attacks),” he told journalists at a briefing.

“This is not about China or Russia,” he said, adding that cyber attacks had originated both locally and from abroad.

A KPU source with knowledge of the matter said the voter database had been subject to “probing” attacks from IP addresses originating in several countries, not just China and Russia.

Communications Minister Rudiantara previously told Reuters that servers and websites in Indonesia are regularly targeted by cyber attacks originating overseas, but that many were in fact local hackers masked by a virtual private network.

President Joko Widodo is running for re-election against ex-military general Prabowo Subianto, and much of the candidates’ campaigns are being waged online and on social media.

Election watchdogs have reported a spike in fake news during the campaign amid raised concerns about the impact in a country of avid social media users.

Both camps have denied spreading misinformation and using so-called “buzzer teams”, which a Reuters investigation found are being used to create content aimed at influencing voters.

(Reporting by Jessica Damiana and Fanny Potkin; Writing by Kanupriya Kapoor; Editing by Nick Macfie)

Source: OANN

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Dutch telecom KPN won’t use Huawei for ‘core’ 5G network

FILE PHOTO: KPN logo is seen at its headquarters in Rotterdam
FILE PHOTO: KPN logo is seen at its headquarters in Rotterdam, Netherlands, January 30, 2019. REUTERS/Piroschka van de Wouw

April 26, 2019

By Bart H. Meijer and Toby Sterling

AMSTERDAM (Reuters) – Dutch telecom firm Royal KPN NV said on Friday it would select a Western supplier to build its core 5G mobile network, making it one of the first European operators to make clear it would not pick China’s Huawei for such work.

The United States has been seeking to discourage its allies from using equipment made by Huawei because of concerns that it could eventually be used for Chinese government spying. Huawei says such worries are baseless and U.S. policy is driven by economic interests.

The Hague-based KPN, the Netherlands’ largest telecom firm, said its decision took into account “the evolving assessment on the protection of vital infrastructure and the influence this may have on future Dutch policy.”

The Dutch government has not taken a decision on the issue.

KPN, which also reported on Friday slightly worse than expected first quarter core earnings of 563 million euros ($627 million), said it would still use equipment made by Huawei in some capacities.

In addition, the company announced a preliminary deal with Huawei to upgrade existing mobile telecommunications gear to make it safer. Huawei has been a key supplier to KPN in the past decade.

The Dutch government set up a task force with KPN and other major operators in the Netherlands this month to analyze the “vulnerability of 5G telecommunications networks to misuse by technology vendors … and measures needed to manage risks.”

KPN said it would use equipment made by Huawei, which it described as a world leader in radio and antenna technology, to improve security on its existing network.

“This preliminary agreement can be adjusted or reversed to align it with future Dutch government policy,” it added.

Sources told Reuters on Wednesday that Britain’s National Security Council (NSC) had decided to bar Huawei from core parts of the country’s 5G network and restrict its access to non-core areas.

(Reporting by Bart Meijer; Editing by Kirsten Donovan and Edmund Blair)

Source: OANN

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Jury selection begins for trial in death of Antwon Rose, 17

A white police officer accused of shooting to death an unarmed black 17-year-old in western Pennsylvania last summer arrived at a Harrisburg courtroom Tuesday as jury selection gets underway.

The jurors will be taken to Allegheny County for the trial next week of Michael Rosfeld, a former East Pittsburgh police officer charged with criminal homicide for the June 19 death of Antwon Rose II.

A judge ruled a jury from outside the Pittsburgh area is needed because of widespread publicity.

The defense lawyer for Rosfeld, 30, of Verona, has said that Rosfeld was in fear and that the shooting was justified.

Rosfeld was charged , investigators said, after his story changed about whether he saw or believed a gun was in Rose's hands.

"When confronted with this inconsistency, Rosfeld stated he saw something in the passenger's hand but was not sure what it was," according to the police affidavit used to charge Rosfeld. "In addition, Officer Rosfeld stated that he was not certain if the individual who had his arm pointed at him was still pointing at him when he fired the shots."

Video shot from a nearby house captured the shooting.

Rose had been a front-seat passenger in an unlicensed cab that was stopped as part of an investigation into a drive-by shooting. As he ran from the vehicle, Rose was shot in the right side of his face, in his elbow and in his back, through his heart and lung.

A prosecutor said Rose had nothing to do with the drive-by shooting, and had shown his hands when he got out of the unlicensed cab.

A gag order is in place, and Rosfeld's lawyer did not return messages seeking comment in recent days.

"He's very, very remorseful. He's not remorseful because he's been charged. He legitimately is sad that this happened," defense attorney Patrick Thomassey told the Pittsburgh Post-Gazette in June. "Mike kept saying, 'I can't believe this happened. I can't believe that kid didn't have a gun in his hand.'"

Rose was described as a promising student who did charity work. He would have been a high school senior this year.

Officials say two handguns were found inside the car Rose had been riding in. District Attorney Stephen Zappala said an empty gun clip was found in Rose's pocket.

Rose's killing prompted days of protest, including a late-night march that shut down a major highway.

Rosfeld had worked for the East Pittsburgh police for just a few weeks, and was officially sworn in just hours before the fatal shooting. He had worked for other departments over seven years.

Rose's family has filed a wrongful death lawsuit against Rosfeld and East Pittsburgh, alleging the use of excessive deadly force and the lack of proper police training.

East Pittsburgh, about 10 miles (16 kilometers) east of Pittsburgh, notified state police in November it was closing down its police department.

The trial is expected to last as long as 10 days.

Source: Fox News National

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Mnuchin has fiery exchange with Rep. Maxine Waters during hearing

Treasury Secretary Steven Mnuchin got into a fiery exchange with U.S. Rep. Maxine Waters on Tuesday during a committee hearing with lawmakers on Capitol Hill.

At the end of a three-and-half-hour testimony before the House Appropriations Committee and Financial Services Committee, which is chaired by Waters, Mnuchin interrupted the hearing to remind the committee of a prior agreement that he would be able to leave by 5 p.m.

Mnuchin said that he was scheduled to meet with a senior official from the Bahrain government. After running overtime, he said he would be willing to stay until 5:15 and return at a later date to testify before Congress.

"It will be embarrassing if I keep this person waiting for a long period of time," Mnuchin said.

His departure, however, did not come without a heated back-and-forth with Waters.

"Unfortunately, we are all pressed for time," said the California congresswoman, whose committee grilled Mnuchin about his plans to respond to Democrats’ requests for access to President Trump’s tax returns.

MAXINE WATERS REIGNITES CALLS  TO IMPEACH PRESIDENT TRUMP, ACCUSES HIM OF 'CONSPIRING WITH THE KREMLIN AND OLIGARCHS OF RUSSIA'

Waters refused to formally dismiss Mnuchin, whom she asked to stay for an additional 10 minutes, Bloomberg reported. "This is a new way and it's a new day. And it's a new chair. And I have the gavel," she said.

Mnuchin said he'd “rethink” whether he would return to sit before the committee if he was going to be poorly treated.

"If you'd wish to keep me here so that I don't have my important meeting and continue to grill me, then we can do that," he said. "I will cancel my meeting and I will not be back here. I will be very clear if that's the way you'd like to have this relationship."

After Waters proceeded to continue with the hearing, Mnuchin again chimed in to clarify whether or not Waters was “instructing” him to stay, and therefore, cancel his meeting.

CANDACE OWENS EXPLODES AT TED LIEU MID-HEARING AFTER HE PLAYS SHORT CLIP OF HER HITLER COMMENTS

"You made me an offer that I accepted," Waters said. "No, I'm not ordering you. I said you may leave anytime you want and you said OK.”

Mnuchin replied that he could not leave until Waters dismissed him. “You're supposed to take the gavel and bang it,” he said.

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Waters then interrupted him, saying, “Please do not instruct me as to how I am to conduct this committee."

Mnuchin was eventually advised by staff that he was not obligated to stay and could leave. Before Waters ended the hearing at 5:30 p.m., Mnuchin withdrew his offer to return before the committee in May.

Source: Fox News Politics

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Former UAW official pleads guilty in U.S. corruption case

FILE PHOTO: UAW Vice President Norwood Jewell addresses their Special Bargaining Convention held at COBO Hall in Detroit
FILE PHOTO: UAW Vice President Norwood Jewell addresses their Special Bargaining Convention held at COBO Hall in Detroit, Michigan March 25, 2015. REUTERS/Jeff Kowalsky/File Photo

April 2, 2019

By Nick Carey

DETROIT (Reuters) – A former top United Auto Workers official in charge of the union’s relations with Fiat Chrysler Automobiles NV (FCA) pleaded guilty on Tuesday in a U.S. federal court in Detroit to misusing the automaker’s funds for lavish spending on UAW officials.

As part of a plea agreement, Norwood Jewell, who headed the UAW’s FCA department from 2014 until his retirement in January 2018, pleaded guilty to a single charge of conspiring to violate the Labor Relations Management Act, which carries a maximum prison sentence of five years and a fine of up to $250,000.

Jewell is the highest-ranking former UAW official charged so far in a wide-ranging investigation into illegal payoffs to UAW officials by FCA. To date, seven people linked to the union and the automaker have been sentenced in the government’s corruption investigation.

Jewell’s court appearance comes at a sensitive time for the UAW, which faces contract talks later this year with FCA, General Motors Co and Ford Motor Co.

Prosecutors say FCA officials conspired to divert to UAW officials more than $4.5 million in training center funds intended to pay for training for union members.

Both the UAW and FCA have repeatedly said that only a few individuals were involved and that this did not affect contract talks between the two in 2015.

Dressed in a black suit, charcoal gray shirt and a black-and-blue striped tie, Jewell told the court he failed to properly apportion funds between his two roles at the UAW and the National Training Center funded by the FCA to train workers.

“I own up to what I did and I am taking responsibility for my actions,” Jewell said.

Prosecutors have recommended a sentence of 12 months to 18 months.

According to court documents, Jewell used the FCA’s National Training Center credit card and approved the use of the credit cards by other UAW officials to make more than $40,000 worth of charges for items such as travel and meals.

Defense attorney Michael Manley told reporters the corrupt practices preceded Jewell’s appointment in 2014, that he had worked to halt those practices and “that he did not take anything for personal gain.”

“My hope is that he will not go to jail,” Manley said.

(Reporting By Nick Carey; Editing by Sonya Hepinstall)

Source: OANN

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FILE PHOTO: An aerial photo looking north shows shipping containers at the Port of Seattle and the Elliott Bay waterfront in Seattle
FILE PHOTO: An aerial photo looking north shows shipping containers at the Port of Seattle and the Elliott Bay waterfront in Seattle, Washington, U.S. March 21, 2019. REUTERS/Lindsey Wasson/File Photo

April 26, 2019

NEW YORK (Reuters) – U.S. economic growth is running at a 1.1% pace in the second quarter as the gains in exports and inventories recorded in the first quarter are expected to reverse, Morgan Stanley economists said on Friday.

“Our preliminary expectations for growth in the second quarter sees large drags from net exports and inventories after their contributions in 1Q,” they wrote in a research note.

Gross domestic product increased at a 3.2% annualized rate in the first three months of the year, driven by a smaller trade deficit and the largest accumulation of unsold merchandise since 2015, the Commerce Department said earlier Friday.

(Reporting by Richard Leong)

Source: OANN

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FILE PHOTO: The Deutsche Bank headquarters are pictured in Frankfurt
FILE PHOTO: The Deutsche Bank headquarters are pictured in Frankfurt, Germany, April 25, 2019. REUTERS/Ralph Orlowski/File Photo

April 26, 2019

By Tom Sims

FRANKFURT (Reuters) – Within hours of the collapse of merger talks with Commerzbank, Christian Sewing scrambled to convince investors and employees that Deutsche Bank can stand on its own two feet.

The Deutsche Bank chief executive told staff, many of whom opposed a merger because of significant job losses, that while he had not been “skeptical” about the Commerzbank talks, he was cautious about the chances of success from the start.

And another top Deutsche Bank executive said on Friday that it had been Commerzbank that initiated the talks, suggesting there was no desperation on their part for a deal.

Commerzbank denied that version of events, ending the apparent truce between the normally highly competitive cross-town Frankfurt rivals over the past six weeks.

German hopes of creating a national banking champion able to challenge global competitors were finally dashed on Thursday when Deutsche Bank and Commerzbank ended their talks due to the risks of doing a deal, restructuring costs and capital demands.

For Sewing, the failure to clinch a deal has left the 49-year-old chief executive of Germany’s largest bank, who took over just over a year ago, with his back to the wall.

Credit ratings agency Standard & Poor’s, which downgraded Deutsche Bank last year, said on Friday that Deutsche Bank “will remain under strain”, adding that it “seems to have acknowledged the need to adjust its strategy”.

Under Sewing, a new leadership has tried to revive Deutsche Bank’s fortunes, but it has faced money laundering allegations and failed stress tests, as well as ratings downgrades.

At the heart of the debate over its future is whether it should focus its business on Germany and draw a line under its costly global ambitions to take on Wall Street’s big guns.

“MARKET PLAY”

Without a deal, Deutsche Bank now finds itself back at the mercy of equity and debt markets, with UBS analysts warning that in a “stress scenario” it could again “be forced into a ‘debt-driven capital increase’ even with solid capital ratios”.

“Deutsche remains a levered market play vulnerable to external events,” the UBS analysts said in a note.

Sewing, along with many analysts, believes Deutsche Bank can go it alone in the short-term, but will be counting on a turnaround in market conditions to do so in the long-run given its dependence on volatile investment bank earnings.

“To reach our return objective, we also need to see a revenue recovery in our more market-sensitive business,” Sewing said on Friday after reporting results.

“These revenues are available to us in better market conditions given our leading positions in many of these businesses, but we need to capture them,” he added.

Revenue at Deutsche Bank’s bond trading division fell 19 percent in the first quarter, it said on Friday, underscoring weakness at its investment bank.

If those earnings do not improve, Berlin’s desire to keep its biggest bank out of foreign hands may start to wane.

“Germany’s globally active companies need competitive financial institutions that can support them around the world,” German finance minister Olaf Scholz said on Thursday.

(Writing by Alexander Smith; Editing by Keith Weir)

Source: OANN

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Panama's former president Ricardo Martinelli yells to the media while arriving to the Electoral Court in Panama City
Panama’s former president Ricardo Martinelli reacts to the media while arriving to the Electoral Court in Panama City, Panama April 26, 2019. REUTERS/Erick Marciscano

April 26, 2019

PANAMA CITY (Reuters) – Panama’s electoral tribunal has ruled that former President Ricardo Martinelli, who is awaiting trial on wiretapping charges, cannot take part in elections on May 5 in which he was running for mayor of Panama City and a seat in Congress, a spokesman for Martinelli said on Friday.

“The ruling of the electoral tribunal has disqualified him as candidate,” said the spokesman, Eduardo Camacho, calling the court’s ruling a “political decision.”

Officials at the tribunal did not immediately confirm the ruling, which also was reported in local media in Panama.

Martinelli, a supermarket tycoon who ran the Central American country from 2009 to 2014, was extradited to Panama last June from the United States and charged with spying on 150 people, including politicians, union leaders and journalists.

A judge had previously cleared Martinelli to run for mayor of the capital. His critics vowed to appeal that decision.

(Reporting by Elida Moreno and Stefanie Eschenbacher; Editing by Bill Trott)

Source: OANN

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FILE PHOTO: Amazon boxes are seen stacked for delivery in the Manhattan borough of New York City
FILE PHOTO: Amazon boxes are seen stacked for delivery in the Manhattan borough of New York City, January 29, 2016. REUTERS/Mike Segar/File Photo

April 26, 2019

(Reuters) – Shares of Walmart, Target and other U.S. retailers fell on Friday as Amazon.com Inc unveiled a one-day delivery plan for its Prime members in a move to further disrupt the fiercely competitive retail landscape.

The e-commerce giant’s announcement on Thursday could cause other brands, manufacturers, retailers, and logistics companies to have to invest more aggressively to compete with Amazon and its delivery, analysts said.

Retailers in recent years have poured billions into ecommerce and faster shipping options and are trying to close the gap with Amazon.

“This is about making it more expensive to catch up and affirms our world view that only the largest and smartest will survive,” Bernstein analyst Brandon Fletcher said.

The move is expected to heighten consumer expectations on e-commerce delivery just like Amazon did with its two-day shipping option for members of its loyalty club Prime, noted analysts.

“The faster you ship, the more people buy,” RBC Capital Markets analyst Mark Mahaney said.

The challenge for non-Amazon players was that very few of the existing logistics and parcel delivery players now have the ability to do nationwide one-day delivery, Morgan Stanley analyst Brian Nowak said.

“And even fewer can do it at the vast scale and reasonable cost that AMZN would need for Prime delivery,” Nowak said in a note.

Walmart Inc’s shares fell about 3 percent, while Target Corp dropped about 5 percent in morning trade.

Shares of Kohl’s Corp, Macy’s Inc and Nordstrom Inc fell about 1 percent. Grocer Kroger Co was nearly 3 percent lower, while consumer electronics retailer Best Buy Inc dropped 2.1 percent.

(Reporting by Soundarya J and Akanksha Rana in Bengaluru; Editing by Maju Samuel)

Source: OANN

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A Chinese woman adjusts a Chinese national flag next to U.S. national flags before a Strategic Dialogue expanded meeting, part of the U.S.-China Strategic and Economic Dialogue (S&ED) in Beijing
A Chinese woman adjusts a Chinese national flag next to U.S. national flags before a Strategic Dialogue expanded meeting, part of the U.S.-China Strategic and Economic Dialogue (S&ED) held at the Diaoyutai State Guesthouse in Beijing, July 10, 2014. REUTERS/Ng Han Guan/Pool (CHINA – Tags: POLITICS BUSINESS)

April 26, 2019

By April Joyner

NEW YORK (Reuters) – Even as the lift from optimism over prospects for U.S.-China trade detente shows signs of wearing off for the wider U.S. stock market, upbeat sentiment around China’s economy could bolster shares of materials companies.

Shares of S&P 500 industrial and technology companies, which were buffeted by last year’s tit-for-tat tariffs as well as slowing global demand, have been very responsive to progress in U.S.-China trade relations and a strengthening Chinese economy. This year, those sectors have outpaced the ascent in the S&P 500, which reached a record closing high on Tuesday.

Materials stocks have not been as sensitive, however, even though they also stand to benefit as a stronger Chinese economy lifts global consumption and industrial output. As China has taken measures to stimulate its economy, its economic data have turned more upbeat. That in turn could aid global growth, which has flagged as a result of China’s cooldown.

“What we’re seeing is China spending more on stimulus: fiscal stimulus and monetary stimulus,” said Kristina Hooper, chief global market strategist at Invesco in New York. “That’s likely to be a positive for materials.”

The People’s Bank of China has cut banks’ reserve requirement ratio five times over the past year and is widely expected to ease policy further to spur lending and reduce borrowing costs. The stimulus appears to have boosted Chinese economic data, with factory activity growing in March for the first time in four months.

Yet so far in 2019, the S&P 500 materials index has underperformed the S&P 500 at large, rising just 11.9% compared with 16.7% for the benchmark index. Moreover, it is among the biggest decliners in the period since the S&P’s previous record closing level on Sept. 20. The materials index has fallen 7% over those seven months, versus a 5.2% gain for technology and a 3% loss for industrials. Only the energy index has dropped more over that period.

A trade agreement could serve as a catalyst for a bump in materials shares as a drag on China’s economy is lifted, some market strategists say. Some commodity prices, including those for copper and oil, have ascended this year as the prospects for the global economy have somewhat brightened.

“It all goes back to the global growth outlook,” said Andrea DiCenso, portfolio manager for alpha strategies at Loomis Sayles in Boston. “With the front run in hard data, we’re beginning to see a pretty significant rally.”

Additionally, a trade agreement is expected to include commitments from China to purchase higher quantities of U.S. products such as soybeans, which could benefit companies that make agricultural chemicals, including DowDuPont Inc and CF Industries Holdings Inc.

CF Industries is scheduled to report quarterly results after the bell on Wednesday, and DowDuPont is scheduled to report before the market open on Thursday.

To be sure, even with a trade agreement, some materials companies could face price pressures. Shares of Freeport-McMoRan Inc fell 10.1% on Thursday after the copper mining company posted a lower-than-expected profit as its production slipped and its costs rose.

A rollback of tariffs on Chinese imports, particularly aluminum and steel, would likely prompt a fall in some commodity prices, which could hurt prospects for certain materials companies, said Gene Goldman, chief investment officer at Cetera Investment Management in El Segundo, California.

Even so, those drawbacks may be outweighed by the support for global demand fostered by a U.S.-China trade agreement.

“You could see a number of companies with lowered expectations bring them back up as they talk favorably about the impact that a trade deal would have on them,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

(Reporting by April Joyner; additional reporting by Sinéad Carew; editing by Jonathan Oatis)

Source: OANN

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