Inflation falls to lowest level in nearly two years as oil prices 'tumble'

The Consumer Prices Index (CPI) fell to 2.1% in December, as was widely predicted by economists, from 2.3% in November, figures from the Office for National Statistics (ONS) showed.

This is the lowest rate since January 2017 when it was 1.8%

Inflation is now close to the Bank of England’s 2% target, which means policymakers are likely to leave interest rates on hold ahead of Britain’s expected departure from the European Union at the end of March.

Mike Hardie, head of inflation at the ONS, said: “Inflation eased mainly due to a big fall in petrol, with oil prices tumbling in recent months.

“Air fares also helped push down the rate with seasonal prices rising less than they did last year. These were partially offset by small rises in hotel prices and mobile phone charges.”

At the pumps, motorists faced lower fuel costs with petrol down by 6.4p per litre on the month to 121.7p, which was the lowest price since April 2018.

Diesel also fell by 4.6p to 131.9p per litre, the lowest since July 2018.

The fall in inflation will come as a relief to some consumers who have reined in their spending ahead of Brexit.

Separate figures have shown a boost for household spending power as the rate of wage growth is easily outpacing that of price increases.

Inflation had been steadily rising after Britain’s decision to leave the European Union in June 2016 as sterling plunged in value. Inflation peaked at a five-year high of 3.1% in November 2017.

“Although we think that Brexit uncertainty will keep the MPC (Monetary Policy Committee) on hold for the time being, we doubt the Bank will miss out on the global tightening cycle altogether,” Ruth Gregory, senior UK economist at Capital Economics said.

“The MPC has raised rates several times in the past when the prevailing rate of inflation has been below target, because it feared that domestic price pressure would build if it did not act.

“And with external pressures depressing inflation and a recovery in wage growth in train, we suspect it won’t be too long before the MPC reaches the same conclusion again.”

The ONS said most goods and services lifted inflation, apart from clothing and footwear, which had a small downward pull on the rate, with prices falling by 0.9% in the year to December.

The Retail Prices Index (RPI), a separate measure of inflation, was 2.7% last month, down from 3.2% in November.

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Exclusive: ADM CEO says wrong time for 'monster' acquisitions

CHICAGO (Reuters) – U.S. grain merchant Archer Daniels Midland Co (ADM) has looked at buying rivals including Bunge Ltd. and dozens of other companies but decided the time is not right for “monster” acquisitions, the company’s chief executive told Reuters.

ADM’s overture to Bunge last year, reported by Reuters and other media, fueled Wall Street speculation of further consolidation among the world’s major trading houses that sell, store and ship crops.

“I cannot run ADM and say Bunge is out there, oh, I never made an analysis of Bunge. Of course we do,” CEO and Chairman Juan Luciano said in a rare interview to discuss M&A strategy. He explained ADM has also analyzed other companies in the past including Cargill Inc [CARG.UL] and Louis Dreyfus Co [LOUDR.UL], the other members of the so-called ABCD group of grain traders.

Luciano declined to comment on whether ADM had formally made a bid for New York-based Bunge. ADM is pursuing growth in its nutrition business through smaller acquisitions and potential joint ventures in agricultural processing and other areas, he said.

“We feel we don’t need that monster transformational transaction,” Luciano said at ADM’S Chicago headquarters. High valuations and M&A competition are also deterrents from large acquisitions, Luciano said.

“When credit becomes tighter, we might flex our balance sheet a little bit more, when there’s a little bit less competition,” he said.

Acquiring Bunge would be “a nice optimization,” Luciano said. “But I have a lot of the things that Bunge has,” so there is “not a lot of urgency to me.”

Analysts have said ADM’s conservative trading strategy and diversification into flavors and nutrition helped it weather a deep slump in commodity prices better than some rivals during a global soy and corn surplus and the U.S.-China trade war.

Still, it is the only major trading company without crushing capacity in Luciano’s native Argentina, the world’s top exporter of soy meal and oil made by processing soybeans. That has increased investor expectations of ADM striking a deal with Bunge or acquiring an Argentine crushing company such as Molinos Agro.

“At the right time, we will go into Argentina,” Luciano said. He said crushing plants in Argentina were running at around 65 percent capacity and would only fall further if ADM built a new plant, limiting profit margins and further flooding the marketplace.

ADM announced on Friday the acquisition of flavors and fragrances firm Florida Chemical Company (FCC), a division of Flotek Industries, for $175 million.

    Luciano said ADM evaluates more than 50 companies each year, and added he was open to more joint ventures with competitors, like the one ADM did with privately held Cargill in Egypt. ADM does not have any JVs with Bunge, which was approached by commodity trader Glencore Plc in 2017.

“We don’t have joint ventures with Bunge, candidly, because they were in turmoil during this time,” he said.

Bunge was particularly hard hit by a global grains glut and currency issues in South America that crimped its profits before the U.S.-China trade war upended global commodities markets. Bunge spokesman Frank Mantero declined to comment, saying only “we are business as usual at Bunge.”

    ADM does not have any joint ventures with Louis Dreyfus Co. either. Louis Dreyfus did not respond to a request for comment.

TRADE WAR

Luciano said he meets regularly with U.S. and Chinese officials, and believes the countries will resolve their trade war this year, though he worried about long-term tensions.

“I think the longer it lasts, the more it complicates our lives,” he said, explaining Canadian or Russian soymeal could become alternatives to the United States.

In an example of shifting trade flows, he said ADM had sold U.S. soybeans to Argentina after prices for U.S. beans plummeted when China virtually stopped buying them. Argentina, the world’s No. 3 soybean grower after Brazil, was the world’s top importer of U.S. soybeans last year.

As part of its corporate strategy in recent years, ADM has sold assets like Brazilian sugar and Bolivian oilseed ventures. ADM is “90-something percent” done with its strategic review, he said.

The company’s two U.S. dry ethanol mills have been for sale since 2016. Luciano said offers ADM had received were too low. It is holding on to its so-called wet mills, which produce more products than dry mills.

“We are a nutrition company, not a fuel company so ethanol is not our main thrust,” he said.

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Red Bull '4pm Finish' tube ad banned over implied health claims

The poster, seen on the London Underground on 11 September, implied Red Bull could help workers finish their work by 4pm.

It stated: “The secret to finishing early… Because to leap every hurdle a hectic day brings, you just need to know: Red Bull gives you wings… For a flying 4pm finish…”

The Advertising Standards Authority said it was upholding a complaint from a reader and while the advert was light-hearted, it made health claims that are against European Union rules.

The watchdog said: “While we understood that the ad was intended to be part of a marketing initiative aimed at encouraging consumers to improve their productivity and leave at 4pm on a specific day, we considered that the penultimate line of the poem, ‘to leap every hurdle a hectic day brings’, implied that Red Bull could help improve consumers’ mental focus, concentration and energy levels, and therefore increase productivity.”

Red Bull said the ad promoted the 4pm Finish “consumer initiative”, which encouraged workers to leave one hour early on Friday 14 September.

It said the ad did not suggest the drink delivered a health benefit, made people better at doing their job through increased concentration or focus, or had any health benefit at all.

The ASA warned Red Bull that the ad must not appear again in its current form.

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Siemens rules out further concessions to get Alstom deal approval: sources

MUNICH (Reuters) – Siemens (SIEGn.DE) will not make further concessions to save a rail merger deal with France’s Alstom (ALSO.PA) even after European competition authorities demanded further concessions, sources familiar with the matter said.

Siemens is ready to walk away from the tie-up which was announced in Sept. 2017, a source familiar with the matter said.

“If the Commission refuses, then we cannot do the deal,” this source said, “Then this topic is over.”

Siemens has already offered to license parts of its high speed train business and sell parts of its signaling operations to meet the concerns of the EU authorities who are worried about stifling competition in the rail sector.

But a key disagreement remains around how much of its high-speed train technology – which allows trains to travel faster than 250 km per hour – Siemens should be made to share with third parties.

The first source said the fate of the merger now rests with the European Commission, which is due to make a ruling by February 18. Siemens still considers the merger with Alstom to be the best option, the first source explained.

The deal would create the world’s second largest rail company with combined revenues of around 15 billion euros, roughly half the size of China’s state-owned CRRC Corp Ltd [601766.SS.] but twice the size of Canada’s Bombardier (BBDb.TO).

If the merger is not approved, the German company remains confident about the growth prospects for its own in-house rail technology division – called Siemens Mobility, sources said.

Growth opportunities included potential acquisitions, the first source said, although a collaboration with Bombardier is not on the agenda.

“We will consider all options,” the first source said, including a potential float of the Siemens mobility business with Siemens keeping a stake.

“We absolutely believe that we can develop our business as it is today in a very attractive way,” said the first source.

Alstom on Thursday said it was making progress on the deal and was optimistic it could be completed in the first half of 2019.

“The proposed combination of Alstom with Siemens Mobility, including its rail traction drive business, has progressed in the last quarter,” Alstom said in statement, adding that both companies had presented proposals to win over regulators.

“The proposed remedies include mainly signaling activities as well as rolling stock products and represent around four percent of the sales of the combined entity. The parties consider that the proposed remedy package is appropriate and adequate,” added Alstom.

A company spokeswoman declined to comment on the outcome if the European Commission asked for more concessions.

In 2017, Siemens and Alstom agreed to merge their rail operations, creating a European group better able to withstand the international advance of CCRC.

The German government has given its backing to the merger, saying it would help secure the competitiveness of the European rail industry. France has also said a decision to block the merger would be a mistake.

However Germany’s antitrust authority and four other national regulators have expressed concerns to the European Union’s competition watchdog.

In December, European antitrust commissioner Margrethe Vestager voiced her doubts over the impact that their deal would have on high-speed trains in Europe.

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S&P cuts rating on PG&E unit in third such cut this month

(Reuters) – S&P cut its rating on PG&E Corp’s (PCG.N) Pacific Gas & Electric Co unit on Wednesday, making it the third such cut this month, after the unit missed interest payments on its 2040 senior notes.

The credit rating agency downgraded the unit’s rating to ‘D’ from ‘CC’ after Pacific Gas and Electric failed to make the $21.6 million interest payment due on Tuesday, as the company planned to seek Chapter 11 bankruptcy protection.

The latest cut comes two days after both Fitch and S&P downgraded PG&E and its Pacific Power & Gas Co unit in the face of massive claims stemming from deadly wildfires.

PG&E, which provides electricity and natural gas to 16 million customers in northern and central California, faces widespread litigation, government investigations and liabilities that could potentially exceed $30 billion because of the fires.

The most recent fire last November killed at least 86 people in the deadliest and most destructive blaze in California history.

San Francisco-based PG&E is working on lining up roughly $5.5 billion in so-called debtor-in-possession financing to help operations during bankruptcy proceedings.

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Upbeat bank earnings send Wall Street to one-month highs

NEW YORK (Reuters) – Wall Street’s major indexes hit one-month highs on Wednesday as strong earnings from Bank of America Corp (BAC.N) and Goldman Sachs Group Inc (GS.N) boosted investor sentiment.

Goldman Sachs shares surged 9.5 percent, providing the greatest boost to the Dow, after the bank reported quarterly revenue and earnings that topped estimates. The shares registered their biggest daily percentage gain in nearly 10 years.

Bank of America shares jumped 7.2 percent, leading the S&P 500 higher, after the bank reported a higher-than-expected quarterly profit on growth in its loan book. The shares posted their biggest one-day percentage gain in 6-1/2 years.

The two banks’ results drove a 2.2 percent gain in the S&P 500 financial index .SPSY, which was by far the biggest advancer among the S&P’s major sectors. The S&P banking subsector .SPXBK climbed 2.7 percent.

A strong start to the U.S. earnings season, along with trade optimism and hopes of a slower pace in the Federal Reserve’s interest-rate hikes, have helped S&P 500 recoup some of its losses from a recent rout. The index is now 10.7 percent away from its Sept. 20 record close after having fallen as much as 19.8 percent below that level.

“Overall, banks need a good economy and a properly sloped yield curve, and maybe we’re getting that,” said Kevin Caron, senior portfolio manager at Washington Crossing Advisors in Florham Park, New Jersey. “We’re starting to see that percolate into bank earnings.”

With Wednesday’s gains, the S&P 500 came within striking distance of its 50-day moving average, a key indicator of short-term trends, for the first time since Dec. 4. The Nasdaq crossed its 50-day moving average on Tuesday for the first time since Dec. 3.

The Dow Jones Industrial Average .DJI rose 141.57 points, or 0.59 percent, to 24,207.16, the S&P 500 .SPX gained 5.8 points, or 0.22 percent, to 2,616.1 and the Nasdaq Composite .IXIC added 10.86 points, or 0.15 percent, to 7,034.69.

Stocks slightly pared gains in the last half-hour of trading after the Wall Street Journal reported federal prosecutors were investigating Huawei Technologies Co Ltd HWT.UL, the world’s largest telecommunications equipment maker, for allegedly stealing trade secrets from U.S. businesses.

Among other stocks, United Continental Holdings Inc (UAL.O) shares rose 6.4 percent after the airline posted a quarterly profit that beat expectations.

Shares of First Data Corp (FDC.N) soared 21.1 percent after Fiserv Inc (FISV.O) said it had agreed to buy the payment processor for $22 billion in the biggest-ever deal within the digital payments industry. Fiserv’s shares fell 3.3 percent.

Nordstrom Inc (JWN.N) shares fell 4.8 percent after the department store forecast full-year profit at the lower end of its prior estimates.

Ford Motor Co (F.N) shares dropped 6.2 percent after the automaker forecast a weaker-than-expected fourth quarter profit and said tariffs could erode its 2019 earnings.

Advancing issues outnumbered declining ones on the NYSE by a 1.80-to-1 ratio; on Nasdaq, a 1.62-to-1 ratio favored advancers.

The S&P 500 posted one new 52-week high and one new low; the Nasdaq Composite recorded 32 new highs and 19 new lows.

Volume on U.S. exchanges was 7.48 billion shares, compared to the 8.69 billion average over the last 20 trading days.

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Asia shares edge up, pound gets moment's peace

SYDNEY (Reuters) – Asian shares crept higher on Thursday as upbeat bank earnings bolstered Wall Street, while an anti-climactic end to the latest chapter in the Brexit saga gave sterling a moment’s peace.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.1 percent, with Australia was ahead by 0.2 percent.

Nikkei futures JNIc1NKc1 pointed to an opening rise of around 0.5 percent for the cash index .N225. E-Mini futures for the S&P 500 ESc1 firmed 0.6 percent.

On Wall Street, strong earnings from Bank of America (BAC.N) and Goldman Sachs (GS.N) eased worries about the earnings outlook. Bank of America shares jumped 7.2 percent and Goldman 9.5 percent. [.N]

The Dow .DJI ended Wednesday with gains of 0.59 percent, while the S&P 500 .SPX added 0.22 percent and the Nasdaq .IXIC 0.15 percent.

Investors in Asia might be less encouraged by a Wall Street Journal report that U.S. federal prosecutors were investigating Huawei Technologies, the world’s largest telecommunications equipment maker, for allegedly stealing trade secrets from U.S. businesses and could soon issue an indictment.

Such a move could inflame tensions between Beijing and Washington and make a trade deal yet harder.

China’s central bank on Wednesday moved to avert a cash crunch in the economy by injecting a record $83 billion into the country’s financial system.

Also looming in the background were concerns the U.S. government shutdown was starting to take a toll on its economy.

White House economic adviser Kevin Hassett said the shutdown shaved 0.13 percent off quarterly economic growth for each week it goes on.

PLAN B

As expected, British Prime Minister Theresa May narrowly won her confidence vote and invited other party leaders for talks to try to break the impasse on a Brexit divorce deal.

An outline for Plan ‘B’ is due by Monday and the market assumes there will have to be an extension of the Article 50 exit date past March 29.

“Nothing has happened in the last 24 hours to dissuade us from the view that we are headed in the direction of an Article 50 delay, a softer Brexit or no Brexit,” said Ray Attrill, head of FX strategy at NAB.

“But it remains too soon to be buying sterling with your ears pinned back,” he added, noting many uncertainties remained.

All of which left the pound firm at $1.2881 GBP=, though still short of Monday’s peak at $1.2929. It fared well on the euro, which hit a seven-week low before steadying at 88.45 pence EURGBP=.

The lessening of Brexit risk pressured the safe-haven yen and helped the U.S. dollar up to 109.10 JPY=. The euro eased back to $1.1394 EUR= while the dollar index nudged up to 96.077 .DXY.

In commodity markets, palladium XPD= hit record highs thanks to increasing demand and lower supply of the metal used in auto catalysts. Spot gold XAU= held steady at $1,293.68 per ounce.

Brent crude LCOc1 futures rose 66 cents to $61.30 a barrel overnight, while U.S. crude CLc1 was last off 7 cents at $52.24.

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S&P cuts rating on PG&E unit in third such cut this month

(Reuters) – S&P cut its rating on PG&E Corp’s (PCG.N) Pacific Gas & Electric Co unit on Wednesday, making it the third such cut this month, after the unit missed interest payments on its 2040 senior notes.

The credit rating agency downgraded the unit’s rating to ‘D’ from ‘CC’ after Pacific Gas and Electric failed to make the $21.6 million interest payment due on Tuesday, as the company planned to seek Chapter 11 bankruptcy protection.

The latest cut comes two days after both Fitch and S&P downgraded PG&E and its Pacific Power & Gas Co unit in the face of massive claims stemming from deadly wildfires.

PG&E, which provides electricity and natural gas to 16 million customers in northern and central California, faces widespread litigation, government investigations and liabilities that could potentially exceed $30 billion because of the fires.

The most recent fire last November killed at least 86 people in the deadliest and most destructive blaze in California history.

San Francisco-based PG&E is working on lining up roughly $5.5 billion in so-called debtor-in-possession financing to help operations during bankruptcy proceedings.

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Sears Won’t Close Yet as Its Chairman, Edward Lampert, Fends Off Creditors

Sears lives. For now.

The bankrupt retailer and Edward S. Lampert have reached $5.3 billion deal that would keep its 425 stores open and its 50,000 employees at work, according to a person familiar with the situation.

In the deal, which was reached in the early morning hours on Wednesday, Mr. Lampert would acquire most of Sears’s assets, the person said. The final details of the sale still needed to be arranged, and negotiations were expected to continue through the day and could still apart.

Mr. Lampert, a hedge fund manager and Sears’s chairman, was the only bidder at a closed-door auction this week who sought to keep the company operating as a “going concern.” All of the competing bidders planned to liquidate the company’s real estate, inventory and brands.

A federal bankruptcy judge must still approve Mr. Lampert’s bid at a hearing later this month, giving the company’s creditors a chance to derail the deal. At a hearing last week, the bankruptcy judge, Robert D. Drain, said Mr. Lampert’s bid was “a good development” because it offered Sears a shot at survival.

If the deal is approved, Sears will emerge from bankruptcy with less debt but it will still face steep odds in winning back shoppers. Mr. Lampert is deepening his investment in Sears at a time of great uncertainty for old-line retailers. While overall consumer spending has been solid, some retailers like Macy’s and JC Penny reported weak holiday sales, signaling that their turnaround plans are floundering as Americans change the way they shop.

[Read more about what led Sears to file for bankruptcy.]

Founded shortly after the Civil War, Sears was once the nation’s largest retailer. But it has been in a precipitous decline for years, losing ground to Amazon and Walmart as consumers moved their spending online and mall-based chains suffered.

It is unclear how Mr. Lampert plans to turn Sears around. The company filed for bankruptcy in October, as its sales stalled and its debt payments mounted.

Mr. Lampert, who took control of Sears in 2005 when it merged with Kmart, was the company’s largest shareholder and lender through his hedge fund, ESL Investments.

Some creditors have criticized Mr. Lampert for making deals, including selling some of the company’s most valuable real estate and the Lands’ End brand, that have benefited his hedge fund while harming Sears in the long run.

Mr. Lampert has countered those arguments by saying in interviews that his investments in Sears have hurt him financially.

Even without Mr. Lampert’s financial engineering, analysts acknowledge that Sears would still probably struggle to compete against more innovative retailers with greater resources.

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Upbeat bank earnings send Wall Street to one-month highs

NEW YORK (Reuters) – Wall Street’s major indexes hit one-month highs on Wednesday as strong earnings from Bank of America Corp (BAC.N) and Goldman Sachs Group Inc (GS.N) boosted investor sentiment.

Goldman Sachs shares surged 9.5 percent, providing the greatest boost to the Dow, after the bank reported quarterly revenue and earnings that topped estimates. The shares registered their biggest daily percentage gain in nearly 10 years.

Bank of America shares jumped 7.2 percent, leading the S&P 500 higher, after the bank reported a higher-than-expected quarterly profit on growth in its loan book. The shares posted their biggest one-day percentage gain in 6-1/2 years.

The two banks’ results drove a 2.2 percent gain in the S&P 500 financial index .SPSY, which was by far the biggest advancer among the S&P’s major sectors. The S&P banking subsector .SPXBK climbed 2.7 percent.

A strong start to the U.S. earnings season, along with trade optimism and hopes of a slower pace in the Federal Reserve’s interest-rate hikes, have helped S&P 500 recoup some of its losses from a recent rout. The index is now 10.7 percent away from its Sept. 20 record close after having fallen as much as 19.8 percent below that level.

“Overall, banks need a good economy and a properly sloped yield curve, and maybe we’re getting that,” said Kevin Caron, senior portfolio manager at Washington Crossing Advisors in Florham Park, New Jersey. “We’re starting to see that percolate into bank earnings.”

With Wednesday’s gains, the S&P 500 came within striking distance of its 50-day moving average, a key indicator of short-term trends, for the first time since Dec. 4. The Nasdaq crossed its 50-day moving average on Tuesday for the first time since Dec. 3.

The Dow Jones Industrial Average .DJI rose 141.57 points, or 0.59 percent, to 24,207.16, the S&P 500 .SPX gained 5.8 points, or 0.22 percent, to 2,616.1 and the Nasdaq Composite .IXIC added 10.86 points, or 0.15 percent, to 7,034.69.

Stocks slightly pared gains in the last half-hour of trading after the Wall Street Journal reported federal prosecutors were investigating Huawei Technologies Co Ltd HWT.UL, the world’s largest telecommunications equipment maker, for allegedly stealing trade secrets from U.S. businesses.

Among other stocks, United Continental Holdings Inc (UAL.O) shares rose 6.4 percent after the airline posted a quarterly profit that beat expectations.

Shares of First Data Corp (FDC.N) soared 21.1 percent after Fiserv Inc (FISV.O) said it had agreed to buy the payment processor for $22 billion in the biggest-ever deal within the digital payments industry. Fiserv’s shares fell 3.3 percent.

Nordstrom Inc (JWN.N) shares fell 4.8 percent after the department store forecast full-year profit at the lower end of its prior estimates.

Ford Motor Co (F.N) shares dropped 6.2 percent after the automaker forecast a weaker-than-expected fourth quarter profit and said tariffs could erode its 2019 earnings.

Advancing issues outnumbered declining ones on the NYSE by a 1.80-to-1 ratio; on Nasdaq, a 1.62-to-1 ratio favored advancers.

The S&P 500 posted one new 52-week high and one new low; the Nasdaq Composite recorded 32 new highs and 19 new lows.

Volume on U.S. exchanges was 7.48 billion shares, compared to the 8.69 billion average over the last 20 trading days.

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