Major International Business Headlines Brief::: 24 November 2021
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Major International Business Headlines Brief::: 24 November 2021
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ü Samsung chooses Texas as site of new $17bn chip plant
ü US to release oil reserves in attempt to lower prices
ü Apple sues Israeli spyware firm NSO Group
ü Turkish lira nose-dives 15% as president defies critics
ü Walgreens, CVS, and Walmart fuelled opioid crisis, Ohio jury finds
ü Italy fines Apple and Amazon over Beats headphones
ü Crypto US constitution bidder refunds hit by high fees
ü Uber takes its first step into the cannabis market
ü Atom Bank introduces four-day working week without cutting pay
ü Asian shares on edge as U.S. bond yields rise, oil volatile
ü Major Toshiba shareholder objects to break-up, urges board to solicit offers
ü As U.S. inflation hits 31-year high, banks assess risks and opportunities
ü Japan PM confirms oil reserve release in response to U.S. request
ü Tesla's Musk exercises more options, sells shares worth $1.05 bln
ü 'Black Friday' drags through November amid tight U.S. inventories
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Samsung chooses Texas as site of new $17bn chip plant
Samsung has chosen a site close to the city of Taylor in Texas for its new $17bn (£12.7bn) computer chip plant, amid a global shortage of semiconductors.
It is the South Korean electronics giant's biggest-ever US investment.
The plant is expected to create 2,000 technology industry jobs, with construction starting early next year.
Samsung, like several of its rivals, is racing to expand chip making in the US to tackle supply chain issues.
"With greater manufacturing capacity, we will be able to better serve the needs of our customers and contribute to the stability of the global semiconductor supply chain," Kinam Kim, chief executive of Samsung electronics device solutions said.
The plant is expected to be operational by the second half of 2024.
It comes as US President Joe Biden has been pushing chip giants to increase their production in the US.
White House officials said the new facility would help "protect our supply chains, revitalise our manufacturing base and create good jobs".
"Increasing domestic production of semiconductor chips is critical for our national and economic security," US Commerce Secretary Gina Raimondo said separately.
The Republican governor of Texas, Greg Abbott, tweeted "Welcome to Texas, Samsung!", as he posted photographs of an event to announce the plan.
Separately, a statement from the governor's office said the company would get a $27m grant for creating jobs in the state.
Chips made at the new facility will be used in a range of technologies including mobile, 5G, high-performance computing and artificial intelligence.
Samsung is one of the world's largest chipmakers with more than 20,000 employees across the US.
The company said that the latest announcement takes its total investment in the world's biggest economy to $47bn.
Global chip shortage
The global chip shortage has been causing major disruptions for manufacturers, from carmakers that have had to suspend production to Apple warning that iPhone shipments would be delayed.
Taiwanese chipmaker TSMC announced a $100bn investment in Arizona earlier this year, while US contract semiconductor manufacturer GlobalFoundries announced that it will increase its investment in upstate New York.
Global supply chain problems have hit the chip industry particularly hard.
Added to that are other environmental problems that have strained production. You need a lot of water to make chips, so a drought in Taiwan [a global leader in chip manufacturing] hasn't helped things.
Nor did a power cut in Texas last winter, shutting down production for a while. Texas is the centre of the US chip industry.
This then will come as welcome news for Joe Biden, who's trying to ramp up chip production in the US through generous subsidies.
The only problem is, this is no quick fix. Building chipmaking facilities takes a long time. We won't see a spade in the ground on this project until next year - and it won't start producing chips until at least 2024.
The world is hungry for computer chips right now. Demand far outstrips supply, and there's simply no easy short term solution.-BBC
US to release oil reserves in attempt to lower prices
The US has said it is releasing 50 million barrels of oil from its reserves in an attempt to bring down soaring energy and petrol prices.
The move is being taken in parallel with other major oil-consuming nations, including China, India, Japan, South Korea and the UK.
US President Joe Biden has repeatedly asked the Opec group of oil-producing nations to boost output more rapidly.
But Opec has stuck to an agreement to only increase production gradually.
It says it is concerned that a resurgence of coronavirus cases could drive down demand, as happened at the height of the pandemic.
Crude oil prices recently touched seven-year highs, amid a sharp uptick in global demand as economies recover from the coronavirus crisis.
It's driven up petrol prices and energy bills in many countries.
In a statement the White House said: "American consumers are feeling the impact of elevated gas prices at the pump and in their home heating bills, and American businesses are, too, because oil supply has not kept up with demand.
"That's why President Biden is using every tool available to him to work to lower prices and address the lack of supply."
As part of the coordinated effort, the UK government will allow firms to voluntarily release 1.5 million barrels of oil from privately-held reserves.
It said the action would support the global economic recovery but "any benefit for UK drivers is likely to be limited and short in nature".
India will release five million barrels, while South Korea, Japan and China will announce the amount and timing of their releases in due course.
'Not large enough'
Officials said it was the first time that the US had coordinated such a move with some of the world's largest oil consumers. But analysts questioned whether it would have much impact.
"It's not large enough to bring down prices in a meaningful way and may even backfire if it prompts Opec+ [which includes Russia] to slow the pace at which it is raising output," said Caroline Bain, chief commodities economist at Capital Economics.
But the effort by Washington to team up with other major economies to lower energy prices sends a warning to Opec and other big producers that they need to address concerns about high crude prices, which are up more than 50% this year.
Opec+, which includes major producers such as Saudi Arabia and Russia, has repeatedly rebuffed requests to pump more oil at its monthly meetings, causing frustration in the US.
"We will continue talking to international partners on this issue," a senior US administration official told reporters on Tuesday.
"The president stands ready to take additional action if needed, and is prepared to use his full authorities working in coordination with the rest of the world."
Carsten Fritsch, a Commerzbank analyst, said the move may lead to Opec+ rethinking its strategy and agreeing to increase output at a meeting next week.
"To put things into perspective, 50 million barrels is equivalent to a production hike by 1.6 million barrels per day for one month or by 1 million barrels per day for seven weeks. This is quite significant."
However, Caroline Bain, chief commodities analyst a Capital Economics, said the release was "not large enough to bring down prices in a meaningful way and may even backfire if it prompts Opec+ to slow the pace at which it is raising output".
"As such, it seems quite symbolic and politically motivated," she said.
She added that the move "also seems a bit impatient" with the consensus among analysts being that if Opec+ continues to pump more oil, the market will move into surplus in the first quarter next year.
This "would naturally bring down oil prices," Ms Bain said.-BBC
Apple sues Israeli spyware firm NSO Group
Apple is suing Israeli spyware firm NSO Group and its parent company for allegedly targeting iPhone users with a hacking tool.
NSO's Pegasus software can infect both iPhones and Android devices, allowing operators to extract messages, photos and emails, record calls and secretly activate microphones and cameras.
NSO Group said its tools were made to target terrorists and criminals.
But it has allegedly also been used on activists, politicians and journalists.
NSO Group says it only supplies Pegasus to military, law enforcement and intelligence agencies from countries with good human-rights records.
However earlier this month, US officials placed the company on a trade blacklist, saying the software had "enabled foreign governments to conduct transnational repression, which is the practice of authoritarian governments targeting dissidents, journalists and activists".
This action from Apple follows criticism from other tech firms including Microsoft, Meta Platforms (formerly Facebook), Google-owner Alphabet and Cisco Systems.
In a blog post, Apple said it wanted to hold NSO Group and its parent company OSY Technologies "accountable for the surveillance and targeting of Apple users".
"To prevent further abuse and harm to its users, Apple is also seeking a permanent injunction to ban NSO Group from using any Apple software, services, or devices," it said.
Apple prides itself on its privacy. It's a major selling point for its devices.
So it's not totally surprising that a company that has allegedly sought to bypass Apple security features might antagonise the giant.
That's not the only reason Apple is making a stand though.
Not all hackers are considered equals. NSO Group has government clients, or as Apple puts it, is "state-sponsored".
NSO claims it only works with agencies with good human rights records.
In that way the company has tried to distinguish itself from underground hackers doing nefarious activities.
By suing NSO Group Apple is rejecting that distinction.
Apple is making the point that it doesn't matter who you are, if you're a group trying to hack into an Apple product they'll take action - whatever the motives.
But there's a bit more depth to it than that.
Apple will feel it's easier, and more politically palatable, to sue a private company, rather than the governments who are allegedly using the tech.
In its complaint, filed in US District Court for the Northern District of California, Apple said NSO's tools were used in "concerted efforts in 2021 to target and attack Apple customers" and that "US citizens have been surveilled by NSO's spyware on mobile devices that can and do cross international borders."
Apple alleged that NSO group created more than 100 fake Apple ID user credentials to carry out its attacks.
The tech giant said that its servers were not hacked, but that NSO misused and manipulated the servers to deliver the attacks on Apple users.
Apple also alleged that NSO Group was directly involved in providing consulting services for the spyware, but NSO maintains that it only sells its tools to clients.
Apple said it was forced to engage in a continual arms race with NSO, saying the Israeli firm was "constantly updating their malware and exploits to overcome Apple's own security upgrades".
The iPhone maker said that it will donate $10m, as well as any damages recovered in the lawsuit, to cybersurveillance research groups including Citizen Lab, the University of Toronto group that first discovered NSO's attacks.
NSO Group said in response: "Thousands of lives were saved around the world thanks to NSO Group's technologies used by its customers".
"Paedophiles and terrorists can freely operate in technological safe-havens, and we provide governments with the lawful tools to fight [them].
"NSO group will continue to advocate for the truth."-BBC
Turkish lira nose-dives 15% as president defies critics
The Turkish lira nose-dived 15% on Tuesday after President Tayyip Erdogan defended a controversial plan to cut interest rates to boost the economy.
The currency hit a record low of just over 13 lira to the dollar, before recovering slightly, marking 11 straight days of falls.
Mr Erdogan has pushed Turkey's central bank to make three rate cuts since September, the most recent last week.
But this has been blamed for driving up inflation which is now at 20%.
Investors are losing confidence and the lira has shed some 45% of its value this year, making it the world's worst performing currency.
Despite this, Mr Erdogan vowed to stick to his policies on Monday, arguing that high interest rates would not lower inflation - an unorthodox view he has repeated for years.
Turkish lira falls 15% after bank governor sacked
"I reject policies that will contract our country, weaken it, condemn our people to unemployment, hunger and poverty," he said after a cabinet meeting.
"We see the game played by those over the currency, interest and price hikes... and show our will to proceed with our own game plan," he added.
The president and his allies argue that lower interest rates will boost Turkish exports, investment and jobs. But many economists say the rate cuts are reckless.
President Erdogan thinks raising interest rates causes inflation, and that the way to combat rising prices is to make money cheaper.
It is, to say the least, an unconventional view. Orthodox thinking is the opposite: that raising rates encourages saving, reduces expenditure and as a result slows price increases.
The president is determined that it's his way or the highway. In March, he sacked the Bank's governor, Naci Agbal - who had been hiking interest rates aggressively. Two of his deputy governors soon followed.
Now Mr Erdogan is in control. Last week saw the latest in a series of rate cuts, the trigger for an ever-deeper decline in the value of the lira.
Yesterday, he said the country was embroiled in a battle for its "economic independence".
It is also involved in what looks like a rather hazardous economic experiment.
Presentational grey line
Former central bank deputy governor Semih Tumen, who was dismissed by the president last month amid a leadership shake-up, called for a return to policies which protect the lira's value.
"This irrational experiment which has no chance of success must be abandoned immediately and we must return to quality policies which protect the Turkish lira's value and the prosperity of the Turkish people," he said on Twitter.
Opinion polls suggest Mr Erdogan's AK Party is losing support because of the situation, and opposition politicians have appealed for early elections.
However, he has the backing of his party and other allies in Turkey's parliament.
Tuesday's slide was the lira's worst since the height of a currency crisis in 2018 that led to a sharp recession, and brought on three years of weak economic growth and double-digit inflation.
Though the lira recovered half of its losses by 2pm UK time on Tuesday, the last 11 days have been its worst run since 1999.
'Breaking point'
Analysts say emergency rate hikes will be needed soon to avert a deeper economic crisis.
French investment bank Societe Generale predicts rates will rise to about 19% by the end of the first quarter of 2022. Currently the country's benchmark rate is 15%.
Ilan Solot, global market strategist at Brown Brothers Harriman, said Mr Erdogan was likely to wait until a "breaking point" before reversing course.
"Right now locals seem content to keep their dollars in the local system. If they start to move money elsewhere, to Germany, to Austria, it's another story," Mr Solot told the Reuters news agency.
"At that point we are talking capital controls. There are not enough dollar reserves, not enough dollars in the system to handle that. Then we will have a conversation about a real currency crisis," he added.-BBC
Walgreens, CVS, and Walmart fuelled opioid crisis, Ohio jury finds
America's three largest pharmacies have been found to be liable for helping fuel a painkiller crisis in two Ohio counties, in a landmark case.
A federal court found that actions by Walgreens Boots Alliance, CVS, and Walmart helped create an oversupply of addictive opioid pills.
The scale of compensation, to be paid to the two Ohio counties, will be decided at a future hearing.
CVS said it would appeal against the judgement.
The other retailers, who all contested the cases, did not immediately comment.
Over the last two decades, millions of Americans have become addicts through over-prescription and abuse of legal opiate-based painkillers such as Fentanyl and OxyContin.
Nearly 500,000 deaths were attributed to painkiller overdoses between 1999 and 2019.
Local and state governments say the painkiller epidemic put huge strain on their resources as they tried to tackle it through social programmes and the legal system.
There are around 3,300 other cases being brought in an attempt to recoup some of those costs from firms that profited from the sales of the painkillers.
As well as the pharmacy chains, big pharmaceutical companies and medical professionals have been accused of turning a blind eye to the problem.
Lawyers for the two Ohio counties, Lake and Trumbull, said the costs are potentially $1bn for each county, to cover social and legal expenses related to the impact of the opioid epidemic.
"The judgement today against Walmart, Walgreens and CVS represents the overdue reckoning for their complicity in creating a public nuisance," they said in a joint statement.
They argued that the pharmacies created a public nuisance by failing to ensure opioid prescriptions were valid allowing excessive quantities of addictive pain pills to flood their communities.
Walgreens Boots Alliance, CVS and Walmart denied the allegations, saying they had taken steps to prevent painkillers being diverted from their intended legal use.
CVS in a statement said it strongly disagreed with the verdict and would appeal.
"As plaintiffs' own experts testified, many factors have contributed to the opioid abuse issue, and solving this problem will require involvement from all stakeholders in our healthcare system and all members of our community," CVS said.
Other cases around the country are relying on the "public nuisance" argument to target the companies involved in making and distributing the opioid painkillers.
However earlier this month courts in Oklahoma and California rejected it as a legal argument in cases against drugs makers.-BBC
Italy fines Apple and Amazon over Beats headphones
Italy's competition watchdog has fined Amazon and Apple more than €200m (£168m) for allegedly flouting competition regulations.
The fine relates to Beats headphones, a brand bought by Apple for $3bn (£1.8bn at the time) in 2014.
A 2018 agreement between the tech giants meant only selected resellers could sell the products on Amazon's Italian website.
Both Apple and Amazon said they plan to appeal against the fines.
The Italian Competition Authority said the actions of the two companies also violated European Union rules, and affected competition on pricing.
It ordered the two companies to end the restrictions and give resellers access in a "non-discriminatory manner."
'Done nothing wrong'
Apple said it respected the watchdog's decision, "but believe we have done nothing wrong."
Teaming up with selected resellers helps customer safety because it ensures products are genuine, Apple said.
"Non-genuine products deliver an inferior experience and can often be dangerous," said its spokesperson.
"To ensure our customers purchase genuine products, we work closely with our reseller partners and have dedicated teams of experts around the world who work with law enforcement, customs and merchants, to ensure only genuine Apple products are being sold."
Amazon said it strongly disagreed with the decision of the Italian authority, and that its share of the proposed fine (€68.7m) was "disproportionate and unjustified".
A spokesperson for the company said: "We reject the suggestion that Amazon benefits by excluding sellers from our store, since our business model relies on their success.
It said the agreement at issue "more than doubled" the catalogue of products available to Italian customers, and resulted in "better deals and faster shipping".-BBC
Crypto US constitution bidder refunds hit by high fees
The people behind a failed bid to buy a rare original copy of the US constitution are facing an avalanche of refunds - up to $40m for 17,000 donors.
The ConstitutionDAO team used a "decentralised" approach - largely unregulated and using cryptocurrency - to amass the fortune.
But large fees for those crypto-transactions are eating up huge sums of money in the refund process.
The group said issuing refunds was its top priority.
ConstitutionDAO - short for "decentralised autonomous organisation" - raised the vast sums of money in the Ethereum cryptocurrency to bid on an extremely rare privately-owned copy of the original printing of the US constitution.
The group had promised to maintain the historic document "for the people".
But they were outbid by a private investor, and the document sold for more than double the auction house's original estimate.
Now, some investors in the scheme are reporting that they must pay fees of up to half their refund.
Gas money
That is because the Ethereum network records its transactions on the blockchain, the same basic technology idea that powers other cryptocurrencies such as Bitcoin.
And like Bitcoin mining, it requires computational power to run.
"Gas" is the fee paid to those who run the computer systems to facilitate transactions. And it changes price based on supply and demand.
That means that at times, it can be much more expensive to make any kind of transaction, depending on how busy the Ethereum network is.
And the network has recently seen high usage - and high gas prices.
Buying a pink NFT cat was a nightmare
On its official Discord - the chat app which allows anyone to create rooms and discussion channels for enthusiasts on almost any topic - the group said it had 17,437 donors with a median donation of $206.26.
High gas fees mean that "small" donations could be severely hit by the transaction charge.
One user on the Discord said that in order to get $400 refunded, they would have to pay $168 in gas. Others complained of the fees being higher than the relatively small amount of their refund.
"Wow, lessons learned, [Ethereum] is no good. Gas too high," wrote another in the support channel.
A different contributor lamented that the experience might sour cryptocurrency for those who were not already investors, but got caught up in the drama of "buying the constitution".
"Almost a third of people that contributed are new to [Ethereum] and their first experience is this. Not only that, they'll have to know the pain of paying $200+ in gas for literally nothing," they said.
The future
Senior figures in the Discord- known as delegates - said there was no clear solution.
"We looked at and did everything in our power to come up with a gas-free refund option. However there was nothing that could be set up in a timely manner," wrote one.
"Providing a safe refund process as soon as possible was the primary goal."
Another admin on the server told users: "This was a very, very hard call and we've all been at our computers for the last several days for every waking hour trying to find the least bad option. There was no solution that was going to please everyone."
But despite the chaotic refunds process after the group's initial reason for existence failed, its organisers have pledged that this is not the end.
The group was only established days before the auction of the historic document by Sotheby's, and so had little time to set up its desired decentralised structure. Instead, a core group of insiders - the delegates - took care of managing the project, writing and rewriting the rules and FAQs as they went.
The group had originally planned to use ownership of digital tokens as a way of allocating voting power over the care and display of the constitution document, and briefly proposed a new type of token to decide its future.
That has since been scrapped - but the group is promising an imminent announcement "regarding the future of ConstitutionDAO".
"We know you have been waiting patiently, and we are grateful for it. We know you have questions, and we are working on answers."-BBC
Uber takes its first step into the cannabis market
Uber is making its first foray into the marijuana market, as Uber Eats users in Ontario, Canada will soon be able to order cannabis products on the app.
Customers will be able to place orders in a dedicated section of the app for cannabis retailer Tokyo Smoke and then pick them up at a nearby store.
The firm refused to be drawn on whether it will roll out the offering further across Canada and the US.
Canada's marijuana market is worth around CAD$5bn (£3bn; $4bn) a year.
Uber Eats users will have to verify their age on the app and then will be able to pick up their orders within an hour, the company said.
Under Canadian law, although marijuana use has been legal since 2018, it is still illegal to deliver it.
Uber has had its sights set on the booming cannabis market for some time now.
In April, chief executive Dara Khosrowshahi said the company will consider delivering cannabis once it is permitted under US law.
Illegal producers
Despite the sale of cannabis for recreational use becoming legal in Canada three years ago, illegal producers still control a large share of sales. This is something the government has been trying to remedy.
Uber said that its partnership with Tokyo Smoke will help adults in the country buy safe, legal cannabis, combatting illegal sellers.
Canada's cannabis market is forecast to continue expanding in the coming years with industry research firm BDS Analytics expecting sales to grow to $6.7bn by 2026.
"We will continue to watch regulations and opportunities closely market by market. And as local and federal laws evolve, we will explore opportunities with merchants who operate in other regions," an Uber spokesperson said.
Demand for cannabis products grew significantly last year as people were were stuck at home during lockdowns.-BBC
Atom Bank introduces four-day working week without cutting pay
The online bank Atom Bank has introduced a four-day work week for its 430 staff without cutting their pay.
Employees now work 34 hours over four days and get Monday or Friday off, when previously they clocked up 37.5 hours across the whole week.
Boss Mark Mullen told the BBC it was inspired by the pandemic and would help improve wellbeing and retain staff.
However, employees will have to work longer hours on the days that they are in.
"Before Covid, the conventional wisdom was you had to commute in, sit at a desk all day and repeat that process when you commuted home," said Mr Mullen, who has led the Durham-based bank since 2014.
"Covid showed us that it wasn't necessary…I think doing 9-5, Monday to Friday is a pretty old fashioned way of working."
Atom was one of the UK's first digital challenger banks and had £2.7bn of loans on its books in the last financial year. Its new working arrangements kicked in on 1 November after a review found they would not affect customer service or productivity.
Mr Mullen said the new arrangement was voluntary, but strongly reflected his staff's preferences for more flexible working.
"Everyone is expected to stick to it," he added. "I can't be sending my staff emails on a Friday, I can't expect to them to respond to them."
Working patterns have changed over time. In the 19th Century most British workers worked six day weeks, but in the 1930s Henry Ford in the US and pharmacy chain Boots in the UK popularised the two-day weekend as a way of boosting wellbeing and productivity.
Now, calls for a four-day work week are growing amid similar claims that it could improve people's lives.
Recent research found trials of a four-day week among public sector workers in Iceland were an "overwhelming success" and helped reduce stress and burnout.
And Microsoft Japan said sales had been boosted by nearly 40% during an experiment in which staff worked a four-day week on full pay back in 2019.
However, some employers believe it's not the right thing to do.
In 2019, UK science research foundation the Wellcome Trust scrapped plans to trial a four-day week for its 800 head office staff, saying it would be "too operationally complex".
The decision followed a three-month study which found compressing work into a Monday to Thursday window could negatively affect the wellbeing of some workers and harm productivity.
'Increased exposure to stress'
"It is undoubtedly a positive move for employers to seek to reduce people's working hours without compromising pay," Ben Willmott, head of public policy at the Chartered Institute of Professional Development, told the BBC.
"However, I think the challenge of simply reducing people's working hours without other changes is that you can increase exposure to stress, which is already one of the main causes of working time lost to sickness absence."
Atom is asking its staff to compress their hours into a shorter period, and proportionally their hours have not been cut by a whole day. But Mr Mullen said workers would still get paid the same and enjoy a "three day weekend in perpetuity".
He also hopes it will help attract talent at time when staff attrition at the bank is "unusually" high due to the pandemic.
"With Covid-19 causing vast numbers of people to reconsider how they want to live their lives, anything that leads to more productive, healthier, and, crucially, happier colleagues, is a win for everyone," he added.-BBC
Asian shares on edge as U.S. bond yields rise, oil volatile
(Reuters) - Share markets were jittery in early Asia on Wednesday as trading was buffeted by a step-up in U.S. Treasury yields as well as volatile oil prices in the face of price-cooling moves by the United States and other nations.
MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) slid 0.24%, while Japan's benchmark Nikkei stock price index (.N225) fell 1.13%, as it returned from holiday and caught up with global falls the day before .
Oil steadied a day after rising 3% to a one-week high, even after the U.S. said it would release millions of barrels of oil from strategic reserves in coordination with China, India, South Korea, Japan and Britain to try and cool prices after repeated calls for more crude failed to sway OPEC+ producers. read more
Brent crude futures reversed early losses to rise 0.15% to $82.43 a barrel and U.S. crude futures rose 0.33% to $78.76 a barrel.
"There's a lot going on at the moment," said senior Asia economist Carlos Casanova at Swiss private bank UBP.
"10 year yields are rising, and the U.S. dollar is strong, which is a little bit disruptive for Asian markets as a lot of the currencies (apart from the Chinese yuan) will depreciate and there will be some outflows on the back of widening real rate differentials."
However, "Chinese asset classes have been holding up relatively well," he said, attributing the strength to the People's Bank of China removing several hawkish references from Friday's quarterly monetary policy support, indicating central bank support later this year or early next, "which will provide a floor for equities."
Chinese blue chips (.CSI300) were last flat 0.1% and are up about 0.5% so far this week, versus a near 1% fall this week in the Asian regional benchmark. Hong Kong shares (.HSI) lost 0.1%.
Overnight, yields on 10-year U.S. Treasury notes rose more than 5 basis points to as high as 1.684% while yields on 30-year Treasury bond gained 6 basis points. Two-year U.S. Treasury yields slipped having touched their highest level since March 2020 on Monday.
"There's a risk that the Fed may speed up tapering (of its bond-buying stimulus programme) and that in turn means the timetable for tightening may be brought forward, contributing to the stronger dollar," said currency strategist Sim Moh Siong at Bank of Singapore.
Investors will be scrutinising the minutes of the U.S. Federal Reserve policy committee's November meeting to be published later in the global day for signs that the pace of tapering could accelerate.
Non-interest bearing gold which had reacted poorly to the rise in Treasury yields, recovered a little. The spot price was last at $1,794 up 0.2% but still close to Tuesday's two-week low.
Major currencies are largely trading based on market expectations of central banks' interest rate normalisation schedules.
New Zealand's central bank lifted interest rates for the second time in as many months on Wednesday, driven by rising inflationary pressure and as an easing of coronavirus restrictions supported economic activity.
However, with markets having been open to the possibility of a larger hike, the New Zealand dollar wobbled on the news before ending marginally weaker at $0.6928.
Next on the agenda in Asia is the Bank of Korea (BOK), which has its policy meeting Thursday.
All but one of 30 economists in a Nov. 15-22 Reuters poll predicted the BOK would raise its base interest rate (KROCRT=ECI) by 25 basis points to 1.00%, with the dissenter anticipating a larger hike. read more
Otherwise, currency markets paused for breath on Wednesday as the dollar largely held onto recent gains against most peers on the back of rising Treasury yields.
However, the greenback did manage to edge up marginally to hit a four-and-a-half-year top of 115.22 yen.
The Thomson Reuters Trust Principles.
Major Toshiba shareholder objects to break-up, urges board to solicit offers
(Reuters) - Toshiba Corp's (6502.T) second-largest shareholder on Wednesday objected to the Japanese conglomerate's plan to split itself into three companies and called on it to instead solicit offers from potential buyers.
Hedge fund 3D Investment Partners, which owns more than 7% of Toshiba, laid out its objections in a three-page letter to the company's board, becoming the first major shareholder to formally oppose the break-up plan outlined this month.
The letter, seen by Reuters, highlights shareholder discomfort over Toshiba's proposal - an unease reflected in the company's recent weak stock performance - and raises the possibility that the break-up may struggle to win approval at a shareholder meeting early next year.
A Toshiba spokesperson said it does not comment on individual exchanges with shareholders. 3D declined to comment.
The proposed break-up is "extremely unlikely" to resolve any of Toshiba's current problems and "is instead very likely to create three underperforming companies in the image of today's Toshiba," Singapore-based 3D said in the letter.
Some other hedge fund shareholders have also told Reuters, on condition of anonymity, that they were disappointed Toshiba had turned down the idea of going private.
In its letter, 3D said Toshiba should "open a formal process, develop a compelling plan for each of the businesses, provide detailed diligence materials and management meetings to interested financial and strategic parties, encourage and enable stretch proposals from those parties and evaluate the best path forward".
Toshiba launched its strategic review after pressure from investors following a governance scandal over management's alleged collusion with Japan's trade ministry to pressure foreign shareholders.
FIVE-MONTH REVIEW
During the five-month review, Toshiba's review committee held talks with six private equity firms, which sources said included KKR & Co (KKR.N) and Brookfield (BAMa.TO), seeking strategic ideas including going private.
While the review committee never conducted an auction process with due diligence for a possible sale, it has said talks with private equity firms suggested potential offers were "not compelling relative to market expectations".
The review committee, which consists of five external board directors, has said it did not receive any bona fide proposals to take the company private. The idea of going private, it has said, raised concerns inside Toshiba.
However, in its letter - which was also addressed to the review committee - 3D criticised the committee for what it said was a failure to ask for proposals for the sale of Toshiba, or the partial disposition of some of its businesses.
"Overly reliant upon an intransigent management team's uninspired projection model and dubious claims of regulatory, employee morale and customer concerns about a different ownership structure, the (committee) appears to have compromised its review and relented," the fund said.
3D, founded by former Goldman Sachs banker Kanya Hasegawa in 2015, was one of dozens foreign hedge funds that participated in a $5.4 billion capital injection Toshiba received during a crisis stemming from the bankruptcy of its U.S. nuclear power unit in 2017.
In addition to Toshiba, 3D has stakes in a number of smaller Japanese firms including IT company Fuji Soft Inc (9749.T), textile and technology firm Daiwabo Holdings Co Ltd (3107.T) and music publisher Avex Inc (7860.T), according to Refinitiv data based on filings this year.
It also owns a stake U.S.-based biotech MediciNova Inc (MNOV.O), according to Refinitv.
Founded in 1875, Toshiba plans to house its energy and infrastructure divisions in one company while its hard disk drive and power semiconductor businesses will form the backbone of another. A third will manage Toshiba's stake in flash-memory chip company Kioxia Holdings and other assets.
Toshiba plans to complete the overhaul by March 2024.
Shares of Toshiba have dipped more than 4% since the plan was first reported by the Nikkei business daily on Nov. 8.
The stock was down 2% at 4,652 yen versus a 1.4% decline in the benchmark Nikkei index (.N225) on Wednesday afternoon.
The Thomson Reuters Trust Principles.
As U.S. inflation hits 31-year high, banks assess risks and opportunities
(Reuters) - Wall Street banks are planning for a sustained period of higher inflation, running internal health checks, monitoring whether clients in exposed sectors could pay back loans, devising hedging strategies and counseling caution when it comes to deals.
U.S. consumer prices this month posted their biggest annual gain in 31 years, driven by surges in the cost of gasoline and other goods. read more
Senior bank executives have become less convinced by central bankers' arguments that the spike is a temporary blip caused by supply chain disruption and are stepping up risk management.
Higher inflation is generally seen as a positive for banks, raising net interest income and boosting profitability. But if it jumps high too quickly, inflation could become a headwind, top bankers warn.
Goldman Sachs Chief Operating Officer John Waldron last month identified inflation as the No. 1 risk that could derail the global economy and stock markets.
JPMorgan Chief Executive Officer Jamie Dimon told analysts last month that banks "should be worried" that high inflation and high interest rates increase the risk of extreme price movements.
A sustained period of higher inflation would pose both credit and market risk to banks, and they are assessing that risk in internal stress tests, said one senior banker at a European bank with large U.S. operations.
Risk teams are also monitoring credit exposures in sectors most affected by inflation, another banker said. They include firms in the consumer discretionary, industrial and manufacturing sectors.
"We are very active with those clients, offering hedging protections," said the banker, who asked not to be named as client discussions are confidential.
Clients that may need extra funding to get them through a period of higher inflation are being advised to raise capital while interest rates remain relatively low, the banker said.
"It's still a very beneficial environment to be in if you need funding, but that won't last forever."
Investment bankers are also assessing whether higher inflation and monetary tightening could disrupt record deals and public offering pipelines.
"We expect a sustained period of higher inflation, and monetary tightening could slow the momentum in the M&A market," said Paul Colone, U.S.-based managing partner at Alantra, a global mid-market investment bank.
Alantra is advising clients in the early stages of M&A discussions "to review the risks sustained inflation could bring to both valuation and business results," Colone said.
Sales and trading teams, meanwhile, are taking more calls from clients looking to reposition portfolios, which are vulnerable to a loss in value. When inflation ran out of control in the 1970s, U.S. stock indices were hit hard.
"We're seeing more interest from clients in finding some manner of inflation protection," said Chris McReynolds, Barclays' head of U.S. inflation trading.
Treasury Inflation Protected Securities, which are issued and backed by the U.S. government, are proving popular, he said. The securities are similar to Treasury bonds but come with protection against inflation.
Traders are also seeing demand for derivatives that offer inflation protection such as zero-coupon inflation swaps, in which a fixed rate payment on an investment is exchanged for a payment at the rate of inflation.
"People are realizing they have inflation exposure and it makes sense for them to hedge their assets and liabilities," McReynolds said.
Banks with diversified businesses are likely to fare best during a sustained period of inflation, most analysts say.
They expect that a steepening yield curve will boost overall profit margins, while trading businesses can benefit from increased volatility and the strength of deals, and initial public offering pipelines mean investment banking activity will remain healthy.
But Dick Bove, a prominent independent banking analyst, takes a different view. He anticipates the yield curve will flatten as higher rates reduce inflation expectations, crimping profit margins.
"Perhaps for as long as 12 to 18 months, bank stock prices will rise," he said. "At some point, however, if inflation continues to rise, the multiples on bank stocks will collapse and so will bank stock prices."
The Thomson Reuters Trust Principles.
Japan PM confirms oil reserve release in response to U.S. request
(Reuters) - Japan's Prime Minister Fumio Kishida said on Wednesday his government would release some oil reserves in response to a U.S. request in a way that does not breach a Japanese law that only allows stock releases if there is a risk of supply disruption.
"We have been working with the United States to stabilise the international oil market and we have decided to join the United States in selling part of our national oil reserves in a way that does not contravene existing (Japanese) oil reserve law," Kishida told reporters.
Kishida didn't say exactly how the stocks would be released. He said Industry Minister Koichi Hagiuda will announce details later on Wednesday, such as the amount to be sold, adding Japan would continue to lobby oil-producing countries to combat drastic price moves.
The Nikkei newspaper reported earlier that Japan will hold auctions for about 4.2 million barrels of oil out of an overall national stockpile of about 490 million barrels. The auctions for the crude oil, about one or two days' of Japan's national demand, will be held by the end of the year, the Nikkei said, without citing a source for the information.
Kishida's confirmation came after the administration of U.S. President Joe Biden announced on Tuesday it will release millions of barrels of oil from strategic reserves in coordination with China, India, South Korea, Japan and Britain, to try to cool rising crude prices after major global producers repeatedly ignored calls for more supply. read more
Under the coordinated plan, the United States will release 50 million barrels, the equivalent of about two and a half days of U.S. demand. India, meanwhile, said it would release 5 million barrels, while Britain said it would allow the voluntary release of 1.5 million barrels of oil from privately held reserves.
Details on the amount and timing of the release of oil from South Korea and China were not announced. Seoul said it would decide after discussions with the United States and other allies.
The Thomson Reuters Trust Principles.
Tesla's Musk exercises more options, sells shares worth $1.05 bln
(Reuters) - Tesla Inc (TSLA.O) Chief Executive Elon Musk sold another 934,091 shares of the electric vehicle maker worth $1.05 billion after exercising options to buy 2.15 million shares, U.S. securities filings showed on Tuesday.
The world's richest person had on Nov. 6 tweeted that he would sell 10% of his stock if users of the social media platform approved. A majority of them had agreed with the sale.
Since then, he has sold 9.2 million shares worth $9.9 billion. Last Tuesday, Musk sold 934,091 shares to meet tax withholding obligations related to the exercise of stock options. read more
The Thomson Reuters Trust Principles.
'Black Friday' drags through November amid tight U.S. inventories
(Reuters) - Facing scarce year-end inventories and a shortage of workers, retailers are turning "Black Friday" into a month-long event.
Walmart, the world's largest retailer, said on Monday it had already started "Black Friday" discounts, such as $30 off AirPods and KidKraft dollhouses. Walmart, whose stores will be closed on Thanksgiving for the second year in a row, said it would only offer the same discounts in stores on Friday.
Rival big-box retailer Target on Sunday began running its own Black Friday sales, such as up to 30% off Samsung and TCL flat screen televisions, and 50% off headphones. Target said on Monday that from now on, it will keep all its roughly 1,900 stores closed on Thanksgiving.
The Thanksgiving weekend previously kicked off the U.S. holiday shopping season with "doorbuster" discounts that had consumers lining up for blocks outside brick-and-mortar stores across the country on Black Friday, the day following Thanksgiving. In recent years, shopping at stores on Black Friday has faded, with online sales on the day outpacing brick-and-mortar sales for the first time in 2019.
This year, retailers started promoting online holiday "deals" as early as September, because the ongoing supply chain logjam threatened to block them from bringing new merchandise from Asia into the United States in the weeks before the Christmas holiday. But the bargains are modest. Retailers are expected to dangle price cuts of 5%-to-25% this Friday, only slightly deeper than the 5%-to-10%-off discounts they offered in October, according to Adobe Digital Economy Index.
Best Buy said on Tuesday during an earnings conference that starting its Black Friday promotions in mid-October hurt quarterly profit margins.
Retailers have increasingly reduced Black Friday store hours as shoppers turn to online shopping. "Are discounts going to be as prevalent and as deep as they normally have been in the last few years?” asked Marshal Cohen, chief industry analyst at NPD Group. “No, not if the demand for product is high and the supply is low – there’s no reason to promote discounts.”
"Stores are trying to berate the public into thinking ‘get it now or it might be gone," said 70-year-old artist Maggie Smith from Tucson, Arizona.
According to a Reuters/IPSOS poll of about 1,000 people, more than a fifth of shoppers said they planned to primarily buy gifts online this year, while only 12% said they would shop primarily in stores. Online sales on Black Friday itself are expected to increase by 5% to $9.5 billion, according to the Adobe Digital Economy Index.
Walmart and Target both said they would invest more in same-day options, including the ability for shoppers to pick up merchandise ordered online.
But fulfilling quick-turn online orders could put pressure on retailers' labor forces at a time when warehouse workers are in short supply.
"We're seeing double-time for those shifts and increases in the pay, but then that's going to be painful," said Andy Halliwell, senior director of retail at consultancy Publicis Sapient. "That's going to come out of the retailers' margins."
JC Penney, which is owned by Simon Property Group (SPG.N) and Brookfield Asset Management (BAMa.TO), wants to hire 3,000 supply-chain workers in distribution centers in addition to 25,000 seasonal associates. The retailer is offering $2,000 retention bonuses for select supply chain associates in certain locations.
Macy’s (M.N), which plans to hire 71,000 seasonal workers, said that nearly one-third of those employees will work in fulfillment centers across the country, and Kohl’s (KSS.N) in July said it would give maximum bonuses of $400 to hourly store and supply chain associates who stuck around for the holiday season.
To be sure, some retailers said they are preparing for brick-and-mortar stores to make a comeback, and said they have enough inventory.
"We’re seeing our customers return to in-store shopping," William White, Walmart's chief marketing officer in the United States, told Reuters. White also said Walmart has expanded its toy assortment by "more than double."
For Marc Ivan, a 23-year-old student in Philadelphia, going to stores isn't a tradition he plans to give up, even though he said he will do most of his shopping online as early as possible this week.
"I'll still go out on Black Friday, just to do some casual shopping and hang out with friends."
The Thomson Reuters Trust Principles.
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INVESTORS DIARY 2021
Company
Event
Venue
Date & Time
National Unity Day
December 22
Christmas Day
December 25
Boxing Day
December 26
Public Holiday in lieu of Boxing Day falling on a Sunday
December 27
Companies under Cautionary
ART
PPC
Starafrica
Fidelity
Turnall
Medtech
Zimre
Nampak Zimbabwe
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