Japan’s Fujifilm to take over Xerox in $6.1 billion deal, create joint venture

(Reuters) – Japan’s Fujifilm Holdings is set to take over Xerox Corp in a $6.1 billion deal, combining the U.S. company into their existing joint venture to gain scale and cut costs amid declining demand for office printing.

The acquisition announced on Wednesday comes as Xerox has been under pressure to find new sources of growth as it struggles to reinvent its legacy business amid waning demand for office printing. Fujifilm is also trying to streamline its copier business with a larger focus on document solutions services.

Consolidation of R&D, procurement and other operations would enable Fuji Xerox to deliver at least $1.7 billion in total cost savings by 2022, the two companies said.

Fujifilm now owns 75 percent of Fuji Xerox, the joint venture going back more than 50 years ago which sells photocopying products and services in the Asia-Pacific region.

The two companies said that Fuji Xerox will buy back that stake from Fujifilm for around $6.1 billion, using bank debt. Fujifilm will use those proceeds to purchase 50.1 percent of new Xerox shares. Plans were for the deal to be completed around July-August, they added.

The combined company will keep the Fuji Xerox name and become a subsidiary of Fujifilm, with dual headquarters in the United States and Japan, and listed in New York. It will be led by Xerox CEO Jeff Jacobson, while Fujifilm CEO Shigetaka Komori will serve as chairman.

The joint venture accounts for nearly half of Fujifilm’s sales and operating profit.

Both companies have struggled with slow sales of photocopy products, as businesses increasingly go paperless. Fujifilm on Wednesday reported a 29.4 percent drop in operating profit at its document solutions operations, which includes Fuji Xerox, for the third quarter, underperforming its imaging and information segments. Overall, the company reported a 3.4 percent increase in operating profit for the quarter.

Fujifilm Holdings’ logos are pictured ahead of its news conference in Tokyo, Japan January 31, 2018. REUTERS/Kim Kyung-Hoon

Xerox reported a net loss from continuing operations of $196 million in the fourth quarter, mainly due to a one-off $400 million charge as it sought to take advantage of changes to U.S. tax law but also reflecting the steady decline in office printing.

“This has been a speedy decision, but I believe it’s a creative one,” Fujifilm CEO Komori told reporters at a briefing. “The new structure will leverage the strengths of our three companies.”

As part of its own restructuring, Fujifilm said it was cutting 10,000 jobs at Fuji Xerox, more than a fifth of its workforce at the joint venture, in the Asia Pacific region.

Sluggish performance at Xerox had prompted investors to call on the U.S. company, which had owned 25 percent of the joint venture, to explore strategic options.

Xerox has been targeted by activist investor Carl Icahn and shareholder Darwin Deason, who joined forces last week to push Xerox to explore strategic options, oust its “old guard”, including its CEO, and negotiate better terms for its decades-long deal with Fujifilm. Icahn is Xerox’s biggest shareholder, with a 9.72 percent stake.

Xerox’s CEO said the combined company would gain an increased edge in new technologies, along with higher revenues and cost synergies, while Xerox shareholders would also benefit from a $2.5 billion special cash dividend resulting from the deal.

“This transaction…offers substantial upside for shareholders of the combined companies, including current shareholders of Xerox and Fujifilm Holdings, who will own shares in a more competitive company that has enhanced opportunities for long-term growth and margin expansion,” Jacobson said in a pre-recorded video message.

The takeover deal comes less than a year after Fujifilm admitted improper accounting standards at Fuji Xerox, but Komori said that Xerox’s strong governance standards could be beneficial to the new company.

Fujifilm shares fell 8.3 percent on Wednesday ahead of its announcement of job cuts but after the Journal report about a deal with Xerox. Xerox shares ended down 0.5 percent on Tuesday.

Additional reporting by Minami Funakoshi in Tokyo, Diptendu Lahiri, Muvija M and Ismail Shakil in Bengaluru; Editing by Sandra Maler, Muralikumar Anantharaman and Jacqueline Wong

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Amid angst over iPhone X, Wall Street braces for weak forecast from Apple

SAN FRANCISCO (Reuters) – When Apple Inc (AAPL.O) announces its first-quarter earnings on Thursday, investors will seek signs of whether the company’s $999 iPhone X launched last autumn was a Steve Jobs-style hit or, as more analysts suspect, a letdown.

In recent weeks, Wall Street analysts have come to a consensus that iPhone X sales were slower than previously expected for the first quarter that ended in December and may drop off sharply for the March quarter.

Analysts have lowered their expectations for Apple’s second- quarter revenue guidance to as low as $60 billion from a previous average of $67 billion.

Combined with concerns about the impact of an imbroglio in which Apple acknowledged slowing down phones with worn-out batteries, the weak iPhone X performance has again raised the question of whether the company can keep up its rapid revenue growth without a new hit product.

With eight different iPhone models priced from $350 to $999 on sale over the holidays, Apple showed that it has moved decisively away from co-founder Jobs’ tight lineup of premium-priced products and embraced an iPhone-for-everybody strategy.

Analysts are questioning whether Apple can boost its revenue even as iPhone sales essentially plateau.

“Apple will have to answer the question of what’s next,” UBS analyst Steven Milunovich wrote in a note to investors. “More services to monetize the base of one billion customers and eventually enhanced [augmented reality] capabilities may be part of the answer.”

Analysts still expect Apple to post record revenue, hitting the top of its $87 billion guidance for the holiday quarter. But they have slashed revenue estimates for the March quarter and expect the company to sell fewer iPhones in fiscal 2018 than initially thought.

Bernstein analyst Toni Sacconaghi predicted as few as 220 million iPhones will sell in fiscal 2018, just above the 216.7 million sold in 2017 and well below the 2015 peak of 231.2 million.

BTIG analyst Walter Piecyk spotlighted a steadily lengthening replacement cycle as new iPhones offer only small improvements over prior models. Now that it has become clear that a new battery can give life to an old phone, more customers may choose to delay an upgrade, especially with Apple cutting the price of a battery replacement to $29 from $79.

Analysts still believe Apple will report sales of $272.2 billion for its fiscal 2018, 18.7 percent above its $229.2 billion in fiscal 2017. That will be driven largely by higher average prices paid for iPhones, they said.

‘WILD CARD’

But Apple does not give data on specific models, and with the wider lineup, analysts must do more guesswork based on surveys and other tools. They also find it harder to predict how much money Apple makes off each phone.

“We believe that gross margins are a key wild card for investors, given limited transparency into relative margins across iPhone [models],” Sacconaghi said in a note to investors.

All in all, it’s a far cry from the days of Jobs, who shrank the company’s product lineup when he returned to the helm in 1997 and kept it limited to a few models of each product at one time until his death in 2011.

But the Apple of today has something Jobs never had: An imposing user base into which it can sell a host of other products and services.

Trip Miller, managing partner at Gullane Capital and an Apple investor, believes Apple’s services segment is the firm’s next hit product. Analyst expect it to hit sales of $34.7 billion this year, up 16 percent.

Reporting by Stephen Nellis; Editing by Jonathan Weber and Cynthia Osterman

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Trump security team sees building U.S. 5G network as option

WASHINGTON (Reuters) – President Donald Trump’s national security team is looking at options to counter the threat of China spying on U.S. phone calls that include the government building a super-fast 5G wireless network, a senior administration official said on Sunday.

The official, confirming the gist of a report from Axios.com, said the option was being debated at a low level in the administration and was six to eight months away from being considered by the president himself.

The 5G network concept is aimed at addressing what officials see as China’s threat to U.S. cyber security and economic security.

The Trump administration has taken a harder line on policies initiated by predecessor Barack Obama on issues ranging from Beijing’s role in restraining North Korea to Chinese efforts to acquire U.S. strategic industries.

This month AT&T was forced to scrap a plan to offer its customers handsets built by China’s Huawei after some members of Congress lobbied against the idea with federal regulators, sources told Reuters.

In 2012, Huawei and ZTE Corp were the subject of a U.S. investigation into whether their equipment provided an opportunity for foreign espionage and threatened critical U.S. infrastructure.

Some members of the House intelligence committee remain troubled by security threats posed by Huawei and ZTE, according to a congressional aide.

Issues raised in a 2012 committee report about the Chinese firms have “never subsided,” the aide said, adding that there was newer classified intelligence that recently resurfaced those concerns.

“We want to build a network so the Chinese can’t listen to your calls,” the senior official told Reuters.

“We have to have a secure network that doesn’t allow bad actors to get in. We also have to ensure the Chinese don’t take over the market and put every non-5G network out of business.”

In Beijing on Monday, Chinese foreign ministry spokeswoman Hua Chunying said China prohibited all forms of hacking, but did not specifically address the 5G network security issue.

“We believe that the international community should, on the basis of mutual respect and trust, strengthen dialogue and cooperation and join hands in addressing the threat of cyber attacks,” Hua told a regular news briefing.

Major wireless carriers have spent billions of dollars buying spectrum to launch 5G networks, and it is unclear if the U.S. government would have enough spectrum to build its own 5G network.

Furthermore, Accenture has estimated that wireless operators will invest as much as $275 billion in the United States over seven years as they build out 5G.

Last year, T-Mobile US Inc spent $8 billion and Dish Network Corp $6.2 billion to win the bulk of broadcast airwaves spectrum for sale in a government auction.

An AT&T spokesman said they could not comment on something they have not seen, and added, “Thanks to multi-billion dollar investments made by American companies, the work to launch 5G service in the United States is already well down the road.”

Later this year, AT&T is set to be the first to launch mobile 5G service in 12 U.S. locations, the spokesman said.

A Verizon spokesman declined to comment. Representatives for Sprint and T-Mobile did not immediately respond to requests for comment.

Another option includes having a 5G network built by a consortium of wireless carriers, the U.S. official said.

“We want to build a secure 5G network and we have to work with industry to figure out the best way to do it,” the official said, speaking on condition of anonymity.

Axios published documents it said were from a presentation from a National Security Council official. If the government built the network, it would rent access to carriers, Axios said.

A looming concern laid out in the presentation was China’s growing presence in the manufacture and operation of wireless networks. A concerted government push could help the U.S. compete on that front, according to the presentation.

A 5G network is expected to offer significantly faster speeds, more capacity and shorter response times, which could be utilized for new technologies ranging from self-driving cars to remote surgeries. Telecom companies and their suppliers consider it to be a multibillion-dollar revenue opportunity.

Reporting by Steve Holland and Pete Schroeder; Additional reporting by Duston Volz, Suzanne Barlyn and David Shepardson, and Michael Martina in Beijing; Editing by Chris Sanders, Peter Cooney and Clarence Fernandez

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U.S. trade body backs Canadian plane maker Bombardier against Boeing

MONTREAL/WASHINGTON (Reuters) – A U.S. trade commission on Friday handed an unexpected victory to Bombardier Inc against Boeing Co, in a ruling that allows the Canadian company to sell its newest jets to U.S. airlines without heavy duties, sending Bombardier’s shares up 15 percent.

The U.S. International Trade Commission’s unanimous decision is the latest twist in U.S.-Canadian trade relations that have been complicated by disputes over tariffs on Canadian lumber and U.S. milk and President Donald Trump’s desire to renegotiate or even abandon the North American Free Trade Agreement (NAFTA).

Trump, who did not weigh in on the dispute personally, took his “America First” message to the world’s elite on Friday, telling a summit that the United States would “no longer turn a blind eye” to what he described as unfair trade practices.

The ITC commissioners voted 4-0 that Bombardier’s prices did not harm Boeing and discarded a U.S. Commerce Department recommendation to slap a near 300 percent duty on sales of the company’s 110-to-130-seat CSeries jets for five years. It did not give a reason immediately.

U.S. Commerce Secretary Wilbur Ross said in a statement that the commission’s finding “shows how robust our system of checks and balances is.”

Boeing’s shares closed flat.

“It’s reassuring to see that facts and evidence matter,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics in Washington. “This part of the trade policy process works unimpeded despite President Trump’s protectionist rhetoric.”

The decision will also help Bombardier sell the CSeries in the United States by removing “a huge amount of uncertainty,” at a time when its Brazilian rival Embraer is bringing its new E190-E2 jet to market, a source familiar with the Canadian plane and train maker’s thinking said.

The ITC had been expected to side with Chicago-based Boeing. The company alleged it was forced to discount its 737 narrow-bodies to compete with Bombardier, which it said used government subsidies to dump the CSeries during the 2016 sale of 75 jets at “absurdly low” prices to Delta Air Lines.

Bombardier called the trade case self-serving after Boeing revealed on Dec. 21 that it was discussing a “potential combination” with Embraer. Boeing denied the trade case was motivated by those talks.

BOEING TO CONSIDER ITS OPTIONS

FILE PHOTO: Bombardier’s CS300 Aircraft, showing its Pratt & Whitney engine in the foreground, sits in the hangar prior to its test flight in Mirabel, Qubec, Canada February 27, 2015. REUTERS/Christinne Muschi/File Photo

The dispute may not be over.

“This can still be appealed by Boeing,” Andrew Leslie, parliamentary secretary to Canadian Foreign Minister Chrystia Freeland, told reporters in Montreal.

Boeing said it would not consider such options before seeing the ITC’s reasoning in February.

But Boeing said it was disappointed the commission did not recognize “the harm that Boeing has suffered from the billions of dollars in illegal government subsidies that the Department of Commerce found Bombardier received and used to dump aircraft in the U.S. small single-aisle airplane market.”

Slideshow (5 Images)

Bombardier, Delta and the U.S. consumer advocacy group Travelers United all called the ITC decision a victory for consumers and airlines.

The decision may end up helping Trump’s goal of boosting U.S. jobs as the CSeries jets for U.S. airlines will be built in the United States rather than Canada.

Through a venture with European planemaker Airbus SE, which has agreed to take a majority stake in the CSeries this year, Bombardier plans to assemble CSeries jets in Alabama to be sold to U.S. carriers starting in 2019.

Airbus Chief Executive Tom Enders promised to push ahead “full throttle” with the Alabama plans. “Nothing is sweeter than a surprise, a surprise victory,” he said.

The case had sparked trade tensions between the United States and its allies Canada and the UK. Ottawa last year scrapped plans to buy 18 Super Hornet fighter jets from Boeing.

The well-paid jobs associated with the CSeries are important both to Ottawa and the British government. Bombardier employs about 4,000 workers in Northern Ireland.

The British prime minister’s office said it welcomed the decision, “which is good news” for the British industry, while Canada’s innovation minister said the ITC came to the “right decision” on Bombardier.

Former ITC chairman Dan Pearson praised the decision. “Not a single commissioner was willing to buy Boeing’s arguments,” he said. “I think ‘America First’ is a policy of the White House and the Commerce Department. But it’s not the policy of an independent agency (like the ITC).”

Additional reporting by David Shepardson, Alana Wise, David Ljunggren and Tim Hepher; Editing by Bill Rigby, Susan Thomas and Leslie Adler

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State of the Union more likely to raise eyebrows than stocks

(Reuters) – Anybody hoping for a replay of the stock market advance that followed U.S. President Donald Trump’s first address to Congress may be disappointed. This time around, shares could suffer if Trump does not tread carefully on hot-button issues.

The S&P 500 jumped 1.4 percent the day after Trump’s speech last February, as an unexpectedly measured tone from the notoriously abrasive president boosted investor optimism that he would be able to deliver on pro-business campaign promises.

But with a new tax law under his belt, Trump is expected to use his late-night State of the Union speech on Tuesday to applaud that victory and broach topics including trade agreements, immigration reform and infrastructure spending.

That may not be enough to inspire investors further, after enthusiasm about corporate tax cuts helped push the S&P 500 up more than 19 percent in 2017 and close to 7 percent so far this year.

“Nothing is going to trump tax reform,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut. “Since I expect the president to do a victory lap, the typical market reaction would be a sell-the-news reaction in contrast to last year.”

The S&P 500 has had only 4 daily declines so far this year, and the chances of a Jan. 31 selloff are higher if the market does not take a breather before then, O‘Rourke said.

Investors could be rattled by tough talk from Trump on issues including U.S. immigration policy, which has already divided lawmakers in a Republican-controlled Congress and led to a three-day government shutdown.

“He’s got to tread carefully on the hot-button items,” said Phil Blancato, chief executive of Ladenburg Thalmann Asset Management in New York, citing immigration and trade talks.

He noted that a “pro-immigration agenda” could be the easiest way to expand the U.S. workforce to boost an economy with a tight labor market.

Congress agreed to extend funding to Feb. 8 and the White House is expected to unveil an immigration legislation framework a day before the speech.

Strategists also are wary about how Trump will approach international trade, including the North American Free Trade Agreement (NAFTA) in his speech due to his tendency for “America First” rhetoric.

“We know historically protectionism is bad for the economy. It’s bad for markets. You open a great deal of uncertainty if you hone in on that,” said JonesTrading’s O‘Rourke.

U.S. officials on Thursday probed Canadian proposals for unblocking talks on NAFTA but there were few signs of progress, raising questions about whether any real movement is happening at the penultimate round of negotiations on the treaty.

Any trade comments would also come on the heels of Trump approving a steep tariff on solar panels and washing machines, moves those industries have warned could raise prices and endanger jobs.

To be sure, Trump could boost sentiment with details on a plan to rebuild U.S. infrastructure. On Wednesday he promised $1.7 trillion in investments over the next 10 years. But any related gains may be limited to sectors like industrials and materials.

And in general, big moves like the one seen last year are relatively rare.

The market moved more than 1 percent in either direction just 15 times the day after the annual U.S. presidential address since 1965, when it was first televised at night. By comparison, it had a 1 percent or more move 13 times in the session before the speech.

Retail investors may be more likely than professional fund managers to let policy comments influence their trading, said Blancato, who is not planning to make any asset allocation changes based on the speech.

Investors may also be less sensitive to the speech’s message this time around. Many now say they largely ignore politics after a tumultuous year with a divided Republican party, heated exchanges with nuclear-armed North Korea, a probe of possible collusion between Trump’s election campaign and Russia and the government shutdown.

Traders have instead focused on economic data and earnings, which continue to look strong. Analysts expect the S&P 500’s fourth-quarter earnings per share to rise by 12.7 percent from a year earlier, according to Thomson Reuters data.

“Short of something truly stupid like a trade war with China or a withdrawal from NAFTA, or something horrific like a nuclear conflict with North Korea, we don’t see a scenario where investors are likely to elevate politics to the same level of importance as the global recovery and improving earnings,” said Robert Phipps, a director at Per Stirling Capital Management in Austin, Texas.

Additional reporting by Lewis Krauskopf; Editing by Alden Bentley and Meredith Mazzilli

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Asia stocks rise for 11th straight session, Trump helps dollar bounce

TOKYO (Reuters) – Asian stocks extended their winning run to the 11th day on Friday, while the battered dollar won back some ground after President Donald Trump said he wanted a strong U.S. currency.

European shares are expected to open higher, with spread-betters foreseeing a 0.3 percent gain in Germany’s DAX and France’s Cac and a 0.4 percent rise in Britain’s FTSE.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.25 percent for the day, led by gains in Chinese financial and property shares.

It headed for its 11th straight day of gains, the longest sequence since 2015, and also for seventh straight week of gains for the first time since 2010.

Japan’s Nikkei ended down 0.2 percent.

World equity markets have rallied over the past year, buoyed by a synchronized uptick in global economic growth in a boon to corporate profits and stock valuations.

Australian markets were closed for a public holiday.

The Dow and S&P 500 ended at their highest closing levels ever on Thursday although Wall Street relinquished bigger intraday gains after President Trump’s strong dollar comments.[.N]

Trump said on Thursday he ultimately wants the dollar to be strong, contradicting comments made by Treasury Secretary Steven Mnuchin one day earlier.

The dollar index against a basket of six major currencies was at 89.034. It had sunk to a three-year low of 88.438 on Thursday after Mnuchin said he welcomed a weaker greenback, which the markets initially took as Washington’s departure from its strong dollar policy.

“Trump did say he wanted a stronger dollar, but at the same time made no intention of changing his stance towards pursuing U.S. interest through trade policies,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

“Comments from U.S. top officials regarding the dollar are likely to continue lacking consistency going forward,” he said.

The euro was 0.2 percent higher at $1.2426 but still some distance from $1.2538, its highest since December 2014 scaled on Thursday.

The common currency had soared to the fresh three-year high on Thursday after European Central Bank President Mario Draghi said economic data pointed to “solid and broad” growth with inflation likely to rise in the medium term from subdued levels.

Draghi also said the recent surge in the euro was a source of uncertainty, although this had little impact on the currency as some market participants had expected the ECB chief to use stronger language.

The dollar slipped 0.2 percent to 109.42 yen, though it rebounded from a four-month low of 108.500 set the previous day.

The pound was 0.5 percent higher at $1.4205 following its ascent to a 1-1/2-year high of $1.4346 the previous day.

The Australian dollar climbed 0.5 percent to $0.8059, edging back towards a four-month peak of set $0.8119 overnight.

Even if the Trump administration does push for a weaker dollar, the current U.S. monetary policy trend was expected to complicate the agenda.

“Help from the Federal Reserve would be needed to weaken the dollar. But right now, the Fed is in midst of raising interest rates and this is not conducive to a weaker currency,” said Makoto Noji, senior strategist at SMBC Nikko Securities in Tokyo.

The Fed conducted three rate hikes in 2017 and is expected to tighten as many as three more times in 2018.

Oil prices fell ahead of the end of the peak-demand winter season in the northern hemisphere, although ongoing supply cuts and the weakening dollar offered broad support to the market.

U.S. crude futures were 0.1 percent lower at $65.43 per barrel after reaching $66.66 on Thursday, highest since December 2014.

Spot gold was a shade higher at $1,354 per ounce after sliding 0.8 percent overnight. It set $1,366.06 earlier on Thursday, its highest since August 2016.

Additional reporting by Hideyuki Sano; Editing by Sam Holmes

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Asia shares hit record peak but trade protectionist fears cast shadow

TOKYO (Reuters) – Asian stocks hit a record high on Thursday though concerns about the Trump administration’s protectionist stance tempered enthusiasm in financial markets, while the dollar struggled after U.S. Treasury Secretary Steven Mnuchin welcomed a weaker currency.

European shares are expected to tick up slightly, with spread-betters seeing a small rise of 0.1 percent in Britain’s FTSE, Germany’s DAX and France’s Cac.

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.3 percent to an all-time peak for the ninth session in a row.

Japan’s Nikkei fell 1.1 percent, hit by the dollar’s decline against the yen.

MSCI ACWI, the index provider’s broadest gauge of the world’s stock markets, boosted its gains for the month to 6.6 percent. It had registered declines only on two days this year amid optimism over an extended growth spurt in the global economy and solid earnings.

A Reuters poll of over 500 economists showed the global economy is expected to grow at the fastest pace since 2010.

The upbeat mood, however, has come up against renewed fears of protectionism after U.S. President Donald Trump’s decision to impose steep import tariffs on washing machines and solar panels earlier in the week.

U.S. Commerce Secretary Wilbur Ross, who attended the World Economic Forum in Davos, hinted at action against China, saying U.S. trade authorities were investigating whether there is a case for taking action over China’s infringements of intellectual property.

Trump is scheduled to speak in Davos on Thursday.

Also in the Swiss Alpine town, Mnuchin made a major departure from traditional U.S. currency policy on Wednesday, saying “obviously a weaker dollar is good for us as it relates to trade and opportunities.”

Analysts say they cannot remember any U.S. Treasury Secretary openly embracing a cheaper dollar at least in the last two decades or so.

“I was speculating the Trump administration may role out something with fanfare given its big delegation to Davos,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management.

“I’d think the real aim of Mnuchin’s comments on the dollar is not so much engineering a weaker dollar per se as putting pressure on trading partners to do some trade deals with the administration,” he added.

The dollar’s index against a basket of six major currencies tumbled to a three-year low of 88.816, falling 1.9 percent so far this week.

The euro rose to as high as $1.2459, a peak not scaled since December 2014, ahead of the European Central Bank’s policy meeting later in the day.

The meeting comes against a backdrop of heightened speculation over when it will end its vast stimulus and signal a rise in interest rates from record lows.

The dollar slipped to 108.74 yen, its lowest levels since mid-September.

The Chinese yuan also strengthened, gaining 0.5 percent to 6.3280 yuan per dollar in onshore trade, hitting its highest level since November 2015.

It rose 2.7 percent so far this month. The gains, if sustained, would mark the biggest monthly rise ever.

Gold jumped past its September peak to 1-1/2-year high of $1,365.8 per ounce. A break above its July 2016 high around $1,375 would take it to a four-year high.

Brazilian markets might be in for another strong day following rally in the real and shares on Wednesday after an appeals court upheld the corruption conviction of former President Luiz Inacio Lula da Silva, a major blow to the popular politician’s plans to run again for the presidency this year.

He was perceived to be not friendly to markets, even though his eight-year reign from 2003 saw strong gains in Brazilian shares and currency.

Oil prices rallied to three-year high, boosted by a record 10th straight weekly decline in U.S. crude inventories, though reduced refining activity and rising production signaled U.S. stocks could rise in coming weeks.

International benchmark Brent futures were nudging $71 per barrel – $71.03 a barrel at 0232 GMT – a level not seen since early December 2014 and up 45 cents, or 0.6 percent, from their last close.

Bitcoin extended its rebound from Tuesday’s low of $9,927 to $11,541, up 1 percent so far in Asia.

Editing by Shri Navaratnam

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Asia shares take a breather, dollar sold anew

SYDNEY (Reuters) – Asian share markets took a time out on Wednesday as investors were left breathless at the breakneck pace of recent gains, while a fresh burst of speculative selling took the U.S. dollar to three-year lows.

Most Asian stock indices are up anywhere from 5 to 10 percent since the start of the year with many at all-time highs.

“These markets are absolutely flying and have had seemingly one-way moves since late December,” noted Chris Weston, chief market strategist at broker IG.

“There has clearly been a wall of capital hitting these markets, as is the case with many Asian currencies,” he added. “One simply can’t rule out further upside here, even if there are growing risks of buyers’ fatigue kicking in.”

Early Wednesday, MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.2 percent, having jumped 1.2 percent on Tuesday to an all-time peak.

Japan’s Nikkei .N225 edged down 0.6 percent as the yen strengthened, though that was from a 26-year top.

Figures out of Japan showed exports growing for a 13th straight month, led by record demand from China and Asia as a whole, while manufacturing activity expanded at the fastest pace in almost four years. [

Investors seemed to have largely shaken off worries about a trade war, sparked when U.S. President Donald Trump’s slapped steep import tariffs on washing machines and solar panels in a move condemned by China and South Korea.

Korea’s main index .KS11 was flat, while China’s blue-chip CSI300 index .CSI300 dipped 0.3 percent. The latter is still up more than 8 percent on the year so far and near its highest since mid-2015.

On Wall Street, a 10 percent surge in Netflix (NFLX.O) led gains across the tech sector as it became just the latest to top forecasts. So far, 82 percent of reporting companies having beaten estimates.

The Nasdaq .IXIC ended Tuesday with gains of 0.71 percent and the S&P 500 .SPX 0.22 percent, while the Dow .DJI edged down a tiny 0.01 percent.

EUROPE ON A ROLL

In currency markets, the dollar remained under fire as investors wagered the Federal Reserve would be far from the only central bank to tighten this year as growth spread more widely.

The sea change has been greatest in Europe where a survey of consumers overnight showed confidence jumped to a 17-year high in January.

“Both investors and consumers in Europe have started 2018 in a cheery mood, as the rotation away from the U.S. as the epicentre of global growth continues,” said ANZ analyst Richard Yetsenga in a note to clients.

The upbeat data only reinforced speculation the European Central Bank might take a step toward an eventual tightening at its policy meeting on Thursday.

That helped lift to euro to $1.2315 EUR= and back toward the three-year top of $1.2322 touched last week. The dollar was already at a fresh three-year trough against a basket of major currencies at 90.003 .DXY.

It also ran into selling against the yen even though the Bank of Japan tried hard on Tuesday to quash talk it might curb its massive asset buying campaign anytime soon.

The dollar was last down 0.35 percent at 109.90 JPY=, having breached support at 110.00 for the first time since September.

The British pound GBP= also powered to $1.4040, its highest since the vote to leave the European Union in June 2016, aided by optimism around Britain’s chances of securing a favourable Brexit deal. [GBP/]

The dollar’s decline has been a boon to commodities priced in the currency, with gold edging up to $1,341.26 an ounce XAU=.

Oil prices were consolidating after jumping more than 1 percent on Tuesday, with benchmark Brent crude hitting $70 a barrel for the first time in a week.

Brent futures LCOc1 were off 19 cents at $69.77, still not far off the three-year high of $70.37 reached on Jan. 15, while U.S. crude CLc1 eased 6 cents to $64.41 a barrel.

Editing by Sam Holmes

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Netflix crosses $100 billion market capitalization as subscribers surge

(Reuters) – Netflix Inc (NFLX.O) snagged 2 million more subscribers than Wall Street expected in the final three months of 2017, tripling profits at the online video service that is burning money on new programming to dominate internet television around the world.

The results drove Netflix to a market capitalization of more than $100 billion for the first time. Shares jumped 9 percent to over $248 in after-hours trading on Monday after rallying throughout the month and rising 53 percent last year. (tmsnrt.rs/1Ry82wG)

The company has signed up more than half of all U.S. broadband households and is building its customer base in 190 countries by spending billions on programming.

Netflix picked up 6.36 million subscribers in international markets from October through December, when it released new seasons of critically acclaimed shows “Stranger Things” and “The Crown” as well as Will Smith action movie “Bright.” That topped Wall Street expectations of 5.1 million, according to FactSet.

Along with 1.98 million customer additions in the United States, the company ended the year with 117.58 million streaming subscribers around the globe, despite a price hike in October.

“Netflix is pouring more and more money into making content, and it is directly translating into more subscribers,” BTIG analyst Richard Greenfield said. “They see a huge opportunity and they are moving as fast as they can to attack it.”

The company also said it took a $39 million non-cash charge for “unreleased content we’ve decided not to move forward with.” A source familiar with the matter said the charge was related to content starring Kevin Spacey, with whom Netflix cut ties after he was accused of sexual misconduct.

Netflix temporarily halted production of “House of Cards” to write out Spacey’s character and decided not to release the film “Gore,” which starred Spacey as Gore Vidal.

Spacey has apologized to one of his accusers, and according to his representatives is seeking unspecified treatment. Reuters was unable to independently confirm the accusations.

The charge is one of the first signs of costs faced by companies in the wake of a widespread campaign against sexual harassment.

Netflix turned a DVD-by-mail business into an online competitor of movie channel HBO. As it grew it began licensing its own original shows to ensure a stream of new offerings if studio suppliers ended deals.

FILE PHOTO: The Netflix logo is pictured on a television in this illustration photograph taken in Encinitas, California, U.S., on January 18, 2017. REUTERS/Mike Blake/File Photo

In fact, Walt Disney Co (DIS.N) is making a major push into online streaming and will pull its first-run shows and movies from Netflix in 2019 as Hollywood fights for audiences.

Netflix plans to spend up to $8 billion this year on TV shows and movies to fend off Disney, Amazon.com Inc (AMZN.O), studios-owned Hulu and local competitors that are jumping into online video, and it is turning more and more to high-budget projects, such as the roughly $90 million “Bright.”

In 2017, Netflix recorded its first full-year profit in international markets. The company has said it is aiming for steady improvements in profitability overseas this year.

“We believe our big investments in content are paying off,” Netflix said in a quarterly letter to shareholders.

Netflix is raising its marketing budget faster than revenue is growing and will spend about $2 billion this year. The company expects negative cash flow in 2018 of $3 billion to $4 billion, up from $2 billion in 2017.

Last October, Netflix raised prices for two of its three main subscription plans to help fund the substantial content investment. The earnings report showed customers took it in stride.

“Consumers are tolerant as long as something’s improving,” Netflix CEO Reed Hastings, on a post-earnings webcast, said of the price increase.

For the December quarter, Netflix reported diluted earnings-per-share of 41 cents, even with the expectations of analysts polled by Thomson Reuters I/B/E/S.

Revenue for the three months totaled $3.286 billion, in line with forecasts.

Looking ahead, Netflix forecast streaming customer additions of 6.35 million for the first quarter, above analysts’ expectation of 5.01 million, according to FactSet.

Investors appear confident in Netflix’s ability to grow. Netflix recently traded at 91 times expected earnings for the next 12 months, versus Amazon at 152 times earnings and Disney at 17 times earnings, according to Thomson Reuters data.

Netflix also said Monday that Rodolphe Belmer, CEO of global satellite company Eutelsat, had joined the company’s board.

Reporting by Lisa Richwine in Los Angeles and Aishwarya Venugopal in Bengaluru; Editing by Peter Henderson and Lisa Shumaker

Our Standards:The Thomson Reuters Trust Principles.

Wall Street futures, dollar dip after U.S. government shutdown, Asia resilient

TOKYO (Reuters) – Wall Street stock futures and the dollar pulled back slightly on Monday after the U.S. government was forced to shut down amid a dispute between President Donald Trump and Democrats over immigration.

But Asian shares remained resilient overall while U.S. bond yields continue to rise as investors saw limited economic fallout from the standoff in the U.S. capital.

European stock futures are mostly opening slightly higher, with Dax futures up 0.2 percent, and France’s Cac futures up 0.05 percent. Britain’s FTSE futures are down 0.1 percent.

“After all, people know this is just a political show. Neither Republicans nor Democrats can afford to keep dragging their feet for long ahead of mid-term elections this year,” said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

MSCI’s broadest index of Asia-Pacific shares outside Japan managed to erase slim losses earlier to eke out gains of 0.1 percent, hitting a record high for six days in a row. Japan’s Nikkei also ended up 0.03 point.

U.S. S&P500 mini futures dipped just 0.1 percent, still clinging near a record high hit on Friday.

A U.S. government shutdown will enter its third day on Monday as Senate negotiators failed to reach an agreement late on Sunday to restore federal spending authority and deal with demands from Democrats that young “Dreamers” be protected from deportation.

The Senate set a vote for 12 p.m. (1700 GMT) on Monday on advancing a measure to provide temporary government funding through Feb. 8, end the shutdown and allow hundreds of thousands of federal employees to return to work.

But it was unclear whether there would be enough Democratic votes on Monday to advance a temporary spending bill.

While many see minimal impact on the economy from a short-term government shutdown, analysts say a prolonged stalemate in Washington could dampen investors’ confidence in U.S. assets.

“The markets had not expected this shutdown. Given that U.S. share prices have rallied strongly since the beginning of the year, we have to see if this event is a trigger to change the market trend,” said Takafumi Yamawaki, head of Japan fixed income research at JPMorgan Securities.

Yamawaki noted that during previous government shutdowns – two in 1995 and one in 2013 – U.S. bond yields have tended to slip in the first few weeks after the closure.

But so far U.S. Treasuries yields have risen despite the government shutdown, extending their uptrend since September.

The benchmark 10-year yield rose to as high as 2.672 percent, its highest level in 3-1/2 years. A clear break above its double top marked in December last year and March could signal a further rise in the yield, analysts say.

In the foreign exchange market, the dollar’s index against a basket of major currencies dropped about 0.2 percent from late last week to 90.465, not far from three-year low of 90.104 touched on Wednesday, before edging back to 90.63.

The euro opened the day 0.4 percent higher at $1.2275, but it stopped short of testing Wednesday’s three-year peak of $1.2323 and pared back much of the gains to trade at $1.2225.

The common currency was also helped after Germany’s Social Democrats (SPD) voted on Sunday to begin formal coalition talks with Chancellor Angela Merkel’s conservatives, moving Europe’s economic powerhouse closer to a stable government after months of political deadlock.

The safe-haven Swiss franc gained 0.3 percent to 0.9619 franc per dollar. It hit a four-month high of 0.9536 to the dollar on Friday.

The Japanese yen was little changed at 110.83 yen to the dollar, not far from Wednesday’s four-month high of 110.19.

The South African rand was the biggest mover in Asian trade, rising almost 1 percent at one point to 2-1/2-year highs of 12.0825 per dollar.

Leaders of South Africa’s ruling African National Congress (ANC) met on Saturday to outline the party’s program for the coming year amid reports that its executive planned to force Jacob Zuma to quit as the country’s president.

Moving in the opposite direction, the Turkish lira eased 0.6 percent to 3.8280 after Turkey’s army and rebel allies battled U.S.-backed Kurdish militia in northern Syria, in a campaign that has opened a new front in Syria’s civil war.

Oil prices ticked up, pushed higher by comments from Saudi Arabia that cooperation between oil producers who are currently withholding supplies in an effort to prop up the market would continue beyond 2018.

Brent crude futures were at $68.75, up 0.2 percent, from their last close. Brent on Jan. 15 hit its highest since December, 2014, at $70.37 a barrel.

U.S. West Texas Intermediate (WTI) crude futures were at $63.53 a barrel, up 0.3 percent from their last settlement. WTI marked a December-2014 peak of $64.89 a barrel on Jan. 16.

Editing by Shri Navaratnam and Sam Holmes

Our Standards:The Thomson Reuters Trust Principles.