Spotify puts bank IPO paydays under fund manager scrutiny

LONDON (Reuters) – After shaking up the music industry, Spotify is now prompting investors to question the value they get from investment banks underwriting new listings with its low-cost IPO.

The Spotify logo hangs on the facade of the New York Stock Exchange with U.S. and a Swiss flag as the company lists it’s stock with a direct listing in New York, U.S., April 3, 2018. REUTERS/Lucas Jackson

The music streaming firm effectively deprived banks of hundreds of millions of dollars in fees by shunning them in its $26.5 billion New York Stock Exchange float on April 3.

Banks can charge companies as much as 7 percent of the amount raised in a U.S. listing and fund managers in London, another of the main centers for initial public offerings (IPOs), say Spotify’s success means underwriters will now have to show more clearly what value they bring to companies and their backers.

“Besides saving the right type of company a lot of money, the real positive demonstrated by this kind of listing is the level playing field it creates,” Trevor Green, head of institutional equities at Aviva Investors, told Reuters.

Banks have been richly rewarded for co-ordinating IPOs and ensuring companies raise the money, pocketing annual fees of $33.6 billion in the U.S. and $14.4 billion in Europe over the last decade, Thomson Reuters data shows. (tmsnrt.rs/2GRVTV2)

And although tussles between investment banks and asset managers over these fees are not new, evolving technology, more freely available capital for privately-held companies and regulatory pressures mean changes could now be on the cards.

But while critics claim that high costs have discouraged some firms from joining the stock market, crimping their prospects and hindering the growth of the economy, bankers say few are likely to be able to replicate Spotify’s direct listing.

This was only possible because a large number of founding shareholders wanted to sell and it was not raising a large sum of capital, meaning that for now, the route may only be open to well-known, highly valued internet firms like Spotify.

“It’s a one-off,” Suneel Hargunani, Head of EMEA Equity Syndicate at Citigroup, said on Wednesday of Spotify’s listing.

“There’s not a lot of companies that would tick all those boxes, hence why we don’t think it’s going to become too common,” he told a Thomson Reuters/IFR briefing.

OLD SCHOOL TIES

The problem facing fund managers is that while they would like to see the companies they invest in pay less to be publicly listed, they are bound by long-standing ties to bankers who vet potential new fundraisers, influence the allocation of new stock and manage access to company executives.

And many are cautious about speaking out publicly for fear of being frozen out of highly competitive new issues.

Banks help to make trading in newly listed shares less volatile by hand-picking institutional investors who are likely to hold them over the medium to long term, and by limiting the volume of stock sold to day traders keen to make a quick buck.

Early indications from Spotify’s post listing performance are mixed, with its shares are down 8 percent from its $166 opening price and trading volumes down to a trickle, while the stock is vulnerable to bouts of volatility.

While this may not be a problem for Spotify, bankers argue that where underwriters often show their value is in helping lesser known companies through their earliest days as a publicly quoted firm.

“I would rather pay the banks their fees, accept a little dilution and have the benefit of a tried-and-tested ecosystem with a network of sponsors that will be there to help,” another investment manager, who declined to be named, said.

But concerns about transparency and competition have led the Organisation for Economic Co-operation and Development to call last year for a review by regulators of signs of parallel pricing which it said were said were “akin to tacit collusion”.

Others say companies under club the longer term relationship value they could offer banks when negotiating IPO fees, with further paydays for credit facilities, buybacks, debt issues and even merger and acquisition activity later on.

Green said he expected banks to fight harder for the big paydays offered by blue chip names and do more to convince investors of the value they offer in a typical listing process.

“The reason why the Ubers and Airbnbs of this world have been able to stay unlisted is because there is so much private money available to finance their growth right now,” he said.

“Many of these types of well-known firms could easily go public without the support of the banks, and losing those fees would certainly sting.”

Spotify’s success would at the very least prompt other high profile companies to reconsider their options before rushing into costly bank-led IPOs, the second investment manager said, adding that other alternative models were also evolving.

“Initial Coin Offerings (ICOs) point to another possible route in the future to raise money with less bank sponsorship.”

In an ICO, a company attracts funding by offering investors virtual currency known as tokens. If the cash raised does not meet the minimum funds as set out in its prospectus, the money is returned and the ICO is deemed to be unsuccessful.

“It is healthy for people to try different things; that is progress,” Steven Magill, head of European Value at UBS Global Asset Management told Reuters.

“If we see more situations like this, they will enable us to gain a better perspective on the advantages and disadvantages.”

Additional reporting by Simon Jessop, Lawrence White and Eric Auchard; Editing by Alexander Smith

EU Justice Commissioner held ‘constructive’ talks with Facebook’s Sandberg

BRUSSELS (Reuters) – European Union Justice Commissioner Vera Jourova said she had a “constructive and open discussion” with Facebook Chief Operating Officer Sheryl Sandberg about the Cambridge Analytica scandal on Thursday.

FILE PHOTO: Sheryl Sandberg, Facebook’s chief operating officer, addresses the Facebook Gather conference in Brussels, Belgium January 23, 2018. REUTERS/Yves Herman

The call lasted around half an hour and Jourova said the EU would closely monitor Facebook’s implementation of a strict new EU data protection law.

“Of my particular concern is the information to European citizens affected by the scandal. I was told that Facebook has started to inform people this week,” Jourova said after the call.

Reporting by Julia Fioretti; Editing by Robin Pomeroy

Disney must offer to buy all of Sky, Britain’s takeover regulator rules

LONDON (Reuters) – Britain’s takeover regulator said Walt Disney (DIS.N) must offer to buy all of Sky if it acquires Twenty-First Century Fox’s 39 percent stake and if Rupert Murdoch’s Fox is prevented from purchasing all of the European pay-TV company itself.

FILE PHOTO: The Sky logo is seen on outside of an entrance to offices and studios in west London, Britain June 29, 2017. REUTERS/Toby Melville/File Photo

Fox (FOXA.O) agreed an offer to buy all of Sky (SKYB.L) 17 months ago but is still waiting regulatory approval, while Disney has agreed to buy Fox assets, including its stake in Sky, in a separate deal subject to its own regulatory clearance.

The ruling means that if Fox’s bid to buy Sky is blocked by the government in June because of Murdoch’s media influence, Disney will have to step in to make the same offer to shareholders if and when it becomes the owner of Fox’s assets.

Disney had said it should not be required to make a bid for the whole of Sky in line with Fox’s existing offer if it bought the Fox assets, but Britain’s Takeover Panel ruled on Thursday that it must match Fox’s 10.75 pounds-a-share price.

A screen shows the logo and a ticker symbol for The Walt Disney Company on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 14, 2017. REUTERS/Brendan McDermid – RC1277BFE810

Analysts had said Disney wanted a special dispensation to give it more flexibility on whether or when it would bid for the rest of Sky if it only bought the 39 percent stake from Fox.

The Takeover Panel, however, said it considered that securing control of Sky might reasonably be considered to be a significant purpose of Disney’s acquiring control of Fox, and it must make an offer within 28 days of buying the Fox assets.

FOX COMMITTED

The Panel’s ruling will not stand if Fox has acquired 100 percent of Sky by the time Disney buys the Fox assets, or if Comcast Corp or any other third party has acquired a stake of more than 50 percent in Sky.

U.S. cable company Comcast (CMCSA.O) said on Feb. 27 that it was considering making an offer for Sky.

Sky said it noted the Takeover Panel’s ruling, and it advised shareholders to take no further action at this time.

Twenty-First Century Fox said that under the ruling, any mandatory offer by Disney would only be required after Disney’s acquisition of Fox is completed, which Fox currently expects to occur after completion of Fox’s offer for Sky.

“21CF (Fox) remains committed to its recommended cash offer for Sky announced on 15th December 2016,” it said.

The offer was supported by revised remedies it had offered to Britain’s Competition and Markets Authority, it added.

Reporting by Paul Sandle; Editing by Kate Holton and Alexander Smith

ESPN+ streaming service launches Disney’s digital drive

LOS ANGELES (Reuters) – Walt Disney Co (DIS.N) on Thursday debuted its new ESPN+ digital subscription service, the first consumer offering in the traditional media company’s push to become a leader in streaming entertainment.

FILE PHOTO: A screen shows the logo and a ticker symbol for The Walt Disney Company on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 14, 2017. REUTERS/Brendan McDermid

The service will carry more than 10,000 live sporting events that are not shown on television, as well as exclusive on-demand programing such as a new documentary about controversial college basketball coach Bobby Knight.

ESPN and other cable networks have been losing pay TV subscribers as audiences rapidly migrate to online services such as Netflix Inc (NFLX.O). Disney is trying to adapt to the switch by developing its own streaming offerings.

ESPN+ may lose money for “some number of years, not huge” as the company works to lure enough subscribers to cover programing investments, said Kevin Mayer, chairman of Disney’s direct-to-consumer and international unit.

During a briefing at ESPN’s studio in downtown Los Angeles, Mayer told reporters he expects the service will become profitable and will provide valuable insight for other Disney streaming services.

“This is strategic for us,” Mayer said. “This is a multi-year effort. It’s going to take some time to assess how it has performed.”

ESPN+ is designed for fanatics who want more sports programing, and for people who cannot find their favorite teams or sports on TV, Disney executives said. The latter includes fans of cricket, rugby, Canadian football or Ivy League sports.

The service is offered as an add-on inside a newly designed ESPN mobile app or through ESPN.com. It costs $4.99 a month, or $49.99 per year.

“It is an opportunity for us to serve sports fans in new ways, and in ways no one else can,” ESPN President Jimmy Pitaro said.

Programing includes one live Major League Baseball game each day during the regular season, starting with the San Diego Padres and San Francisco Giants on Thursday. Customers also will see Major League Soccer games, college sports from 20 U.S. conferences, and boxing and Grand Slam tennis matches that do not air on TV. A daily National Hockey League matchup will be added starting with the 2018-2019 season.

ESPN+ does not include Monday Night Football or National Basketball Association games that are shown on ESPN’s TV channels. Those are reserved for subscribers of pay TV packages, who can stream the live TV lineup through the ESPN app. The redesigned app allows customers to watch up to four streams simultaneously on one screen.

Reporting by Lisa Richwine

Wall Street gains as conflict fears ease, earnings optimism rises

(Reuters) – Technology and financial stocks led a rally on Wall Street on Thursday as President Donald Trump toned down his views on attacking Syria and investors focused on what could be the strongest earnings reporting season in seven years.

Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., April 12, 2018. REUTERS/Lucas Jackson

Trump said a possible attack on Syria may not be imminent, easing fears of confrontation with Russia.

That lifted U.S. Treasury yields, leading to a nearly 2 percent increase in the financial sector .SPSY.

“In the past few days, some of the worries that market was fretting about – trade wars, Facebook, missile attacks – all of those have things have been walked back a little bit,” said Michael Antonelli, managing director, institutional sales trading at Robert W. Baird in Milwaukee.

BlackRock (BLK.N) gained 2.8 percent after the asset manager’s profit rose more than expected. Reports from JPMorgan (JPM.N), Citigroup (C.N) and Wells Fargo (WFC.N) will kick off the earnings season in earnest on Friday.

Slideshow (2 Images)

Analysts expect quarterly profit for SP 500 companies to rise 18.5 percent from a year ago, the biggest gain in seven years, according to Thomson Reuters I/B/E/S.

“The market is finally starting to build on itself, earnings are coming. This is the real risk-on type of rally,” Antonelli said.

At 12:53 p.m. ET, the Dow Jones Industrial Average .DJI was up 1.52 percent at 24,556.29. The SP 500 .SPX gained 1.12 percent to 2,671.73 and the Nasdaq Composite .IXIC rose 1.23 percent to 7,156.18.

Treasury yields and investor sentiment were also boosted by an upbeat U.S. initial jobless claims report that pointed to sustained labor market strength.

Eight SP sectors were higher, with the technology sector’s .SPLRCT 1.6 percent gain giving the biggest boost to the market.

One notable laggard among techs was Facebook (FB.O). Its shares fell 1 percent following a 5.3 percent gain in the past two days when Chief Executive Mark Zuckerberg testified before Congress on the data privacy scandal.

Delta Air Lines (DAL.N) reported quarterly results that topped estimates in several key metrics, sending its shares 2.84 percent higher and also boosting other airline stocks.

Bed Bath Beyond (BBBY.O) shares dived more than 18 percent after the company’s full-year profit forecast missed estimates.

Advancing issues outnumbered decliners on the NYSE for a 1.50-to-1 ratio and on the Nasdaq, for a 2.17-to-1 ratio.

Reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur and Saumyadeb Chakrabarty

U.S. companies found ways to avoid taxes before tax bill: report

WASHINGTON (Reuters) – Fifteen U.S. corporations including online retailer Amazon.com Inc (AMZN.O), power company Duke Energy Corp (DUK.N) and insurer Prudential Financial Inc (PRU.N) avoided U.S. tax on nearly $25 billion in combined profits last year, a tax watchdog group said on Tuesday.

FILE PHOTO: An Amazon.com Inc driver stands next to an Amazon delivery truck in Los Angeles, California, U.S., May 21, 2016. REUTERS/Lucy Nicholson/File Photo

A report by the Institute on Taxation and Economic Policy, or ITEP, said data showed how profitable Fortune 500 companies have routinely lowered their tax bills long before the Republican tax overhaul signed into law by President Donald Trump in December.

The 15 corporations had profits of $24.5 billion in 2017 but managed to obtain nearly $1.4 billion in rebates from the U.S. Treasury for a combined tax rate of minus 5.6 percent, according to the ITEP report, which examined corporate income tax disclosures.

The nonpartisan group said the new U.S. tax regime, which slashed the corporate income tax rate from 35 percent to 21 percent beginning in January, will likely allow corporations avoid even more tax.

FILE PHOTO: U.S. President Donald Trump displays his signature after signing the $1.5 trillion tax overhaul plan in the Oval Office of the White House in Washington, U.S., December 22, 2017. REUTERS/Jonathan Ernst

ITEP said while “disclosures made by these companies are too vague to allow a complete diagnosis of how they are avoiding income taxes” they used a variety of tax breaks to cut their tax bills.

Amazon (AMZN.O) received a $137 million federal rebate on $5.4 billion in U.S. profits, resulting an effective tax rate of negative 2.5 percent, by using a tax break that allows companies to write off the value of executive stock options, according to ITEP.

Charlotte, North Carolina-based Duke Energy obtained a $247 million rebate on $4.2 billion in U.S. profits by using accelerated depreciation on capital investments and renewable energy production tax credits to lower its federal tax rate to a minus 5.9 percent, the report said.

Officials at Amazon.com were not immediately available for comment.

A spokesman for Duke Energy called the report “deeply flawed and misleading.”

The bonus depreciation tax policy was introduced during the recession “to encourage companies to invest and create jobs to spur economic growth,” spokesman Neil Nissan said in a statement.

Last year’s tax legislation dramatically expanded the depreciation tax break used by Fortune 500 corporations, the group said.

Prudential Financial (PRU.N), which has operations in investment management and other financial services in addition to insurance, reduced its effective federal tax rate to negative 1.9 percent on $2.5 billion in U.S. profits partly through low-income housing credits, ITEP said.

Officials at Prudential also were not immediately available for comment.

Reporting by David Morgan; Editing by Cynthia Osterman

Federal Reserve proposes new capital rules for Wall Street

WASHINGTON (Reuters) – The Federal Reserve on Tuesday proposed new rules that could allow some large banks to reduce the amount of capital they must hold as a cushion against a future economic shock.

FILE PHOTO: The Federal Reserve headquarters in Washington September 16 2015. REUTERS/Kevin Lamarque/File Photo

The proposal may clear the way for some large banks to reduce their capital levels in the future but the largest firms on Wall Street are not likely to get such relief, the Fed said.

The proposal is expected to reduce bank paperwork and also make it easier for regulators to monitor the health of banks, said Randal Quarles who is the top Fed official in charge of regulations.

“Our regulatory measures are most effective when they are as simple and transparent as possible,” Quarles, the Fed Vice Chairman for Supervision, said in a statement.

The Fed said the proposed changes are likely to somewhat increase the amount of capital required for the 30 largest banks known as GSIBs or global systemically important banks.

The measures should modestly decrease the amount of capital required for banks smaller than the GSIBs, the Fed said.

“No firm is expected to need to raise additional capital as a result of this proposal,” the Fed said in a statement.

Banks and other stakeholders will have 60 days to comment on the proposal that is likely to take effect next year, said the Federal Reserve.

The new capital standards would be the first reform of capital standards conceived after the decade-old financial crisis.

The new capital standard would be called the ‘stress capital buffer’ and work in tandem with the annual Fed checkup on bank health known as the ‘stress test’.

Reporting By Patrick Rucker; Editing by Chizu Nomiyama

China’s Xi renews vow to open economy, cut tariffs as U.S. trade row deepens

BOAO/BEIJING, China (Reuters) – Chinese President Xi Jinping promised on Tuesday to open the country’s economy further and lower import tariffs on products like cars, in a speech seen as an attempt to defuse an escalating trade dispute with the United States.

While much of his pledges were reiterations of previously announced reforms that foreign businesses say are long overdue, Xi’s comments sent stock markets and the U.S. dollar higher on hopes of a compromise that could avert a trade war.

Xi said China will widen market access for foreign investors, addressing a chief complaint of its trading partners and a point of contention for U.S. President Donald Trump’s administration, which has threatened billions of dollars in tariffs on Chinese goods.

(GRAPHIC: U.S. and Chinese tariffs – tmsnrt.rs/2GXE9qr)

Trump struck a conciliatory tone in response to Xi’s speech, saying in a post on Twitter that he was “thankful” for the Chinese leader’s kind words on tariffs and access for U.S. automakers, as well as his “enlightenment” on the issue of intellectual property.

“We will make great progress together!” Trump tweeted.

Washington charges that Chinese companies steal the trade secrets of American companies and force them into joint ventures to get hold of their technology, an issue that is at the center of Trump’s current tariff threats.

The latest comments from both leaders appear to reinforce a view that a full-scale trade war can be averted, although there have been no talks between the world’s two economic superpowers since the U.S. tariffs were announced.

“President Xi’s speech appears to have struck a relatively positive tone and opens the door to potential negotiations with the U.S. in our view. The focus now shifts to the possible U.S. response,” economists at Nomura said.

“But of course actions speak louder than words. We will keep an eye on the progress of those opening-up measures.”

The speech at the Boao Forum for Asia in the southern province of Hainan had been widely anticipated as one of Xi’s first major addresses in a year in which the ruling Communist Party marks the 40th anniversary of its landmark economic reforms and opening up under former leader Deng Xiaoping.

  • Moody’s, Fitch see limited impact of U.S. tariffs on Chinese economy

Xi said China would raise the foreign ownership limit in the automobile, shipbuilding and aircraft sectors “as soon as possible” and push previously announced measures to open the financial sector.

“This year, we will considerably reduce auto import tariffs, and at the same time reduce import tariffs on some other products,” Xi said.

He said “Cold War mentality” and arrogance had become obsolete and would be repudiated. His speech did not specifically mention the United States or its trade policies, which have been assailed by Chinese state media in recent days.

Vice Premier Liu He had already vowed at the World Economic Forum in January that China would roll out fresh market opening moves this year, and that it would lower auto import tariffs in an “orderly way”.

Chinese officials have promised since at least 2013 to ease restrictions on foreign joint ventures in the auto industry, which would allow foreign firms to take a majority stake. They currently are limited to a 50 percent stake in joint ventures and cannot establish their own wholly owned factories.

Tesla’s Chief Executive Elon Musk has railed against an unequal playing field in China and wants to retain full ownership over a manufacturing facility the company is in talks to build there.

“This is a very important action by China. Avoiding a trade war will benefit all countries,” Musk tweeted after Xi’s speech.

Foreign business groups welcomed Xi’s commitment to reforms, including promises to strengthen legal deterrence on intellectual property violators, but said the speech fell short on specifics.

“Ultimately U.S. industry will be looking for implementation of long-stalled economic reforms, but actions to date have greatly undermined the optimism of the U.S. business community,” said Jacob Parker, vice president of China operations at the U.S.-China Business Council.

Chinese President Xi Jinping delivers a speech at an annual meeting of the Boao Forum for Asia in Boao, in the southern Chinese province of Hainan, in this photo taken by Kyodo April 10, 2018. Kyodo/via REUTERS

EASING OF TENSION

Jonas Short, head of the Beijing office at Everbright Sun Hung Kai, said the market was cheered by Xi’s speech because it was framed in more positive terms which could ease trade tensions, but he voiced caution about promised reforms.

“China is opening sectors where they already have a distinct advantage, or a stranglehold over the sector,” Short said, citing its banking industry, which is dominated by domestic players.

Xi’s renewed pledges to open up the auto sector come after Trump on Monday criticized China on Twitter for maintaining 25 percent auto import tariffs compared to the United States’ 2.5 percent duties, calling such a relationship with China not free trade but “stupid trade.”

Analysts have cautioned that any Chinese concessions on autos, while welcome, would be a relatively easy win for China to offer the United States, as plans for opening that sector had been under way well before Trump took office.

But Vice Commerce Minister Qian Keming said at the forum on Tuesday that China’s economic reforms were driven by domestic factors and not due to external pressures.

Xi said China would accelerate opening up its insurance industry, with Shanghai Securities News citing a government researcher after the speech saying foreign investors should be able to hold a controlling stake or even full ownership of an insurance company in the future.

Trump’s move last week to threaten China with tariffs on $50 billion in Chinese goods was aimed at forcing Beijing to address what Washington says is deeply entrenched theft of U.S. intellectual property and forced technology transfers from U.S. companies.

Chinese officials deny such charges, and responded within hours of Trump’s announcement of tariffs with their own proposed commensurate duties.

The move prompted Trump last week to threaten tariffs on an additional $100 billion in Chinese goods, which have yet to be identified. None of the announced duties have been implemented yet, offering room for negotiation.

Beijing charges that Washington is the aggressor and spurring global protectionism, although China’s trading partners have complained for years that it abuses World Trade Organization rules and practices unfair industrial policies that lock foreign companies out of crucial sectors with the intent of creating domestic champions.

Chinese President Xi Jinping delivers a speech at an annual meeting of the Boao Forum for Asia in Boao, in the southern Chinese province of Hainan, in this photo taken by Kyodo April 10, 2018. Kyodo/via REUTERS

While U.S. officials, including Trump, have recently expressed optimism that the two sides would hammer out a trade deal, Chinese officials in recent days have said negotiations would be impossible under “current circumstances”.

Dallas Federal Reserve Bank President Robert Kaplan, on a visit to Beijing, said he was optimistic that very few if any of the proposed tariffs by the United States and China announced in recent weeks will actually be implemented.

“I think it’s so clearly in the interest of both countries that we have a constructive trading relationship and that we have substantive talks to redress these issues.”

Additional reporting by Norihiko Shirouzu, Shu Zhang, Adam Jourdan and Makini Brice in Washington; Writing by Michael Martina; Editing by Sam Holmes, Kim Coghill and Bernadette Baum

Zuckerberg resists effort by U.S. senators to commit him to regulation

WASHINGTON/SAN FRANCISCO (Reuters) – Facebook Inc Chief Executive Mark Zuckerberg on Tuesday navigated through the first of two U.S. congressional hearings without making any further promises to support new legislation or change how the social network does business.

During nearly five hours of questioning by 44 U.S. senators, Zuckerberg repeated apologies he previously made for a range of problems that have beset Facebook, from a lack of data protection to Russian agents using Facebook to influence U.S. elections.

But the 33-year-old internet mogul managed to deflect any specific promises to support any congressional regulation of the world’s largest social media network and other U.S. internet companies.

“I’ll have my team follow up with you so that way we can have this discussion across the different categories where I think this discussion needs to happen,” Zuckerberg told a joint hearing by the U.S. Senate’s Commerce and Judiciary committees, when asked what regulations he thought were necessary.

Investors were impressed with his performance. Shares in Facebook posted their biggest daily gain in nearly two years, closing up 4.5 percent.

(GRAPHIC: Facebook shares fly as Zuckerberg speaks – tmsnrt.rs/2GN8toG)

The shares fell steeply last month after it came to light that millions of users’ personal information was harvested from Facebook by Cambridge Analytica, a political consultancy that has counted U.S. President Donald Trump’s election campaign among its clients. The latest estimate of affected users is up to 87 million.

That disclosure pitched Facebook into a crisis of confidence among users, advertisers, employees and investors who were already struggling with Facebook’s reaction to fake news and its role in the 2016 election.

  • Facebook’s Zuckerberg vows to work harder to block hate speech in Myanmar

PACKED HEARING

The crowded Senate hearing was not without theatrics, although most was from the audience, like an activist dressed in costume as a Russian internet “troll.” On Twitter, observers seemed obsessed with an extra cushion on Zuckerberg’s chair that was dubbed his “booster seat.” A photojournalist for Associated Press took a picture of his prepared talking points and the photo was posted on Twitter.

The Senate hearing ended just past 7 p.m. (2300 GMT), and a second session before a House of Representatives committee is scheduled for Wednesday at 10 a.m. (1400 GMT).

Wearing a dark suit and tie instead of his typical T-shirt and jeans, Zuckerberg remained largely unruffled and serious as senators questioned him. But some senators did provoke a reaction. Zuckerberg was asked whether Facebook was a monopoly. “It certainly doesn’t feel that way to me,” he said, breaking into a smile as the audience laughed.

But the senators who asked sharp questions were often at a disadvantage because each had only five minutes to pin down the billionaire.

Democratic Senator Kamala Harris, from Facebook’s home state of California, asked a line of questions about whether Zuckerberg or his senior executives considered notifying Facebook users of the data breach. She was among the lawmakers dissatisfied.

“Mark Zuckerberg’s failure to answer several critical questions during his appearance before the Senate today leaves me concerned about how much Facebook values trust and transparency,” she wrote on Twitter.

Facebook CEO Mark Zuckerberg testifies before a joint Senate Judiciary and Commerce Committees hearing regarding the company’s use and protection of user data, on Capitol Hill in Washington, U.S., April 10, 2018. REUTERS/Aaron P. Bernstein

SEEING A CONNECTION

Facebook disclosed in September that Russians under fake names used the social network to try to influence U.S. voters in the months before and after the 2016 election, writing about inflammatory subjects, setting up events and buying ads.

“We believe it is entirely possible that there will be a connection there,” Zuckerberg said when asked if there was overlap between Cambridge Analytica’s harvested user data and the political propaganda pushed by the Kremlin-linked Internet Research Agency during the 2016 presidential election, which Facebook has said was seen by some 126 million people.

The U.S. Federal Trade Commission is investigating whether Facebook violated an agreement it signed with the agency in 2011 by its actions in the Cambridge Analytica scandal.

In the agreement, which Facebook signed to end an investigation into privacy breaches, the company promised not to misrepresent the extent to which it maintains the privacy or security of personal information, and it said it would obtain users’ affirmative consent before sharing personal information with any third party.

Zuckerberg told senators he did not see the Cambridge Analytica episode as a violation. But he acknowledged that Facebook did not notify the FTC in 2015 when it first learned of that company’s data-harvesting.

On Friday, Zuckerberg threw his support behind proposed legislation, known as the Honest Ads Act, that would require social media sites to disclose the identities of buyers of online political campaign ads.

On Tuesday, however, Zuckerberg would not agree to speak out further on behalf of the Honest Ads Act.

“Are you going to come back up here and be a strong advocate to see that that law’s passed?” asked Democratic Senator Tom Udall.

“Senator, the biggest thing I think we can do is implement it,” Zuckerberg responded, saying that Facebook already planned to comply voluntarily.

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Udall pressed: “I’d like a yes or no answer.”

Zuckerberg again demurred, saying: “I’m going to direct my team to focus on this.”

Reporting by Dustin Volz in Washington and David Ingram in San Francisco; Additional reporting by David Shepardson and Andy Sullivan in Washington, April Joyner and Lewis Krauskopf in New York, and Paresh Dave in San Francisco; Writing by Bill Rigby; Editing by Meredith Mazzilli and Peter Cooney

Asian stocks pare gains on U.S.-China trade tensions, Syria, but euro buoyant

TOKYO (Reuters) – Asian stocks rose modestly on Wednesday but pared early gains as caution again crept into markets over strained U.S-China trade ties and escalating tensions in Syria.

FILE PHOTO: Market prices are reflected in a glass window at the Tokyo Stock Exchange (TSE) in Tokyo, Japan, February 6, 2018. REUTERS/Toru Hanai

Spreadbetters expected European stocks to open lower, with Britain’s FTSE .FTSE seen losing 0.3 percent, Germany’s DAX .GDAXI slipping 0.4 percent and France’s CAC .FCHI shedding 0.4 percent.

Wall Street also looked set for a softer start with SP mini futures ESc1 down 0.5 percent.

Chinese President Xi Jinping and U.S. President Donald Trump both struck conciliatory tones on Tuesday, which analysts hoped could open the door for negotiations to avert a trade war. But one report said early talks have already broken down.

Adding to market jitters, the United States and its Western allies are reportedly discussing possible military action over a suspected poison gas attack in Syria, a move which could provoke a response from Russia.

Pan-European air traffic control agency Eurocontrol warned airlines to exercise caution in the eastern Mediterranean due to the possible launch of air strikes into Syria in next 72 hours.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was 0.2 percent higher.

It had gained 1.2 percent the previous day on relief that Xi’s speech was businesslike and non-confrontational, but lost some steam on Wednesday on concerns over how long it may take the world’s two biggest economies to hash out a compromise on trade, if one is possible.

“The United States and China are still at a phase in which they are attempting to probe the intentions of the other,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.

“While China showed how far it can go, the markets won’t settle down until the two powers reach an actual agreement. The next focal point is how the United States responds.”

Australian stocks were down 0.4 percent and Japan’s Nikkei .N225 lost 0.4 percent. South Korea’s KOSPI .KS11 was 0.2 percent lower.

Chinese shares fared better after the country’s central bank set out the clearest timetable yet for opening the financial services sector to foreign investors. It will allow offshore firms to enter its trust, financial leasing, auto finance and consumer finance sectors by the end of this year.

China watchers said the announcement may further ease trade tensions. But they remained cautious, however, noting that action speaks louder than words and pointing out that foreign companies have continued to face unofficial barriers even after some sectors were ostensibly opened up.

Shanghai stocks .SSEC rose 0.9 percent and Hong Kong’s Hang Seng .HSI was up 0.8 percent.

The Dow .DJI advanced 1.8 percent, the SP 500 rose 1.7 percent and Nasdaq .IXIC added 2.1 percent overnight after Xi on Tuesday pledged to further open up the economy and promised to cut import tariffs on products including cars.

In currencies, the euro was a shade higher at $1.2358 EUR= and on its fourth session of gains.

The common currency was not far from a two-week high of $1.2378 scaled overnight after European Central Bank policymaker Ewald Nowotny told Reuters in an interview that its 2.55-trillion euro bond buying program would be wound down by the end of this year.

The euro has risen about 3 percent this year on expectations that the ECB would eventually normalize monetary policy and hike interest rates.

“We anticipate further, gradual euro appreciation versus the dollar over the course of 2018. Greatly reduced deflationary risks for the euro area have been fundamental to the stabilization and recovery of the single currency since the first half of last year,” wrote Brian Martin, head of global economics at ANZ.

The dollar dipped 0.15 percent to 107.050 yen JPY=. The greenback had gained 0.4 percent overnight when an uptick in risk appetite weakened demand for its Japanese peer, often sought in times of market turmoil and political tensions.

The dollar index against a basket of six major currencies was little changed at 89.573 .DXY after shedding 0.3 percent the previous day.

Oil prices slipped following the previous days sharp rally, although losses were limited as the commodity markets eyed an escalation of Middle East tensions.

U.S. crude futures CLc1 were down 0.3 percent at $65.32 a barrel after surging more than 3 percent on Tuesday on the back of the surge in risk appetite in the broader markets.

Brent LCOc1 lost 0.45 percent to $70.73 a barrel after jumping 3.5 percent on Tuesday, when it rose to $71.34, highest since December 2014.

Spot gold XAU= touched a one-week high of $1,342.64 an ounce on lingering geopolitical tensions.

Editing by Shri Navaratnam, Sam Holmes and KIm Coghill