HONG KONG/DUESSELDORF (Reuters) – Chinese e-commerce giant Alibaba Group Holding Ltd is in talks with Germany’s Metro about taking a stake in the German wholesaler’s China operations, three sources told Reuters on Thursday.
Metro and Alibaba declined to comment.
The talks are at an early stage and could still fall apart, the sources said.
Alibaba’s interest comes after rival Tencent last year signed a partnership deal with France’s Carrefour.
Once a sprawling retail conglomerate, Metro has been restructuring in recent years to focus on its core cash-and-carry business, selling Kaufhof department stores and then splitting from consumer electronics group Ceconomy.
It is also trying to offload its loss-making Real hypermarkets chain, saying on Tuesday that the sale is progressing.
Metro shares, which have gained 16 percent this year on speculation of a possible bid for the company and news on divestments, were up 0.6 percent after the Reuters report.
“Initial excitement about a bid premium will soon be replaced by worries about hollowing out the business and removing one of the few paths for sustainable growth,” said Bernstein analyst Bruno Monteyn.
Metro has 95 stores in China and real estate assets in major centers, such as Beijing and Shanghai, one of the sources said.
Apart from Alibaba, there are other parties involved in early discussions with Metro, according to the sources, with an official sale process expected to kick off soon.
Metro Chief Executive Olaf Koch said on Tuesday that the German firm was reviewing potential partnerships with local players in China.
Metro and Alibaba have already partnered in online retail in China. “We are growing continually and we are profitable there,” Koch said when Metro presented first quarter earnings.
Metro reported that same store sales in Asia rose a currency adjusted 7 percent to 1.04 billion euros ($1.17 billion) in the October to December quarter.
The possible China move comes as Czech investor Daniel Kretinsky is preparing a potential bid for Metro, people close to the matter told Reuters last month.
Global Commerce (EPGC), a vehicle co-owned by Kretinsky and Slovak investor Patrik Tkac, is expected to have the financing and other arrangements in place to be able to announce a tender offer for Metro as early as March, the people added.
($1 = 0.8853 euros)
Reporting by Kane Wu in Hong Kong and Matthias Inverardi in Duesseldorf, Germany; Additional reporting by Doug Busvine in Frankfurt; Editing by Edward Taylor, Emma Thomasson and Edmund Blair
WASHINGTON (Reuters) – U.S. retail sales recorded their biggest drop in more than nine years in December as receipts fell across the board, suggesting a sharp slowdown in economic activity at the end of 2018.
The economy’s outlook was further dimmed by other data on Thursday showing an unexpected increase in the number of Americans filing claims for unemployment benefits last week. That pushed the four-week moving average of claims to a one-year high, an indication that job growth was moderating.
There was also little sign of inflation in the economy, with producer prices dropping in January for a second straight month. Moderate inflation and softening domestic demand support the Federal Reserve’s pledge to be “patient” before raising interest rates further this year.
“This suggests that the word ‘patience’ will be in the Fed’s vernacular for some time,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.
The Commerce Department said retail sales tumbled 1.2 percent, the largest decline since September 2009 when the economy was emerging from recession. Data for November was revised slightly down to show retail sales edging up 0.1 percent instead of gaining 0.2 percent as previously reported.
Economists polled by Reuters had forecast retail sales increasing 0.2 percent in December. Retail sales in December rose 2.3 percent from a year ago.
The December retail sales report was delayed by a 35-day partial shutdown of the federal government that ended on Jan. 25. No date has been set for the release of the January retail sales report, which was scheduled for publication on Friday.
The plunge in retail sales came amid a sharp stock market sell-off and drop in consumer confidence in December. The longest government shutdown could also have undercut sales.
Some economists questioned the credibility of the report, arguing that the shutdown could have impacted on the collection of data. But the Commerce Department said the “processing and data quality were monitored throughout and response rates were at or above normal levels for this release.”
Excluding automobiles, gasoline, building materials and food services, retail sales dropped 1.7 percent last month after an upwardly revised 1.0 percent surge in November. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously reported to have jumped 0.9 percent in November.
December’s sharp drop in core retail sales suggested a moderation in the pace of consumer spending in the fourth quarter. Consumer spending, which accounts for more than two-thirds of the U.S. economy, increased at a 3.5 percent annualized rate in the July-September quarter.
As result of the weak retail sales report, economists slashed their fourth-quarter gross domestic product growth estimates by as much as seven-tenths of a percentage point to as low as a 2.0 percent rate.
Growth estimates could be trimmed further after another report from the Commerce Department showed retail inventories excluding automobiles tumbled 1.0 percent in November, the most since December 2008. [USNEDEFQ5]
The economy grew at a 3.4 percent pace in the July-September period. U.S. Treasury prices rose on the data, while the dollar fell to session lows against a basket of currencies. Stocks were trading lower.
In December, online and mail-order retail sales dropped 3.9 percent, the biggest drop since November 2008. Receipts at service stations dived 5.1 percent, the biggest fall since February 2016, reflecting cheaper gasoline prices.
There were also declines in receipts at clothing and furniture stores. Americans also cut spending at restaurants and bars. Sales at hobby, musical instrument and book stores plunged 4.9 percent, the biggest drop since September 2008.
But sales at auto dealerships rose 1.0 percent in December and receipts at building material stores gained 0.3 percent.
The outlook for consumer spending, which has been underpinned by a strong labor market and cheaper gasoline, is not encouraging. A report this week from the New York Fed showed the overall debt shouldered by Americans edged up to a record $13.5 trillion in the fourth quarter of 2018.
In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits increased 4,000 to a seasonally adjusted 239,000 for the week ended Feb. 9.
Economists had forecast claims falling to 225,000 in the latest week. Claims surged to a near 1-1/2-year high of 253,000 in the week ended Jan. 26 and last week’s surprise increase suggested some ebbing in labor market conditions.
The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 6,750 to 231,750 last week, the highest level since January 2018. [USNEDEFQ2]
In another report on Thursday, the Labor Department said its producer price index for final demand dipped 0.1 percent last month as the cost of energy products and food fell. The PPI dipped 0.1 percent in December.
In the 12 months through January, the PPI rose 2.0 percent. That was the smallest gain since July 2017 and followed a 2.5 percent rise in December. Economists had forecast the PPI edging up 0.1 percent in January and increasing 2.1 percent on a year-on-year basis. [USNEDEFQ6]
The PPI report came on the heels of data on Wednesday showing consumer prices were unchanged in January for a third straight month.
Reporting by Lucia Mutikani; Editing by Andrea Ricci
(Reuters) – U.S. stocks fell on Thursday, as consumer and retail stocks dropped after a sharp decline in retail sales in December suggested a slowdown in economic activity.
Retail sales tumbled 1.2 percent in the last month of 2018, the commerce department said, the largest decline since September 2009 when the economy was emerging from a recession. Economists polled by Reuters had forecast retail sales increasing 0.2 percent.
The SP consumer staples declined 1.18 percent, the most among the 10 major sectors trading lower, also weighed down by a steep drop in shares of Coca-Cola Co.
The soda maker fell 7 percent after forecasting full-year profit well below expectations and reporting a quarterly decline in volumes in North America.
The SP retailing index fell 1.33 percent, as Amazon.com dropped 1.4 percent, while home improvement chains Home Depot Inc and Lowe’s Companies slipped 1 percent each.
“The numbers were a bit of a surprise on the downside and that is critical because this is for December and it suggests that people weren’t spending enough on holiday sales shopping,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.
The disappointing data pushed U.S. Treasury yields lower, sending financials and the SP banking sector tumbling 1.8 percent.
The weak retail data also spurred more traders to bet that the Federal Reserve would cut key lending rates by the end of the year. [MMT/]
The data cast a shadow over optimism about the U.S.-China trade talks, which entered a higher level in Beijing.
Top White House economic adviser Larry Kudlow gave an upbeat assessment on the talks, but said a decision has not yet been made on whether to extend a March 1 deadline.
Meanwhile, the Congress is looking to end a dispute over border security on Thursday with legislation that would ignore President Donald Trump’s request for funds to help build a U.S.-Mexico border wall.
At 9:51 a.m. ET, the Dow Jones Industrial Average was down 195.24 points, or 0.76 percent, at 25,348.03. The SP 500 was down 17.92 points, or 0.65 percent, at 2,735.11 and the Nasdaq Composite was down 32.37 points, or 0.44 percent, at 7,388.00.
The fourth-quarter earnings season is slowly tapering off, and about 71 percent of the SP 500 companies that have reported earnings have topped expectations.
But outlook for the current quarter is less rosy. Analysts’ now estimate current-quarter profit to decline 0.3 percent, which would be the first loss since the second quarter of 2016.
Cisco Systems Inc rose 4.4 percent after the network gear maker’s earnings beat estimates, driven by strength in its newer applications and security businesses.
Declining issues outnumbered advancers for a 2.11-to-1 ratio on the NYSE and for a 1.72-to-1 ratio on the Nasdaq.
The SP index recorded eight new 52-week highs and one new low, while the Nasdaq recorded 20 new highs and 15 new lows.
Reporting by Amy Caren Daniel and Shreyashi Sanyal in Bengaluru; Editing by Sriraj Kalluvila
HONG KONG (Reuters) – Alibaba Group Holding Ltd has bought an 8 percent stake in Chinese video platform Bilibili Inc, the official Xinhua news agency reported on Thursday.
Alibaba’s e-commerce retail arm, Taobao, will own 24 million shares in Bilibili, one of China’s leading online video sharing and entertainment platforms which listed on Nasdaq in March, Xinhua reported.
Chen Rui, Bilibili’s CEO and chairman, was quoted by Xinhua as saying that he hoped the collaboration would help boost Bilibili’s users by leveraging on Taobao’s huge platform.
Alibaba and Bilibili were not immediately available for comments.
Xinhua gave no further details of the deal such as the price.
Reporting by Meg Shen in Hong Kong and Lee Chyen Yee in Singapore; Editing by Alexandra Hudson
NEW YORK (Reuters) – American whiskey makers are feeling the pain after their major overseas markets imposed hefty duties on their liquor in retaliation against President Donald Trump’s tariffs on aluminum imports.
U.S. global whiskey exports, which include rye and bourbons, recorded a nifty 28 percent year-over-year increase in the first six months 2018, the Distilled Spirits Council said on Tuesday.
But once levies from Canada, Mexico, China and the European Union took effect, the collective whiskey exports from 37 U.S. states fell by 8 percent in the period from July to November last year, compared with the same five months in 2017, according to the Washington-based industry trade group.
The tariff-induced drop wiped out the overseas sales gain the industry had enjoyed in the first half of 2018, the group’s data showed.
“Tariffs are starting to have a negative effect on exports,” Christine LoCascio, the group’s senior vice president of international trade, told a press conference. “Many of the small distillers have felt the effect on day one.”
In 2017, American whiskey producers exported $1.1 billion worth of their products. Nearly 60 percent was shipped to the EU, 12 percent to Canada and the rest to other countries, including China.
On the other hand, the distillers fared better at home.
In 2017, American whiskey rang up a 6.6 percent increase in revenues from a year earlier to $3.6 billion, the group’s data showed.
In the wake of the EU’s imposing 25 percent tariffs last June, U.S. whiskey exports fell 8.7 percent in the following five months, compared with the same period in 2017.
Canada’s 10 percent duties that took effect on July 1 resulted in an 8.3 percent sales decline in that country for American whiskey producers in the July-November period compared with the same period a year earlier, the group said.
Reporting by Richard Leong; Editing by Dan Grebler
SINGAPORE (Reuters) – Oil prices rose on Wednesday as producer club OPEC said it had cut supply deeply in January and as U.S. sanctions hit Venezuela’s oil exports.
U.S. West Texas Intermediate (WTI) crude oil futures were at $53.60 per barrel at 0219 GMT, up 50 cents, or 0.9 percent, from their last close.
International Brent crude futures were up 0.8 percent, or 51 cents, at $62.93 per barrel.
Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore, said oil prices were boosted after “Saudi Arabia announced it was cutting daily production and exports by a further 500,000 barrels per day (bpd) on top of its agreed OPEC quota cut”.
The Organization of the Petroleum Exporting Countries (OPEC), which Saudi Arabia de-facto leads as the world’s top crude oil exporter, said on Tuesday that it had cut its output by almost 800,000 bpd in January to 30.81 million bpd.
Supply issues in Venezuela, another OPEC member, are also bolstering oil prices as the South American country suffers a political and economic crisis, with Washington introducing petroleum export sanctions against state-owned energy firm PDVSA.
Despite the political rifts between Venezuela and the United States, U.S. refiners have in the past been some of the biggest buyers of Venezuelan crude.
These customers have fallen away after Washington imposed sanctions earlier this year.
Venezuela has tried to find alternative customers, especially in Asia, but under U.S. pressure many buyers there are also shying away from dealing with PDVSA.
“Oil production is rapidly falling and companies that normally resell Venezuelan crude have not found ways to mitigate the effect of the U.S. sanctions,” Barclays bank said in a note issued on Tuesday.
Despite the OPEC cuts and crisis in Venezuela, analysts said global oil markets remain well supplied.
“Oil markets continue to focus at the macro level on the dual notions of adequate supply and softening demand,” Frank Verrastro, senior vice president for the Energy and National Security Program at the Center for Strategic and International Studies (CSIS), a U.S. think-tank, said in a note.
He added that markets were amply supplied due to “adequate global oil inventories, the prospect of weakened demand tied both to U.S.-China trade and broader economic concerns, the approach of seasonal refinery maintenance – when crude oil demand declines – and an influx of new supply from the United States and elsewhere”.
Reporting by Henning Gloystein; Editing by Joseph Radford
BEIJING (Reuters) – U.S. Treasury Secretary Steven Mnuchin said on Wednesday he hopes for “productive” trade meetings in China this week, as the two countries seek to hammer out an agreement amid a festering dispute that has seen both level tariffs at each other.
U.S. tariffs on $200 billion worth of imports from China are scheduled to rise to 25 percent from 10 percent if the two sides cannot reach a deal by a March 1 deadline, increasing pain and costs in sectors from consumer electronics to agriculture.
Mnuchin, asked by reporters as he left his Beijing hotel what his hopes were for the visit, said “productive meetings”. He did not elaborate.
Mnuchin, along with U.S. Trade Representative Robert Lighthizer, arrived in the Chinese capital on Tuesday.
U.S. President Donald Trump said on Tuesday that he could let the deadline for a trade agreement “slide for a little while,” but that he would prefer not to and expects to meet with Chinese President Xi Jinping to close the deal at some point.
Trump’s advisers have previously described March 1 as a “hard deadline,” but Trump told reporters for the first time that a delay was now possible.
A growing number of U.S. businesses and lawmakers have expressed hopes for a delay in the tariff increase while the two sides tackle the difficult U.S. demands for major structural policy changes by China aimed at ending the forced transfer of American trade secrets, curbing Beijing’s industrial subsidies and enforcing intellectual property rights.
Trump said last week he did not plan to meet with Xi before the March 1 deadline.
Mnuchin and Lighthizer are scheduled to hold talks on Thursday and Friday with Vice Premier Liu He, the top economic adviser to Xi.
The latest round of talks in Beijing kicked off on Monday with discussions among deputy-level officials to try to work out technical details, including a mechanism for enforcing any trade agreement.
A round of talks at the end of January ended with some progress reported, but no deal and U.S. declarations that much more work was needed.
China and the United States, the world’s two largest economies, have a series of other disagreements too, including over Chinese telecoms giant Huawei Technologies.
U.S. Secretary of State Mike Pompeo cautioned allies on Monday against deploying equipment from Chinese telecoms giant Huawei on their soil, saying it would make it more difficult for Washington to “partner alongside them”.
The United States and its Western allies believe Huawei’s apparatus could be used for espionage, and see its expansion into central Europe as a way to gain a foothold in the European Union market.
Both the Chinese government and Huawei have dismissed these concerns.
Reporting by Philip Wen; Writing by Ben Blanchard; Editing by Paul Tait and Darren Schuettler
(Reuters) – Advisers to Venezuela’s self-declared president Juan Guaido have proposed he appoint six executives to a transitional board for U.S. refiner Citgo Petroleum Corp, Venezuela’s most important foreign asset, four people close to the talks said.
The congress chief wants to secure control of the U.S. subsidiary of Venezuelan state-run energy firm PDVSA as he seeks to assemble an interim government. Controlling Citgo and other assets outside Venezuela, especially those that generate revenue, would provide him with much-needed funds.
PDVSA, Citgo and Venezuela’s oil ministry did not respond to requests for comments.
Guaido invoked a constitutional provision to assume the presidency three weeks ago, arguing that the re-election last year of President Nicolas Maduro was a sham. Most Western countries, including the United States, have recognized Guaido as Venezuela’s legitimate head of state, but Maduro retains control of state institutions.
The proposed board would be composed of Venezuelans Luisa Palacios, Angel Olmeta, Luis Urdaneta and Edgar Rincon, all of whom are currently living in the United States, plus two American Citgo employees. They would be assigned specific tasks by Guaido’s team to secure operational and financial control while resolving internal disputes, said the people, who were not authorized to speak publicly.
Guaido’s advisers have been recruiting from a wide range of Venezuelan energy executives in recent weeks, the people said. Some have declined to join his proposed board.
Palacios, who holds a doctorate from the Johns Hopkins School of Advanced International Studies, has been head of emerging markets and Latin American research at consultancy Medley Global Advisors. She did not respond to a request for comment.
Olmeta and Urdaneta were top executives at PDVSA and Citgo, and Rincon worked as senior vice president of operations at energy firm Nabors Industries Ltd, according to their LinkedIn profiles. They could not immediately be reached for comment.
Two top American executives currently working for Citgo, Vice President of Refining, Art Klein, and chief strategy officer, Rick Esser, also would join the board, the people said. They did not respond to requests for comment.
Maduro calls Guaido’s claim to the presidency an attempted U.S.-backed coup and promised he will not allow Citgo to be “stolen.”
“We have protected the nation’s assets and that is hurting them,” Guaido said in a speech on Tuesday, in reference to Maduro’s government.
Citgo’s U.S. headquarters have been torn into factions by the political battle. PDVSA last week sought to remove U.S. citizens from its board and huddled over a legal strategy to block the expected appointments. Some Venezuelan executives have been recalled to Caracas, others dismissed, and some Maduro loyalists suddenly reappeared, people familiar with the company’s operations said.
Washington also has been closely involved in talks on the fate of Citgo, which owns about 4 percent of U.S. oil refining capacity. The unit runs refineries in Illinois, Texas, and Louisiana, operates fuel pipelines and terminals, and supplies a retail network of 5,500 gas station across 29 U.S. states.
Esser has been making routine decisions as Citgo’s current president, Asdrubal Chavez, and his closest collaborators have run the company from the Bahamas, where a Citgo executive office was opened last year, three people at the Houston-based firm said.
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The mechanics of how the new board would take over are unclear, and there are likely to be court challenges to the board’s authority, people familiar with the deliberations said.
A long fight in U.S. courts could jeopardize Guaido’s attempt to control operation of Citgo’s refineries and gain access to the millions of dollars of dividends Citgo generates each year. The company has been barred from paying dividends to PDVSA and the cash is believed to have accrued on its books.
His plan for Citgo recently was revised to give the proposed board a timeline to act and specific directions, while offering candidates protection from liability over allegations linked to PDVSA, some of which are under investigation by U.S. authorities.
Reporting by Marianna Parraga in Mexico City and Mayela Armas in Caracas; Editing by Gary McWilliams, Phil Berlowitz and Rosalba O’Brien
HOUSTON/MEXICO CITY/MOSCOW (Reuters) – Venezuela’s oil exports have tapered off and shifted toward India since new U.S. sanctions began Jan. 28 as state-run oil company PDVSA seeks to replace deliveries to the United States and Europe that were disrupted by payment restrictions.
The South American nation is turning its focus to cash-paying buyers, especially in India, its second-largest customer after the United States, amid U.S. sanctions designed to undercut financial support for Venezuelan President Nicolas Maduro. Sanctions are designed to bar Maduro’s access to oil revenue that has helped his government remain in power.
In the two weeks since the sanctions were announced, PDVSA has been able to load and export 1.15 million barrels per day (bpd) of crude and refined products, according to Refinitiv Eikon data. Venezuela was exporting about 1.4 million bpd in the months before sanctions, according to the Eikon data.
Two supertankers, Baghdad and Folegandros I, launched late on Monday from Venezuela’s Jose terminal carrying cargoes to Indian ports.
Ship tracking data in Refinitiv showed several other tankers carrying Venezuelan crude or fuel toward Asia, although the final destinations of these vessels were not yet clear.
DOUBLING INDIA SALES
Before the sanctions, PDVSA shipped over 500,000 bpd to the United States, its largest cash market, followed by India then China, at above and below 300,000 bpd respectively. [GRAPHIC: Top importers of Venezuelan crude: tmsnrt.rs/2RYGk2E]
Venezuela has sent its oil minister, Manuel Quevedo, to India to convince refiners, including Reliance Industries Ltd and Nayara Energy Ltd, to double their oil purchases.
“We are selling more than 300,000” bpd to Indian buyers, Quevedo said on Monday in New Delhi. “We want to double that amount.”
Reliance is among PDVSA’s main cash-paying customers, while Nayara receives Venezuelan oil from one of its largest stakeholders, Russian oil-giant Rosneft. The latter supplies PDVSA oil to Vadinar, India’s second largest refinery, under a Rosneft payment for loan program that dates to 2014.
Rosneft should be able to continue to receive PDVSA cargoes under its oil-for-loans, according to a reading of U.S. sanctions by lawyers and traders. Nayara receives around half of Venezuelan crude supplied to Rosneft, with the remainder shipped to Europe, including Rosneft operations in Germany.
According to a trading source close both to Rosneft and PDVSA crude operations, the last cargo containing fuel oil for the Russian company left Venezuela for Asia on Jan. 30-31, containing around 1 million barrels.
“PDVSA supplies to Rosneft or its subsidiaries in India under deals clinched before the sanctions are not falling under the sanctions,” said Natalia Abtseshko, head of international projects group at Moscow law firm Vegas Lex.
CASH STILL LACKING
Indian refineries could absorb a large portion of those barrels, but it is still unclear how cash sales would be effected without using the U.S. or European bank systems after April 28, the deadline set by the U.S. Treasury.
Venezuela also is open to barter arrangements with India using oil as payment, its oil minister said, though Quevedo did not explain how such a system would work.
Quevedo’s willingness to barter goods for oil suggests the turn may not soon resolve the country’s need for cash-paying customers to replace U.S. buyers.
About 9 million barrels were stuck last week in tankers waiting for payment or discharge instructions, according to Eikon data. Most are anchored in the U.S. Gulf Coast as Venezuelan opposition leader and self-proclaimed president Juan Guaido moves to set up escrow accounts to receive proceeds.
(This story corrects headline and first two paragraphs to specify Venezuela turns to India, not Asia, for oil exports. Also corrects paragraphs 5 stating Venezuelan oil is heading to India, China, Singapore, Malaysia and Japan, to clarify that the final destination of these shipments is not yet clear.)
Reporting by Collin Eaton in Houston, Marianna Parraga in Mexico City, Olga Yagova in Moscow; additional reporting by Nidhi Verma in New Delhi and Gleb Gorodyankin in Moscow; editing by Gary McWilliams and Marguerita Choy