Macquarie raises $5 billion for North America infrastructure fund

(Reuters) – The investment arm of Australia’s Macquarie Group Ltd (MQG.AX) said on Thursday it has raised $5 billion for its latest fund to invest in infrastructure in North America.

The fundraising underscores the private sector’s appetite to invest in U.S. infrastructure, which runs the gamut from toll roads to airports to oil fields, amid a dearth of federal and state infrastructure funding for many projects.

Private equity fund managers raised a record $85 billion in 2018 for infrastructure, with more than half coming from funds raised with a focus on North America, data from Preqin, an industry tracker, showed. Globally, the amount of money raised but not yet invested hit a record $172 billion last year.

Blackstone Group LP (BX.N) reached a first close last year of $5 billion for its new infrastructure fund and is aiming eventually to raise up to $40 billion. Major infrastructure investors Brookfield Asset Management (BAMa.TO) and Global Infrastructure Partners are also raising new funds.

While there were hopes that political consensus would emerge in the United States for more federal spending in infrastructure, this has not yet come to pass.

Democrats last year indicated a willingness to work with U.S. President Donald Trump’s administration on an infrastructure investment program. This would follow a plan by Trump unveiled in 2017 designed to encourage spending on improvements by states, localities and private investors, which was widely panned for offering no new direct federal spending and never got a vote in Congress.

“To the extent that there are government privatizations in areas where there’s been historically few, we would certainly review those opportunities,” Macquarie Infrastructure Partners Chief Executive Karl Kuchel said in an interview.

“But there is already a large and deep private sector infrastructure investment opportunity set in North America and there always has been.”

Investment is needed, with America $1.44 trillion short of what it needs to spend on infrastructure through the next decade, according to a 2016 report by The American Society of Civil Engineers (ASCE).

The new Macquarie fund, Macquarie Infrastructure Partners IV, will primarily focus on the United States and Canada.

It will follow the same strategy as its predecessor fund, which closed in 2014, to invest in energy, transportation, waste and communications infrastructure but dependant on where the strength of the U.S. economy is, Kuchel said.

“The difference between fund III and fund IV is the expectation of where we are in the economic cycle. With fund III we had recently come out of the global financial crisis. Now, it’s reasonable to expect we’re close to the end of this economic cycle,” he said.

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U.S. labor market tightens, wages grow moderately: Fed Beige Book

WASHINGTON (Reuters) – Labor markets tightened across the United States as businesses struggled to find workers at any skill level and wages generally grew moderately, the Federal Reserve said on Wednesday in its latest report on the economy.

The U.S. central bank’s “Beige Book” report, a snapshot of the economy gleaned from discussions with business contacts, found tight labor markets across all 12 Fed districts, with a majority reporting moderate wage gains.

A majority of districts also reported modest-to-moderate price increases, with a number saying higher tariffs had driven up costs.

The Fed reported that outlooks for the economy were generally positive, but added that many districts said contacts were less optimistic due to increased financial market volatility, rising short-term interest rates, falling energy prices, and elevated trade and political uncertainty.

The effect of the partial U.S. government shutdown, now in its fourth week, appeared to be muted while the information for the Beige Book was gathered.

The only mention of a shutdown-related impact came from the Chicago Fed, which said farmers and others were facing greater uncertainty due to the slowed release of government agricultural reports. Payments to farmers impacted by tariffs were also disrupted by the shutdown.

The Fed raised interest rates at its policy meeting last month, its fourth hike of 2018.

But with inflation showing no sign of rising above the Fed’s 2 percent target, and mounting worries about trade policy and slowing global growth, Fed Chairman Jerome Powell has said the central bank will take a “patient” approach to rate hikes this year.

And now, as the record-long government shutdown threatens growth further and the Fed begins preparing for its next policy meeting later this month, many of Powell’s fellow policymakers have echoed that sentiment.

The Beige Book offers a window into what policymakers are seeing and hearing in their own districts, information that they typically draw on when they stake out their own views of the economy at the Fed’s rate-setting meetings.

Powell in particular has said he pays close attention to such anecdotes to assess where the economy is heading before it is apparent in the data.

The latest Beige Book was prepared by the Chicago Fed based on information collected on or before Jan. 7, 2019.

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China brushes off outrage over death sentence, Canada fires back

BEIJING/SHERBROOKE, Quebec (Reuters) – China said on Wednesday it was “not worried in the slightest” by mounting international concern over the death sentence handed to a Canadian for drug smuggling.

Monday’s sentence for Robert Schellenberg for smuggling 222 kg (489 lbs) of methamphetamines prompted Canadian Prime Minister Justin Trudeau to accuse China of “arbitrarily” applying the death penalty.

Trudeau has called several world leaders in recent days to share concerns about the case of Schellenberg and two Canadians that Beijing detained last month after a senior Chinese executive was arrested in Vancouver on a U.S. arrest warrant.

Speaking at a daily news briefing, Chinese Foreign Ministry spokeswoman Hua Chunying said Canada’s “so-called allies could be counted on ten fingers” and did not represent the views of the wider international community.

“I can very clearly state that we are not worried in the slightest,” Hua said of the mounting outcry, adding that a majority of Chinese supported severe punishment for drug crimes.

Schellenberg’s sentence has further strained relations between China and Canada, already aggravated by the December arrest of Meng Wanzhou, chief financial officer of Huawei Technologies Co Ltd [HWT.UL], on a U.S. extradition request.

Asked about Hua’s remarks, Canadian Foreign Minister Chrystia Freeland noted that the 28-nation European Union had offered its backing to Ottawa.

“We’re very pleased to have this support from the EU which …, like Canada, believes in the rule of law,” she told reporters as Trudeau’s cabinet prepared to meet in Sherbrooke, Quebec.

For the second day in a row, however, she stressed that Canada and China enjoyed a broad and deep relationship.

Freeland and U.S. Secretary of State Mike Pompeo spoke on Tuesday and “expressed their concerns about the arbitrary detentions and politically motivated sentencing of Canadian nationals”, the State Department said.

Days after Meng’s arrest, China detained two Canadians on suspicion of endangering state security. One of the men, Michael Kovrig, is a diplomat on leave without pay from Canada’s embassy in Beijing.

John McCallum, Canada’s ambassador to China, told reporters the standoff would not be settled quickly and vowed to enlist the help of foreign allies – especially the United States – and the business community.

“I think we have to engage the senior Chinese leaders and persuade them that what they are doing is not good for China’s image in the world, it’s not good for the image of corporate China,” he said on the sidelines of the retreat.

“It’s difficult, it won’t happen tomorrow.”

Trudeau complained last week that China was not respecting Kovrig’s diplomatic immunity. A source directly familiar with the case said Canada was unhappy because Chinese officials were questioning Kovrig about his work when stationed at the embassy.

The news was first reported by the Globe and Mail newspaper.

McCallum said Kovrig and the other Canadian were being questioned up to four hours a day, had no access to lawyers and were only allowed one consular visit a month.

China has not linked any of the three Canadians’ cases to Meng’s arrest, but has warned of severe consequences if she was not immediately released.

The Global Times, a state-run tabloid with a nationalistic bent, said China “cannot be weak at this time”.

“Canada does not have any special cards that can allow Chinese law to bow its head to it,” the newspaper said in an editorial on Wednesday, adding that Canada’s protests would have no effect.

Freeland said on Tuesday that Ottawa had formally applied for clemency for Schellenberg.

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When asked if China typically listened to this type of request, Hua said the judiciary was not subject to “interference from administrative organs”.

“You ask whether China is willing to listen to the Canadian side’s request, but I don’t know if Canada’s leaders or politicians have seriously listened to China’s solemn position,” Hua said.

Schellenberg had appealed against an original 15-year prison sentence issued in November, but the court in Liaoning province sided with prosecutors who argued at a retrial that the punishment was too light.

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Tunisia's largest union stages nationwide strike over pay

TUNIS (Reuters) – Rail, bus and air traffic stopped in Tunisia on Thursday as the powerful UGTT union staged a one-day nationwide strike to protest against the government’s refusal to raise the salaries of 670,000 public servants.

Thousands gathered in front of UGTT headquarters in central Tunis chanting: “The people want the overthrow of the government”. The same slogan was used in 2011 when mass protests toppled strongman Ben Ali and kicked off “Arab Spring” uprisings across the region.

Tunisia is the only Arab country that has undergone a transition to democracy in the wake of those protests, avoiding civil war as in Syria or a return to autocratic rule like Egypt.

But an economic crisis has eroded living standards in the North African country and unemployment is high as political turmoil and lack of reforms have deterred investment needed to create jobs. That has forced the government to launch austerity measures to please donors and lenders including the International Monetary Fund.

The one-day strike hit airports, ports, schools, hospitals, state media and government offices. At Tunis Carthage airport, most flights were canceled and check-in counters closed, leaving hundreds of angry passengers stranded.

“The power belongs to the people”, protesters chanted at a central UGTT rally near the central Habib Bourghiba Avenue, the scene of mass protests in 2011, also calling for salary increases. Police showed a strong presence but did not interfere.

Tunisia is under pressure from the IMF to freeze public sector wages as part of measures to reduce its budget deficit.

The public sector wage bill has doubled to about 16 billion dinars ($5.5 billion) in 2018 from 7.6 billion in 2010.

But the UGTT says the monthly average wage of about $250 is one of the lowest in the world, while the state Institute of Strategic Studies says real purchasing power has fallen by 40 percent since 2014.

Sami Tahri, Deputy Secretary-General of the UGTT, said the government had opted for a confrontation with public servants in a bid to meet the IMF’s demands.

Government spokesman Iyad Dahmani said the state did not have the funds to pay more for public employees — any increase would lift annual inflation to 10 percent from 7.4 percent now.

Government and union sources told Reuters the government had proposed spending about $400 million on pay rises whereas the UGTT had asked for about $850 million. The government aims to cut the public sector wage bill to 12.5 percent of gross domestic product in 2020 from the current 15.5 percent, one of the world’s highest levels according to the IMF. Tunisia struck a $2.8 billion loan deal with the IMF in December 2016. The program aims to overhaul its ailing economy with steps to cut chronic deficits and trim bloated public services, but progress has been slow.

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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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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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As shutdown lingers, Pelosi asks Trump to delay State of Union address

WASHINGTON (Reuters) – With the U.S. government shutdown dragging into its 26th day, House Speaker Nancy Pelosi on Wednesday urged President Donald Trump to reschedule his State of the Union address – a move that could deny the president the opportunity to use the pageantry of the speech to attack Democrats in their own chamber over the impasse.

With Trump’s address set for Jan. 29, Pelosi wrote him a letter citing security concerns because the Secret Service, which is required to provide security for the address, has not received funding during the dispute.

The standoff was triggered by Trump’s demand for a round of funding for his promised wall on the U.S.-Mexico border.

Presidents traditionally deliver the address, which lays out the administration’s goals for the upcoming year, in the House chamber before a joint session of Congress and the majority of the Cabinet.

Democrats took control of the House after last year’s congressional elections. During the shutdown, Trump has routinely blamed them for the stalemate, although he had earlier said he would take responsibility.

In comments to reporters on Wednesday, Pelosi suggested that if Trump would not agree to reschedule the speech until the government re-opens, he could deliver it from the Oval Office instead, a setting that would lack the grandeur of the congressional address.

The White House had no immediate comment on Pelosi’s request and her letter appeared to take aides by surprise. It pointed out that she had invited Trump to make the State of the Union address at the Capitol but said the shutdown complicated the situation.

“Sadly, given the security concerns and unless government re-opens this week, I suggest we work together to determine another suitable date after government has re-opened for this address or for you to consider delivering your State of the Union address in writing to the Congress,” Pelosi wrote.

Representative Jim Jordan of the House Freedom Caucus, a group of conservative Republicans who are close allies of Trump, said Pelosi’s move showed the lengths to which Democrats will go to obstruct Trump.

“It sure sounds like she’s looking to not have the president come and give the State of the Union address, not have the commander-in-chief come and address the nation,” Jordan told Reuters. “I think that just shows that they’re more focused on stopping the president than they are on serving the country.”

Trump on Wednesday is expected to sign legislation that would ensure 800,000 federal employees will receive back pay when the government reopens.

Some government employees are being asked to return to work after being initially told to stay home during the shutdown, although they will not be paid on schedule.

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Both the Internal Revenue Service and the Federal Aviation Administration on Tuesday said they would call back nearly 50,000 employees to process tax returns, refunds and other tasks or to work in aviation safety inspection.

The U.S. Department of Agriculture said it was recalling about 2,500 furloughed Farm Service Administration employees to assist farmers with existing loans and ensure the agency meets a deadline for providing tax documents.

The Washington Post reported that Food and Drug Administration workers also have been called to work without pay during the shutdown.

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U.S. money market assets recede from recent surge: iMoneynet

NEW YORK (Reuters) – The U.S. money market industry recorded its first outflow in six weeks, as assets retreated from their strongest levels since early 2010 prompted by a rebound in equities and other risky assets, according to a private report released on Wednesday.

U.S. money market funds, which are seen only a tad riskier than bank accounts, posted a $17.00 billion drop in assets to $3.012 trillion in the week ended Jan. 15, the Money Fund Report said on Wednesday.

Withdrawals from money market funds in the latest week reversed prior weeks’ heavy inflows, as stock markets around the world showed some stabilization after being rattled in the last weeks of 2018 and early 2019 on worries about a global economic slowdown, analysts said.

Taxable money market fund assets declined by $16.22 billion to $2.867 trillion, led by a $16.03 billion drop in assets among institutional government funds, according to the report, published by iMoneyNet.

Tax-free assets fell by $775.80 million to $145.76 billion,

The seven-day simple yield on taxable money-market funds averaged 2.03 percent, down from 2.07 percent the week before, while the average seven-day simple yield for tax-free and municipal money-market funds slipped to 0.98 percent from 1.19 percent the previous week, iMoneyNet said.

(GRAPHIC: U.S. money fund assets – tmsnrt.rs/2N3eZa0)

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Greek PM Tsipras wins confidence vote, eyes Macedonia accord

ATHENS (Reuters) – Greek Prime Minister Alexis Tsipras won a confidence vote in parliament on Wednesday, clearing a major hurdle for Greece’s approval of an accord to end a dispute over Macedonia’s name and averting the prospect of a snap election.

Tsipras called the confidence motion after his right-wing coalition partner Panos Kammenos quit the government on Jan. 13 in protest over the name deal signed between Athens and Skopje last year.

Parliament gave Tsipras 151 votes, meeting the threshold he required in the 300-member assembly. His leftist Syriza party has 145 seats in parliament while additional support was gleaned by defectors of Kammenos’s ANEL party and independents.

“I call upon you with hand on heart to give a vote of confidence to the government which gave battle, which bled, but managed to haul the country out of memorandums and surveillance,” Tsipras said, referring to Greece’s international lenders who kept the country on a tight leash for years.

He described the vote as a ‘vote of confidence in stability’.

“Our only concern is to continue to address the needs and interests of the Greek people,” Tsipras told journalists.

Greek opponents of the agreement say Macedonia’s new name – the Republic of North Macedonia, reached after decades of dispute between Athens and Skopje, represents an attempt to appropriate Greek identity.

Macedonia is the name of Greece’s biggest northern region. The deal was signed between the two countries in mid-2018, contingent on ratification of parliaments in both countries and a necessary step for the tiny Balkan state to be considered for European Union and NATO membership.

The Macedonian parliament ratified the pact last week. It has yet to be brought to a vote by Greece, though that is expected this month.

Tsipras, whose four-year term expires in October, has faced down parliament before on the Macedonia deal. He survived a no-confidence vote mounted by the opposition when the two states agreed on a compromise in June 2018.

But setting the stage for more acrimony over an issue which is a red flag for many Greeks, opposition parties have decried the deal as a national sell out, while demonstrators plan to protest in central Athens on Jan. 20. Past protests have drawn hundreds of thousands.

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“This is a nationally-damaging agreement,” Kyriakos Mitsotakis, head of the main opposition New Democracy conservatives, told parliament during the confidence debate.

He repeatedly called the administration “a ragbag government” clutching at straws to stay in power.

“Elections are the only solution for the country to move ahead … for Greeks to take their fate into their hands. Just leave.” he said.

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