ARAB TIMES, THURSDAY, NOVEMBER 26, 2015

31BUSINESS

US consumer spending slows in OctoberBusiness investment poised to rise

WASHINGTON, Nov 25,(RTRS): US consumer spend-ing barely rose in October ashouseholds took advantage ofrising incomes to boost sav-ings to their highest level innearly three years, pointingto moderate economic growthin the fourth quarter.

Anemic consumer spending willprobably do little do change expecta-tions that the Federal Reserve willraise interest rates next month as otherdata on Wednesday showed a surge inbusiness spending plans in Octoberand a drop in new applications forunemployment benefits last week.

“As far as fourth-quarter GDP goes, thatis likely to keep estimates close to 2 per-cent. That’s enough to justify a rate hike aslong as next Friday’s employment report isnot a disaster,” said Chris Low, chief econ-omist at FTN Financial in New York.

The Commerce Department said con-sumer spending edged up 0.1 percent aftera similar increase in September. That sug-

gests consumer spending, which accountsfor more than two-thirds of US economicactivity, has slowed from the third quar-ter’s brisk 3.0 percent annual pace.

The tepid rise in consumer spendingcould combine with an anticipated dragfrom an ongoing inventory reduction tohold the economy to around a 2 percentgrowth rate in the fourth quarter.

But the economy, which expanded at a2.1 percent rate in the third quarter, couldget support from business spending.

In a separate report, the CommerceDepartment said non-defense capitalgoods orders excluding aircraft, a closelywatched proxy for business spendingplans, increased 1.3 percent last monthafter rising 0.4 percent in September.

Coming on the heels of data this monthshowing a solid increase in manufacturingoutput in October, it suggested the worstof the drag from a strong dollar and deepspending cuts by energy firms was over.

Fed officials had held off raising ratesat their last two meetings as they assessedthe degree to which dollar strength and aslowing in economies overseas wouldweigh on the United States.

“The surge in core capital goods orderscould be a crucial signal that this impor-

State-owned Oman Oil Refineries andPetroleum Industries Co (ORPIC)said it had finalised negotiations withpreferred bidders for $4.5 billion worthof contracts to build a major plasticscomplex in the sultanate.

The four engineering, procurementand contracting packages will becompleted in four years, with plantsto be commissioned in 2019, ORPICsaid in a statement on Wednesday.

A joint venture of Chicago Bridge

& Iron Co of the United States andTaiwan’s CTCI will be awarded thecontract for a steam cracker andutilities, ORPIC said. In a separatestatement, Chicago Bridge & Ironsaid that contract would be worthabout $2.8 billion.

Italy’s Tecnimont will win a con-tract for plastics units, SouthKorea’s GS Engineering andConstruction and Japan’s Mitsui &Co a contract for natural gas liquids

extraction facilities, and India’sPunj Lloyd a contract for a pipe-lime, ORPIC said.

The Liwa Plastics Project, beingbuilt in Oman’s northern port city ofSohar, is a big part of the sul-tanate’s effort to diversify its econo-my away from hydrocarbons. It isdesigned to enable Oman to pro-duce polyethylene for the first time,and to increase its output ofpolypropylene. (RTRS)

Oman completes $4.5b contract talks for plastics complex

Mexico and Qatar signed an agree-ment on Tuesday to establish com-mercial flights between their capi-tals as the Gulf monarchy’s rulervisited the Latin American nation.

Mexican President Enrique PenaNieto hosted Qatar’s Amir, SheikhTamim bin Hamad Al Thani, atMexico City’s National Palace,where they oversaw the signing ofseveral agreements.

It was the first visit by a Qatari

Amir since the two nations estab-lished diplomatic relations in 1975.

Pena Nieto declared that themeeting will open opportunities forbusiness between the two nationsin energy and infrastructure, theMexican presidency said in a state-ment.

The two countries inked an airservice agreement to establishflights between Doha and MexicoCity, the statement said.

Their respective central bankssigned a memorandum of under-standing to exchange experiences inbanking regulation and supervision.

The governments also agreed ona technical cooperation deal to pro-mote trade, mining, energy, agricul-ture, tourism and education.

Pena Nieto accepted an invitationto visit Qatar at an undetermineddate, which would be the first tripthere by a Mexican leader. (AP)

Mexico, Qatar sign aviation deal during Amir’s visit

BoE to hike rates in Q2 2016, but dependent on Dec Fed moveLONDON, Nov 25, (RTRS): The Bankof England will hike interest rates inthe second quarter of next year butthe timing may rest on whether theUS Federal Reserve tightens policy inthe world’s largest economy nextmonth, a Reuters poll found.

Bank Rate has sat at a record low0.5 percent since March 2009 and themedian from the poll of over 50 econ-omists, taken this week, said a first 25basis point rise will not come until atleast April, unchanged from a pollpublished on Nov 10.

But half of the 36 economists whoanswered an extra question said if theFed does not raise borrowing costs as

expected in December, they will prob-ably move their BoE forecasts furtherinto the future.

“If the Fed decide not to hike inDecember we would expect thatwould be the result of a weaker glob-al outlook. When the BoE come tomake their decision they would citethe same risks and exercise the samecaution,” said Kallum Pickering atBerenberg Bank.

Of the five economists who stillexpect a move in the first quarter,three said their conviction over thetiming had decreased over the pastmonth. None of the 52 economistspolled expect any move at the Bank’s

policy meeting on Dec 10.Economists once predicted it would

be the first central bank to raise inter-est rates from crisis-era lows but haveshifted their forecasts as the globaleconomic outlook has darkened.Inflation remains non-existent inBritain, where the Bank targets a rateof 2 percent.

Britain’s recovery lost momentumlast quarter, with GDP growing 0.5percent, data are expected to showon Friday.

British finance minister GeorgeOsborne is likely renew his austeritydrive later on Wednesday, taking agamble that voters can accept four

more years of deep spending cuts to fixthe country’s public finances, despitethe dimming economic outlook.

Economists gave a median 23 per-cent chance of a hike by end-March,a 55 percent likelihood rates will movein the second quarter and a more cer-tain 80 percent chance Bank Ratehas gone up by the end of next year.

Nearly all the economists polledsaid financial markets, which do notexpect any change in interest ratesuntil the tail-end of 2016, were under-pricing a first rate move. Reuters pollsthis year have consistently foundeconomists predicting a hike by theBoE in the first half of 2016.

tant sector of the economy may be at aturning point, further bolstering the Fed’sconfidence in the sustainability of theeconomic recovery,” said MillanMulraine, deputy chief US economist atTD Securities in New York

Manufacturing, which accounts for 12percent of the economy, has beenslammed by the strong dollar and spend-ing cuts in the energy sector. The dollarhas appreciated 18.1 percent against thecurrencies of the United States’ maintrading partners since June 2014.

The pace of appreciation, however, isgradually slowing. Economists alsobelieve that the bulk of spending cuts byoil field firms like Schlumberger inresponse to lower crude prices havealready been implemented.

US Treasury debt prices pared gainsafter the reports, while the dollar hit aneight-month high against a basket of cur-rencies.

Economists speculate that rising rentsare diverting money from discretionaryspending. While consumer sentiment

increased in November from October,households continued to fret over theirfinancial prospects, another reportshowed.

But as the labor market continues totighten, there is optimism that wagegrowth will pick up and encourage con-sumers to loosen their purse strings andboost spending.

A fourth report from the LaborDepartment showed initial claims forstate unemployment benefits declined12,000 to a seasonally adjusted 260,000

for the week ended Nov 21.Claims have now held below the

300,000 threshold for 38 consecutiveweeks, the longest stretch in years, andremain close to levels last seen in theearly 1970s.

Strengthening labor market conditionsare gradually lifting income. TheCommerce Department said personalincome increased 0.4 percent last month,accelerating after a 0.2 percent gain inSeptember. Wages and salaries shot up 0.6percent, the largest increase since May.

In this file photo, 2015 Chrysler 200 automobiles move down the assembly line at the Sterling Heights Assembly Plant in SterlingHeights, Mich. Fiat Chrysler will have to spend an additional $1 billion on Michigan facilities over 15 years to qualify for $1.9

billion in business tax credits under an agreement approved on Nov 24, by the state’s economic development board. (AP)

Tech world raids Wall St talent

Three Goldman bankers leave for UberNEW YORK/SAN FRANCISCO, Nov25, (RTRS): Three mid-level bankers inGoldman Sachs Group Inc’s technologyinvestment banking group in SanFrancisco have left to take positions atride service company Uber TechnologiesInc in recent months, people familiar withthe matter told Reuters.

The bankers are the latest to leave WallStreet banks for Silicon Valley startups,where the lure of more flexible hours -and in some cases stock options and sharegrants - can be hard to resist. For techcompanies, having bankers on staff canhelp smooth the path to an initial publicoffering and other capital raisings.

Uber, currently valued at around $51billion, said in August that it expected anIPO within 18 to 24 months. It hasalready raised $7.4 billion from multiplefinancing rounds, and is the biggest so-called “unicorn” - the term for privatelyheld tech startups worth $1 billion ormore - that has yet to go public.

Goldman does not disclose attritionfigures, but it has lost enough employeesto startups, private equity firms, and othercompanies in recent years that itannounced earlier this month a series ofchanges designed to help it retain morejunior employees at the analyst and asso-ciate level, including promoting themfaster. It has also set up a task force tohelp it retain mid-level employees whohold the vice president title.

Spokespeople for Goldman and Uberboth declined to comment.

The increasing attraction of otherfields for Wall Street bankers underscoreshow increased regulation after the finan-cial crisis has weighed on employees’potential earnings from careers in the sec-tor.

There is a lack of publicly availabledata documenting how many people haveleft the big banks, but there have been a

series of high profile exits, includingRuth Porat, former chief financial officerat Morgan Stanley, who earlier this yeartook a similar role at Google parentAlphabet Inc , and Michael Evans, for-mer vice chairman and head of Asia atGoldman, who became president ofChina e-commerce company AlibabaGroup Holding in August.

A vice president in Wall Street invest-ment banking can get paid $500,000,including bonus, while a mid-level cor-porate development employee at a tech-nology company like Uber might earncloser to $200,000, recruiters said. Thebanker’s salary will often fluctuatedepending on how the deals and capitalraising areas are doing in a particularyear.

OpportunityBankers may take pay cuts to move to

Silicon Valley, but there is often theappeal of a better work-life balance andthe opportunity to work at fast-growingprivate companies that can offer shares orstock options, and therefore the possibili-ty of big IPO paydays for senior staff.Those gains can sometimes more thanmake up for the reduced salaries.

Some younger workers who wouldhave been expected to head to Wall Streetin the past are avoiding banks altogether.At Harvard Business School, for exam-ple, 20 percent of graduating studentsfrom the class of 2015 said they were tak-ing jobs at technology companies, upfrom 11 percent in 2011, according to theschool’s employment report.

While 31 percent of students said theywere going to work for financial servicescompanies, about three quarters of thatgroup went into venture capital, privateequity and leveraged buyout firms. Thenumbers going into investment bankingand sales and trading, the traditional

focus of firms like Goldman, halved to 5percent, from 10 percent in 2011.

Banks may not like losing employees,but they would rather lose them to clientsthan to competitors, said Noah Schwarz, asenior recruiter at headhunters Korn Ferry.A banker that goes to a client is “viewed asa ‘good leaver,’” Schwarz said.

The three Goldman employees whojoined Uber — Ian Kleinfield, PrabirAdarkar, and Chris Lapointe — did notreturn emails and LinkedIn messagesseeking comment.

Uber has hired a number of senioremployees from Goldman’s technologyinvestment banking group before, includ-ing finance chief Gautam Gupta and cor-porate development head CameronPoetzscher.

The ride service company often hiresbankers for corporate development. Theyfocus on plotting the company’s strategyand handling financial transactionsincluding capital raising. Some of thebank’s employees would know Uber’sfinances well as Goldman helped it toraise $1.6 billion by selling convertiblesecurities to Goldman wealth manage-ment clients this year.

Former Goldman employees on theengineering side have also played keyroles in creating the formulas that Uberuses to determine how much it shouldcharge for rides at any given time basedon demand, recruiters said.

Uber has relationships with a numberof other Wall Street banks. They includeMorgan Stanley, which was the leadarranger of a $2 billion line of credit forthe company, also this year.

Uber is growing very rapidly, and nowhas about 5,000 employees, up from onlyabout 550 at the beginning of 2014. Thecompany has expanded to dozens of newcities in the past two years, and nowspans 68 countries.

Greater transparency

Regulators move onhigh-speed tradersNEW YORK, Nov 25, (AP): Regulatorsare proposing new procedures to monitorhigh-speed trading more closely inresponse to wild market swings broughton by a series of technical breakdowns.

More than 70 percent of all trading todayis automated, the Commodity FuturesTrading Commission said Tuesday as itvoted unanimously in favor of new regis-tration standards for high-speed traders.

The systems use algorithms to spotvariances in market data, allowing trad-ing firms to deliver buy and sell orders inmilliseconds.

That technology has led to a number ofhigh-profile glitches, including one thissummer that shut down the New YorkStock Exchange for almost half a day.

The CFTC proposals would requiresome traders to register with the commis-sion, specifically those “engaged in algo-rithmic trading through direct electronicaccess” to major U.S. markets. The newrules are meant to foster greater trans-parency and they are open for a 90-daypublic comment period.

They also call for tools to prevent“self-trading,” when one firm takes bothsides of a trade.

Key elements of the proposal involvemarket participants, including merchants,setting up risk controls for the tradingorders. They must also submit compli-ance reports describing those controls.

CFTC commissioner Timothy Massadsaid the proposal “provides some common-sense risk controls” that also embrace thebenefits of automated trading. In a state-ment, he said the goal is to have risk controlsat multiple levels, from the exchange itself,to clearing members and trading firms.

The approach comes one year afterhigh-speed trading firm Athena CapitalResearch agreed to pay a $1 millionpenalty to settle allegations of marketmanipulation. The Securities andExchange Commission alleged that thecompany used an algorithm to manipu-late closing prices of thousands of stocks.The company placed a large number ofrapid trades in the final seconds of everytrading day over a six-month period.

S&P downgradesYahoo’s outlookPARIS, Nov 25, (AFP): Rating agencyStandard and Poor’s said onWednesday it had cut its credit ratingoutlook for Internet giant Yahoo, say-ing revenue growth was likely to below.

“The negative rating outlook reflectsour expectation that Yahoo’s operatingperformance will remain weak over thenext 12 months, primarily due to low rev-enue growth and rising traffic acquisitioncost,” Standard and Poor’s said in a state-ment.

The move revises downward theagency’s previous “stable” rating forYahoo.

Standard and Poor’s warned it couldcut its current “BB+” corporate rating forYahoo “if the company’s competitive-ness in its display or search advertisingbusinesses continues to decline” and ifYahoo “failed to reverse the negativeoperating trends affecting EBITDA”, ameasure of a company’s operating per-formance.

It warned that further “debt-financed,shareholder-oriented initiatives or acqui-sitions” could also cost Yahoo its currentrating.

Standard and Poor’s said it couldrevise Yahoo’s outlook back up to stableif the company implements a businessplan that would allow it to keep its mar-ket share, make more money from itsportfolio and stem a decline in operatingprofits.

Energy unlikely to be hit

‘Retaliation’ of Russia onTurkey won’t cut too deepMOSCOW Nov 25, (RTRS): Russiamay mothball deals with Turkishfirms and curb imports of Turkishgoods in retaliation for the downingof a Russian fighter jet, but it isunlikely to let the fallout affect ener-gy exports that are the core of theireconomic relationship.

Pushed to the margins of theEuropean mainstream, in partbecause of their idiosyncratic lead-ers, Turkey and Russia have foundsupport in each other, building bur-geoning trade ties.

Those ties were under scrutiny onWednesday after Russian PrimeMinister Dmitry Medvedev accusedTurkey of a “criminal act” in shoot-ing down a Russian Su-24 jet.Ankara said it encroached intoTurkish airspace, while Moscow saidit did not.

“The direct consequences couldlead to our refusal to take part in awhole raft of important joint projectsand Turkish companies losing theirpositions on the Russian market,”Medvedev said in a statement.

Energy exports from Russia toTurkey are the biggest part of thetrade relationship. After Germany,Turkey is the second-largest buyer ofRussian natural gas. Russia’sGazprom supplies about 27 billioncubic metres of Russian natural gas ayear, or almost 70 percent of the totalgas Turkey consumes.

Halting gas flows “would be avery tough decision as the exportmarkets are bad, they are not risingbut only getting tighter,” saidMikhail Krutikhin, a partner at theRusEnergy consulting firm.

“The loss of such a big market (asTurkey) would be very sensitive bothfor the state budget and forGazprom.”

Asked if there was any threat to itssupplies to Turkey, a spokesman forRussian state-run gas giant Gazpromdeclined to comment.

Limiting supplies would haverisks for Russia: it would send amessage to other customers thatdeliveries are at the mercy of polit-ical considerations, and with glob-al demand low, Moscow wouldstruggle to find alternative cus-tomers.

DeliverGazprom could slow preparation

work for a planned new pipeline,dubbed TurkStream, that woulddeliver gas via Turkey to southernEurope. There would though be littlereal effect because the project isyears away from the start of con-struction and is already beset withobstacles.

There appeared to be no appetitefor any steps that would heap seriouspain on either Turkey or Russia, bothof which are already struggling eco-nomically.

Russia’s economy will shrinkaround 4 percent this year from thecombined effects of the low oil price,and sanctions over the conflict inUkraine.

Andrei Kostin, the head ofRussian state-owned bank VTB ,told reporters at a forum in theRussian city of Yekaterinburg thatpolitics and economics should bekept separate.

“I would not be inclined to whipup the situation right now,” saidKostin. “I think that one has toapproach this very calmly. There arealways negative events going on in

the world.”Meanwhile Turkey’s economy will

grow only under 3 percent this year,below the government’s target,weighed down by political uncertain-ty at home and conflict in the MiddleEast.

“Erdogan is a tough character, andquite emotional, and if Russia pushestoo far in terms of retaliatory action,I think there will inevitably be acounter reaction from Turkey (like)tit-for-tat trade sanctions,” Nomurastrategist Timothy Ash wrote in anote.

“But I think there is also a clearunderstanding that any such action isdamaging for both sides, and unwel-come.”

But even if Ankara and Moscowavoid inflicting deep economic dam-age on each other, there was still awhole range of deals, investmentsand commercial relationships thatcould be threatened in the falloutfrom the downing of the Russian jet.

ProjectRussia’s state Atomic Energy

Corporation, known as Rosatom, isdue to build Turkey’s first nuclearpower station, a $20 billion project.Rosatom said it has no comment onthe issue.

Shares in Turkish firm EnkaInsaat, which has construction proj-ects in Russia and two power plantsin Turkey using Russian gas, fell fora second day on Wednesday.

Turkish brewer Anadolu Efes,which has six breweries in Russiaand controls around 14 percent of themarket, also saw its shares fall onTuesday.

Tourism is already being hit. AfterRussian officials on Tuesday advisedholidaymakers against travelling toTurkish resorts, at least two largeRussian tour operators said they wouldstop selling packages to Turkey.

Russians are second only toGermans in terms of the numbers vis-iting Turkey, bringing in an estimated$4 billion a year in tourism revenues.

Retaliatory measures could suck inthe trade in food.

Turkey, alongside Egypt, is theequal biggest buyer of Russianwheat. It bought 4.1 million tonnes inthe marketing year which ended onJune 30.

Traders and Russian officials saidno restrictions had been imposed onthe export of grain to Turkey, butsome traders said they anticipatedthere could be informal measuressoon to limit the volumes reachingTurkey.

In the other direction, Russia is amajor importer of Turkish food prod-ucts.

During past diplomatic spats withother countries, Russia’s food safetywatchdog has imposed bans onimports of certain products, though italways says it is for public health rea-sons only and not linked to politics.

The watchdog, Rosselkhoznadzor,announced on Wednesday that it wassuspending imports of poultry fromone Turkish company, citing teststhat showed the presence of danger-ous bacteria.

Asked if there would be a blanketsuspension of Turkish poultryexports, the watchdog’s spokesman,Aleksey Alekseenko, told Reuters:“For now it’s too early to talk aboutthis. I think a decision will be takensoon at the level of the top politicalleadership.”

Michigan, Fiat Chrysler reach deal on tax creditsFiat Chrysler will have to spend anadditional $1 billion on Michigan facil-ities over 15 years to qualify for $1.9billion in business tax credits under anagreement approved Tuesday by thestate’s economic development board.

The deal, the second with a DetroitThree automaker this year, isdesigned to help Michigan get a bet-ter handle on billions in tax incentivesgiven to keep auto jobs in the state,primarily during the economic down-turn. The redemption of higher-than-expected credits led to mid-budget

year spending cuts in February.The agreement amends a 2010

deal between what was then ChryslerGroup LLC (now FCA US LLC) andthe former Michigan EconomicGrowth Authority. The carmaker at thetime was offered what was projectedto be $1.3 billion in tax credits through2031 for a maximum of 20,000retained jobs in the state.

The credits are worth more, though— nearly $2 billion — because ofhigher wages and other factors.

The new deal caps Fiat Chrysler’s

maximum credits at $1.93 billionthrough 2029 and gradually increasesthe number of retained jobs the com-pany can claim to 27,000. It also setannual limits on the tax credit valuethat may be claimed in a given year.

In a statement, FCA said therevised agreement provides greatereconomic certainty for all parties.

The Michigan Strategic Fund boardapproved a similar deal with FordMotor Co. in June, capping the totalvalue of the auto company’s credits at$2.3 billion. (AP)