GM Korea to slash executive numbers, talks with union make little progress

SEOUL (Reuters) – General Motors’ South Korean unit plans to slash the number of its executives, an internal letter seen by Reuters showed – the latest step by the U.S. automaker as it attempts a politically contentious restructuring of the loss-making business.

GM, which has some 16,000 employees in South Korea, also asked staff to “actively consider” a previously announced voluntary redundancy plan which has a Friday deadline, a separate letter showed.

The automaker this month shocked South Korea when it said it would shut one of its factories in the country and decide the fate of three remaining plants in the coming weeks.

The letters underscore the difficulties GM faces as it tries to wrangle concessions on wages from an angry labor union and win financial support from a South Korean government that is set to conduct due diligence on what it has called GM Korea’s “opaque” management.

Although talks with unions have come much earlier than expected with union leaders under pressure to make concessions to prevent more factory closures, a union official told Reuters that initial discussions on Wednesday had not made any progress.

According to one of the letters sent to staff, GM Korea plans to cut the number of executives ranked managing director or more senior by 35 percent and reduce the number of directors and team leaders by 20 percent.

A GM Korea spokesman confirmed the plan, noting that the unit had around 150 executives and hundreds of team leaders.

“Changing our leadership structure is another of many initiatives to move forward the viability of the company,” he said.

The unit also plans to shrink the number of so-called “international service personnel” executives, who have been dispatched from GM headquarters and other affiliates overseas, by 45 percent.

In particular, generous packages for the 36 such ex-pats which include support for housing, cars and payment of school fees for their children have come under fire from GM Korea’s labor union.

The changes will start immediately and with all set to be in place by the third quarter of this year, the letter said, which added that a freeze was being put on executive promotions.

In a separate letter, GM Korea stressed to employees that they only had till Friday to apply for the redundancy program and urged them to apply. It is offering South Korean workers three times their annual base salary, money for college tuition and more than $9,000 toward a new car as part of the redundancy proposal.

In talks with the union, GM is proposing a base wage freeze and no bonuses this year along with a suspension of some benefits such as the payment of university tuition for employees’ children and gold medals for long-serving workers.

The talks on Wednesday ended after just a couple of hours, the union official said.

“Management is demanding unilateral sacrifice by the union, but the company should come up with a turnaround plan,” he said, adding that demands by the union for executives’ wages to be disclosed had been rejected.

Reporting by Hyunjoo Jin; Editing by Edwina Gibbs

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Exclusive: Secretive U.S. security panel discussing Broadcom’s Qualcomm bid – sources

WASHINGTON (Reuters) – A national security panel that can stop mergers that could harm U.S. security has begun looking at Singapore-based chipmaker Broadcom Ltd’s plan to take over rival Qualcomm Inc, according to three sources familiar with the matter.

CFIUS, an opaque inter-agency panel, has been in touch with at least one of the companies in the proposed merger, one source said, and met last month to discuss the potential merger of the two big semiconductor companies, according to two sources familiar with the matter.

Senator John Cornyn, the No. 2 Republican in the Senate, urged Treasury Secretary Steven Mnuchin on Monday to have the Committee on Foreign Investment in the United States, or CFIUS, officially review the proposed transaction before a key shareholder vote expected on March 6, according to a letter seen by Reuters.

The pre-deal discussions by CFIUS — which are extremely rare — suggest Broadcom’s plans to move its headquarters to the United States before it completes its proposed purchase of Qualcomm may not be enough to sidestep a national security review that could threaten the deal.

Part of the CFIUS’ current concern, which is echoed in Cornyn’s letter, could lie in the fact that Broadcom has failed to strike a deal with Qualcomm and has resorted to what is essentially a hostile takeover by putting forward a slate of six Broadcom nominees for Qualcomm’s 11-member board.

If the six are elected on March 6, the vote would give control of Qualcomm to Broadcom’s nominees. That would happen before a CFIUS review or antitrust review is complete.

“I urge CFIUS to promptly review Broadcom’s proposed acquisition of control of Qualcomm’s board, and to act prior to the March 6 Qualcomm meeting to address any national security concerns that may be identified,” Cornyn wrote to Secretary Mnuchin, according to the letter, a copy of which was seen by Reuters.

FILE PHOTO: A sign on the Qualcomm campus is seen in San Diego, California, U.S. November 6, 2017. REUTERS/Mike Blake/File Photo

A spokesman for CFIUS declined to comment. Representatives for Cornyn were not immediately available for comment.

A CFIUS review in itself does not mean a deal will be halted. CFIUS, under former President Barack Obama and current President Donald Trump, has soured on high tech deals, particularly involving semiconductors, or involving sensitive information about American citizens.

Microprocessor expert Linley Gwennap, of the Linley Group, noted that Qualcomm had world-leading chips in several areas.

“Qualcomm is a crown jewel of the American semiconductor industry,” he said. “I would think that CFIUS would be very protective of that. … Singapore is nominally a friendly country but it still seems dangerous for that level of technology to go overseas.”

Broadcom, which is based in Singapore, struggled to win CFIUS approval to buy Brocade Communications Systems late last year. In the end, that approval came just weeks after Broadcom CEO Hock Tan announced in an Oval Office ceremony with Trump that Broadcom would return its headquarters to the United States.

Broadcom declined to comment on the CFIUS process for this deal but reiterated that it intends to move forward with its move to the United States after receiving approval to do so, which is expected on May 6.

Lawyers who take deals to CFIUS and know how the panel thinks said that it was unusual, if not unprecedented, for a company to move to the United States to avoid CFIUS scrutiny. But they also said that the strategy could work.

“Broadcom could very well establish its position as a U.S. person,” one expert said privately to protect business relationships. “Would CFIUS want to look at it? They would want to be comfortable that Broadcom is actually a U.S. person within the meaning of the statute.”

Others cautioned that CFIUS could also look at the make-up of Broadcom’s board and who the major shareholders are as a way to determine if control of the company resides outside the United States.

Reporting by Diane Bartz; Editing by Chris Sanders and Lisa Shumaker

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New NAFTA talks aim to clear pathway to toughest issues

MEXICO CITY (Reuters) – Mexico and Canada aim to finish reworking less contentious chapters of the NAFTA trade deal with the United States in new talks that began on Sunday, hoping to clear the path for a breakthrough on the toughest issues before upcoming elections.

In six months, negotiators have made progress on the technical details of a revamped North American Free Trade Agreement, but made little advance on strong demands for change made by the administration of U.S. President Donald Trump.

Ranging from calls for major changes to automotive content rules and dispute resolution mechanisms, to imposing a clause that could automatically kill NAFTA after five years, the chief stumbling blocks laid by the White House look unlikely to be removed in the latest Mexico City round, officials said.

Trump frequently threatens to walk away from NAFTA unless big changes are made to a pact he blames for U.S. manufacturing job losses.

“I think there’s going to be major progress on the technical issues and major obstacles on the critical issues,” Bosco de la Vega, head of the Mexico’s National Agricultural Council farm lobby, said of the talks running until March 5.

Once agreement is reached on technical chapters such as state-owned enterprises, barriers to trade and e-commerce, about 10 percent of the modernized accord would eventually be left over for political leaders to work out, de la Vega estimated.

A schedule for the latest round showed that the discussions for the first three days would include rules of origin, an issue at the heart of the Trump administration’s demand to raise the amount of auto content sourced from the NAFTA region.

Under NAFTA, at least 62.5 percent of the net cost of a passenger car or light truck must originate in the region to avoid tariffs. Trump wants the threshold raised to 85 percent.

“You can’t have a successful negotiation if there’s no change to the rules of origin,” said a Mexican official, speaking on condition of anonymity, adding: “It won’t be 85 percent. We’re not sure what the number is going to be.”

Mexican Economy Minister Ildefonso Guajardo has said his negotiating team aims to present a proposal on rules of origin, although he has not provided details.

On Sunday evening, the Mexican official told Reuters: “We don’t have a counterproposal yet.”

A NAFTA logo is seen during NAFTA talks in Mexico City, Mexico February 25, 2018. REUTERS/Edgard Garrido

Any final agreement would need to be reached between Trump and auto-sector leaders in the United States who oversee the NAFTA region, an industry source close to the process said.

The North American auto industry has pushed back against Trump’s demands, arguing they would damage competitiveness and regional supply chains.

Mexico aims to build on the previous round in Montreal, when Canada floated proposals to address U.S. demands, including one to include costs for engineering, research and development and other items in the total value of an auto.

Slideshow (2 Images)

The schedule showed that several chapters that negotiators have signaled are close to concluding, including e-commerce, telecommunications and energy, are up for discussion toward the end of the round. Financial services will last for three days.

NO QUICK FIX

The latest round comes amid flare-ups between Washington and Ottawa and growing, if cautious, optimism in Mexico that the trade agreement will remain.

Talks are running behind schedule and some officials believe the longer they last, the less likely it is that Trump will dump NAFTA.

Negotiators had wanted to wrap up talks by March to avoid them being politicized by Mexico’s July presidential election. U.S. congressional elections in November could also complicate the talks.

But officials have raised the possibility that they will run past Mexico’s vote, and some said they could continue at a technical level for several months if necessary.

A U.S. official said: “There has never been a hard deadline,” and belief is growing among Mexicans following the process that lobbying efforts by U.S. business leaders and politicians to preserve NAFTA have been gaining traction.

The office of Minnesota Governor Mark Dayton on Friday published a letter sent this month to U.S. Trade Representative Robert Lighthizer in which he urged him to “preserve and expand market access” under NAFTA, and build on existing ties.

While pledging to stay in the talks, Canada’s chief negotiator, Steve Verheul, struck a downbeat tone last week, telling a business audience: “There are large gaps between what we’re trying to achieve and what the U.S. is trying to achieve.”

Additional reporting by Dave Graham and Adriana Barrera in Mexico City, Lesley Wroughton in Washington and David Ljunggren in Ottawa; Editing by Susan Thomas and Peter Cooney

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With $116 billion cash, Buffett says Berkshire needs ‘huge’ deals

NEW YORK (Reuters) – Warren Buffett on Saturday lamented his inability to find big companies to buy and said his goal is to make “one or more huge acquisitions” of non-insurance businesses to bolster results at his conglomerate Berkshire Hathaway Inc.

In his annual letter to Berkshire shareholders, Buffett said finding things to buy at a “sensible purchase price” has become a challenge and is a major reason Berkshire is awash with $116 billion of low-yielding cash and government bonds.

Buffett said a “purchasing frenzy” binge by deal-hungry chief executives employing cheap debt has made that task difficult. Berkshire typically pays all cash for acquisitions.

“Our smiles will broaden when we have redeployed Berkshire’s excess funds into more productive assets,” Buffett wrote. “Berkshire’s goal is to substantially increase the earnings of its non-insurance group. For that to happen, we will need to make one or more huge acquisitions.”

The letter was considerably shorter than in recent years, a little over 8,000 words compared with more than 14,000 last year, and did not discuss major Berkshire stock holdings such as Apple Inc and Wells Fargo & Co. Buffett often invests in stocks when he cannot find whole companies to buy.

It was also short on faulting excesses of Wall Street and Washington, and said nothing about Berkshire’s plan to create a healthcare company with Amazon.com Inc and JPMorgan Chase & Co.

At age 87, “he doesn’t want to make any enemies,” said Bill Smead, chief executive of Smead Capital Management in Seattle, a Berkshire investor.

Berkshire also posted a record $44.94 billion annual profit, though $29.1 billion stemmed from the slashing of the U.S. corporate tax rate, which reduced the Omaha, Nebraska-based conglomerate’s deferred tax liabilities. Book value per share, measuring assets minus liabilities, rose 23 percent in 2017.

ABEL, JAIN

It has been more than two years since Buffett made a major purchase, the $32.1 billion takeover of aircraft parts maker Precision Castparts Corp, and his advancing age gives him less time to find more of the “elephants” he prefers.

But he has given himself and longtime Vice Chairman Charlie Munger, 94, more freedom to focus on investing and allocating capital.

FILE PHOTO: Berkshire Hathaway CEO Warren Buffett plays bridge during the Berkshire annual meeting weekend in Omaha, Nebraska May 3, 2015. REUTERS/Rick Wilking/File Photo

Neither has signaled any intention of stepping down soon, though Berkshire last month named two additional vice chairmen who could eventually succeed Buffett as chief executive.

Gregory Abel, who had run Berkshire Hathaway Energy, is now overseeing Berkshire’s non-insurance businesses such as the BNSF railroad and Dairy Queen ice cream, all of which employ 330,000 people, while insurance specialist Ajit Jain oversee the Geico auto insurer and other insurance businesses, employing 47,000.

“Berkshire’s blood flows through their veins,” Buffett wrote.

APPLE

While the Wells Fargo investment has struggled in recent months because of scandals over how it treats customers, Apple has performed better.

Buffett revealed in his letter that Berkshire was sitting at year end on a $7.25 billion paper profit on what has become a 3.3 percent stake in the iPhone maker, worth $28.2 billion.

Some Berkshire stock investments are made by deputies Todd Combs and Ted Weschler, who Buffett said together manage about $25 billion, up from $21 billion a year ago.

Buffett also warned long-term investors including pension funds, college endowments and “savings-minded individuals” that even with U.S. stock prices near record highs, it would be a “terrible mistake” to assume bonds are safer.

“Often, high-grade bonds in an investment portfolio increase its risk,” he wrote.

Fourth-quarter net income quintupled to $32.55 billion, or $19,790 per Class A share, from $6.29 billion, or $3,823 per share, a year earlier.

Operating profit, which Buffett considers a better gauge of performance, fell more than analysts expected in the fourth quarter, and slid 18 percent for the year to $14.46 billion.

Full-year results suffered from Berkshire’s first full-year insurance underwriting loss since 2002, hurt by Hurricanes Harvey, Irma and Maria and wildfires in California.

Even so, insurance float, or premiums collected before claims are paid, and which give Buffett more money to invest, rose 25 percent last year, to $114.5 billion.

Reporting by Trevor Hunnicutt and Jonathan Stempel; Editing by Jennifer Ablan and Diane Craft

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Stocks rally as Fed eases rate worry, tech climbs

NEW YORK (Reuters) – U.S. stocks rallied on Friday, lifted by gains in technology stocks and a retreat in Treasury yields as the Federal Reserve eased concerns about the path of interest rate hikes this year.

The U.S. central bank, looking past the recent stock market sell-off and inflation concerns, said it expected economic growth to remain steady and saw no serious risks on the horizon that might pause its planned pace of rate hikes.

Investors largely expect the Fed to raise rates three times this year, beginning with its next meeting in March, the first under new Chair Jerome Powell. Traders currently see a 95.5 percent chance of a quarter-percentage-point hike next month, according to Thomson Reuters data.

“Certainly bond yields pulling back today is helpful for stocks, at least for the short term, that has been the narrative that is out there – that higher bond yields are weighing on stocks and this preoccupation with three percent,” said Willie Delwiche, investment strategist at Baird in Milwaukee.

“So moving away from that, for today at least, provides a bid for equities.”

Powell’s first public outing will be on Tuesday, when he will testify separately before the House and Senate committees.

The Dow Jones Industrial Average .DJI rose 347.51 points, or 1.39 percent, to 25,309.99, the S&P 500 .SPX gained 43.34 points, or 1.60 percent, to 2,747.30 and the Nasdaq Composite .IXIC added 127.30 points, or 1.77 percent, to 7,337.39.

FILE PHOTO: Traders work on the floor of the New York Stock Exchange, (NYSE) in New York, U.S., February 6, 2018. REUTERS/Brendan McDermid

Benchmark 10-year U.S. Treasury notes US10YT=RR last rose 13/32 in price to yield 2.8714 percent, from 2.917 percent late on Thursday.

The dip in yields helped boost bond proxy sectors such as utilities .SPLRCU, up 2.66 percent, and real estate .SPLRCR, up 1.72 percent. The sectors have been among the worst performers so far this year on expectations of climbing rates.

Tech shares .SPLRCT climbed 2.17 percent led by gains in Hewlett Packard Enterprise (HPE.N), which rose 10.5 percent and HP Inc (HPQ.N), up 3.5 percent.

The two companies created from the split of Hewlett Packard Co in 2015, reported strong results and HPE also announced a plan to return $7 billion to shareholders.

For the week, the Dow rose 0.37 percent, the S&P advanced 0.56 percent and the Nasdaq gained 1.35 percent.

Blue Buffalo Pet Products (BUFF.O) jumped 17.23 percent after General Mills (GIS.N) said it would buy the natural pet food maker for $8 billion. General Mills was the biggest percentage decline on S&P 500, falling 3.59 percent.

Advancing issues outnumbered declining ones on the NYSE by a 4.54-to-1 ratio; on Nasdaq, a 2.82-to-1 ratio favored advancers.

The S&P 500 posted 10 new 52-week highs and one new low; the Nasdaq Composite recorded 64 new highs and 57 new lows.

Volume on U.S. exchanges was 6.05 billion shares, well below the 8.38 billion average over the last 20 trading days.

Reporting by Chuck Mikolajczak; Editing by Chizu Nomiyama and James Dalgleish

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Asian shares rebound as U.S. rate fears ebb

SYDNEY (Reuters) – Asian shares rebounded on Friday as comments from a Federal Reserve official eased worries that the central bank might raise rates more aggressively this year, while the safe-haven yen held on to its gains amid heightened volatility across markets.

Financial markets have fluctuated wildly this month as investors fretted about how fast the Fed might raise rates in the wake of data showing a pick up in U.S. inflation. That in turn has stoked anxiety that many central banks will start to tighten policy in a hit to earnings, which have boomed thanks to a synchronized uptick in global growth.

MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.4 percent, but was still on track to end the week barely changed.

Australian and New Zealand shares were each up 0.5 percent while Japan’s Nikkei edged 0.3 percent higher and South Korea’s KOSPI index rose 1 percent.

Asian shares took a knock on Thursday after minutes of the Fed’s last meeting showed policy makers were confident about the economic outlook, prompting some investors to boost the odds of faster rate hikes.

The Fed started tightening its ultra-loose policy at the end of 2015 after keeping rates on hold for almost a decade. It raised interest rates three times in 2017 and is likely to tighten again in March.

St Louis Fed President James Bullard tried to tamp down of expectations of four rate hikes in 2018, instead of the widely anticipated three increases, saying on Thursday policymakers need to be careful not to increase rates too quickly because that could slow the economy.

That was enough to send U.S. shares rallying, despite the negative lead from Asia and Europe.

On Wall Street, the Dow added 0.7 percent, the S&P 500 ended a tad firmer while the Nasdaq lost 0.11 percent.

Analysts expect the market to be in a “holding pattern” ahead of a slew of important U.S. January activity data on Tuesday, followed by global surveys on manufacturing activity on Thursday.

BONDS AND CURRENCIES

“We think inflation and yield fears are overblown near term,” JPMorgan analyst Marko Kolanovic wrote in a note.

“However, speculators have amassed the largest short position in the history of bond futures trading. With such a large short position, there is always risk of profit taking, or worse a proper short-squeeze.”

Bond prices gained, sending benchmark U.S. Treasury 10-year yields <US10YT=RR > down from a four-year high of 2.9570 percent.

In the foreign exchange market, the dollar index, which measures the greenback against a basket of currencies, was flat at 89.736, with the euro a touch softer at $1.2324 after rising 0.4 percent on Wednesday.

“Movements in EUR/USD seem to be mirroring movements in US equities, rising when equities sell off and weakening when they rally,” ANZ analysts wrote in a note to clients.

The yen, which tends to benefit during times of heightened volatility or uncertainty, rose almost 1 percent overnight to last fetch around 106.8 per dollar.

In Germany, Europe’s biggest economy, data showed business confidence fell more than expected in February.

Though Germany is set for solid growth in the first quarter, diverging monetary policy expectations with the United States sent the “trans-Atlantic spread” between German and U.S. 10-year borrowing costs to 222 bps, the highest in more than a year.

Oil prices eased from two-week highs. [O/R]

U.S. crude was down 13 cents at $62.64 per barrel and Brent was last at $66.39. Spot gold ticked lower to $1330.26 an ounce.

Reporting by Swati PandeyEditing by Shri Navaratnam

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Asia stocks slip as U.S. rate risk lifts bond yields

SYDNEY (Reuters) – Asian shares slipped on Thursday as the risk of faster hikes in U.S interest rates lifted short-term Treasury yields to the highest in almost a decade and boosted the dollar.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.35 percent in early trade, while E-Mini futures for the S&P 500 ESc1 lost 0.2 percent.

Japan’s Nikkei .N225 shed 1 percent even as the yen gave back some of its recent gains on the dollar.

On Wall Street the Dow .DJI had ended Wednesday down 0.67 percent, while the S&P 500 .SPX fell 0.55 percent and the Nasdaq .IXIC 0.22 percent. [.N]

The retreat came after minutes of the Federal Reserve’s last policy meeting showed the usual concerns that inflation might disappoint, but also an expectation of faster economic growth due to fiscal stimulus.

In particular, members agreed that “the strengthening in the near-term economic outlook increased the likelihood that a gradual upward trajectory of the federal funds rate would be appropriate.”

That led investors to narrow the odds on faster hikes with a host of Fed fund futures <0#FF:> hitting contract lows. Three rate rises are now almost fully priced in for this year, compared to two as recently as December.

“Participants saw a more favorable outlook as supporting gradual rate hikes,” noted Barclays analyst Michael Gapen.

“Since then, more stimulus has arrived and there is some tentative, though not conclusive, evidence of stronger wage and inflation data,” he added. “We continue to expect four rate hikes in 2018 and 2019.”

That risk was not welcome in the Treasury market where yields on 10-year notes touched their highest in four years, and those on two-year paper the highest in nine.

Yields on 10-year debt US10YT=TWEB were last trading at 2.95 percent and creeping ever closer to 3 percent – a huge psychological milestone for bulls and bears alike.

For once, the lift in yields seemed to benefit the U.S. dollar which was up at 90.134 .DXY against a basket of currencies having rallied 0.47 percent overnight.

The dollar extended its bounce on the yen to 107.68 JPY=, a marked turnaround from last week’s 105.545 low.

The euro slipped to $1.2274 EUR=, from a $1.2359 top on Wednesday and looked in danger of testing its February trough at $1.2204.

The next hurdle will be minutes from the European Central Bank’s last meeting with markets wary in case there is more talk of an eventual winding back on stimulus.

Higher bond yields were a deadweight on gold, which pays no return, and left the metal at $1,325.20 an ounce XAU=.

Industrial commodities including copper fared better as the first round of flash readings on manufacturing for February showed global activity in rude health.

In oil markets, U.S. crude futures CLc1 fell 50 cents to $61.18 a barrel in early Asian trade. Brent LCOc1 had yet to trade at $65.42.

Reporting by Wayne Cole; Editing by Eric Meijer

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Asia stocks dip, dollar recovery continues as yields rise

TOKYO (Reuters) – Stock markets dipped after a long winning run on Wall Street ended overnight, while the dollar gained momentum on Wednesday as yields on U.S. Treasury debt headed for highs not seen in four years.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS lost 0.15 percent. Japan’s Nikkei .N225 shed 0.2 percent.Australian stocks were down 0.05 percent and South Korea’s KOSPI .KS11 fell 0.4 percent.

The Dow .DJI and S&P 500 .SPX fell on Tuesday to snap a six-session winning streak as a sharp decline in Walmart (WMT.N) weighed heavily.

Gains in Amazon (AMZN.O) and chip stocks helped the Nasdaq .IXIC hold near the unchanged mark.

U.S. equities pulled back sharply from record highs earlier this month as a steady rise in Treasury yields raised worries that the Federal Reserve could hike interest rates more frequently this year than initially expected.

Treasury yields rose overnight with the benchmark 10-year yield US10YT=RR crawling back to near a four-year peak as investors made room for this week’s $258 billion deluge of new government debt.

Treasury yields have risen in the wake of increased government borrowing. The U.S. Treasury Department has issued more debt in anticipation of a higher deficit from last year’s major tax overhaul and a budget deal that will increase federal spending over the next two years.

The dollar benefited from the higher yields, with its index against a basket of six major currencies .DXY rising to a one-week high of 89.802.

The index has bounced 0.7 percent so far this week after slumping 1.5 percent the previous week to a three-year low.

The U.S. currency has been weighed down by a variety of factors this year, including concerns that Washington might pursue a weak dollar strategy and the perceived erosion of its yield advantage as other countries start to scale back easy monetary policy.

Confidence in the dollar has also been shaken by mounting worries over the U.S. budget deficit.

But the greenback managed to find bids once the dust began to settle after last week’s tumble.

“We are seeing the dollar being bought back after last week’s slide. The steady U.S. economy and the possibility of the Fed accelerating its rate increases will likely keep fuelling the dollar’s rebound, particularly against the euro and yen,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.

The dollar was steady at 107.365 yen JPY= after gaining 0.7 percent overnight. The euro was 0.05 percent lower at $1.2331 EUR= following losses of 0.55 percent the previous day.

The Australian dollar was flat at $0.7877 AUD=D4 and the New Zealand dollar dipped 0.1 percent to $0.7340 NZD=D4.

The stronger dollar weighed on commodities, with U.S. crude oil futures slipping 0.25 percent to $61.63 per barrel CLc1.

U.S. crude hit a near two-week high the previous day on news of inventory declines at a key storage hub and from expectations that top OPEC producers could extend cooperation beyond 2018.

Reporting by Shinichi Saoshiro; Editing by Eric Meijer

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Asian stocks dip after European surge fades, dollar firm

TOKYO (Reuters) – Asian stocks dipped on Tuesday, their recent recovery slowing after European equities broke a winning streak run, while the dollar held firm after bouncing from three-year lows.

MSCI’s broadest index of Asia-Pacific shares outside Japan edged down 0.1 percent. Australian stocks dipped 0.45 percent.

Japan’s Nikkei shed 0.4 percent after three successive days of gains.

The pan-European STOXX index fell 0.6 percent on Monday following three days of large gains, dragged down by falls in consumer staples stocks.

The U.S. markets were closed on Monday for a holiday, leaving Asia short of the usual leads, with the focus on whether Wall Street could continue its recovery once trading resumed.

The Dow gained 4.5 percent last week, winning back more than half of the territory lost during a sharp downturn earlier in the month that rocked the global markets.

“U.S. stocks will be watched after their holiday because whether other markets can continue their recovery depends to a large degree on how U.S. stocks perform,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.

“Volatility will also have to keep settling for the broader recovery to continue,” he said.

The VIX index – Wall Street’s “fear gauge” measure of market volatility – has slipped below 20, less than half the 50-point peak touched earlier in February.

The dollar index against a basket of six major currencies was little changed at 89.239 after gaining for a second session overnight, during which it pulled back from a three-year low of 88.253.

The dollar was steady at 106.640 yen and the euro was effectively flat, at $1.2402.

Oil prices hovered near two-week highs, lifted by tensions in the Middle East after Israeli Prime Minister Benjamin Netanyahu said on Sunday that Israel could act against Iran itself, not just its allies in the region. [O/R]

U.S. crude futures rose 1.3 percent to $62.48 per barrel after touching $62.57, the highest since Feb. 7.

Spot gold was little changed at $1,346.50 an ounce, after it was nudged off the three-week peak of 1,361.76 it scaled last week when the dollar rebounded from three-year lows.

Reporting by Shinichi Saoshiro; Editing by Eric Meijer

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Proxy advisory firm ISS says Qualcomm should negotiate sale to Broadcom

(Reuters) – U.S. semiconductor company Qualcomm Inc should try to negotiate a sale to Broadcom Ltd following the latter’s sweetened $121 billion offer, proxy advisory firm Institutional Shareholder Services Inc (ISS) said.

Qualcomm has been seeking to walk a fine line between resisting Broadcom’s acquisition approach, which it says undervalues it and is fraught with regulatory risks, and demonstrating to shareholders and proxy advisory firms such as ISS that it is willing to engage to secure a better deal if possible.

In a report published late on Friday, ISS recommended to Qualcomm shareholders that they vote for four out of the six board director nominees that Broadcom has put forward for election at Qualcomm’s shareholder meeting on March 6.

While this recommendation would fall short of Broadcom’s nominees winning a majority on Qualcomm’s 11-member board, ISS said such a vote by Qualcomm shareholders would offer a reasonable path to a negotiated deal that would deliver value.

“The tenor of (Qualcomm‘s) engagement leading up to the present raises questions as to whether the incumbent (Qualcomm) board is committed to playing its part in attempting to maximize the offer,” ISS said in its report.

Broadcom first unveiled an unsolicited $70 per share cash-and-stock offer in November, which Qualcomm rejected. It raised its offer to $82 per share in cash and stock on Feb. 5 and offered other concessions, including paying an $8 billion breakup fee in the event regulators thwart the deal, which would be the technology sector’s largest-ever acquisition.

ISS said it did not recommend voting for all six Broadcom nominees because Qualcomm’s board would then be less inclined to drive a hard bargain with Broadcom in deal negotiations. ISS recommended that Broadcom nominees Samih Elhage, Julie Hill, John Kispert and Harry You should be elected as Qualcomm board directors.

Qualcomm on Friday called a Feb. 14 meeting with Broadcom constructive and opened the door to more talks, but continued to reject the proposed deal.

As of Saturday afternoon, no new meeting between the two companies had been scheduled, according to people familiar with the matter. Broadcom and Qualcomm representatives offered no immediate comment.

FILE PHOTO: Broadcom Limited company logo is pictured on an office building in Rancho Bernardo, California May 12, 2016. REUTERS/Mike Blake/File Photo

The takeover battle is at the heart of a race to consolidate the wireless technology equipment sector, as smartphone makers such as Apple Inc and Samsung Electronics Co Ltd use their market dominance to negotiate lower chip prices.

Singapore-based Broadcom is mainly a manufacturer whose connectivity chips are used in products ranging from mobile phones to servers. San Diego-based Qualcomm primarily outsources the manufacturing of its chips which are used for the delivery of broadband and data, a business that would significantly benefit from the rollout of 5G wireless technology.

ISS said in its report that Broadcom’s latest $82 per share cash-and-stock bid, which Broadcom CEO Hock Tan has called its best and final offer, does not appear to be clearly superior to Qualcomm’s potential standalone value in the short term. ISS added, however, that the offer seemed to represent a reasonable starting point for negotiations.

Even though both companies “have adopted strategies that do not lend themselves to fluid negotiations,” a deal between them is possible, ISS said. It suggested that Qualcomm shareholders could gain greater exposure to the deal’s potential upside if they were to receive more of the combined company.

ISS also said it appeared more likely than not that Broadcom and Qualcomm, with their collective experience and resources, can find a reasonable path to regulatory approval, despite Qualcomm’s current concerns about antitrust risk.

NXP DEAL

Qualcomm is currently seeking to complete a $38 billion deal to acquire NXP Semiconductors NV, which is still pending regulatory approval. NXP shares ended trading on Friday at $118.50, significantly above Qualcomm’s $110 per share all-cash offer, as some NXP shareholders, led by activist hedge fund Elliott Management Corp, have called on Qualcomm to raise its price.

Broadcom has said its acquisition offer is contingent on either Qualcomm buying NXP at currently disclosed terms of $110 per share in cash or the deal being terminated.

ISS said in its report that Qualcomm could negotiate provisions with Broadcom to close the NXP deal at a mutually agreed price, which would provide Qualcomm with the “next-best safety net of diversification” in the event the deal with Broadcom falls through.

China’s MOFCOM is the only regulator globally required to approve the Qualcomm-NXP deal that has yet to do so. With the start of the Chinese New Year public holiday this week, Qualcomm may now delay its decision on raising its offer for NXP until after the March 6 Qualcomm shareholder meeting.

Reporting by Greg Roumeliotis in New YorkEditing by Matthew Lewis

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