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BW Businessworld

Focus On Fed

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Global stocks fell after strong US jobs data increased chances that the Federal Reserve will move up its timetable for raising interest rates.

The US employment growth in February was good news for workers but alarmed investors, who worried a rate hike, previously not expected until late October, might happen as early as June. The Fed held interest rates close to zero for more than six years to stimulate growth, following the 2008  crisis. But the recent announcement that employers added 295,000 jobs last month, which was far above expectations of 235,000, fuelled expectations unemployment would fall further and inflation might pick up.

Meaty Matter
KFC, the world’s largest chain of fried chicken restaurants, may face pressure from consumer and environmental groups to change how its poultry is raised after McDonald’s said it would switch to chicken raised without human antibiotics. McDonald’s will phase out chicken raised with antibiotics that are important to human health over two years to allay concern that use of the drugs in meat production has exacerbated the rise of deadly “superbugs” that resist treatment. Within days, retailer Costco Wholesale said it aims to eliminate the sale of chicken and meat raised with human antibiotics.
Deal Time
KKR & Co is in advanced talks to acquire Air Medical Group Holdings in a deal that could value the US helicopter ambulance company at around $2 billion, including debt, according to people familiar with the matter. KKR, a New York-based private equity firm, has prevailed over other buyout firms in the auction for Air Medical and is now in the final stages of negotiating a deal with the company’s owner, Bain Capital. The sources said a deal could be announced soon. KKR and Bain declined to comment. Based in Lewisville, Texas, Air Medical operates a fleet of 222 helicopters and 25 airplanes from locations in 27 states.

Launch Time
Apple launched its long-awaited watch, including yellow and rose gold models with sapphire faces costing up to $17,000, but some investors questioned whether chief executive Tim Cook’s first product would be a breakaway hit. Apple’s first new device since Cook became CEO will be available for order on April 10 and in stores on April 24, including chic boutiques in Paris, London and Tokyo. However, Apple shares barely budged. Investors and analysts agreed that Apple would sell millions to fans but questioned whether it had a “killer app” that would engage a broader audience.  The standard version of the watch will start at $549, and the high-end “Edition” watch will be priced from $10,000, said Cook.

Bailout Backlash
Greece has threatened to seize German assets as compensation for Nazi war crimes — 70 years after the end of World War 2. The threat, made by the Greek justice minister, has been supported by PM Alexis Tsipras, who told the Greek parliament he would pursue the “very technical and sensitive” matter. Justice minister Nikos Paraskevopoulos has called for “war reparations, the repayment of a forced loan and the return of antiquities” from Germany and said an old court ruling gave him the power to sanction “the foreclosure of German assets in Greece” as a form of compensation. The issue was dismissed out of hand by Germany, with Angela Merkel’s spokesperson Steffen Seibert saying questions about reparations “have been legally and politically resolved”. “We should concentrate on current issues,” he added.

Sale Near
Britain is looking to sell Royal Bank of Scotland (RBS) as quickly as possible, chancellor George Osborne said. He said he hoped to sell the bank “as quickly as we can get rid of it” after the May election, and the public “want to see they get their money back”, but this could take years. Despite major restructuring and job cuts, it reported losses of £50 billion. RBS announced in February it would hugely reduce its investment banking operations worldwide, and Osborne said he regretted not imposing a radical restructuring on the bank earlier.
Mixed Feelings
Japan’s emergence from recession was weaker than first estimated as companies unexpectedly cut investment and drew down their inventories, offsetting a pickup in consumer spending. GDP expanded at an annualised 1.5 per cent in the three months through December from the previous quarter, less than a preliminary 2.2 per cent, revised government data show. The rebound followed a contraction caused by an increase in sales tax last April.

More For Investors
General Motors said it would launch a $5 billion share buyback in an effort to avert a proxy war with dissident investors, and detailed a plan that could allocate investors even more cash. GM said it had reached a deal with an investor group that averts a proxy fight over its balance sheet and governance. As part of the agreement, investment group leader Harry Wilson will drop his effort to get a seat on GM’s board. Wilson, a former member of the Obama administration auto task force, was instrumental in GM’s federally financed bankruptcy restructuring in 2009.
Balancing Act
Ride-hailing app Uber, under the microscope due to a handful of driver assaults on passengers in some cities, pledged to sign up 1 million female drivers around the world by 2020. The ride service did not provide comparable figures for how many women drivers are on the Uber service worldwide at present. In the US, about 14 per cent of its 160,000 drivers are female, the company said. Uber said it is adding thousands of drivers each month. “Uber does not require (minimum) hours, and it does not require a schedule,” Salle Yoo, Uber’s general counsel, said, referring to why women might find working for Uber attractive. “It offers the chance to be entrepreneurial, the chance to balance work and family.”

Eyeing Growth
South Korean conglomerate LG Group said its companies plan to invest $5.57 billion in research and development in 2015 to secure future growth. LG Group, which has arms including appliance maker LG Electronics and LG Display, said technologies like electric car batteries, next-generation displays and Internet of Things were key areas for investment. The company said it spent a combined 5.9 trillion won on research and development last year.

(This story was published in BW | Businessworld Issue Dated 06-04-2015)