Starbucks chief executive apologizes for arrests of two black men

(Reuters) – Starbucks Chief Executive Kevin Johnson apologized late on Saturday for the arrests of two black men at a Philadelphia coffee shop last week, which sparked accusations of racial profiling.

Promising to make everything right, Johnson promised a thorough investigation of the incident caught on video by a patron Thursday and shared widely online.

The men were accused of trespassing but have said they were waiting for a friend before ordering.

“The video shot by customers is very hard to watch and the actions in it are not representative of our Starbucks mission and values,” Johnson said in a statement.

He added, “The basis for the call to the Philadelphia police department was wrong.”

Philadelphia’s police commissioner on Saturday defended the arrest, saying his officers had to act after Starbucks employees told them the pair were trespassing.

Video of Thursday’s incident showed other patrons telling officers the pair were doing nothing wrong and appeared to have been targeted merely because of their race.

Police Commissioner Richard Ross said he knew the incident had prompted a lot of concern, but said his officers “did absolutely nothing wrong.”

In a video statement, Ross said store employees called 911 to report a disturbance and trespassing.

FILE PHOTO – Kevin Johnson delivers remarks at the Starbucks 2016 Investor Day in Manhattan, New York, U.S., December 7, 2016. REUTERS/Andrew Kelly

When officers arrived, Ross said, staff told them the two men had wanted to use the restroom but were informed it was only for paying customers. The pair repeatedly refused to leave when politely asked to do so by the employees and officers, he said.

“If you think about it logically, that if a business calls and they say that someone is here that I no longer wish to be in my business, they (the officers) now have a legal obligation to carry out their duties. And they did just that,” Ross said.

“They were professional in all their dealings with these gentlemen, and instead they got the opposite back.”

Ross said that as an African-American man he was acutely aware of implicit bias. “We are committed to fair and unbiased policing and anything less than that will not be tolerated in this department,” he said.

The two men were released, Ross said, after officers learned Starbucks was “no longer interested” in prosecuting them.

In a post on Twitter earlier on Saturday, Starbucks Corp (SBUX.O) said it was sorry for what took place.

Johnson added his apology, saying the company would review its policies and “further train our partners to better know when police assistance is warranted.”

Melissa DePino, an author who posted video of the arrest, said staff called police because the two men had not ordered anything while waiting for a friend. She said white customers were “wondering why it’s never happened to us when we do the same thing.”

Police departments across the United States have come under criticism for repeated instances of killing unarmed black men in recent years, which activists blame on racial biases in the criminal justice system.

Reporting by Jonathan Allen in New York; Additional reporting by Rich McKay in Atlanta; Editing by David Gregorio and Clarence Fernandez

Ad king Sorrell’s abdication leaves WPP at crossroads

LONDON (Reuters) – Martin Sorrell’s sudden exit from WPP marks a shocking end to the career of a chief executive who through sheer force of personality made it the world’s biggest advertising firm.

WPP said in early April it had appointed lawyers to investigate a whistleblower’s allegation of personal misconduct against Sorrell, who over 33 years turned a two-man outfit into one of Britain’s biggest companies present in 112 countries.

The 73-year-old said on Saturday he was standing down, departing at a crucial time for WPP which has seen its share price fall 30 percent this year due to lower client spending, contract losses and a growing threat from Google and Facebook.

“I shall miss all of you greatly,” he wrote in an email to staff. “As a founder, I can say that WPP is not just a matter of life or death, it was, is and will be more important than that.”

WPP did not give any details of the allegation and Sorrell denied the charges, initially saying that he understood the need to investigate. However, when the matter made it into the Wall Street Journal he told friends he thought it was being used as a weapon to force him out, one source said.

A former rival chief executive and a current CEO told Reuters last week that the fact Sorrell was under investigation showed how the dynamic within WPP had changed.

“To me it’s not actually about whether he did anything wrong but it’s the fact that three years ago the board would not even have gone down this path,” the former CEO said. “Martin was all powerful and WPP without Martin was not worth thinking about.”


The son of an electronics retailer who was educated at the University of Cambridge, Sorrell made his name as the finance director of the start-up British ad agency Saatchi Saatchi.

He took center stage in 1985, buying a stake in a small manufacturing firm Wire and Plastic Products Plc to use it as a public vehicle to buy communications groups around the world.

Within a few years he had sealed a string of takeovers, snapping up such storied creative agencies as J. Walter Thompson and Ogilvy before moving into the cash cow of media planning and buying by creating Group M. Market-research firms and public relations groups such as Finsbury followed.

Known for a ferocious work ethic and microscopic attention to detail, Sorrell built up the group by pitching aggressively for work, often leading the charge himself and going above the heads of marketing officers to deal directly with their bosses.

The role meant Sorrell became an authority not just on advertising but on the global economy and an ever present voice on the media and at events such as Davos.

Respected by his peers, he was however shown little affection by them in the ego-driven ad business and was sometimes dismissed as a “beancounter” because of his financial rather than advertising background.

David Ogilvy famously referred to Sorrell as an “odious little jerk” when the WPP CEO sought to buy his company. The two ad men later made up and Sorrell signed off WPP’s annual report that year as “OLJ”.

“He is so brutally competitive,” the former CEO said. “He is such a competitor and he can get so angry when he loses.”

Many executives recount stories of the CEO taking contract losses personally, including one who told Reuters how Sorrell had shared an hour’s car journey in complete silence after his rival mentioned an account he had recently won from WPP.

Sorrell sparred repeatedly with the long-time boss of French rival Publicis, Maurice Levy, and enjoyed pointing out to journalists the failings of his rivals.

His combative style earned respect from the senior staff who worked for him however. One New York-based executive told Reuters how, on a night out, senior executives would all email Sorrell at exactly the same time to see who he would respond to first.

“He has an astounding grasp of detail if you consider the scale of the enterprise,” said another executive who knew Sorrell professionally for many decades. “It’s practically a stage show.”

The success also brought great wealth for the father of four, with the perma-tanned executive earning around 200 million pounds in the last five years alone due to a performance-linked bonus scheme that angered many shareholders.


CEOs and executives, who asked not to be named, lamented that Sorrell would not get the chance to reposition WPP, which in March posted its weakest results since the financial crash.

Whoever takes over will have to decide whether the group of 200,000 people should remain in its current form.

Having run the agencies as separate companies for years to stimulate competition, WPP had started to break down the barriers to appease clients who found it unwieldy and unsuited to the digital age where clients could create their own content and place it directly on Google and Facebook.

Brian Wieser, advertising analyst at Pivotal Research, said WPP had the right assets but it had not packaged them properly in recent years and the fact it was more fragmented than Omnicom and Publicis meant it was now harder to reposition.

The initial task will fall to Chairman Roberto Quarta, who described Sorrell as the “driving force” behind WPP, and executives Mark Read and Andrew Scott who will be joint chief operating officers while the company seeks a new CEO.

Sorrell told staff that WPP had come through difficult times before and would do so again, saying he would be available to anyone who wanted advice.

“For the past 33 years, I have spent every single day thinking about the future of WPP,” he said. “Good fortune and Godspeed to all of you. Now, Back to the Future.”

FILE PHOTO: Sir Martin Sorrell, Chairman and Chief Executive Officer of advertising company WPP, attends a conference at the Cannes Lions Festival in Cannes, France, June 23, 2017. REUTERS/Eric Gaillard/File Photo

Editing by Alexander Smith

Oil, gold to gain on Syrian strikes, Russian retaliation in focus

LONDON (Reuters) – Gold and oil will extend their gains on Monday, albeit modestly, when the markets open for the first time since Western powers launched a missile attack on Syria but equities and bonds are unlikely to suffer big losses unless the West strikes again or Russia retaliates.

FILE PHOTO: A Syrian firefighter is seen inside the destroyed Scientific Research Centre in Damascus, Syria April 14, 2018. REUTERS/Omar Sanadiki

“The newsflow is actually better than what it looked like at one point during last week as the strike was surgical, followed by a pullback. Reports show a lot of care was taken not to hit Russian targets, which is a good sign and the market should take heart from that,” said Salman Ahmed, chief investment strategist at Lombard Odier investment managers in London.

Gold has benefited in recent days as a safe-haven asset amid a U.S.-China trade dispute and the escalating conflict in Syria, which also pushed oil above $70 per barrel due to concerns about a spike in Middle Eastern tensions.

World stocks wobbled last week but still ended with the best weekly gain in over a month, as investors await potentially healthy U.S. company earnings.

Despite heightened geo-political risks, the impact on so-called safe-haven assets has been short-lived and modest – while the yen rose initially on fears of a Syrian strike, it ended near seven-week lows to the dollar last week.

On Saturday, U.S., French and British missile attacks struck at the heart of Syria’s chemical weapons program in retaliation for a suspected poison gas attack a week ago, although the assault appeared unlikely to halt Syrian President Bashar al-Assad’s progress in the seven-year-old civil war.

For map of Syrian strikes

The bombing, denounced by Damascus and its allies as an illegal act of aggression, was the biggest intervention by Western countries against Assad and his powerful ally Russia.

But the three countries said the strikes were limited to Syria’s chemical weapons capabilities and not aimed at toppling Assad or intervening in the civil war.

Naeem Aslam, chief market analyst at Think Markets, said gold was poised to gain on Monday but the rally wouldn’t be very steep: “The focus will be on the counter-reaction from Russia.”

Gold, often used as a store of value in times of political and economic uncertainty, could rally towards $1,400 per ounce after two consecutive weeks of gains.

FILE PHOTO: Syrians wave Iranian, Russian and Syrian flags during a protest against U.S.-led air strikes in Damascus, Syria April 14, 2018. REUTERS/Omar Sanadiki

“If we do break above $1,365 that next week we would be very bullish,” said Aslam.

Others were less convinced of the market’s ability to gain much further ground.

“I think the strikes were well targeted, and as such gold market impact will be minimal as it will be hard to justify a major retaliation,” said a trader at a leading bullion bank.

Tokyo will be the first major market to open on Monday and the yen will likely strengthen to the dollar, but not beyond 106.50, said Itsuo Toshima, market analyst at Toshima Associates adding that he didn’t expect stocks traders to take sharp moves tomorrow.

“The first attack was within expectations and was already priced in the market … However, if there is second round of strikes, that is not in line with expectations. So that should prompt a sharp risk-off move in markets. Stocks will plunge, the yen and the oil prices will surge,” he added.

Frank Benzimra, head of global markets for Asia Pacific at Societe Generale Corporate and Investment Banking, also said stocks were set to plunge only in case of new strikes by Western powers.

In case of such an escalation, energy-related assets should outperform Asia markets, oil would rally further, the yen would spike and Japan’s domestic defensive stocks would outperform international stocks.

“For the stress on Asia equity markets to be sustainable we would need to have oil prices spiking to such a level that fundamental concerns, i.e. higher inflation and risks on growth, return to the market,” he said.

Amrita Sen from Energy Aspects said that despite Middle Eastern tensions and looming new U.S. sanctions on Iran, she believed oil has outperformed most expectations this year and may have rallied too far too fast.

“We are likely to get a sell-off this week as the extent of the Syrian strikes have been muted and, in general, calmer nerves prevail in Washington,” she said.

Reporting by Vidya Ranganathan, Sujata Rao, Jan Harvey and Dmitry Zhdannikov; Writing by Dmitry Zhdannikov; editing by David Evans

Facebook fuels broad privacy debate by tracking non-users

SAN FRANCISCO (Reuters) – Concern about Facebook Inc’s (FB.O) respect for data privacy is widening to include the information it collects about non-users, after Chief Executive Mark Zuckerberg said the world’s largest social network tracks people whether they have accounts or not.

Privacy concerns have swamped Facebook since it acknowledged last month that information about millions of users wrongly ended up in the hands of political consultancy Cambridge Analytica, a firm that has counted U.S. President Donald Trump’s 2016 electoral campaign among its clients.

Zuckerberg said on Wednesday under questioning by U.S. Representative Ben Luján that, for security reasons, Facebook also collects “data of people who have not signed up for Facebook.”

Lawmakers and privacy advocates immediately protested the practice, with many saying Facebook needed to develop a way for non-users to find out what the company knows about them.

“We’ve got to fix that,” Representative Luján, a Democrat, told Zuckerberg, calling for such disclosure, a move that would have unclear effects on the company’s ability to target ads. Zuckerberg did not respond. On Friday Facebook said it had no plans to build such a tool.

Critics said that Zuckerberg has not said enough about the extent and use of the data. “It’s not clear what Facebook is doing with that information,” said Chris Calabrese, vice president for policy at the Center for Democracy Technology, a Washington advocacy group.


Facebook gets some data on non-users from people on its network, such as when a user uploads email addresses of friends. Other information comes from “cookies,” small files stored via a browser and used by Facebook and others to track people on the internet, sometimes to target them with ads.

“This kind of data collection is fundamental to how the internet works,” Facebook said in a statement to Reuters.

Asked if people could opt out, Facebook added, “There are basic things you can do to limit the use of this information for advertising, like using browser or device settings to delete cookies. This would apply to other services beyond Facebook because, as mentioned, it is standard to how the internet works.”

Facebook often installs cookies on non-users’ browsers if they visit sites with Facebook “like” and “share” buttons, whether or not a person pushes a button. Facebook said it uses browsing data to create analytics reports, including about traffic to a site.

The company said it does not use the data to target ads, except those inviting people to join Facebook.

Slideshow (2 Images)


Advocates and lawmakers say they are singling out Facebook because of its size, rivaled outside China only by Alphabet Inc’s (GOOGL.O) Google, and because they allege Zuckerberg was not forthcoming about the extent and reasons for the tracking.

“He’s either deliberately misunderstanding some of the questions, or he’s not clear about what’s actually happening inside Facebook’s operation,” said Daniel Kahn Gillmor, a senior staff technologist at the American Civil Liberties Union.

Zuckerberg, for instance, said the collection was done for security purposes, without explaining further or saying whether it was also used for measurement or analytics, Gillmor said, adding that Facebook had a business incentive to use the non-user data to target ads.

Facebook declined to comment on why Zuckerberg referred to security only.

Gillmor said Facebook could build databases on non-users by combining web browsing history with uploaded contacts. Facebook said on Friday that it does not do so.

The ACLU is pushing U.S. lawmakers to enact broad privacy legislation including a requirement for consent prior to data collection.

The first regulatory challenge to Facebook’s practices for non-users may come next month when a new European Union law, known as the General Data Protection Regulation (GDPR), takes effect and requires notice and consent prior to data collection.

At a minimum, “Facebook is going to have to think about ways to structure their technology to give that proper notice,” said Woodrow Hartzog, a Northeastern University professor of law and computer science.

Facebook said in its statement on Friday, “Our products and services comply with applicable law and will comply with GDPR.”

The social network would be wise to recognize at least a right to know, said Michael Froomkin, a University of Miami law professor.

“If I’m not a Facebook user, I ought to have a right to know what data Facebook has about me,” Froomkin said.

Reporting by David Ingram; Editing by Peter Henderson and Richard Chang

South Dakota e-commerce sale tax fight reaches U.S. Supreme Court

WASHINGTON (Reuters) – A high-stakes showdown at the U.S. Supreme Court on Tuesday will determine whether states can force out-of-state online retailers to collect sales taxes in a fight between South Dakota and e-commerce businesses.

FILE PHOTO: The South Dakota state capitol building is seen in Pierre, South Dakota, U.S., February 7, 2018. REUTERS/Lawrence Hurley/File Photo

South Dakota is asking the nine justices to overturn a 1992 Supreme Court precedent that states cannot require retailers to collect state sales taxes on purchases unless the businesses have a “physical presence” in the state.

The state, appealing a lower court decision that favored Wayfair Inc (W.N), Inc (OSTK.O) and Newegg Inc, is being supported by President Donald Trump’s administration.

A ruling favoring South Dakota could help small brick-and-mortar retailers compete with online rivals while funneling up to $18 billion into the coffers of the affected states, according to a 2017 federal report.

The justices will hear arguments in the case on Tuesday against a backdrop of Trump’s harsh criticism of Inc(AMZN.O), the dominant player in online retail, on the issue of taxes and other matters. Trump has assailed Amazon CEO Jeff Bezos, who owns the Washington Post, a newspaper that the Republican president also has disparaged.

FILE PHOTO: A view of the U.S. Supreme Court building is seen in Washington, DC, U.S., October 13, 2015. REUTERS/Jonathan Ernst/File Photo

Amazon, which is not involved in the Supreme Court case, collects sales taxes on direct purchases on its site but does not collect taxes for items sold on its platform by third-party venders, constituting around half of total sales.

South Dakota depends more than most states on sales taxes because it is one of nine that do not have a state income tax. South Dakota projects its revenue losses because of online sales that do not collect state taxes at around $50 million annually, while its opponents in the case estimate it as less than half that figure.

Major retailers that have brick-and-mortar stores, and therefore already collect taxes, are represented by industry groups that back South Dakota. The National Retail Federation, which supports the state, has a membership list that includes Walmart Inc(WMT.N) and Target Corp(TGT.N), as well as Amazon.

Stephanie Martz, the federation’s general counsel, said in an interview the case gives the Supreme Court a chance to adapt the law to new circumstances prompted by the rise of internet shopping.

“Things have changed a lot since 1992. The entire nature of interstate commerce has changed,” Martz said.

E-commerce companies supporting Wayfair, Overstock and Newegg include two that provide online platforms for individuals to sell online: eBay Inc(EBAY.O) and Etsy Inc(ETSY.O).

“Win or lose at the Supreme Court, we will continue to advocate for a legislative solution and a level playing field where all retailers collect and remit sales tax on the same basis,” Wayfair spokeswoman Jane Carpenter said in a statement.

Brian Bieron, eBay’s senior director of government relations, said in an interview the 1992 precedent “provides the many small businesses that use the internet with a very clear and simple and stable legal environment in which to grow their business.”

Overturning the ruling while not replacing it with a new national framework “is really going to be a negative move in terms of e-commerce,” Bieron added.

A 2016 South Dakota law requires out-of-state online retailers to collect sales tax if they clear $100,000 in sales or 200 separate transactions. State legislators knew the measure was unlawful under the 1992 precedent.

The state sued a group of online retailers after the law was enacted to force them to collect the state sale taxes, with the aim of overturning the precedent.

Reporting by Lawrence Hurley; Editing by Will Dunham

Facebook CEO’s compensation jumps to $8.9 million as security costs soar

(Reuters) – Facebook Inc (FB.O) Chief Executive Mark Zuckerberg’s compensation rose 53.5 percent to $8.9 million in 2017, a regulatory filing showed on Friday, largely due to higher costs related to the 33-year old billionaire’s personal security.

FILE PHOTO: Facebook CEO Mark Zuckerberg testifies before a House Energy and Commerce Committee hearing regarding the company’s use and protection of user data on Capitol Hill in Washington, U.S., April 11, 2018. REUTERS/Aaron P. Bernstein

About 83 percent of the compensation represented security-related expenses, while most of the rest were tied to Zuckerberg’s personal usage of private aircraft.

Zuckerberg spent much of last year traveling after he pledged to visit all the U.S. states that he had not previously been to.

His security expenses climbed to $7.3 million in 2017 from $4.9 million a year earlier.

Menlo Park, California-based Facebook paid to buy, install and maintain security measures for Zuckerberg’s personal residences, which include properties in San Francisco and Palo Alto, the filing showed.

The Facebook board’s compensation committee authorized Zuckerberg’s security program, the filing said, “to address safety concerns due to specific threats to his safety arising directly as a result of his position as our founder, Chairman, and CEO.”

Zuckerberg’s base salary was unchanged at $1, while his total voting power at Facebook rose marginally to 59.9 percent.

Facebook, which has consistently reported stronger-than-expected earnings over the past two years, has faced public outcry over its role in Russia’s alleged influence over the 2016 U.S. presidential election.

Earlier this week, Zuckerberg emerged largely unscathed after facing hours of questioning from U.S. lawmakers on how the personal information of several million Facebook users might have been improperly shared with political consultancy Cambridge Analytica.

Reporting by Munsif Vengattil in Bengaluru and David Ingram in San Francisco; Editing by Sai Sachin Ravikumar and Richard Chang

Musk insists Tesla does not need more capital, predicts profit soon

(Reuters) – Tesla Inc (TSLA.O) will be profitable in the third and fourth quarters of this year and will not have to raise any money from investors, billionaire Chief Executive Elon Musk said on Friday, driving shares in the electric carmaker higher.

FILE PHOTO: Elon Musk, founder, CEO and lead designer at SpaceX and co-founder of Tesla, speaks at the International Space Station Research and Development Conference in Washington, U.S., July 19, 2017. REUTERS/Aaron P. Bernstein

Tesla has already sought this month to play down widespread Wall Street speculation that it would need to return to capital markets this year to raise more funds for the money-losing company as it ramps up production of the Model 3 sedan seen as crucial to its long-term profitability.

The Silicon Valley car maker, which has consistently fallen short of promised production targets and is fighting bad publicity over a fatal crash of a car using its Autopilot system, said 10 days ago it would have positive cash flow from the third quarter.

Musk went further on Friday in a tweeted response to a story in The Economist which cited estimates Tesla would need $2.5 billion to $3 billion this year in additional funding.

“The Economist used to be boring, but smart with a wicked dry wit. Now it’s just boring (sigh). Tesla will be profitable cash flow+ in Q3 Q4, so obv no need to raise money,” Musk wrote.

Tesla shares, which have gained nearly 10 percent since disclosing the Model 3 production numbers on April 3, were up 1.8 percent in afternoon trading on Wall Street.

Musk’s claim about profit and cash flow hinges on a rapid rise in production of the Model 3 sedan, Tesla’s latest vehicle to have experienced production delays. That has postponed revenue from reaching Tesla’s bottom line from cars being delivered to customers.

FILE PHOTO: A Tesla dealership is seen in West Drayton, just outside London, Britain, February 7, 2018. REUTERS/Hannah McKay/File Photo

An unprecedented level of robots used in the Model 3’s final assembly, in a break with automotive manufacturing norms, has added complexity and delays, which Musk acknowledged on Friday.

“Excessive automation at Tesla was a mistake,” Musk tweeted. To be precise, my mistake. Humans are underrated.”

Thomson Reuters consensus of analyst estimates predicts Tesla’s free cash flow to be negative well into 2019, thanks in part to heavy investments. Only one of 19 analysts covering the stock see positive adjusted earnings per share in the third quarter, with that number growing to four for the fourth quarter.

Wall Street brokerage Jefferies, which provided the funding estimate cited by The Economist, said in a note last week it expects refinancing risk to remain high for Tesla until it can consistently produce 10,000 Model 3s a week.

The company again missed its own 2,500 target for weekly production at the end of the first quarter, and analysts and fund managers doubt Tesla’s ability to keep production growing to a promised 5,000 Model 3s per week in three months time.

Musk in July said Tesla was going through “manufacturing hell” in ramping up production of the Model 3.

He told “CBS News” in an interview that aired Friday the company “got complacent” and “put too much new technology into the Model 3 all at once.” Part of the interview took place in a Tesla Model 3 Musk was driving with Autopilot activated at times.

Musk told CBS Tesla is currently producing 2,000 Model 3 cars a week.

Last month, Moody’s Investors Service downgraded Tesla’s credit rating to B3 from B2, reflecting “the significant shortfall in the production rate of the company’s Model 3.”

Moody’s added that its negative outlook for Tesla “reflects the likelihood that Tesla will have to undertake a large, near-term capital raise in order to refund maturing obligations and avoid a liquidity shortfall.”

On Thursday, the National Transportation Safety Board said that after a series of public disclosures by Tesla it had taken the unusual step of revoking Tesla’s status as a formal party to its investigation of a March 23 crash in California that killed a driver who was using Autopilot. The NTSB is also investigating two other Tesla crashes.

Tesla lashed out at the NTSB and said it planned to complain to Congress.

Asked by CBS if there was a defect with Autopilot, Musk responded: “The system worked as described, which is that it is a hands-on system. It is not a self-driving system.”

At one point during the interview, Musk did not have his hands on the wheel and the car beeped at him to retake the wheel.

Reporting by Sonam Rai in Bengaluru and David Shepardson in Washington; additional reporting by Dan Burns and Alexandria Sage; editing by Phil Berlowitz

Trump says U.S. will only rejoin Pacific trade pact if terms are improved

WASHINGTON/TOKYO (Reuters) – U.S. President Donald Trump said the United States would only join the Trans Pacific Partnership, a multinational trade deal his administration walked away from last year, if it offered “substantially better” terms than those provided under previous negotiations.

His comments, made on Twitter late Thursday, came only hours after he had unexpectedly indicated the United States might rejoin the landmark pact, and amid heightened volatility in financial markets as Washington locked horns with China in a bitter trade dispute.

Trump had told Republican senators earlier in the day that he had asked United States Trade Representative Robert Lighthizer and White House economic adviser Larry Kudlow to re-open negotiations.

In his Twitter post, which came during Asian trading hours, Trump said the United States would “only join TPP if the deal were substantially better than the deal offered to Pres. Obama. We already have BILATERAL deals with six of the eleven nations in TPP, and are working to make a deal with the biggest of those nations, Japan, who has hit us hard on trade for years!”

Policymakers in the Asia-Pacific region on Friday responded to the possibility of the U.S. rejoining the trade deal with scepticism.

“If it’s true, I would welcome it,” Japanese Finance Minister Taro Aso told reporters after a cabinet meeting on Friday and before Trump’s tweet. Aso added that the facts needed to be verified.

Trump “is a person who could change temperamentally, so he may say something different the next day”, Aso said.

Australian Prime Minister Malcolm Turnbull, commenting after Trump’s tweet, said it would be “great” to have the U.S. back in the pact though doubted it would happen.

“We’re certainly not counting on it,” Turnbull told reporters in Adelaide in South Australia.

The TPP, which now comprises 11 nations, was designed to cut trade barriers in some of the fastest-growing economies of the Asia-Pacific region and to counter China’s rising economic and diplomatic clout.

Trump, who opposed multilateral trade pacts in his election campaign in 2016 and criticised the TPP as a “horrible deal”, pulled the U.S. out of the pact in early 2017. He argued bilateral deals offered better terms for U.S. businesses and workers, and signaled an intention to raise trade barriers.

But Trump is struggling to get support from other countries for his recent threat to impose import tariffs on China and the U.S. farm lobby is arguing that retaliation by China would hit American agricultural exports.

Trade experts believe Trump is probably trying to placate his political base in the wake of criticism over the U.S.-China China tariff standoff.

“Well I think you have to take it seriously but I think there is an enormous chance that this is simply posturing or a tactical decision taken to placate concerned governors and senators from agricultural states that could be affected by China imposing tariffs,” said Charles Finny, a Wellington-based trade consultant and a former New Zealand government trade negotiator.

“I think it’s very important for people to realize, particularly given this most recent tweet, if there is a negotiation it will not be an easy one. It will take a long time and also there is huge risk around ratification.”


Even before Trump’s official withdrawal last year, U.S. participation in the pact was seen as increasingly unlikely due to opposition in the U.S. Congress.

The United States entered TPP negotiations in 2008. In 2016, then President Barack Obama’s administration abandoned attempts to push the pact through Congress.

The other 11 countries forged ahead with their own agreement without U.S. participation, and in the process eliminated chapters on investment, government procurement and intellectual property that were key planks of Washington’s demands.

New Zealand Prime Minister Jacinda Ardern, noting the progress made by the 11 countries after Trump abandoned the deal, also flagged challenges to the Untied States rejoining the pact.

“If the United States, it turns out, do genuinely wish to rejoin, that triggers a whole new process,” she told reporters in Auckland.

“There would be another process and so, at this stage we are talking hypotheticals.”

The 11-member pact includes Mexico and Canada, which are in the process of re-negotiating the terms of the North American Free Trade Agreement with the United States.

A Canadian government official said on Thursday there had not been any formal outreach from the United States about the pact.

Japanese Prime Minister Shinzo Abe will meet Trump next week. Japan, a close U.S. ally, is a member of the TPP.

FILE PHOTO: U.S. President Donald Trump holds up the executive order on withdrawal from the Trans Pacific Partnership after signing it in the Oval Office of the White House in Washington January 23, 2017. REUTERS/Kevin Lamarque

Reporting by David Chance, Patricia Zengerle and David Brunnstrom in WASHINGTON, David Ljunggren in OTTAWA, Tetsushi Kajimoto in TOKYO and Charlotte Greenfield in WELLINGTON, Brendan O’Brien in MILWAUKEE; Writing by Shri Navaratnam; Editing by Sam Holmes

Wells Fargo faces $1 billion fine from loan abuses

(Reuters) – Two U.S. regulators have proposed Wells Fargo Co (WFC.N) pay $1 billion in penalties to resolve probes into auto insurance and mortgage lending abuses at the third largest U.S. bank, overshadowing its first quarter results.

The San Francisco-based lender, which reported a quarterly profit, said it may have to restate results to reflect the final settlement. The proposed penalties were reported earlier this week by Reuters.

Analysts said that while the $1 billion penalty would not make a significant dent to its balance sheet, it may take the bank some time to repair the damage to its reputation.

Shares of the bank fell 3.4 percent to $50.89.

“Operationally, Wells Fargo can recover, but reputationally and how a billion dollars will weigh on them – only time can tell,” said Art Hogan, chief market strategist at B. Riley in Boston.

“Companies have come back from worse than this but right now they’re still in the eye of the storm,” he added.

The bank, still smarting from a prolonged sales scandal in its retail banking business, found inconsistencies at its auto lending and mortgage in the summer of 2017 – leading to further probes by regulators.

To appease investors and regulators, the bank overhauled its operational structure, shook up its board and hired a new compliance officer.

But this failed to impress the U.S. Federal Reserve, which imposed restrictions in February on the bank’s growth, forbidding it to expand its balance sheet beyond 2017 levels until it makes internal changes that addressed risk management.

“A bank’s balance sheet is the engine for profit growth,” said Kyle Sanders, analyst at Edward Jones. “The constraints on Well’s ability to take on deposits and make new loans will likely result in lagging earnings growth for Wells relative to peers in the near-term.”

Wells estimates restrictions on balance sheet growth will cut annual profit by $300 million to $400 million this year.

Chief Executive Officer Tim Sloan repeatedly sought to reassure investors that the bank was stable despite the regulatory restrictions.

“I’m confident that our outstanding team will continue to transform Wells Fargo into a better, stronger company; however, we recognise that it will take time to put all of our challenges behind us,” Sloan said in the bank’s first-quarter results statement on Friday.

A Wells Fargo logo is seen in New York City, U.S. January 10, 2017. REUTERS/Stephanie Keith/File Photo

But as recently as last month, the bank also said it was examining its wealth and investment management business for possible customer abuse, including overcharging and inappropriate referrals, after inquiries from government agencies.


Despite its ongoing woes, the bank reported a 6 percent jump in profit, saying net income applicable to common stock rose to $5.53 billion, or $1.12 per share in the quarter ended March 31, from $5.23 billion, or $1.03 per share a year ago. (

Analysts on average expected $1.06 per share, according to Thomson Reuters I/B/E/S.

Wells Fargo has been struggling to reduce expenses, but failed to keep a leash on costs in the quarter despite Sloan’s vow to slash $4 billion in costs by 2019 by closing hundreds of branches and taking other measures.

Total noninterest expenses for the first quarter rose 3.3 percent to $14.24 billion.

Sloan reiterated his 2019 cost savings target, and said his non-interest expense dollar target range for full-year 2018 remains unchanged.

In January, the company had said it remained committed to reducing its expenses by $2 billion by the end of 2018.

Total revenue in the quarter fell 1.4 percent to $21.93 billion. Total loans slipped 1.2 percent to $947.3 billion, hurt most by a decline in average loans in its community banking unit, which includes consumer banking.

Non-interest income from mortgage banking, an area where the bank supersedes its peers, fell 23.9 percent due to rising interest rates.

Income tax expenses fell 36 percent to $1.37 billion following President Donald Trump’s tax overhaul last year.

Reporting By Aparajita Saxena in Bengaluru; Editing by Patrick Graham, Bernard Orr

Wall Street eyes earnings stabilizer after FAANG stocks wobble

(Reuters) – Wall Street is hoping that first-quarter earnings growth and corporate forecasts are strong enough to bring the FAANG group of stocks back into favor and take the spotlight off worries that caused the recent sell-off in the high-flying group.

FILE PHOTO: Traders work on the floor of the New York Stock Exchange, (NYSE) in New York, U.S., April 10, 2018. REUTERS/Brendan McDermid

With valuations below recent peaks, the group – comprised of Facebook,, Apple Inc (AAPL.O), Netflix (NFLX.O) and Google parent Alphabet Inc (GOOGL.O) – could get some relief if the companies beat, or at least meet, Wall Street estimates.

Shares in the group, which led the SP 500 to record highs in January, often trade together. They were pummeled late in the quarter on worries about a data privacy scandal at Facebook (FB.O) and U.S. President Donald Trump’s public criticism of (AMZN.O). On top of this, fears of a trade war with China escalated during the quarter.

For the group, analysts expect average first-quarter year-over-year earnings growth of 25.8 percent, up from 12.4 percent growth in the fourth quarter and a 12.8 percent increase a year ago, according to Thomson Reuters data.

“All we’re getting now is negative news … once we start to see the numbers, you’re going to see a bigger spotlight on the success these companies are having,” said Daniel Morgan, portfolio manager at Synovus Trust in Atlanta, which holds shares in the FAANG stocks.

Morgan says he is in a wait-and-see mode until after the first report from Netflix, which is due to be issued on Monday. Analysts expect Netflix earnings growth of 59 percent and revenue growth of 39 percent, according to Thomson Reuters data.

The entire group was hurt by fears that Facebook and other internet firms including Google would face onerous regulations or slowing advertising revenue growth after Facebook said nearly 87 million of its members’ personal data was improperly leaked.

Facebook fell almost 24 percent below its early February record to hit $149.02 on March 26, its lowest point since July last year, due to the scandal. Google had fallen almost 18 percent below its late January record by March 28.

Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia said the $76-million Chase Growth fund cut its Facebook investments to 1.8 percent from 3.1 percent of its portfolio due to the scandal. Tuz may stay on the sidelines until there is more clarity on Facebook’s prospects.

“If fundamentals remain strong with usage staying strong and the company doesn’t get hit with any severe fines or regulations we might very well buy again,” said Tuz, whose firm also owns, Apple and Google shares.

“We feel good about three out of the five FAANGs- Amazon, Apple, Google,” he said. stock was hurt by criticism from U.S. President Donald Trump, who said he would take a serious look at what he claimed were the online retailer’s unfair advantages with taxes and shipping rates. It fell 16.3 percent between March 13 and April 4.

The broader technology sector was also hammered by fears of a trade war with China, a big source of revenue. Apple derived about 20 percent of its revenue from China in its fiscal year 2017. Investors seek details how big the financial risks are in the face of events such as a trade war, new regulations or a stronger dollar.

“The guidance will be more important,” said Robert Phipps, a director at Per Stirling Capital Management in Austin, referring to comments on quarterly conference calls about the potential financial impact of all these issues.

But Patrick Palfrey, equity Strategist at Credit-Suisse in New York is mainly focused on strong estimates for the sector, which has posted impressive growth “time and time again.”

“I can’t help but look at the group and have a positive outlook even with the current uncertainties,” said Palfrey.

Fund flow data shows investors were warming up to the sector again. Science and technology funds showed inflows of $152 million on the week ending April 11 after outflows of $610.9 million the previous week, which had marked the first weekly retreat since early February, according to Thomson Reuters Lipper data.

Facebook has risen about 11 percent from its most recent low while Google has climbed 5 percent above its recent trough; Apple is roughly 6 percent higher than its early April low, as is Netflix has gained about 15 percent in the last 7 sessions.

Options trading flows suggest that much of the fear of the recent sell-off has faded. But while bears have been exiting positions, bulls have yet to make a big move into the space.

Open options contracts on key sector exchange-traded funds, PowerShares QQQ Trust (QQQ.O) and Technology Select Sector SPDR Fund (XLK.P), show investor preferences for puts at or close to multi-month lows, according to Trade Alert data. Put options give investors the right to sell shares at a certain price in the future and are often used as a hedge.   

“Investors have been buying the dip a little bit, but in very small sizes, without very large conviction, until they see the earnings,” said Ilya Feygin, senior strategist at WallachBeth Capital LLC, in Jersey City, New Jersey.

Additional reporting by Saqib Iqbal Ahmed in New York; Editing by Nick Zieminski