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Asian stocks edge up, U.S. futures rise on hope for no U.S. govt. shutdown

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TOKYO (Reuters) – Asian shares edged up on Tuesday as investors hoped a new round of U.S.-China trade talks would help to resolve a dispute that’s dented global growth and some corporate earnings.

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

Improving market sentiment was news that U.S. lawmakers reached a tentative deal on border security funding that would avert another partial government shutdown due to start on Saturday. The S&P 500 e-mini futures were up more than 0.5 percent..

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.3 percent.

The Shanghai Composite Index rose 0.6 percent, South Korea’s KOSPI climbed 0.4 percent and Australian shares were up 0.4 percent.

Japan’s Nikkei advanced 2 percent after a market holiday on Monday, lifted by a weaker yen.

U.S. and Chinese officials expressed hopes the new round of talks, which began in Beijing on Monday, would bring them closer to easing their months-long trade war.

Beijing and Washington are trying to hammer out a deal before a March 1 deadline, without which U.S. tariffs on $200 billion worth of Chinese imports are scheduled to increase to 25 percent from 10 percent.

“There will be no winner in a trade war. So at some point they will likely strike a deal,” said Mutsumi Kagawa, chief global strategist at Rakuten Securities in Tokyo.

The trade dispute has already started to impact global growth, hitting businesses confidence, factory activity and disrupting supply chains. The worry is that a protracted Sino-U.S. tariff row could severely hurt corporate earnings globally.

Analysts are now expecting U.S. corporate earnings for the current quarter to drop 0.2 percent from last year, which would be the first contraction since the second quarter of 2016.

In the currency market, the dollar held firm, having gained for eight straight sessions against a basket of six major currencies until Monday, its longest rally in two years.

Although the Federal Reserve’s dovish turn dented the dollar earlier this year, some analysts noted the U.S. currency still has the highest yield among major peers and that the Fed continues to shrink its balance sheet.

“We see the dollar’s strength essentially stemming from the Fed’s balance sheet reduction,” said Makoto Noji, chief currency and foreign bond strategist at SMBC Nikko Securities.

Growing evidence of a loss of momentum in the global economy has also lifted the U.S. currency, most recently led by the European Commission’s downgrade of growth in Europe, making the dollar a better investment option by default.

The dollar’s index rose to its highest level in almost three months, at 97.123, on Monday. It last stood at 97.042.

In contrast, the euro dropped to as low as $1.1267, its weakest in 2-1/2 months, and last traded at $1.1285.

The dollar popped up to a six-week high of 110.55 yen.

Oil prices ticked up after falls on Monday as traders weigh support from OPEC-led supply restraint and a slowdown in the global economy.

U.S. crude futures traded at $52.56 per barrel, up 0.3 percent. Brent crude rose 0.6 percent to $61.87 per barrel.

(This version of the story corrects dollar index quotation in the 15th paragraph)

Additional reporting by Shinichi Saoshiro in Tokyo; Editing by Shri Navaratnam and Richard Borsuk



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Kraft Heinz forecasts gloomy 2019, writes down value of iconic brands

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(Reuters) – Shares of Kraft Heinz Co slumped 20 percent on Thursday after the food company posted a quarterly loss, disclosed an SEC investigation and wrote down the value of its Kraft and Oscar Mayer brands as it highlighted the tough environment for the packaged food industry.

FILE PHOTO – Bottles of Heinz tomato ketchup of U.S. food company Kraft Heinz are offered at a supermarket of Swiss retail group Coop in Zumikon, Switzerland December 13, 2016. REUTERS/Arnd Wiegmann/File Photo

The gloomy results and forecast from the company, which is one of billionaire Warren Buffett’s largest investments, reflect changes in consumer trends away from processed foods to healthier alternatives.

The after-hours slump erased $12 billion from Kraft Heinz’s stock market value and left its shares trading at their lowest point since H.J. Heinz Co bought Kraft Foods Group Inc in 2015, to create the world’s fifth largest food and beverage company.

The $15.4 billion write-down indicates declining fortunes of the iconic brands and other losses in asset value, meaning the company views those assets as less valuable than before the merger.

“We expect to take a step backwards in 2019,” Chief Financial Officer David Knopf told analysts on a post earnings conference call, promising “consistent profit growth” starting in 2020.

Kraft, which owns Velveeta cheese and Heinz ketchup brands, forecast adjusted earnings before interest, tax, depreciation and amortization (EBITDA) between $6.3 billion and $6.5 billion in 2019, lower than analysts’ estimates of $7.47 billion, according to IBES data from Refinitiv.

On a post-earnings call with analysts, Chief Executive Officer Bernardo Hees said the entire packaged foods industry will likely remain challenged, blaming the rising popularity of private label brands and higher commodity costs.

“Kraft Heinz is in a worse position than many other consumer packaged goods companies because it has got a very weak portfolio of brands. They are not delivering the level of growth that’s needed in this sort of market,” GlobalData Retail managing director Neil Saunders said.

The company, which competes with General Mills Inc and Kellogg Co, cut its quarterly dividend to 40 cents per share from around 63 cents per share on Thursday.

Buffett’s Berkshire Hathaway Inc and Brazil’s 3G Capital control Chicago-based Kraft Heinz.

In addition to lower-than-expected earnings, the company disclosed it had been subpoenaed by the U.S. Securities and Exchange Commission in October, related to an investigation into its accounting policies, procedures and internal controls related to procurement.

The company said it was working on ways to improve its internal controls and determined the problems required it to record a $25 million increase to the cost of products sold.

“That has really made a bad set of results even worse because it has also thrown some uncertainty into the mix,” Saunders said.

For the quarter ended Dec. 29, Kraft had a net loss of $12.6 billion. It earned 84 cents per share on an adjusted basis, missing Wall Street estimates of 94 cents, according to IBES data from Refinitiv.

Net sales of $6.89 billion fell short of analysts’ estimates of $6.94 billion in the reported quarter.

Reporting by Uday Sampath and Nivedita Bhattacharjee in Bengaluru; Editing by Shounak Dasgupta and Lisa Shumaker



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Oil prices dip as U.S. crude output hits record 12 million barrels per day

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SINGAPORE (Reuters) – Oil prices fell on Friday after the United States reported its crude output hit a record 12 million barrels per day (bpd), undermining efforts by Middle East dominated producer club OPEC to withhold supply and tighten global markets.

FILE PHOTO: A Canadian Natural Resources pump jack pumps oil out of the ground near Dorothy, Alberta, Canada, June 30, 2009. REUTERS/Todd Korol/File Photo

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.85 per barrel at 0010 GMT, down 11 cents, or 0.2 percent, from their last settlement.

International Brent crude futures had yet to trade.

U.S. crude oil production reached 12 million barrels per day (bpd) for the first time last week, the Energy Information Administration (EIA) said on Thursday in a weekly report.

(GRAPHIC: U.S. oil production & storage levels – tmsnrt.rs/2Vanxza)

That means U.S. crude output has soared by almost 2.5 million bpd since the start of 2018, and by a whopping 5 million bpd since 2013. America is the only country to reach 12 million bpd of production.

As output surges, U.S. oil stocks are also rising.

U.S. commercial crude oil inventories rose by 3.7 million barrels in the week ending Feb. 15, to 454.5 million barrels, the EIA said.

Analysts say U.S. oil firms will export more oil to sell off surplus stocks.

“The continued surge in U.S. production stands as a bearish dynamic for market prices, especially as increasing volumes get sold abroad in a direct challenge to Saudi Arabia and Russia,” said John Kilduff, partner at Again Capital in New York.

For now, at least, the price dips have halted a rally that pushed crude to 2019 highs this week amid supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC).

OPEC and some non-affiliated producers such as Russia agreed late last year to cut output by 1.2 million bpd to prevent a large supply overhang from growing.

Another price driver has been U.S. sanctions against oil exporters Iran and Venezuela.

Reporting by Henning Gloystein; Editing by Joseph Radford



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Asian shares tread water as investors watch trade talks

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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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