Cologne prosecutors confirm searched Blackrock offices

FRANKFURT (Reuters) – German state prosecutors in Cologne executed a search warrant at Blackrock’s offices in Munich on Tuesday, a spokesman said, adding that the company’s country chairman, Friedrich Merz, was not suspected of wrongdoing.

The prosecutors are investigating a fraud known as cum-ex that typically involved trading company shares rapidly around a syndicate of banks, investors and hedge funds to create the impression of numerous owners, each entitled to a tax rebate.

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Persimmon boss Jeff Fairburn pushed out over £75m pay row

The UK’s largest housebuilder said he would go “by mutual agreement” on 31 December and be replaced on an interim basis by the group’s managing director David Jenkinson pending the appointment of a permanent successor.

The company’s statement said of Mr Fairburn’s departure: “The board believes that the distraction around his remuneration from the 2012 LTIP (long-term incentive) scheme continues to have a negative impact on the reputation of the business and consequently on Jeff’s ability to continue in his role.”

Almost half of Persimmon’s investors voted against its pay report at the AGM in April.

The decision to cut him loose risked a further backlash as it emerged that because he had been asked to leave, the firm could not prevent the payment of the payouts due to him under the share option scheme.

Persimmon said Mr Fairburn had agreed to cut his 12-month notice period and would not receive any further salary or benefits after 31 December.

Shares – down 14% in the year to date – were 0.3% lower in early deals.

Mr Fairburn – and other executives – first agreed to cut their awards in February after widespread outrage over the sums which critics said were inflated by government housing market stimulus in the form of the Help to Buy.

He had been due to receive £100m but gave up £25m.

Mr Fairburn said: “I had hoped that revealing my plans to create a charitable trust and to waive a proportion of the award would enable the company to put the issue of the 2012 LTIP behind it.

“However, this has not been the case and so it is clearly now in the best interests of Persimmon that I should step down.”

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Goldman Sachs CEO: I feel horrible ex-bankers broke law in 1MDB case

SINGAPORE (Reuters) – Goldman Sachs Chief Executive David Solomon said on Wednesday he felt “horrible” that two former employees “blatantly broke the law” in their dealings with Malaysian state fund 1Malaysia Development Berhad.

U.S. prosecutors filed criminal charges against the two former Goldman bankers and a Malaysian financier linked to the alleged theft of billions of dollars from the fund.

An investigation into where 1MDB’s money went became the largest carried out by the Department of Justice under its anti-kleptocracy program, and the scandal was a major reason why Malaysian voters rejected Najib Razak, their prime minister for nearly a decade, in an election earlier this year.

“It is obviously very distressing to see two former Goldman Sachs employees went so blatantly around our policies and so blatantly broke the law,” Solomon said in an interview with Bloomberg TV in Singapore.

“I feel horrible about the fact that people who worked at Goldman Sachs, and it doesn’t matter whether it’s a partner or it’s an entry level employee, would go around our policies and break the law,” Solomon said.

U.S. prosecutors announced last week that Tim Leissner, former partner for Goldman Sachs in Asia, had pleaded guilty to conspiracy to launder money and conspiracy to violate the Foreign Corrupt Practices Act, and agreed to forfeit $43.7 million.

Roger Ng, the other charged former Goldman banker, was arrested in Malaysia and is expected to be extradited.

Reuters was not immediately able to contact Ng’s lawyer on Wednesday. His lawyer did not immediately respond to a request for comment after U.S. prosecutors unveiled the charges last Thursday.

Goldman has also placed its former co-head of Asia investment banking, Andrea Vella, on leave over his role in the firm’s involvement with the case, pending a review of allegations, according to a person familiar with the decision.

The Wall Street bank said in a securities filing on Friday that it may also face penalties from dealings with 1MDB.

Asked if he could provide assurances that neither he, former CEO Lloyd Blankfein or any of the senior management team suspected illegality or compliance breaches in dealings with 1MDB, Solomon said:

“We take compliance and control in our firm extremely seriously, we always have…We are going to continue to cooperate with the authorities and there’s a process in place and that process will proceed.”

According to prosecutors, the investment bank generated about $600 million in fees for its work with 1MDB, which included three bond offerings in 2012 and 2013 that raised $6.5 billion. Leissner, Ng and others received large bonuses in connection with that revenue.

Finance Minister Lim Guan Eng told Reuters in June that the government will be looking at the possibility of seeking claims from Goldman Sachs.

Prime Minister Mahathir Mohamad said Malaysia will look into why Goldman was paid around $600 million in fees, an amount that critics say exceeds normal levels.

Goldman has maintained that the outsized fees related to the additional risks it took on – it bought the un-rated bonds while it sought investors and, in the case of the 2013 deal which raised $2.7 billion, 1MDB wanted the funds in a hurry for a planned investment.

The new Malaysian government has barred Najib and his wife from leaving the country, and the former premier faces multiple charges of corruption, money laundering and abuse of power, though he has consistently denied any wrongdoing related to 1MDB.

In another interview with Bloomberg on Tuesday, Malaysia’s Prime Minister-in-waiting Anwar Ibrahim said it would be “inexcusable” if Goldman Sachs was complicit in the scandal.

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Taoiseach under fire for 'green jersey' demands in Brexit talks

TAOISEACH Leo Varadkar has come under fire for suggesting the Opposition and media should put on the ‘green jersey’ and unquestioningly support his Brexit strategy.

Opposition leaders rounded on him after he announced he was open to the introduction of a review mechanism of the Brexit agreement.

Independent.ie reported on the alarm which surrounded the backtrack on the Brexit backstop that would ensure there will be no border on the island of Ireland.

But the Taoiseach’s officials have been extremely critical of media coverage and Opposition TDs whenever they perceive their commentary is not supportive of the Government’s stance.

One senior official even attacked this newspaper, saying “you are the only guys in Ireland” who are criticising the proposal for a review of the Border deal.

“The only way we can get a Brexit deal is to allow the negotiations to go on in confidence,” he added.

However, Fianna Fáil leader Micheál Martin said the Taoiseach is displaying an “intolerance of genuine criticism” of his Brexit plans.

“The prevalence of megaphone diplomacy and the over-hyping of the December agreement of last year has not helped,” he told Independent.ie.

Labour Party leader Brendan Howlin also said the Government has been “overly sensitive” to criticism on Brexit.

“Fine Gael wants Opposition parties to pull on the green jersey, but its view of that is unquestioning support for its position,” he said.

In the Dáil, Sinn Féin leader Mary Lou McDonald accused the Taoiseach of “losing his nerve” and “blinking” at a crucial final phase in the marathon Brexit talks.

It came as British Prime Minister Theresa May was accused of secretly lining up a Brexit deal behind the backs of her cabinet after a leaked memo revealed detailed plans for selling the agreement to the public.

A three-week strategy leading up to a parliamentary vote includes daily “themed” announcements, a major speech by Mrs May and a televised interview.

The document, which was seen by the BBC and appears to have been written in the past week, proposes a vote on the deal on November 27.

This has added to suspicions from British ministers that Mrs May, desperate for a deal before Christmas, was rushing into an agreement with Brussels.

Meanwhile, there is confusion over how a review of the so-called ‘backstop’ would even work, if it was included in the final Brexit deal.

The Taoiseach’s spokesperson suggested a review of the agreement on the Irish Border was already included in the Brexit agreement signed off by the EU and Britain last March.

He said the agreement included a provision that would allow for the replacement of the backstop with another deal as along as it did not result in a hard Border.

The spokesperson also suggested a review could be carried out by the joint committee that oversees the implementation of the Brexit withdrawal agreement.

This body includes representatives from the EU and Britain, but not specifically Irish representatives.

The draft withdrawal agreement also includes a provision for the establishment of a sub-committee which could review the final agreement on the Border.

But the Taoiseach was forced to defend his decision to suggest a review clause on the Border backstop.

Mr Varadkar insisted he had not weakened Ireland’s negotiating position by agreeing to a review mechanism during a conversation with Mrs May.

Mr Varadkar said he would only agree to a review if the deal on the Border did not have an expiry date and could not be ended at the behest of the British government alone.

EU chief negotiator Michel Barnier also poured cold wateron a potential deal on the Border.

“We are not yet there. We have a lot more work to do,” Mr Barnier said.

He reinforced the EU position that a Border deal could not include an expiry date.

Speaking to his own Cabinet ministers in Government Buildings, the Taoiseach said the EU was making progress but he was not sure they could “see the landing zone yet”.

  • Read more here: The great Brexit Border backtrack

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How Apple is losing its grip on India

BENGALURU (Reuters) – Software engineer Samee Alam was ready to take the big leap and buy an iPhone in this week’s Diwali festival sales, but at the last minute he opted for cheaper Chinese competitor OnePlus instead.

Alam, 27, spends hours on his phone watching shows, surfing and shopping, making him the perfect target for Apple Inc as it strives to raise sales among India’s 1.3 billion consumers.

But in a country where the average per capita income is around $2,000 a year, even the cheapest of this year’s new iPhones, the XR at 76,900 rupees ($1,058), costs twice as much as many of the alternatives.

Hong Kong-based Counterpoint Research says that iPhone sales are falling as a result. From three million phones in 2017, sales may sink to two million this year, according to their estimate, the first decline in four years.

More than half of those sales will come from cheaper older models, and the lack of progress in India was among problems cited by Chief Executive Officer Tim Cook when he gave a disappointing holiday outlook last week.

Even in the premium segment, smartphones that cost more than $400, Apple lagged Samsung and China’s OnePlus in the third quarter.

“I have never used an iPhone and I was keen on getting my hands on one but it didn’t make sense,” says Alam, who works for one of the raft of firms to have invested in the southern city of Bengaluru, often called India’s Silicon Valley.

“I look for storage, camera and processor in phones and cheaper alternatives like OnePlus are more value for the money. The new iPhones cost almost 100,000 rupees – I can get three good phones for that price or even a decent gaming laptop.”

Solid Mac sales and the high unit price of iPhones meant Apple’s total revenue of $2 billion in India last year was still double that of OnePlus, which only sells mobile phones. But Counterpoint’s data says that gap will also shrink.

OnePlus’ India head Vikas Agarwal told Reuters this week that 10-15 percent of new customers in recent months have been defectors from Apple, suggesting even some loyalists are opting out of upgrading their handsets.

HIGH IMPORT DUTIES

Apple’s problems go beyond price.

The company, facing down a handful of regulatory headaches, lost some of its top executives in India at the start of this year.

An Apple spokesman said the departures had nothing to do with the company’s performance, but people familiar with the matter told Reuters that the departures were likely linked to the company changing its distribution system. Apple has cut the number of distributors in the country to two from five.

The sources, who declined to be identified because they have business relationships with Apple, also said company veteran Michel Columb is still working on solidifying business relations since taking control of the Indian operation in December.

Apple declined to comment further.

Prime Minister Narendra Modi’s government has sought to drive electronics producers into manufacturing locally by steadily moving tariffs up the supply chain from simple phone cases to sophisticated chipsets and boards.

Along with local firms like Lava, global smartphone giants including Samsung Electronics Co Ltd, Oppo and Xiaomi Corp have responded aggressively, investing millions of dollars in plants around Bengaluru and Delhi tech hub Noida.

Apple is the only major player which does not manufacture phones in the country and it only assembles two low-cost older models through Wistron Corp in Bengaluru.

Industry experts say as a result the company still imports about 70-80 percent of its phones. That results in high import duties, which in turn make the phones expensive.

In the United States, the basic iPhone XR model costs $749 or roughly 54,400 rupees, only two thirds of its retail price in India. Beyond that, while U.S. phones are subsidized under deals with wireless carriers, Apple’s phones in India are not.

“Apple doesn’t have enough confidence … in the Indian manufacturing system right now, to set up plants and move some of the manufacturing out of China,” said analyst Navkendar Singh of tech consulting firm IDC.

“In the process they are losing around 15-20 percent of their tax incentive … which they could have passed on to the consumer.”

EMPTY STORES

Diwali, the Festival of Lights, is peak selling time for electronics in India, but the Apple-licensed store in one of Bengaluru’s big shopping malls was deserted this past Saturday.

“Features of the emerging phones are very similar to an iPhone,” says salesman Aejaz Ahmed, adding volumes have fallen in the past few months. “It is very difficult to make out the difference from a distance because they even look so alike.”

Sales staff at several stores in Bengaluru and nearby Chennai pointed to the launch this year of the latest OnePlus phone as a major problem for the U.S. phonemaker. At 37,999 rupees, the Chinese company’s 6T is half the price of the XR.

The result, says Neil Shah, from Counterpoint, is that Apple’s user base in India is set to decline about 10 percent to nine million users this year. That compares to an estimated 436 million Android users.

“If your user base is declining, you are losing grip on the market,” he says. “The new customer base is not coming.”

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Ikea sales in Ireland pass the €180m mark

Ikea sales in Ireland grew 7.4pc in their last financial year, to €181.5m.

The company said the introduction of online shopping had helped boost revenues.

Ireland market manager Claudia Marshall said the move to online “has been a great success and has performed strongly in its first 10 months in operation, giving customers all over Ireland the opportunity to shop with IKEA whenever and wherever they want”.

The sales figure covers the year to the end of August last.

The company also said it had been boosted by investment in its two outlets here – the full-sized store in Ballymun and its order and collection point in Carrickmines, South Dublin.

It said price reductions and the hot summer had also helped.

“Ikea’s seasonal sales saw a bumper boost and as a result, Outdoor Furniture was the biggest area of growth in IKEA Ireland this year, with a total sales increase of 29pc,” the company said.

More to follow

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Goodbody upgrades outlook on Irish economy, but Brexit the 'wildcard' for assessing prospects

Goodbody has upgraded its outlook on the Irish economy.

The stockbrokers now expects domestic demand growth of 6pc in 2018, up from 4.8pc previously.

Growth of 4.4pc is anticipated in 2019, according to the ‘Q4 Irish Economy Health Check’ from the group.

  • Read more: Coffee shops ‘at saturation point’ in cities as Bord Bia report warns of staff shortages

Consumer sentiment, business investment and the construction sector have been the key drivers in the “exceptional” 7pc growth achieved in the first half of 2018.

However the report warns that Brexit remains the most important uncertainty around prospects for 2019 and beyond.

“The wildcard in assessing the prospects for the Irish economy in the coming twelve months is of course Brexit,” Dermot O’Leary, chief economist at Goodbody, said.

However it also noted that there is evidence that Ireland is becoming the most popular destination for firms looking for an EU base in the post-Brexit world.

The report also looks at the labour market and finds that there are few resources not being used, as evidenced by a labour market which is very close to full employment.

There is some scope for participation to increase, but this will be a slow process.

“Migration provides an important source of labour, but this is not available to the same extent as in the mid-2000s,” Mr O’Leary, said.

“We believe further skills shortages and upward wage pressures are likely given the expected further fall in unemployment to 4.5pc.”

On the issue of housing, the report finds that supply needs to double again to reach the estimated level of household demand.

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Stocks hold gains, dollar weaker as Democrats win U.S. House

TOKYO (Reuters) – Wall Street stock futures and Asian shares held earlier gains on Wednesday after Democrats won control of the U.S. House of Representatives, boosting the party’s ability to block President Donald Trump’s political and economic agenda.

The Democrats’ House win creates a clear hurdle for Republicans to easily pass legislation through both chambers of Congress, clouding the outlook for some of Trump’s key economic proposals.

In Asian trade, major broadcasters projected the Democrats would wrest House control, while the Republicans were seen retaining the Senate.

While both outcomes were broadly in line with market expectations, a reason markets did not sell off, the prospect of political gridlock creates some uncertainty for investors. The dollar weakened against most of its major counterparts.

In equities markets, U.S. S&P500 futures ESc1 rose 0.3 percent, MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.3 percent and Japan’s Nikkei .N225 gained 1.2 percent.

“It has clearly become difficult for Republicans to pass additional tax hikes or amendments to Dodd-Frank regulations (on financial institutions) for instance,” said Tomoaki Shishido, fixed income analyst at Nomura Securities.

Investor sentiment had been volatile in Asian trade with stocks and the dollar swinging on the Republicans’ fluctuating prospects of retaining the House.

While a split Congress would put a brake on Trump’s agenda, such as tax cuts or deregulation, some investors think the Democrats may agree to more spending.

“There are still areas with compromise for spending, so even with a split government I expect more fiscal stimulus ahead. There is some possibility for compromise on infrastructure spending as well,” said Steve Friedman, New York-based senior economist at BNP Paribas Asset Management.

“If there is additional fiscal stimulus, it suggests that fiscal policy is more of a tailwind for U.S. growth and it should, all things equal, be supportive for stocks.”

On the other hand, many investors also expect Trump to continue to take a hard line on tariffs, which he can impose without Congressional approval. That keeps alive worries about a trade war between China and the United States.

Trump’s massive tax cut, enacted in December, and a spending agreement reached in February have helped lift the U.S. economy, but they have also widened U.S. federal budget deficit.

As a result, Treasury supply has been growing, pushing U.S. bond yields higher.

The election results pushed down the 10-year U.S. Treasuries yield about 2 basis points to 3.193 percent US10YT=RR, off its seven-year high of 3.261 percent touched a month ago. But the debt market also remains under pressure from this week’s record volumes of longer-dated government debt supply.

Oil prices were soft after a 2 percent fall the previous day, with U.S. crude futures hitting an eight-month low as Washington granted sanction waivers to top buyers of Iranian oil and as Iran said it has so far been able to sell as much oil as it needs to.

U.S. West Texas Intermediate (WTI) crude CLc1 futures traded 0.5 percent lower at $61.91 a barrel having hit a low of $61.31 on Tuesday, the weakest price since March 16.

In the currency market, the dollar dipped on the U.S. election results. Against the yen, it was 0.2 percent lower at 113.23 JPY=, reversing earlier gains to one-month high of 113.82 yen.

The euro rose 0.3 percent to $1.1467 EUR= and the British pound GBP=D3 gained 0.3 percent to $1.3140, hitting a three-week high.

Sterling extended gains made the previous day on hopes of a Brexit deal breakthrough after Brexit Secretary Dominic Raab said “Thumbs Up” on his way out of a cabinet meeting.

That helped sterling recover losses following remarks from a senior member of the Northern Irish Democratic Unionist Party earlier that it looked like Britain would exit the EU without a deal.

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Wall Street futures, Asia stocks fall as U.S. elections trickle in

TOKYO (Reuters) – Wall Street stock futures and Asian shares dropped on Wednesday as early results of the U.S. midterm elections started to trickle in, with investors bracing for the Republicans to lose their grip on Congress.

U.S. S&P500 futures dropped 0.4 percent as Democrats are seen as likely to pick up a few closely-contested seats on the East Coast in the congressional elections, which is billed as a referendum on President Donald Trump’s polarizing style and “America First” policies. The initial results also weighed on the dollar.

MSCI’s broadest index of Asia-Pacific shares outside Japan was flat in early trade while Japan’s Nikkei erased earlier gains.

Voter turnout in national elections, normally lower when the presidency is not at stake, could be the highest for a midterm election in 50 years.

The opposition Democrats are favored by election forecasters to pick up the 23 seats they need to gain a majority in the House, but have slimmer chances of gaining control of the Senate, opinion polls show.

“We, like many other market players, expect Democrats to take the House and to have a split Congress. That should mean Trump won’t be able to push for further tax cuts and could lead to a risk-off mood in markets,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

“But that is probably already factored in, so I would think any additional selling in stocks would be limited,” he said.

Many investors also expect Trump to continue to take a hard line on tariffs, which he can impose without Congressional approval. That keeps alive worries about a trade war between China and the United States.

Trump’s massive tax cut, enacted in December, and a spending agreement reached in February have helped lift the U.S. economy, but they have also widened U.S. federal budget deficit.

As a result, Treasury supply has been growing, pushing U.S. bond yields higher.

The 10-year U.S. Treasuries yield stood at 3.195 percent, near its seven-year high of 3.261 percent touched a month ago, as investors sold ahead of this week’s record amounts of longer-dated government debt supply.

Oil prices were soft after a 2 percent fall the previous day, with U.S. crude futures hitting an eight-month low as Washington granted sanction waivers to top buyers of Iranian oil and as Iran said it has so far been able to sell as much oil as it needs to.

U.S. West Texas Intermediate (WTI) crude futures traded down 0.7 percent at $61.79 a barrel having hit a low of $61.31 on Tuesday, the weakest price since March 16.

The dollar slipped broadly on concerns about Republicans defeat in the House.

The euro gained 0.3 percent to $1.1462, hitting a two-week high.

The yen also rose 0.25 percent to 113.18 per dollar, bouncing back from a one-month low of 113.505 on Tuesday.

The British pound gained 0.2 percent to $1.3126, a three-week high, extending gains on hopes of a Brexit deal breakthrough after Brexit Secretary Dominic Raab said “Thumbs Up” on his way out of a cabinet meeting.

That helped sterling recover losses following remarks from a senior member of the Northern Irish Democratic Unionist Party earlier that it looked like Britain would exit the EU without a deal.

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U.S. agency probes 1.7 million GM SUVs for windshield wiper failures

WASHINGTON (Reuters) – The U.S. National Highway Traffic Safety Administration (NHTSA) said on Tuesday it is investigating whether General Motors Co (GM.N), the largest U.S. automaker, should recall an additional 1.7 million sport utility vehicles due to an issue with windshield wiper failures.

GM in August 2016 recalled 367,800 2013 GMC Terrain and Chevrolet Equinox SUVs in the United States to address the problem.

But after receiving 249 complaints about similar problems, the federal agency said it is probing whether the recall should be expanded to include an additional 1.7 million vehicles from the 2010-2016 model years.

The automaker said it is cooperating with the NHTSA review.

GM said it recalled the 2013 GMC Terrain and Chevrolet Equinox SUVs “because warranty data showed a higher-than-expected failure rate,” adding it has continued to monitor field data on other model years of those vehicles.

GM noted that no crashes or injuries related to the issue have been reported.

The Detroit-based automaker said the recalls were prompted after a GM Canada brand quality manager reported a potential safety issue relating to reports of windshield wiper failures in Canada through GM’s “Speak Up For Safety,” program in late 2015.

The data showed significantly higher field incidents in parts of Canada, which prompted a June 2016 recall there. Over the next two months, a higher number of U.S. reports prompted a U.S. recall, the company added.

In the 2016 recall, GM said the front-wiper module would be replaced with a module that has a water deflector and, if needed, dealers would fill the water management hole and drill a new small hole in a different location.

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