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Stocks caught in crosshairs of earnings and central bank meetings

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October 28, 2021

By Huw Jones

LONDON (Reuters) – Global stocks traded in narrow ranges near recent record highs on Thursday as investors digested a stream of mixed earnings ahead of key central bank meetings.

The MSCI All World Stock Index was little changed at 741 points, barely below its lifetime high of 749.16 points hit last month. In Europe, the STOXX index of 600 companies was also flat at 474 points, some two points below its record high from August.

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Markets awaited the European Central Bank’s meeting later in the morning, with the U.S. Federal Reserve and Bank of England meetings next week also a focus against the backdrop of inflationary pressures from bottlenecks in global supply chains.

“The markets are caught in a bit of a no-man’s land of optimism that earnings are going to continue to be positive, against pessimism that inflation is going to crimp profit margins,” said Michael Hewson, chief markets analyst at CMC Markets.

“Even if there has been no evidence of that, we need to get these central bank meetings out of the way as they are keeping investors on tenterhooks,” Hewson said.

The impact of bottlenecks on sectors like autos was further highlighted on Thursday by Volkswagen , its shares falling 2.4% after the German car giant cut its outlook for deliveries as a shortage of computer chips led to lower-than-expected operating profit in the third quarter.

In Asia, Japan’s robot maker Fanuc tumbled 7.8% while IT conglomerate Fujitsu shed 8.4% as their earning showed a bigger than expected impact from a global chips shortages.

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Oil prices eased to their lowest in two weeks after official figures showed a surprise jump in U.S. inventories of crude, while rising cases of COVID-19 in Europe, Russia and some outbreaks in China dented hopes for a global? economic recovery. [O/R]

Brent fell 1% to $83.78 per barrel, off Monday’s seven-year high of $86.70. U.S. crude fetched $81.80 per barrel, down 1% and off a seven-year high of $85.41 hit on Monday.

Investors will scrutinise advance third quarter U.S. economic growth figures ahead of Wall Street’s open for clues on the pace of recovery in the world’s biggest economy after a surge in COVID-19 infections.

Overnight on Wall Street, the S&P 500 lost 0.51% from an all-time high of 4,574.79 hit on Tuesday, while the Nasdaq closed the session little changed.The ECB is expected to keep policy unchanged and push back against growing expectations for an interest rate hike next year, even though it may admit that inflation will be higher than projected.

The euro was steady at $1.1612 ahead of the ECB’s policy announcement later in the day.

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Euro zone inflation expectations

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ASIA EASES ON CHIP WORRIES

Japan’s Nikkei fell 0.9% while mainland Chinese shares slipped 0.7%.

MSCI’s broadest index of Asia-Pacific shares outside Japan ticked down 0.3% amid worries over the impact of chip shortages.

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“The working assumption in the market has been that the impact of a chip shortage will fade by the end of year. But if it remains a problem next year, investors will surely feel less confident about the outlook,” said Masayuki Murata, general manager of balanced portfolio investment at Sumitomo Life Insurance.

The Bank of Canada ended its quantitative easing sooner than expected and signalled on Wednesday that it could hike interest rates earlier than previously thought, as soon as April 2022.

Longer-dated yields fell in part because a tighter monetary policy is likely to tame inflation and could derail the economic recovery down the road.

The 10-year U.S. notes yields dropped to 1.559%, compared with a five-month peak of 1.705% touched a week ago.

“Long-dated yields are falling because of concerns that tighter monetary policies will restrain the economy in the longer run,” said Naokazu Koshimizu, senior rates strategist at Nomura Securities.

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The yen showed limited response to the Bank of Japan’s decision to keep its policy on hold and stood at 113.62 per dollar, slightly down.

(Editing by Shri Navaratnam and Ana Nicolaci da Costa)

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Amazon asks India antitrust body to revoke Reliance-Future deal approval

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November 28, 2021

By Aditya Kalra and Abhirup Roy

NEW DELHI (Reuters) – Amazon has asked India’s antitrust regulator to revoke its approval for Future Retail’s $3.4 billion sale of retail assets to Reliance, saying it was “illegally obtained”, violating an order suspending the deal, a letter seen by Reuters shows.

The approval for the deal was a “nullity in the eyes of law” as an arbitrator’s order was still in force, according to the letter sent by Amazon.com Inc to the Competition Commission of India (CCI) last week.

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The battle between two of the world’s richest men, Amazon founder Jeff Bezos and Reliance Industries Ltd boss Mukesh Ambani, marks a contest for preeminence in India’s booming, nearly trillion-dollar retail market.

The winner in the fight for Future Retail Ltd, India’s second-largest retailer and Amazon’s estranged local partner, will get pole position in the race to meet the daily needs of more than a billion people.

The CCI, Amazon, Future Group and Reliance did not respond to requests for comment.

Future has said the arbitrator’s suspension order was invalid but Indian courts have declined to overturn it.

If the regulator agrees with the previously unreported letter, it would be a major setback for oil-to-telecom conglomerate Reliance.

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Amazon won an injunction against the deal from a Singapore arbitrator last year, alleging Future had violated contracts that prevented it from selling the assets to entities including Reliance.

But the CCI later cleared the deal.

Future misled the CCI and continued to seek approval for the deal, Amazon said in the letter dated Wednesday, calling the injunction a “brazen attempt to subvert the rule of law”.

Amazon asked for a personal hearing from the CCI to make its case.

The letter comes as Amazon is also battling allegations that it misrepresented facts and concealed information while seeking antitrust clearance for a 2019 deal with Future Group.

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Amazon has so far successfully used this deal’s contracts to block Future’s deal with Reliance.

(Reporting by Aditya Kalra and Abhirup Roy in New Delhi; Additional reporting by Zeba Siddiqui; Editing by William Mallard)

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Exclusive-Visa complains to U.S. govt about India backing for local rival RuPay

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November 28, 2021

By Aditya Kalra

NEW DELHI (Reuters) – Visa Inc has complained to the U.S. government that India’s “informal and formal” promotion of domestic payments rival RuPay hurts the U.S. giant in a key market, memos seen by Reuters show.

In public Visa has downplayed concerns about the rise of RuPay, which has been supported by public lobbying from Prime Minister Narendra Modi that has included likening the use of local cards to national service.

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But U.S. government memos show Visa raised concerns about a “level playing field” in India during an Aug. 9 meeting between U.S. Trade Representative (USTR) Katherine Tai and company executives, including CEO Alfred Kelly.

Mastercard Inc has raised similar concerns privately with the USTR. Reuters reported in 2018 that the company had lodged a protest https://reut.rs/3cQA2La with the USTR that Modi was using nationalism to promote the local network.

“Visa remains concerned about India’s informal and formal policies that appear to favour the business of National Payments Corporation of India” (NPCI), the non-profit that runs RuPay, “over other domestic and foreign electronic payments companies,” said a USTR memo prepared for Tai ahead of the meeting.

Visa, USTR, Modi’s office and the NPCI did not respond to requests for comment.

Modi has promoted homegrown RuPay for years, posing a challenge to Visa and Mastercard in the fast-growing payments market. RuPay accounted for 63% of India’s 952 million debit and credit cards as of November 2020, according to the most recent regulatory data on the company, up from just 15% in 2017.

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Publicly, Kelly said in May that for years there was “a lot of concern” that the likes of RuPay could be “potentially problematic” for Visa, but he stressed that his company remained India’s market leader.

“That’s going to be something we’re going to continually deal with and have dealt with for years. So there’s nothing new there,” he told an industry event.

‘NOT SO SUBTLE PRESSURE’

Modi, in a 2018 speech, portrayed the use of RuPay as patriotic, saying that since “everyone cannot go to the border to protect the country, we can use RuPay card to serve the nation.”

When Visa raised its concerns during the USTR gathering on Aug. 9, it cited the Indian leader’s “speech where he basically called on India to use RuPay as a show of service to the country,” according to an email U.S. officials exchanged on the meeting’s readout.

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Finance Minister Nirmala Sitharaman said last year that “RuPay is the only card” banks should promote. The government has also promoted a RuPay-based card for public transportation payments.

While RuPay dominates the number of cards in India, most transactions still go through Visa and Mastercard as most RuPay cards were simply issued by banks under Modi’s financial inclusion programme, industry sources say.

Visa told the U.S. government it was concerned India’s “push to use transit cards linked to RuPay” and “the not so subtle pressure on banks to issue” RuPay cards, the USTR email showed.

Mastercard and Visa count India as a key growth market, but have been jolted by a 2018 central bank directive for them to store payments data “only in India” for “unfettered supervisory access”.

Mastercard faces an indefinite ban on issuing new cards in India after the central bank said it was not complying with the 2018 rules. A USTR official privately called the Mastercard ban “draconian”, Reuters reported in September.

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(Reporting by Aditya Kalra in New Delhi; Editing by William Mallard)

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‘Flash mob’ thieves target U.S. retail stores on Black Friday

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November 28, 2021

By Steve Gorman

LOS ANGELES (Reuters) – Black Friday shoppers weren’t the only ones out hunting for bargains on the day after Thanksgiving. Thieves were busy as well.

Police in Los Angeles and cities elsewhere across the country spent much of their holiday weekend patrols looking for suspects in a spate of “flash mob” robberies on Friday, part of a surging U.S. crime trend in which groups of thieves swarm a store, ransack the shelves and flee.

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Authorities also have used the term “smash-and-grab” to describe the trend.

At least two such robberies were reported on Saturday by the Los Angeles Police Department (LAPD) and the Los Angeles County Sheriff’s Department. A local television station, KCAL-TV, counted a total of six smash-and-grab heists on the city’s west side alone on Friday.

In one incident, a group of eight men entered a Home Depot outlet at a shopping mall in Lakewood, south of downtown Los Angeles, walked directly to the tool aisle and snatched a bunch of hammers, sledgehammers and crowbars valued at about $400 before making their getaway, the sheriff’s office said.

According to L.A. television station KTTV, the Home Depot robbery on Friday night involved up to 20 suspects who pulled up to the store in as many as 10 cars and donned ski masks before raiding the tool aisle.

“We tried to stop them,” store employee Luis Romo told KTTV. “We closed the front entrance, and they put their sledgehammers up and whoever got in the way, they were going to hurt them.”

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The Los Angeles City News Service said four suspects in that robbery were arrested on Saturday by Beverly Hills police.

In a similar incident Friday afternoon, a group of 10 men or more invaded a store in the city’s Fairfax district and started grabbing merchandise without paying for it, pushing employees out of the way before fleeing the scene, according to LAPD.

Police are investigating possible ties between that incident and a flurry of other robberies and retail thefts on Friday and earlier in the week, including two smash-and-grabs reported on Wednesday, an LAPD spokesperson said.

The rash of retail crime prompted the LAPD to place its officers on a citywide tactical alert on Friday afternoon.

Mass robberies also were reported on Friday at two Best Buy electronics stores in the Minneapolis-St. Paul area, one of them involving as many as 30 suspects, while a spree of pre-dawn retail burglaries were under investigation in Chicago.

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In one of the biggest flash-mob robberies reported on the West Coast in recent days, police in the San Francisco suburb of Walnut Creek were seeking about 80 suspects who swarmed and ransacked a department store last Saturday.

(Reporting by Steve Gorman in Los Angeles; Editing by Paul Simao)

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