Southwest to keep Boeing 737 MAX off schedules through May instead of April 20: company memo

SEATTLE (Reuters) – Southwest Airlines Co said on Friday it was pulling its Boeing Co 737 MAX jets from flight schedules through May, extending its earlier timeline from April 20, according to a company memorandum seen by Reuters.

“This will impact the lines in May, but, now that the decision has been made, we can construct our schedule without those flights well in advance in hopes to minimize the daily disruptions,” the Southwest Airlines Pilots Association and the company said in the joint memorandum.

Boeing’s top-selling 737 MAX jetliner has been grounded in the wake of two deadly crashes involving that model in five months, one in Indonesia last October and another on March 10 in Ethiopia.

Reporting by Eric M. Johnson in Seattle; editing by Grant McCool

Our Standards:The Thomson Reuters Trust Principles.

Fed policymakers do not want rate cuts, not even the doves

NEW YORK (Reuters) – Barely a week after the U.S. Federal Reserve called a halt to interest rate hikes, policymakers are now battling a view growing in financial markets, and embraced by the Trump administration, that the Fed will need to cut rates before long.

FILE PHOTO: The Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 27, 2019. REUTERS/Brendan McDermid

Larry Kudlow, President Donald Trump’s top economic advisor, said Friday on CBNC that while there is “no emergency,” the Fed should cut rates to protect the U.S. economy from slowing down.

But no fewer than five Fed officials in the past 24 hours have touted the underlying strength of the American economy and argued the recent spate of weak data on business activity is more likely to prove fleeting than lasting.

Even the Fed’s two most dovish policymakers – the presidents of the St. Louis and Minneapolis regional banks – say they are not ready to agitate for the central bank to start reversing three years of rate increases.

On Friday one of the bank’s centrists, Randal Quarles, the Fed Board of Governor’s Vice Chair for Supervision, offered an optimistic view of the U.S. economy and said more rate increases may be needed if recent positive trends in productivity and investment continue.

Quarles is the latest in a series of policymakers insisting the Fed has an option to raise rates even as markets increasingly regard such a move as unlikely. The latest monthly jobs report showed a sharp slowdown in hiring, and recent data shows factory activity, business and consumer confidence and inflation have all weakened.

Indeed, prices on futures contracts tied to the Fed’s policy rate on Friday reflected bets the central bank will need to reduce interest rates by September.

Speaking in New York, Quarles said he is inclined to dismiss the recent data as “a bit odd” and “inconsistent” with underlying strength, wage gains that should be boosting households, and a rise in productivity he feels could be “persistent” and lead to stronger growth down the road.

DOVES AND HAWKS TOGETHER

But it wasn’t just Quarles, who has long tended to be on the more hawkish end of the Fed’s policy spectrum.

Even Minneapolis Federal Reserve Bank President Neel Kashkari, one of the biggest opponents of rate hikes at the central bank, told Reuters on Friday that it is “premature” to think about a cutting rates in response to economic data and market indicators.

Also on Friday, Dallas Federal Reserve President Robert Kaplan said bond markets are pointing to skepticism about future economic growth. But some economic data in the first quarter was distorted by a partial U.S. government shutdown and consumers are in good shape, he said.

Perhaps most telling are remarks by the influential chief of the New York Fed, John Williams, who on Thursday said the U.S. economy is in “a very good place” and described the likelihood of a recession in 2019 or 2020 as “not elevated.”

“I’m not as worried about a recession as some of my colleagues in the private sector,” Williams said. “I still see the probability of a recession this year or next year as being not elevated relative to any year.”

St. Louis Fed President James Bullard late Thursday also said it was premature to discuss any rate cut and felt the economy would likely rebound.

The Fed last week kept its target range for short-term rates at 2.25 percent to 2.5 percent, and projections showed most policymakers do not see any rate hikes this year, a downgrade from December when the median forecast was for rates to rise to 2.9 percent.

That downgrade was followed days later by a market phenomenon known as a yield curve inversion, where short-term rates exceed long-term rates, a pattern in the bond market that historically precedes a recession.

Policymakers have been keen to avoid the perception becoming reality, which may explain some of their pushback in recent days.

With the unemployment rate at 3.8 percent and the economy still growing faster than potential even as it slows, they also are reluctant to abandon the idea that inflation and wages will eventually perk up.

“It’s just taking a longer time than it typically does,” San Francisco Fed President Mary Daly said earlier this week.

Reporting by Ann Saphir and Trevor Hunnicutt; Editing by Dan Burns and Andrea Ricci

Our Standards:The Thomson Reuters Trust Principles.

Morgan Stanley president Kelleher to retire: memo

FILE PHOTO: A sign is displayed on the Morgan Stanley building in New York U.S., July 16, 2018. REUTERS/Lucas Jackson

NEW YORK (Reuters) – Morgan Stanley said Thursday that its president, Colm Kelleher, will retire at the end of June, according to an internal memo viewed by Reuters.

Kelleher will stay on as senior adviser to the firm, according to the memo from Chief Executive James Gorman. Kelleher’s replacement was not immediately named.

Reporting By Elizabeth Dilts; Editing by Dan Grebler

Our Standards:The Thomson Reuters Trust Principles.

S&P 500 slides, bond yields fall on slowdown worries

NEW YORK (Reuters) – The S&P 500 and Nasdaq fell on Wednesday as U.S. bond yields fell again and a prolonged inversion in the yield curve fanned growth worries.

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., March 26, 2019. REUTERS/Lucas Jackson

Benchmark 10-year Treasury yields slid on Wednesday, but came off 15-month lows reached overnight as investors remained focused on central bank dovishness globally.

The yield curve inverted for the first time since 2007 on Friday and if the inversion continues to persist it could indicate that a recession is likely in one to two years.

Interest-rate sensitive financial stocks were down, with the S&P 500 financial index falling 0.3 percent.

“The inverted yield curve, that’s what worries investors and it’s why you’re getting selling here. It’s definitely a slowing economy indicator, and whether it goes into a recession or not, nobody really knows. But it will put a pause in the market,” said Alan Lancz, president, Alan B. Lancz & Associates Inc, an investment advisory firm, based in Toledo, Ohio.

Investors have been fretting about slowing economic growth since last week after the Federal Reserve did a stunning about-turn on rate hikes and dour factory data from the United States, Europe and Japan.

The European Central Bank became the latest central bank to delay a planned increase in rates amid rising threats to growth.

The Dow Jones Industrial Average rose 1.82 points, or 0.01 percent, to 25,659.55, the S&P 500 lost 8.36 points, or 0.30 percent, to 2,810.1 and the Nasdaq Composite dropped 37.73 points, or 0.49 percent, to 7,653.80.

Not all data was bleak. A Commerce Department report showed that U.S. trade deficit dropped more than expected in January, likely as Chinese purchases of soybeans spurred a rebound in exports after three straight monthly declines.

Lennar Corp rose 3.1 percent as the No.2 U.S. homebuilder said it expected the housing market to improve, while shares of KB Home, which reported upbeat results late Tuesday, were up 1.7 percent.

Also helping was a survey that showed mortgage applications in the week ended March 22 rose nearly 9 percent amid lower interest rates, according to the Mortgage Bankers Association.

Centene Corp’s shares fell 6.2 percent after the health insurer said it would buy smaller rival WellCare Health Plans Inc for $15.27 billion. Shares of WellCare jumped 11 percent.

Declining issues outnumbered advancing ones on the NYSE by a 1.23-to-1 ratio; on Nasdaq, a 1.45-to-1 ratio favored decliners.

The S&P 500 posted 29 new 52-week highs and 6 new lows; the Nasdaq Composite recorded 26 new highs and 60 new lows.

Reporting by Caroline Valetkevitch; Editing by Phil Berlowitz

Our Standards:The Thomson Reuters Trust Principles.

Google launches global council to advise on AI and tech ethics

FILE PHOTO: Journalists follow a news conference during the opening of the new Alphabet’s Google Berlin office in Berlin, Germany, January 22, 2019. REUTERS/Hannibal Hanschke/File Photo

SAN FRANCISCO (Reuters) – Alphabet Inc’s Google said on Tuesday it was launching a global advisory council to consider ethical issues around artificial intelligence and other emerging technologies.

The council, which is slated to publish a report at the end of 2019, includes technology experts, digital ethicists, and people with public policy backgrounds, Kent Walker, Google’s senior vice president for global affairs, said at a Massachusetts Institute of Technology conference.

The group is meant to provide recommendations for Google and other companies and researchers working in areas such as facial recognition software, a form of automation that has prompted concerns about racial bias and other limitations.

“We want to have the most informed and thoughtful conversations we can,” Walker said on stage at the MIT Technology Review event in San Francisco. “We want to sit down with the council and see what agenda they want to set.”

Google already has its own internal AI principles, which, among other provisions, bars the California-based tech firm from using AI to develop weapons.

The eight-member Advanced Technology External Advisory Council includes Joanna Bryson, an associate professor in computing at the University of Bath; William J. Burns, a former U.S. deputy secretary of state, and Dyan Gibbens, chief executive of Houston-based drone startup Trumbull, according to a Google blog post.

The council will meet four times, beginning in April, the blog post said.

Reporting by Paresh Dave; editing by Jeffrey Benkoe and Rosalba O’Brien

Our Standards:The Thomson Reuters Trust Principles.

Airbus wins China order for 300 jets as Xi visits France

PARIS (Reuters) – Airbus signed a deal worth tens of billions of dollars on Monday to sell 300 aircraft to China as part of a trade package coinciding with a visit to Europe by Chinese President Xi Jinping and matching a China record held by rival Boeing.

FILE PHOTO: The Airbus logo is pictured at Airbus headquarters in Blagnac near Toulouse, France, March 20, 2019. REUTERS/Regis Duvignau

The deal between Airbus and China’s state buying agency, China Aviation Supplies Holding Company, which regularly coordinates headline-grabbing deals during diplomatic visits, will include 290 A320-family jets and 10 A350 wide-body jets.

French officials said the deal was worth some 30 billion euros at catalog prices. Planemakers usually grant significant discounts.

The larger-than-expected order, which matches an order for 300 Boeing planes when U.S. Donald Trump visited Beijing in 2017, follows a year-long vacuum of purchases in which China failed to place significant orders amid global trade tensions.

It also comes as the grounding of the Boeing 737 MAX has left uncertainty over Boeing’s immediate hopes for a major jet order as the result of any warming of U.S.-China trade ties.

There was no evidence of any direct connection between the Airbus deal and Sino-U.S. tensions or Boeing fleet problems, but China watchers say Beijing has a history of sending diplomatic signals or playing off suppliers through state aircraft deals.

“The conclusion of a big (aviation) contract … is an important step forward and an excellent signal in the current context,” French President Emmanuel Macron said in a joint address with his Chinese counterpart Xi Jinping.

The United States and China are edging toward a possible deal to ease a months-long tariff row and a deal involving as many as 200-300 Boeing jets had until recently been expected as part of the possible rapprochement.

LONG-TERM RELATIONSHIP

China was also the first to ground the newest version of Boeing’s workhorse 737 model earlier this month following a deadly Ethiopian Airlines crash, touching off a series of regulatory actions worldwide.

Asked if negotiations had accelerated as a result of the Boeing grounding or other issues, Airbus planemaking chief and designated chief executive Guillaume Faury told reporters, “This is a long-term relationship with our Chinese partners that evolves over time; it is a strong sign of confidence.”

China has become a key hunting ground for Airbus and its leading rival Boeing, thanks to surging travel demand.

But whether Airbus or Boeing is involved, analysts say diplomatic deals frequently contain a mixture of new demand, repeats of older orders and credits against future deals, meaning the immediate impact is not always clear.

The outlook has also been complicated by Beijing’s desire to grow its own industrial champions and, more recently for Boeing, the U.S.-China trade war.

French President Macron unexpectedly failed to clinch an Airbus order for 184 planes during a trip to China in early 2018 and the two sides have been working to salvage it.

Industry sources have said the year’s delay in Airbus negotiations, as well as a buying freeze during the U.S. tariff row, created latent demand for jets to feed China’s growth.

Additional reporting by John Irish, Michel Rose, Jean-Baptiste Vey, Tim Hepher; Writing by Richard Lough, Tim Hepher; Editing by Jane Merriman

Our Standards:The Thomson Reuters Trust Principles.

Uber could announce $3 billion deal with Careem early this week: sources

A cell phone with the Uber transport technology app, with the destination and its cost to the international airport, is seen inside a car with an Uber driver, in Santiago, Chile, March 15, 2019. REUTERS/Rodrigo Garrido

(Reuters) – Uber Technologies Inc is set to offer over $3 billion to buy Dubai-based rival Careem Networks FZ, two sources familiar with the deal told Reuters.

Uber’s offer could be unveiled during the early part of this week, a third source added.

Uber will pay $1.4 billion in cash and $1.7 billion in convertible notes, which will be convertible into Uber shares at a price equal to $55 per share, Bloomberg had earlier reported, citing a term-sheet.

Careem declined comment while Uber did not immediately respond to a request from Reuters to comment.

Uber has been preparing for an initial public offering, and its bankers have indicated that it could be valued at as much as $120 billion.

The U.S.-based global logistics and transportation company has been seeking new avenues of growth even as it faces severe competition in its core business of ride hailing from rivals like Lyft Inc.

The IPOs of Lyft and Uber represent a watershed for Silicon Valley’s technology unicorns, which for years have snubbed the stock market in favor of raising capital privately, with investors happy to back their frothy valuations.

Reporting by Saeed Azhar and Hadeel Al Sayegh in Dubai and Mekhla Raina in Bengaluru; additional reporting by Alexander Cornwell in Dubai; Editing by Leslie Adler and Lisa Shumaker

Our Standards:The Thomson Reuters Trust Principles.

U.S. airlines prepare for 737 MAX tests, Southwest parks jets near desert

CHICAGO (Reuters) – Teams from the three U.S. airlines that own 737 MAX jets were heading to Boeing Co’s factory in Renton, Washington, to review a software upgrade on Saturday, even as Southwest Airlines Co began parking its 34 MAXs near the California desert.

FILE PHOTO: A wing of the Boeing 737 MAX is pictured during a media tour of the Boeing 737 MAX at the Boeing plant in Renton, Washington December 7, 2015. REUTERS/Matt Mills McKnight/File Photo

The factory visits indicate Boeing may be nearing completion of a planned software patch for its newest 737 following a fatal Lion Air crash in Indonesia last October, but the timing for a resumption of passenger flights on the jets remains uncertain.

Boeing and the Federal Aviation Administration, which must approve the software fix and new training, are under U.S. and global scrutiny since the MAX suffered a second deadly crash involving Ethiopian Airlines in Addis Ababa on March 10, which led to a worldwide grounding of the fleet.

The Allied Pilots Association (APA), which represents American Airlines pilots, said it has been in talks with Boeing, the FAA and airlines to get the airplanes flying again as soon as possible, albeit with an acceptable level of safety.

“Right now we’re in wait and see mode to see what Boeing comes up with,” Captain Jason Goldberg, a spokesman for APA, said on Saturday. “We’re hopeful, but at the same time the process can’t be rushed.”

APA is among a delegation of airline safety experts and pilots set to test Boeing’s software upgrade, meant to change how much authority is given to a new anti-stall system developed for the 737 MAX, in Renton.

The system, known as the Maneuver Characteristics Augmentation System, or MCAS, is suspected of playing a role in both disasters, which together killed 346 people.

Both crashes are still under investigation.

Southwest, the largest operator of the MAX in the world, and United Airlines said they would also review documentation and training associated with Boeing’s updates on Saturday. United has 14 MAXs while American has 24.

Meanwhile, Southwest said it was starting to move on Saturday its entire MAX fleet to a facility in Victorville, California, at the southwestern edge of the Mojave Desert, while the global grounding remains in effect.

“The planes being in one place will be more efficient for performing the repetitive maintenance necessary for stationary aircraft, as well as any future software enhancements that need to take place,” spokeswoman Brandy King said.

Reporting by Tracy Rucinski; Editing by Tom Brown

Our Standards:The Thomson Reuters Trust Principles.

Global growth rebound hopes hit by weak factory data

LONDON/TOKYO (Reuters) – Manufacturers in Europe, Japan and the United States suffered in March as surveys showed trade tensions had left their mark on factory output, a setback for hopes the global economy might be turning the corner on its slowdown.

FILE PHOTO: A worker is seen at a factory at the Keihin industrial zone in Kawasaki, Japan, March 8, 2017. REUTERS/Toru Hanai

Factory activity in the 19-country euro zone contracted at the fastest pace in nearly six years.

In Japan, manufacturing output shrank the most in almost three years, hurt by China’s economic slowdown.

And a measure of U.S. manufacturing was its weakest since June 2017 while forecasters at the Federal Reserve Bank of Philadelphia slashed their estimate for economic growth in early 2019.

German 10-year bond yields, which plunged on Thursday after the U.S. Federal Reserve signaled no more rate hikes this year, dived again to fall below zero.

In New York, the U.S. 10-year Treasury note yield plunged to a 14-month low as growth worries further weighed on inflation expectations.

That benchmark yield dropped below the yields on all maturities of T-bills for the first time in 12 years, a so-called yield-curve inversion that is often a harbinger of economic recession. [nL1N2190J6]

“While such an inversion has traditionally been an indicator of a recession, this time around it may be less about the prospects for the U.S. economy and more about spillovers from what is happening in Europe and the bond market there, together with the effects of the Fed’s surprising decision to be very dovish again with its unconventional policy tools,” said Mohamed El-Erian, chief economic adviser at Allianz in Newport Beach, California.

U.S. stocks, European shares and the euro also fell on Friday. The benchmark S&P 500 was off by 1.6 percent and on pace for its biggest drop in nearly three months.

Global trade tensions continue to be among the main culprits behind the gloom.

“No other factor shapes the euro zone business cycle more than the ups and downs of global trade,” economists at Berenberg, a bank, said.

The United States and China are due to resume face-to-face talks next week, but it is unclear if the two sides can narrow their differences and end the trade war between the world’s two largest economies.

European officials are also worried about the risk of U.S. tariffs on car imports from Europe.

RISKS – US CHINA TENSIONS, BREXIT, ITALY

The drop in the euro zone’s manufacturing purchasing managers index to a 71-month low of 47.7 from 49.4 in February raised the risk trade flows could turn even more negative in the short term, the Berenberg economists said.

The manufacturing downturn was partly offset by stable — but relatively weak — growth in the euro zone’s dominant services industry.

But the surveys suggested the bloc’s economy had a poor start to 2019.

IHS Markit, which published the surveys, said the PMIs pointed to first-quarter economic growth of 0.2 percent in the euro zone, below the 0.3 percent predicted in a Reuters poll last week.

The euro zone grew 0.2 percent in the final three months of 2018, its slowest pace in four years. [ECILT/EU]

Earlier this month, the European Central Bank changed tack by pushing out the timing of its next rate increase until 2020 at the earliest and said it would offer banks a new round of cheap loans to help revive the economy.

“We highlight downside risks mainly stemming from the external side – e.g. trade tensions, a Chinese-led global slowdown,” Barclays economists Radu-Gabriel Cristea and Francois Cabau said about the euro zone.

“The protracted weakness in manufacturing remains a lingering risk, and overall growth concerns are likely to intensify should the industrial backdrop further deteriorate. At the same time, Italy and Brexit woes remain non-negligible, the uncertainty a further drag on sentiment.”

In the U.S. series, Markit’s measure of manufacturing activity slipped to 52.5 in March from 53 in February, falling short of economists’ forecasts for a modest rebound. Markit’s manufacturing output index was the weakest since June 2016.

“The survey is consistent with the official measure of manufacturing production falling at an increased rate in March and hence acting as a drag on the economy in the first quarter,” Markit’s chief business economist, Chris Williamson, said.

U.S. GDP is forecast to expand at an annualized rate of 1.6 percent this quarter, down from the 2.6 percent in the fourth quarter of 2018, according to a Reuters poll of more than 100 economists released last week. In last month’s poll, first-quarter growth had been pegged at 1.9 percent.

The headline Flash Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) was a seasonally adjusted 48.9, the same as February’s final reading.

The index was below the 50 threshold that separates contraction from expansion for the second consecutive month.

“Concern of weaker growth in China and prolonged global trade frictions kept business confidence well below its historical average in March,” Joe Hayes, an economist at IHS Markit, said.

The flash index for total new orders – domestic and foreign – fell to its lowest since June 2016, the survey showed.

Japan is exposed to the dispute between Washington and Beijing as it ships to China big volumes of electronics items and heavy machinery used to make finished goods destined for the United States.

Writing by William Schomberg and Dan Burns; editing by Jon Boyle and Susan Thomas

Our Standards:The Thomson Reuters Trust Principles.

Wells Fargo in talks with ex-Goldman exec Schwartz to be next CEO: NY Post

FILE PHOTO: A Wells Fargo logo is seen in New York City, U.S. January 10, 2017. REUTERS/Stephanie Keith

(Reuters) – Wells Fargo & Co’s board is in talks with Harvey Schwartz, the former president and co-chief operating officer of Goldman Sachs Group Inc, to take over as the bank’s chief executive, the New York Post reported on Thursday, citing people briefed on the discussion.

A Wells Fargo spokesperson told Reuters that there was “no validity” to rumors the bank was in talks with potential candidates for the CEO position.

Since Tim Sloan took over as the scandal-plagued bank’s CEO in 2016, politicians and analysts have repeatedly questioned whether he was the right person to turn Wells Fargo around.

The bank’s board has consistently defended Sloan, saying his deep knowledge of Wells Fargo was an asset. In September the bank’s chair, Betsy Duke, shot down a similar NY Post report that the board was seeking to replace Sloan with former Goldman Sachs executive and Trump adviser Gary Cohn.

Wells Fargo on Thursday reiterated Duke’s statement from last year.

“Rumors that Wells Fargo’s Board of Directors reached out to potential CEO candidates are completely false,” Duke said. “CEO Tim Sloan has the unanimous support of the board, and this support has never wavered.”

Shares of Wells Fargo pared some losses to trade down 1.5 percent at $49.62. The stock was earlier down 2.4 percent.

Schwartz is up against another serious candidate for Sloan’s job, but that person’s identity could not immediately be learned, the newspaper reported, citing one source close to the situation.

Reporting by Diptendu Lahiri in Bengaluru and Imani Moise in New York; Editing by Meredith Mazzilli

Our Standards:The Thomson Reuters Trust Principles.