Exclusive: KKR, China’s Tencent eyeing bids for Universal Music – sources

LONDON (Reuters) – U.S. buyout fund KKR and China’s Tencent Music Entertainment Group are exploring rival bids for up to half of Vivendi’s iconic Universal Music division, a deal potentially worth up 20 billion euros ($22.73 billion), sources told Reuters.

FILE PHOTO: Singer Taylor Swift performs during her reputation stadium tour at Wembley Stadium in London, Britain June 22, 2018. REUTERS/Simon Dawson/File Photo

French tycoon Vincent Bollore, who controls Vivendi with a 25 percent stake, is in the process of selecting banks to oversee a partial sale of Universal Music Group (UMG), two sources familiar with matter said.

Sell-side banks are expected to be appointed in March, with a process likely to kick off in the second quarter, they said.

But informal discussions with potential bidders are underway as banks are trying to gauge appetite for the unit.

UMG is the world’s biggest music label ahead of Sony Music Entertainment and Warner Music, and is home to artists like Lady Gaga, Taylor Swift, Drake and Kendrick Lamar.

Vivendi and KKR declined to comment. Tencent Music declined to comment.

Analysts have expressed different views on UMG’s valuation.

JPMorgan’s media analyst Daniel Kerven recently described the business as “a unique asset – under-monetized, must-have global content that is strategic to the tech giants and can’t be replicated”. He pegged UMG’s fair value at 44 billion euros.

That is higher than rival estimates. Deutsche Bank put it at 29 billion euros, Goldman Sachs at 35 billion euros and Exane BNP Paribas at 25 billion euros.

Vivendi’s boss Arnaud de Puyfontaine said in 2017 that the unit could be worth more than $40 billion.

At the time Vivendi was exploring a possible stock market listing, a plan later shelved amid challenges in eking out big profits in the sector, with many customers still unwilling to pay much for songs they can hear free on the radio, in music blogs or on free apps.

Universal will generate roughly 1.5 billion euros of free cash flow excluding interest payments in 2023, Deutsche Bank forecast. Tencent Music Entertainment Group, a subsidiary of China’s biggest gaming and social media firm Tencent Holdings Ltd, has an existing licensing agreement with Universal and wants to strengthen its collaboration with a partial acquisition, the sources said, cautioning that no deal was certain.

But industry bidders may find it hard to negotiate a joint venture deal with Bollore as they would not be able to secure a majority stake and have a meaningful say on UMG’s strategy going forward, the sources said.

Bollore wants to stay in the driving seat, they added.

Some private equity funds including U.S.-based KKR are willing to enter an equity partnership with Bollore and help fund UMG’s international expansion, even if they won’t be able to take full control, the sources said.

KKR previously entered a joint venture deal with Bertelsmann, Europe’s largest media company, to back music rights management company BMG. It proved to be a lucrative investment for KKR, which doubled its money when it sold its stake back to Bertelsmann in 2013.

One of the sources said other big buyout funds who are technology-savvy and have conducted similar investments in the TMT sector have shown interest in making a bid for UMG.

For private equity investors the deal offers a high-profile platform to tap into the music industry, which is recovering from a 15-year long downturn and has grown for the past three years.

FILE PHOTO: The logo of Universal Music Group (UMG) is seen at a building in Zurich, Switzerland July 25, 2016. REUTERS/Arnd Wiegmann/File Photo

Global recorded music revenues rose 8.1 percent in 2017 to $17.3 billion, according to record industry trade group IFPI.

Streaming revenues represented the bulk of the growth, with sales up more than 41 percent, driven by 176 million paid subscribers.

UMG owns 4 percent of Spotify, the world’s most popular paid music streaming service, a stake that Vivendi executives have always described as a core investment, ruling out any plans to cash out.

Additional reporting by Arno Schuetze, Mathieu Rosemain, Gwenaelle Barzic and Kane Wu in Hong Kong; Editing by Jan Harvey

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Asia shares inch up, dollar near three-week low after Powell comments

TOKYO (Reuters) – Asian shares inched towards a five-month high on Wednesday and the dollar hovered near a three-week low after Federal Reserve Chairman Jerome Powell reinforced the U.S. central bank’s shift to a more “patient” approach on policy in the face of a slowing economy.

FILE PHOTO : A man is reflected on an electronic board showing a graph analyzing recent change of Nikkei stock index outside a brokerage in Tokyo, Japan, January 7, 2019. REUTERS/Kim Kyung-Hoon/File Photo

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced nearly 0.2 percent, climbing back toward the five-month peak scaled on Monday.

Japan’s Nikkei share average gained half a percent, while Australian stocks were 0.2 percent higher.

China’s blue-chip CSI300 and Hong Kong’s Hang Seng Index also rose, by 0.4 percent and 0.5 percent, respectively.

U.S. stock futures were basically flat, with E-Minis for the S&P 500 holding steady following a technical disruption that halted trading for hours.

“There is a fear in the market that sentiment has got a bit carried away on the positive side, especially given the experiences we had through October and through December, when we had some really sharp downward corrections,” said Nick Twidale, Sydney-based chief operating officer at Rakuten Securities Australia.

“A lot of investors are wary of seeing something along those lines,” he added.

Powell, spelling out the Fed’s approach to an economy that is likely slowing, told U.S. lawmakers on Tuesday it is in “no rush to make a judgment” about further changes to interest rates.

In two hours of testimony to the Senate Banking Committee, Powell elaborated on the “conflicting signals” the Fed has tried to decipher in recent weeks, including disappointing data on retail sales and other aspects of the economy that contrast with steady hiring, wage growth, and ongoing low unemployment.

More evidence of the hot and cold economy came overnight, with weaker-than-expected U.S. housing data and a rosy consumer confidence report..

U.S. homebuilding tumbled to a more than two-year low in December as construction of both single and multi-family housing declined, which overshadowed the rebound in consumer confidence in February after three months of declines.

The contrasting data points left Wall Street underpowered, with the benchmark S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite closing down 0.1 percent each.

“Chairman Powell’s comments were neutral and the economic data released overnight was mixed, insufficient to provide implications for the Fed’s policy and directions to the market,” said Yasuo Sakuma, chief investment officer at Libra Investments in Tokyo.

In the currency market, the dollar was softer after the Fed chief’s testimony, with its index against major peers dipping more than 0.4 percent to its lowest in three weeks overnight. It recovered a little bit of ground in Asian trade, last trading 0.1 percent higher at 96.120.

The British pound vaulted after Prime Minister Theresa May offered lawmakers the chance to vote on delaying Brexit.

Sterling last traded at $1.3246, having risen to $1.3288 on Tuesday, its highest levels in five months. Against the euro, it hit a 21-month high of 85.63 pence .

The euro was down a tad at $1.1380 after hitting a three-week high of $1.1402 overnight.

Against the Japanese yen, the greenback held steady at 110.62 yen per dollar.

Investors will be keeping an eye on the U.S.-North Korean summit, which begins in Hanoi later on Wednesday.

U.S. President Donald Trump and North Korean leader Kim Jong Un were due to meet for their second summit, betting that their personal relationship can break a stalemate over the North’s nuclear weapons and end more than 70 years of hostility.

Oil futures rose slightly on Tuesday after news that OPEC planned to continue production cuts despite Trump criticizing the producer group for rising crude prices a day earlier.

U.S. crude futures stood at $55.96 per barrel, up 0.8 percent while Brent was 0.6 percent higher at $65.62 a barrel.

Gold was down slightly at $1,328.10, 1.4 percent below a 10-month peak of $1,346.70 scaled last Wednesday.

Reporting by Daniel Leussink and Tomo Uetake; Additional reporting by Hideyuki Sano; Editing by Shri Navaratnam and Richard Borsuk

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Asian shares fall from five-month highs, pound jumps on Brexit delay hopes

SYDNEY (Reuters) – Asian shares lost steam on Tuesday after scaling a five-month high as investors waited to see if Washington and Beijing can clinch a trade deal, while the pound advanced on hopes UK Prime Minister Theresa May will delay a Brexit deadline.

FILE PHOTO: A man is seen in front of an electronic board showing stock information on the first day of trading in the Year of the Pig, following the Chinese Lunar New Year holiday, at a brokerage house in Hangzhou, Zhejiang province, China February 11, 2019. REUTERS/Stringer

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5 percent from its highest since mid-September as U.S. and Chinese negotiators work to hammer out a deal that would end a protracted tit-for-tat tariff battle.

President Donald Trump said on Sunday he would delay a tariff hike on $200 billion of Chinese imports in the clearest sign yet that both sides were making progress in the talks, but he also sounded a note of caution, saying a deal “could happen fairly soon, or it might not happen at all.”

Tuesday’s losses in Asian stock markets come as JPMorgan analysts urged investors to “curb some of their enthusiasm” over the trade talks, saying the extension to the deadline was a “foregone conclusion.”

“Most assumed this action would occur,” they added. “And it is notable that 1) no new deadline date has been set and 2) there weren’t any formal statements published from either side following the talks in Washington.”

Australian shares faltered 1.3 percent, weighed by energy stocks as oil prices tumbled overnight.

Chinese shares were in the red, too, with the blue-chip CSI300 slipping over 1 percent following a strong rally the previous day. Hong Kong’s Hang Seng index was off 0.6 percent.[.SS]

Japan’s Nikkei fell 0.2 percent, after starting firmer as some selling pressure built ahead of the fiscal year-end.

U.S. stock futures were down too, with E-Minis for the S&P 500 falling 0.4 percent.

Investors were also wary of weakening estimates for current quarter earnings, with Wall Street on Monday expecting a 0.9 percent decline in S&P first-quarter earnings per share compared with expectations for 5.3 percent growth on Jan. 1, according to IBES data from Refinitiv.

Overnight, the S&P 500 rose to a near four-month peak while the Dow and the Nasdaq also gained.[.N]

BREXIT DEADLINE

In currency markets, sterling jumped to $1.3149, a near four-week high, in early Asian trade after Bloomberg reported May was expected to allow her cabinet to discuss extending the Brexit deadline beyond March 29 at a crunch meeting later in the day.

The news was a relief to investors who had feared Britain would crash out of the European Union without a deal. However, a delay could anger May’s pro-Brexit colleagues who might then support a vote of no confidence in the government, potentially triggering a general election.

“News that Prime Minister May is considering the option of postponing Brexit given all the turmoil in parliament can hardly come as a big surprise,” said Nick Twidale, analyst at Rakuten Securities Australia.

“However…details are few and far between. The market will seek further clarity over the coming sessions and if it is not forthcoming, sterling traders can expect more swings in the currency.”

The dollar fell against the safe-haven Japanese yen from its highest since late December. The greenback was last at 110.79.

The dollar index eased a shade to 96.364 against a basket of currencies.

Markets are now awaiting testimony from U.S. Federal Reserve Chairman Jerome Powell before a U.S. Senate committee on Tuesday, after the central bank last month shifted to a more cautious stance on further interest rate hikes.

“The market will be looking for signs the Fed remains comfortable with the current state of policy,” said Steven Dooley, currency strategist at Western Union Business Solutions. “The markets will also want to hear details about the eventual end of the Fed’s balance sheet reduction program.”

FILE PHOTO: New one pound coins which comes into circulation today, are seen in Liverpool, Britain, March 28, 2017. REUTERS/Phil Noble

Investors will also keep an eye on a two-day U.S.-North Korea summit this week where leaders of the two countries will try to reach an agreement on Pyongyang’s pledge to give up its nuclear weapon program.

Oil prices fell again after posting their largest daily percentage drop this year on Monday as Trump called on OPEC to ease its efforts to boost crude prices, which he said were “getting too high.”

U.S. crude was last down 27 cents at $55.21 a barrel while Brent eased 13 cents to $64.63.

Editing by Jacqueline Wong & Kim Coghill

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Trump delays tariff hike on Chinese goods citing trade talk progress

WASHINGTON (Reuters) – President Donald Trump said on Sunday he would delay an increase in U.S. tariffs on Chinese goods thanks to “productive” trade talks and that he and Chinese President Xi Jinping would meet to seal a deal if progress continued.

FILE PHOTO: China’s Vice Premier Liu He turns with U.S. Trade Representative Robert Lighthizer during a meeting with U.S. President Donald Trump in the Oval Office at the White House in Washington, U.S., February 22, 2019. REUTERS/Carlos Barria/File Photo

The announcement was the clearest sign yet that China and the United States are closing in on a deal to end a months-long trade war that has slowed global growth and disrupted markets.

Trump had planned to raise tariffs to 25 percent from 10 percent on $200 billion worth of Chinese imports into the United States if an agreement between the world’s two largest economies were not reached by Friday.

After a week of talks that extended into the weekend, Trump said those tariffs would not go up for now. In a tweet, he said progress had been made in divisive areas including intellectual property protection, technology transfers, agriculture, services and currency.

As a result, he said: “I will be delaying the U.S. increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement. A very good weekend for U.S. & China!”

Mar-a-Lago is the president’s property in Florida, where the two men have met before.

The president did not set a new deadline for the talks to conclude, but he told U.S. state governors gathered at the White House that there could be “very big news over the next week or two” if all went well in the negotiations.

The White House did not provide specific details on the kind of progress that had been made. China’s official Xinhua news agency reported that the two sides made “substantial progress” on specific issues, citing the Chinese delegation in Washington.

Trump and Xi called a 90-day truce last year to give their advisers time to negotiate a deal. The threat of tariff increases represented significant leverage for the Trump team.

“We can’t be sure whether this constitutes a major cave or success because we don’t know the details of what has been negotiated. But … agreeing to extend negotiations a few more weeks definitely is in China’s interests,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies in Washington. “At this point, the U.S. has likely gotten all it’s going to get out of China.”

J.P. Morgan Asset Management market strategist Tai Hui said the move suggested both sides wanted a settlement of the dispute and added that further tariff escalation would have added to concerns about the U.S. growth outlook.

Markets, which have been sensitive to the dispute as it has slowed global growth, and some U.S. trade associations cheered Trump’s move.

U.S. equity index futures opened higher on Sunday evening as trading kicked off for the week. S&P 500 e-mini futures ticked higher after Trump’s tweets on trade, suggesting Wall Street would open on positive footing on Monday morning.

Asian shares scaled a five-month high and the Australian dollar, a proxy for China investments, got a 0.4 percent lift from the news.

Chinese stocks and the yuan jumped at the start of trade, with the benchmark Shanghai Composite index up 2.1 percent, its highest since Aug. 1, and the yuan hit its strongest level against the dollar since July 17.

Trump leaves on Monday for Vietnam, where he will hold a summit with North Korean leader Kim Jong Un. The president, who faces a re-election battle next year, has portrayed his engagement with Kim and forcefulness with China as key successes of his presidency.

ENFORCEMENT STICKING POINT

Trump said on Friday there was a “good chance” a deal would emerge. But his lead trade negotiator, U.S. Trade Representative Robert Lighthizer, emphasized then that some major hurdles remained. Lighthizer has been a key voice in pushing China to make structural reforms.

China’s negotiators stayed for the weekend and the two sides discussed the thorny issue of how to enforce a potential trade deal on Sunday, according to a person familiar with the talks. Tariffs and commodities were also on Sunday’s agenda, he said.

Negotiators have been seeking to iron out differences on changes to China’s treatment of state-owned enterprises, subsidies, forced technology transfers and cyber theft.

Washington wants a strong enforcement mechanism to ensure that Chinese reform commitments are followed through to completion, while Beijing has insisted on what it called a “fair and objective” process. Another source briefed on the talks said that enforcement remained a major sticking point as of Saturday.

Reuters reported on Wednesday that both sides were drafting memorandums of understanding (MOUs) on cyber theft, intellectual property rights, services, agriculture and non-tariff barriers to trade, including subsidies.

Trump said he did not like MOUs because they are short-term, and he wanted a long-term deal. That sparked a back-and-forth with Lighthizer, who argued that MOUs were binding contracts, before saying they would abandon the term altogether going forward.

The source familiar with the talks played down the apparent tension between the top trade negotiator and the president, saying Trump, a former New York businessman, had viewed MOUs from a real estate perspective, while Lighthizer had done so from a trade perspective. There was no daylight between the two men, the source said.

At the White House event with governors on Sunday, Trump said Lighthizer was doing a “fantastic” job.

Reporting by Jeff Mason and David Lawder; Additional reporting by Rajesh Kumar Singh, Sarah N. Lynch and Howard Schneider in Washington and Josh Horwitz in Shanghai; Editing by Peter Cooney

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U.S., China sprint to seal deal ahead of Trump’s deadline

WASHINGTON (Reuters) – U.S. and Chinese negotiators met for over seven hours on Saturday to resolve their trade dispute and avoid an escalation of the tit-for-tat tariffs that have already disrupted global commerce, slowed the world economy and roiled financial markets.

U.S. President Donald Trump meets with Chinese Vice Premier Liu He in the Oval Office at the White House in Washington, U.S., February 22, 2019. REUTERS/Carlos Barria

The two sides will meet again on Sunday morning as they race to seal an agreement before a March 1 deadline imposed by U.S. President Donald Trump, who has threatened to dramatically hike tariffs on Chinese goods unless there is a deal.

Saturday marked the fifth straight day of the negotiations between the world’s two biggest economies. Talks were extended through the weekend after both sides reported progress in narrowing their differences.

The Chinese delegation is scheduled to leave for Beijing on Monday, according to a person familiar with their itinerary.

This is the fourth round of negotiations since Washington and Beijing agreed to a ceasefire in their trade war.

Trump, who has embraced an “America First” policy aimed at rebalancing global trade in favor of the United States, said on Friday there was “a very good chance” a deal would be struck, and that he was inclined to extend his March 1 tariff deadline and meet soon with Chinese President Xi Jinping.

Extending the deadline would mean putting on hold a scheduled increase in tariffs to 25 percent from 10 percent on $200 billion of Chinese imports into the United States.

Trump and U.S. Treasury Secretary Steven Mnuchin said U.S. and Chinese officials had reached an agreement on currency issues, but did not give details. U.S. officials have long argued that China’s yuan is undervalued, giving it a trade advantage and partly offsetting U.S. tariffs.

China has also committed to buy an additional 10 million metric tons of U.S. soybeans.

ENFORCEMENT MECHANISM

Reuters reported exclusively on Wednesday that both sides were drafting memorandums of understanding (MOUs) on cyber theft, intellectual property rights, services, agriculture and non-tariff barriers to trade, including subsidies.

On Friday, Trump said he did not like MOUs because they are short-term in nature, and he wanted a long-term deal.

An industry source briefed on the talks said both sides have narrowed their differences on intellectual property rights, market access and narrowing a nearly $400 billion U.S. trade deficit with China. But bigger differences remain on changes to China’s treatment of state-owned enterprises, subsidies, forced technology transfers and cyber theft.

There is no agreement on the enforcement mechanism, either. The United States wants a strong mechanism to ensure the Chinese reform commitments are followed through, while Beijing insists upon what it calls a “fair and objective” process.

“Enforcement is a difficult puzzle,” said the source, who requested anonymity to speak candidly about the talks. “You need objective arbitrators to make a decision.”

It was not clear whether Saturday’s talks managed to iron out those differences. Neither side shared the details of the day’s discussions.

Trump said the biggest decisions could be reached when he meets with Xi, probably in Florida next month, and that they may extend beyond trade to encompass Chinese telecommunications companies Huawei Technologies and ZTE Corp <0763.HK 000063.SZ>.

Reporting by Rajesh Kumar Singh; Editing by Daniel Wallis and Paul Simao

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Kraft Heinz shares fall 28 percent after writedown, dividend cut

(Reuters) – Kraft Heinz Co shares fell to a record low on Friday a day after the food company disclosed a $15 billion write-down on its marquee brands, raising concern that years of rigorous cost cutting have eroded the value of its Kraft cheeses and Oscar Mayer deli meats.

Kraft’s revenue growth has stagnated in the years since it merged with Heinz as consumers shun older, established brands for newer products, cheaper private label brands and non-processed and organic food.

The shares fell as much 28 percent to a low of $34.51, wiping $17 billion off the company’s market value. In mid-afternoon trading, shares were down $13.10 at $35.07.

(Graphic: Kraft Heinz stock crushed by writedown – tmsnrt.rs/2BNXPcJ)

Shares of rivals food makers also fell, with General Mills, Conagra Brands Inc, Unilever and Nestle SA all down between 1 percent and 3 percent.

Brazil’s buyout fund 3G Capital and Warren Buffett’s Berkshire Hathaway Inc together own more than 50 percent of Kraft Heinz. 3G has advocated the company combat higher transportation, commodity costs and sluggish growth by reining in expenses companywide. But that has come at a price.

“Investors for years have asked if 3G’s extreme belt-tightening model ultimately would result in brand equity erosion,” JPMorgan analyst Ken Goldman said.

“We think the answer arguably came yesterday in the form of a $15 billion intangible asset write-down for the Kraft and Oscar Mayer brands,” said Goldman, who cut his rating to “neutral” from “overweight.”

On Thursday, Kraft Heinz, whose brands include Jell-O gelatin dessert and Velveeta processed cheese, reported a quarterly loss, said it would cut its dividend 36 percent and disclosed that the U.S. Securities and Exchange Commission was investigating the company’s accounting policies.

Ketchup-maker Heinz merged with Kraft in 2015 in a deal engineered by 3G. Under 3G’s stewardship, the new company embarked on extreme cost cutting that risked stifling investment in innovation and marketing.

Warren Buffett releases his annual letter to shareholders on Saturday and investors will scour the document for any insight from the billionaire on his Kraft stake and relationship with 3G.

ZERO-BASED BUDGETING

Under 3G, Kraft Heinz embraced zero-based budgeting, a cost-conscious strategy intended to improve operating margins that requires managers to justify all expenses, from pencils to forklifts.

Some analysts are now questioning the effectiveness of 3G’s model, given that the company’s margins before interest and taxes fell to 23.2 percent in 2018 from 27.2 percent in 2015, the year Kraft Heinz was formed.

“We see the 3G model as highly dependent on deal-making and synergy realization and at some point having best-in-class margins doesn’t matter if the sales growth doesn’t eventually come,” Guggenheim Partners’ analyst Laurent Grandet said in a note.

“Kraft Heinz results confirmed all our worst fears – plus more,” Grandet wrote in a note.

Stifel downgraded the stock to “hold” from “buy” and more than halved its price target to $35, well below the current median target of $52.

Credit Suisse cut its price target by $9 to $33, making it the lowest on Wall Street.

“This is not your typical “reset the base and everything will be fine” story,” Credit Suisse analyst Robert Moskow wrote.

FILE PHOTO: Heinz tomato Ketchup is show on display during a preview of a new Walmart Super Center prior to its opening in Compton, California, U.S., January 10, 2017. REUTERS/Mike Blake/File Photo

“The dividend cut, the write-down of the Kraft and Oscar Mayer trademarks, and the guidance for further divestitures demonstrate the hallmarks of a company that has a serious balance sheet problem,” Moskow said.

The news also hit the company’s bond investors. Kraft Heinz’s nearly $31 billion of bonds were among the most heavily traded paper in the U.S. corporate debt market on Friday morning, according to MarketAxess, and yields on several of their largest bonds shot higher and their prices dropped by a full point or more.

Spreads on their bonds, or the premium demanded by investors as compensation for holding Kraft paper over safer U.S. Treasury securities, widened by the most ever across a range of the company’s bonds.

Reporting by Siddharth Cavale and Nivedita Balu in Bengaluru; additional reporting by Anna Driver; Editing by Bernard Orr, Sweta Singh and Steve Orlofsky

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Asian shares tread water as investors watch trade talks

SHANGHAI (Reuters) – Shares in Asia were flat in early trade on Friday following a fall on Wall Street, with a deteriorating global economic outlook outweighing more signs of progress in trade talks between China and the United States.

Market prices are reflected in a glass window at the Tokyo Stock Exchange (TSE) in Tokyo, Japan, February 6, 2018. REUTERS/Toru Hanai/File Photo

Early in the Asian trading day, MSCI’s broadest index of Asia-Pacific shares outside Japan was up less than 0.1 percent.

(Graphic: Asian stock markets: tmsnrt.rs/2zpUAr4)

Australian shares gained 0.5 percent and Japan’s Nikkei stock index was 0.3 percent lower.

Investors continue to closely watch high-level talks between U.S. and Chinese trade negotiators in Washington, with little more than a week left before a U.S.-imposed deadline for an agreement expires, triggering higher tariffs.

Reuters reported exclusively on Wednesday that the two sides were drafting language for six memorandums of understanding on proposed Chinese reforms, progress that had helped to lift investor sentiment.

But shares on Wall Street slumped Thursday, pulled down by new data showing weakness in U.S. business spending plans and factory activity.

The Dow Jones Industrial Average fell 0.4 percent to 25,850.63 points, the S&P 500 lost 0.37 percent to 2,774.28 and the Nasdaq Composite – which had climbed the previous eight sessions – dropped 0.4 percent to 7,459.06.

The U.S. Commerce Department said on Thursday that domestic orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.7 percent.

Moreover, the U.S. Mid-Atlantic factory sector fell into contraction territory in February for the first time since May 2016, data from the Philadelphia Federal Reserve showed.

“While global manufacturing is weak, services activity is looking more positive. But it is difficult to see manufacturing and services diverging for long,” analysts at ANZ said in a morning note.

“There are strong multiplier effects from manufacturing that imply downside risks to the services sector, particularly in Europe. And trade uncertainty, which is overhanging the manufacturing sector, needs to be resolved.”

The yield on benchmark 10-year Treasury notes edged lower to 2.686 percent Friday, compared with a U.S. close of 2.688 percent on Thursday as a bump from investor optimism about trade talks progress ebbed.

The two-year yield, watched as a gauge of expectations of higher Fed fund rates, eased to 2.5266 percent from a U.S. close of 2.529 percent.

The Australian dollar rebounded after tumbling Thursday on a Reuters report that China’s northern port of Dalian has placed an indefinite ban on imports of Australian coal. It was last up 0.3 percent at $0.7107.

The U.S. dollar was barely changed against the yen at 110.66, while the euro inched slightly higher to buy $1.1340.

The dollar index, which tracks the greenback against a basket of six major rivals, was steady at 96.586

U.S. crude dipped 0.25 percent at $56.82 a barrel.

Gold rebounded after falling more than 1 percent Thursday, with spot gold trading up about 0.1 percent at $1,324.92 per ounce. [GOL/]

Reporting by Andrew Galbraith; Additional reporting by Richard Leong in NEW YORK; Editing by Richard Borsuk

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Samsung announces folding phone with 5G at nearly $2,000

SAN FRANCISCO (Reuters) – Samsung Electronics Co Ltd on Wednesday unveiled a nearly $2,000 folding smartphone in a bid to top the technology of Apple Inc and Chinese rivals and reignite consumer interest in a massive consumer electronics category that had its worst sales ever last year.

The Galaxy Fold will go on sale on April 26 and take advantage of new and faster 5G mobile networks. The device looks similar to a conventional smartphone, but then opens like a book to reveal a display the size of a small tablet at 7.3 inches (18.5 cm).

The device “answers skeptics who said that everything that could be done has been done,” DJ Koh, chief executive of Samsung Electronics, said at an event in San Francisco. “We are here to prove them wrong.”

With the foldable phone, Samsung is trying to take the technology lead on two fronts in the smart phone race, offering an eye-catching new feature with the big, bending screen and the first 5G connection in a premium phone, a feature analysts do not expect Apple to match until 2020.

It also challenges the notion of what a phone can cost, debuting at nearly twice the price of current top-of-the-line models from Apple and Samsung itself.

Patrick Moorhead, founder of Moor Insights & Strategy, said the new folding device could help Samsung stay at the top and lure consumers to upgrade devices that have looked largely the same over the past five years.

“Samsung and Apple go back and forth” to lead the premium smartphone market, Moorhead said. “I think this is Samsung’s chance to take back the innovation crown.”

And even though the $1,980 starting price is steep, some dedicated Samsung fans said they would pay it. Navneet Kumar Singh, a Samsung enthusiast from India who traveled to San Francisco to watch the launch, is ready to place his order.

“The prices of the flagship models have been a little aggressive in India,” he said, “But in the end, if you invest the money you’re getting a different experience.”

Samsung also introduced several accessories to compete against Apple, including a pair of wireless headphones called Galaxy Buds. The headphones include wireless charging, a feature that Apple has promised to put into is competing AirPods but has not yet released.

Samsung’s new Galaxy Fold smart phone which features the world’s first 7.3-inch Infinity Flex Display that works with the next-generation 5G networks is seen in this image released in San Francisco, California, U.S. February 20, 2019. Courtesy Samsung/Handout via REUTERS

Samsung also said that its new Galaxy phones will be able to wirelessly charge its headphones and new smartwatches by setting the accessories on the back of the phone.

Samsung said it had developed new manufacturing processes for the phone’s hinge and flexible display to tolerate opening and closing hundreds of thousands of times.

10 TIMES FASTER

Along with the folding phone, Samsung also added new cameras and a 5G version to its Galaxy series of phones.

Verizon Communications Inc will be the first carrier to offer service for Samsung’s 5G phones. The networks are expected to be 10 times faster than current ones, improving viewing of live news and sports events.

The 5G smartphones, both folding and rigid, aim to beat major rivals Apple and Xiaomi Corp to market with a next-generation device as Samsung defends a narrowing lead in global handset shipments.

With the 5G versions of its flagships, the Korean electronics maker looks to have beaten Chinese rivals in the 5G race, although the device will operate only on the small number of networks launching later this year. Apple is not expected to release a 5G smartphone until late 2020.

Rival smartphone makers are expected to announce 5G models at next week’s Mobile World Congress, the industry’s top annual event, in Spain. Samsung said its 5G handset would be available in the early summer.

The Galaxy 10 series needs to appeal to consumers who are reluctant to upgrade for only incremental technological improvements in performance. Such reluctance led to the worst-ever year for smartphone sales in 2018.

All of the Galaxy series of rigid phones except the 5G will be available from March 8, with the S10+ priced from $1,000, the S10 priced from $900 and the smaller S10e from $750.

Slideshow (7 Images)

The mainline S10 compares with $999 for Apple’s iPhone XS and $858 for Huawei Technologies Co Ltd’s premium Mate 20 Pro.

Samsung is still the global smartphone market leader with about 19 percent share but it underperformed the market, which was itself down.

Huawei and Apple are vying for second place with about 13 and 12 percent respectively.

Reporting by Stephen Nellis; Editing by Lisa Shumaker

Our Standards:The Thomson Reuters Trust Principles.

Ford to close oldest Brazil plant, exit South America truck biz

SAO PAULO/DETROIT (Reuters) – Ford Motor Co said on Tuesday it will close its oldest factory in Brazil and exit its heavy commercial truck business in South America, a move that could cost more than 2,700 jobs as part of a restructuring meant to end losses around the world.

FILE PHOTO: New Ford trucks are seen at a parking lot of the Ford factory in Sao Bernardo do Campo, Brazil, February 12, 2015. REUTERS/Paulo Whitaker/File Photo

Ford previously said the global reorganization, to impact thousands of jobs and possible plant closures in Europe, would result in $11 billion in charges.

Following that announcement, analysts and investors had expected a similar restructuring in South America. Ford Chief Executive Jim Hackett said last month that investors would not have to wait long for the South American reorganization plan.

The factory slated for closure is in Sao Bernardo do Campo, an industrial suburb of Sao Paulo that has operated since 1967. It first produced a number of auto models before being switched predominantly to trucks in 2001. It makes the F-4000 and F-350 trucks, as well as the Fiesta small car, a sales laggard.

The factory closure may mean Ford is refocusing on the core of its car business in Latin America’s largest economy, based in a much newer factory in the northeastern state of Bahia. But the job cuts in Brazil’s industrial heartland represent a psychological blow for the new administration of far-right President Jair Bolsonaro, which is battling an unemployment rate above 11 percent.

Ford’s latest cuts come as investors watch for signs of progress on the company’s alliance with Volkswagen AG, which already encompasses commercial vans and pickup trucks but may soon expand into electric and self-driving cars. The two automakers have also pledged to work together on other projects, which could include combining capacity in regions like South America.

Ford shares closed up 3.4 percent at $8.83 in New York.

“You can’t cost cut your way to prosperity in the long term,” said David Kudla, who heads Michigan-based Mainstay Capital Management, a firm that previously owned Ford stock. “We want to hear about the future, what you’re doing for mobility services and autonomous vehicles.”

The closure is also a blow to the industrial outskirts of Sao Paulo, where Brazil’s automotive industry was born and which long drove its industrial growth. It is also where imprisoned former President Luiz Inacio Lula da Silva came to fame as a union leader who organized massive strikes that helped harken the end of the military dictatorship.

The union in Sao Bernardo did not have an immediate comment. But Sao Bernardo Mayor Orlando Morando complained angrily that Ford gave no warning and failed to discuss the closure with the workers.

“The 2,800 families directly affected and another 2,000 indirectly affected deserved a chance to react. This is an act of cowardice,” Morando’s office said in a statement.

A Ford spokesman declined to provide a precise figure for job cuts but acknowledged there would be “a significant impact” and said the automaker would work with unions and other affected parties on “next steps.”

Ford South America President Lyle Watters said on Tuesday the automaker remains “committed” to South America, a region where it is not currently profitable.

SLOW GROWTH

Sales of Ford cars and light trucks grew by 10 percent between 2017 and 2018 in Brazil, lagging a 15 percent post-recession increase for the industry as a whole.

In the trucks business, it ranked fourth, with sales less than half those of Mercedes Benz and Volkswagen.

FILE PHOTO: The Ford logo is pictured on the company’s stand during the 88th Geneva International Motor Show in Geneva, Switzerland, March 7, 2018. REUTERS/Denis Balibouse

Ford said in October it would stop building its Focus compact cars in Argentina in May 2019 as part of efforts to end its losses in the region.

Kleiton Da Silva, an employee and union representative in Ford’s surviving Bahia plant, said the carmaker was in talks to cut 650 of its workforce there, which the automaker has said totals 4,604.

The No. 2 U.S. automaker expects to record pre-tax special charges of about $460 million, with most of that recorded this year, it said in the statement.

Reporting by Ben Klayman in Detroit and Marcelo Rochabrun and Alberto Alerigi in Sao Paulo; Editing by Matthew Lewis, Dan Grebler and Bill Berkrot

Our Standards:The Thomson Reuters Trust Principles.

Auto industry lines up against possible U.S. tariffs

WASHINGTON (Reuters) – The U.S. auto industry urged President Donald Trump’s administration on Monday not to saddle imported cars and auto parts with steep tariffs, after the U.S. Commerce Department sent a confidential report to the White House late on Sunday with its recommendations for how to proceed.

Some trade organizations also blasted the Commerce Department for keeping the details of its “Section 232” national security report shrouded in secrecy, which will make it much harder for the industry to react during the next 90 days Trump will have to review it.

“Secrecy around the report only increases the uncertainty and concern across the industry created by the threat of tariffs,” the Motor and Equipment Manufacturers Association said in a statement, adding that it was “alarmed and dismayed.”

“It is critical that our industry have the opportunity to review the recommendations and advise the White House on how proposed tariffs, if they are recommended, will put jobs at risk, impact consumers, and trigger a reduction in U.S. investments that could set us back decades.”

Representatives from the White House and the Commerce Department could not immediately be reached.

The industry has warned that possible tariffs of up to 25 percent on millions of imported cars and parts would add thousands of dollars to vehicle costs and potentially devastate the U.S economy by slashing jobs.

Administration officials have said tariff threats on autos are a way to win concessions from Japan and the EU. Last year, Trump agreed not to impose tariffs as long as talks with the two trading partners were proceeding in a productive manner.

“We believe the imposition of higher import tariffs on automotive products under Section 232 and the likely retaliatory tariffs against U.S. auto exports would undermine – and not help – the economic and employment contributions that FCA, US, Ford Motor Company and General Motors make to the U.S. economy,” said former Missouri Governor Matt Blunt, the president of the American Automotive Policy Council.

Imported vehicles are shown out for delivery in National City, California, U.S. June 27, 2018. REUTERS/Mike Blake

Some Republican lawmakers have also said they share the industry’s concerns.

In a statement issued on Monday, Republican Congresswoman Jackie Walorski said she fears the Commerce Department’s report could “set the stage for costly tariffs on cars and auto parts.”

“President Trump is right to seek a level playing field for American businesses and workers, but the best way to do that is with a scalpel, not an axe,” she added.

Reporting by David Shepardson and David Lawder; Writing by Sarah N. Lynch; Editing by Dan Grebler

Our Standards:The Thomson Reuters Trust Principles.