Markets face mixed week; oil slides

Added to the picture, revised data revealed that the US economy shrank a steep 2.9 per cent in the first three months of 2014, sharply worse than the previous estimate of a 1pc decline.

Oil: The oil market fell as weak data stoked fresh demand fears in top consumer the United States, while Iraqi crude supplies appeared unaffected by ongoing violence, analysts said.

Consumer spending, which accounts for more than two-thirds of US economic growth, rose a mere 0.2pc in May after flattening in April, official data showed.

In addition, initial US jobless claims, a sign of the pace of layoffs, totaled 312,000 in the week ending June 21, a decrease of just 2,000 from the previous week.

And American oil inventories unexpectedly rose by 1.7 million barrels in the week ending June 20. That dashed analysts’ forecasts for a 1.2m-barrel decline, indicating weakening demand.

“As a result of the weaker data and the build in crude stocks ... investors are all of a sudden refocusing their attention on the demand side of things,” said analyst Fawad Razaqzada at trading site Forex.com.

“They are realising that demand is simply not strong enough to justify oil prices at these elevated levels.” New York oil prices had been lifted on Wednesday by a report suggesting that Washington will ease a decades-old ban on crude exports.

Late last week, meanwhile, oil prices had hit nine-month peaks on the back of Iraqi unrest.

“Both crude benchmarks slipped over the past week, correcting lower in small-scale profit-taking,” added VTB Capital analyst Andrey Kryuchenkov. “Importantly, despite ongoing violence in Iraq, supplies remain largely unaffected by the militant advance.”

Iraq’s Prime Minister Nuri al-Maliki conceded Thursday that political measures are needed alongside military action to repel a Sunni insurgent offensive that is threatening to tear the country apart.

Despite ongoing supply fears over violence in Iraq — the second biggest Opec producer after Saudi Arabia — the nation’s oil output has yet to be impacted.

By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in August fell to $113.18 a barrel compared with $114.66 one week earlier.

On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for August sank to $105.55 a barrel compared with $107.13 a week earlier.

Gold climbs on Iraq

Precious metals: Haven investment gold continued to climb on stubborn geopolitical worries in Iraq and Ukraine, hitting a two-month peak of $1,325.92 an ounce on Tuesday.

“With geopolitical tensions in places like Ukraine, Syria and Iraq unlikely to end soon, demand for a safe haven asset could stay well supported for a considerable period of time,” said Capital Spreads dealer Jonathan Sudaria.

Sister metal silver also pushed higher to strike a three-month high at $21.20 an ounce.

By Friday on the London Bullion Market, the price of gold rose to $1,317.50 an ounce from $1,312.50 a week earlier.

Silver increased to $21.04 an ounce from $20.62.

On the London Platinum and Palladium Market, platinum climbed to $1,479 an ounce from $1,456.

Palladium advanced to $839 an ounce from $829.

Base metals: Most prices rose, with zinc striking another 16-month peak at $2,198 a tonne, after upbeat data in China — which needs vast supplies of commodities to power its growth.

HSBC said its purchasing managers index (PMI) of Chinese manufacturing came in at 50.8 this month, up from a final reading of 49.4 in May. Anything above 50 points to growth and anything below suggests contraction.

“A stronger-than-expected Chinese HSBC Flash Manufacturing PMI has given the base metals complex a boost and underscored the effect of the government’s mini-stimulus measures to help stabilise China’s flagging economy,” said Standard Bank analyst Leon Westgate.

The latest figure is the first time the reading has come in above 50 since December’s 50.5, and will raise hopes that a slowdown in the world’s second biggest economy has bottomed out.

By Friday on the London Metal Exchange, copper for delivery in three months climbed to $6,956 a tonne from $6,779.75 a week earlier.

Three-month aluminium eased to $1,886 tonne from $1,894. Three-month lead grew to $2,166 a tonne from $2,146. Three-month tin slipped to $22,315 a tonne from $22,650. Three-month nickel advanced to $18,825 a tonne from $18,523. Three-month zinc increased to $2,187 a tonne from $2,172.25.

Cocoa loses steam

Cocoa: Prices slipped from three-year highs struck the previous week, as traders eyed favourable weather conditions in key producing nations.

“The growing weather has been very good for the mid-crop and this allow for a large harvest and should create further pressure on the futures market,” said Citi analyst Sterling Smith.

By Friday on LIFFE, London’s futures exchange, cocoa for delivery in September eased to £1,924 a tonne from £1,928 a week earlier.

On the ICE Futures US exchange, cocoa for September slid to $3,108 a tonne from $3,116 a week earlier.

Coffee: Prices advanced amid ongoing supply concerns. “Arabica moved higher on the day as worries about the state of the crop is providing support to the market,” said Citi analyst Sterling Smith.

On ICE Futures US, Arabica for delivery in September rose to 181.30 US cents a pound from 170.50 cents a week earlier.

On LIFFE, Robusta for September climbed to $2,036 a tonne from $1,978 a week earlier.

Sugar: The market weakened despite supply worries in key producer Brazil.

“Despite some rainfall, many areas of Brazil are still too dry, which is expected to further reduce crop yields in the harvest that is currently underway,” said Commerzbank analysts.

By Friday on LIFFE, the price of a tonne of white sugar for delivery in August receded to $483.10 from $488.50 a week earlier.

On ICE Futures US, the price of unrefined sugar for October declined to 18.55 US cents a pound from 18.63 US cents a week earlier.

Rubber: Prices in Kuala Lumpur strengthened further, supported by expansion in China’s factory activities.

The Malaysian Rubber Board’s benchmark SMR20 rose to 178.65 US cents a kilo from 173.60 cents a week earlier.

Source:

www.dawn.com

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HP to settle $11bn litigation

NEW YORK: Hewlett-Packard and attorneys representing shareholders have agreed to settle litigation over its troubled $11.1 billion acquisition of British software company Autonomy Corporation.

Under the terms of the settlement, involving three lawsuits, the attorneys for the shareholders have agreed to drop all claims against HP's current and former executives, including chief executive Meg Whitman, board members and advisers to the company.

The exception to that will be former officials at Autonomy. As part of the agreement, the shareholders' attorneys will assist HP in pursuing claims against Autonomy's co-founder and former CEO Michael Lynch, its former chief financial officer Sushovan Hussain, and potentially others related to Autonomy. The precise nature of such claims and when HP might file them could not be learned.

The settlement, which followed mediation, is expected to be announced as soon tomorrow.

HP took an $8.8bn impairment charge in November 2012 for its purchase of Autonomy only just over a year earlier, with more than $5bn of that linked to what HP said at the time were "serious accounting improprieties, misrepresentation and disclosure failures."

In particular, sources close to an HP investigation into the matter say that the technology giant believes that Autonomy's results and prospects were made to look much better than they were.

Lynch has consistently denied HP's allegations, saying HP is blaming him for its own failure to manage Autonomy after the acquisition.

A spokesman for Lynch said that "we continue to reject HP's allegations." He said it appears that Whitman will be using a large sum of HP's money to avoid explaining in court why she made the November 2012 allegations regarding Autonomy.

HP responded by saying that it has evidence showing how Autonomy "created the illusion" that it was a high-growth company. "This had the effect of misleading investors and HP", it said in a statement.

Hussain has not responded to calls and emails.

Source:

www.gulf-daily-news.com

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Ruling Risks New Argentine Default as Monday Deadline Approaches

Bank of New York Mellon Corp. must return a $539 million deposit from Argentina intended for restructured bondholders, a U.S. judge ruled, calling the transfer an “explosive action” that disrupted potential settlement talks with holders of defaulted debt.

U.S. District Judge Thomas Griesa in New York has ruled that Argentina can’t pay holders of its restructured debt without also paying more than $1.5 billion to a group of defaulted bondholders, raising the possibility of a new default as the South American nation approaches a June 30 payment deadline.

Robert Cohen, a lawyer for hedge funds holding the defaulted debt, told Griesa that Argentina “defiantly and contemptuously” violated his court orders. The U.S. Supreme Court this month declined to disturb the judge’s rulings that both groups of debtholders be paid, setting off the latest fight. Griesa urged Argentina to negotiate with the bondholders.

“This payment is illegal and will not be made,” Griesa said today at a hearing in Manhattan federal court. He warned that any attempt to pay restructured bondholders would be in contempt of court.

Argentina, which defaulted on a record $95 billion in debt in 2001, has said it would face a second default if forced to pay both classes of bondholders. In a statement today, the country said Griesa’s ruling on the payment to BNY Mellon was an abuse of authority.

Argentina’s Economy Ministry said in an e-mailed statement that the decision was outside his jurisdiction because restructured bonds aren't part of court case, and that the judge is impeding Argentina from completing its debt obligations.

Scolded

During the hearing, Griesa scolded the nation’s lawyers for failing to file a proper application to stay the ruling, calling a letter sent to his chambers seeking a delay an improper application.

Billionaire Paul Singer’s NML Capital Ltd. said it is willing to agree to a delay that would permit Argentina to make the its bond payment by July 30, the end of a 30-day grace period, if sufficient progress is made in negotiations. The bonds will be in default if payment isn’t made by July 30.

“What was necessary, if anybody wanted to negotiate, was to figure out a way to maintain a status quo so there would not be a default,” said Griesa. “It doesn’t take a rocket scientist to figure out how to do that.”

Griesa expressed frustration several times at Argentina’s failure to engage in negotiations with NML as the payment deadline gets closer.

“Why haven’t settlement negotiations gone forward?” Griesa asked. “Why aren’t they going forward today instead of having us sit in court?”

Griesa on June 23 appointed a special master to aid settlement talks.

Complied

Argentine Economy Minister Axel Kicillof said the nation complied with its foreign debt obligations yesterday when it deposited the funds with BNY Mellon, the trustee under the bond agreements. An interest payment comes due June 30. In a statement to investors, the nation said it was now the bank’s responsibility to pay them.

Eric Shaffer, a lawyer for the bank, told Griesa the bank remains in compliance with his orders as it hasn’t passed Argentina’s money along to clearinghouses for payment to restructured bondholders.

“Your bank didn’t do anything wrong,” Griesa told Shaffer.

The defaulted bondholders, led by NML, rejected Argentina’s offers of new bonds, worth about 30 percent of the defaulted bonds, in debt restructurings in 2005 and 2010. NML, which is seeking to recover the full value of the bonds, asked Griesa to hold Argentina in contempt of court for disobeying his orders and transferring the money to BNY Mellon.

Negotiated Settlement

Carmine Boccuzzi, a lawyer for Argentina, told Griesa at the hearing that the country still hoped for a negotiated settlement. Jay Newman, a money manager at NML, said “we are hoping to have the opportunity to negotiate with Argentina.”

The price on Argentine bonds due 2033, whose coupon payments are being blocked, fell 1.55 cents to 83.69 cents on the dollar at 4:32 p.m. in New York, according to prices compiled by Bloomberg.

The extra yield investors demand to hold Argentine debt over U.S. Treasuries widened 0.04 percentage point to 7.62 percentage points, according to JPMorgan Chase & Co.’s EMBIG diversified index.

Holdout Battle

The dispute between Argentina and holders of its defaulted debt has reached a climax now after the U.S. Supreme Court on June 16 left intact Griesa’s ruling requiring the nation to treat defaulted bondholders equally with holders of its performing debt.

“Conventional wisdom is that this gets resolved before July 30,” said Marco Santamaria, a New York-based money manager at AllianceBernstein, which oversees $25 billion of emerging-market debt. “This may be the opportunity for Argentina to finally put to bed its issues with all external creditors.”

Last year, BNY Mellon had said Griesa’s order would force it to violate contractual obligations to investors.

Argentina deposited $539 million in its BNY Mellon account at Argentina’s central bank designated for payment of the international bonds. In total, including peso payments, more than $1 billion was set aside to pay the debt.

Ron Gruendl, a spokesman for BNY Mellon, declined to comment on Griesa’s ruling today.

Local Bonds

A payment of about $300 million is to be made to Citigroup Inc. for payment of local law bonds. Griesa said that disbursement may go forward if Argentina makes an expected payment to the New York-based bank. In a statement today, Citigroup said it was “an important decision” that allows the bank to fulfill its obligations to the bondholders while complying with Griesa’s rulings.

Griesa denied a request by holders of euro-denominated exchange bonds, who argued that his orders shouldn’t apply to those securities as their payments are made entirely outside of the U.S. The judge replied that his orders apply to payments made by Argentina, which agreed to U.S. jurisdiction when it issued the original bonds.

Griesa today also declined to sign orders requiring payment to five holders of defaulted bonds not involved in the NML case but with similar claims, saying he wanted to avoid further complicating possible settlement talks.

“Their rights aren’t going to go away,” Griesa said.

Carlos Abadi, chief executive officer of New York-based investment bank ACGM Inc., said in an e-mail that Argentina knew BNY Mellon was barred from distributing the $539 million to bondholders before it made the deposit.

“It’s not clear why they would put up such a show and waste precious time,” Abadi said. “It’s going to be incredibly complex to reach a comprehensive deal by July 30th and this sideshow makes the goal even harder.”

The case is NML Capital Ltd. v. Republic of Argentina, 08-cv-06978, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in federal court in Manhattan at rvanvoris@bloomberg.net

Source:

www.bloomberg.com

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American Apparel Adopts Rights Plan to Thwart Ousted CEO

Dov Charney, former chief executive officer of American Apparel Inc. The company investigated Charney’s actions this year and found a history of misconduct, a person familiar with the matter said. Charney is contesting the firing. Photographer: Keith Bedford/Bloomberg

American Apparel Inc. (APP:US), the retailer whose shares have dropped 52 percent in the past year, adopted a one-year shareholder rights plan to keep ousted Chief Executive Officer Dov Charney from taking control of the company.

A special committee of the board made the decision after a filing to the U.S. Securities and Exchange Commission by Charney, “in which he expressed an intent to acquire control or influence over the company” and “reports of rapid accumulations of the company’s outstanding common stock,” American Apparel said in a statement today.

Charney, who already owned 27.2 percent of the troubled retailer, yesterday entered into a loan agreement with Standard General LP to help increase his stake as he contests his firing. American Apparel said last week it replaced Charney after it investigated his actions. The Los Angeles-based company found a history of misconduct that ranged from sexual harassment and retaliation to misallocation of corporate funds, a person familiar with the matter has said.

VIDEO: American Apparel CEO Fights Back Against Ousting

“This plan is an important tool to ensure that all American Apparel stockholders are treated fairly,” the company said today. “It is intended to provide the board of directors and stockholders with time to make informed judgments.”

The rights will be “attached to all shares of common stock,” and each right entitles the holder to purchase one ten-thousandth of a share of preferred stock at an exercise price of $2.75, according to the statement.

15 Percent

The rights may separate “upon the occurrence of certain events,” the company said. The plan allows investors to accumulate as much as 15 percent of common stock and has no impact on a takeover proposal that is acceptable to a majority of investors, American Apparel said.

VIDEO: He's Not Leaving: American Apparel CEO Fights Back

If a person or group already beneficially owns 15 percent or more of the common stock, the person won’t be deemed a so-called acquiring person unless an additional 1 percent of the company’s shares is purchased, American Apparel said.

Under the plan, Charney doesn’t beneficially own any of the American Apparel stock owned by Standard General “solely by reason of the letter agreement dated June 25,” the company said.

Standard General will loan Charney funds to buy at least 10 percent of outstanding shares, according to the SEC filing yesterday. The loan carries a five-year term and will use Charney’s stock as collateral.

STORY: American Apparel Has Finally Had Enough of CEO Dov Charney

“The rights plan is designed to limit the ability of any person or group, including Dov Charney, to seize control of the company without appropriately compensating all American Apparel stockholders,” the company said.

Net Losses

The retail chain, which started out selling U.S.-made T-shirts and became a byword for hip fashion, has racked up about $270 million in net losses since the beginning of 2010. The company avoided a cash crunch this year by selling stock.

Lion Capital LLP, a creditor to the chain, won’t grant a waiver request from the retailer to keep its $10 million loan from going into default and is demanding full repayment, according to two people familiar with the matter.

STORY: American Apparel Founder Dov Charney Finally Gets Fired

That decision threatens to trigger a default on a $50 million credit line with Capital One Financial Corp., under which $30 million is drawn, because of cross-default provisions in the agreements. A default also means American Apparel would lose access to $20 million available under that pact.

Capital One is holding its own talks with the company’s management and working to get Lion back on board with granting a waiver, according to one of the people.

American Apparel shares jumped 30 percent to 97 cents at the close in New York yesterday, giving the retailer a market value of about $169.3 million, and slid 7.2 percent to 90 cents in extended trading.

STORY: American Apparel: Charney's Bad Behavior Was Very, Very Expensive

To contact the reporters on this story: Gabi Thesing in London at gthesing@bloomberg.net; Ben Livesey in San Francisco at blivesey@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net Kristen Hallam, Jennifer Joan Lee

Source:

www.businessweek.com

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Fourth of July Brings Pending Increases at the Gas Pump

AAA is forecasting a spike at the gas pump for the coming Fourth of July weekend. The company pointed to the rising conflict in Iraq as a direct contributor to the increases seen, let alone the pending holiday weekend. Currently, the national average is around $3.68 for a gallon of regular unleaded gas. Gas Buddy.com reports the west coast is seeing well over $4.00 for a gallon of regular unleaded. Based on the current pricing versus last year, there is already a 23 cents increase at the gas pump.

Tom Kloza who is a chief oil analyst for Gas Buddy.com states 2014 will bring the “highest July 4th prices since 2008,” echoing AAA’s assessment of the Iraq civil war. Kloza states if violence moves near the south of Baghdad, the national average can spike to $4.00 a gallon.

Despite the pending increase at the gas pump, AAA executives said it does not seem to slow down the plans of Fourth of July travelers. An estimated 41 million citizens are expected to travel a minimum of 50 miles from home for the coming weekend. AAA states the numbers are an approximation from July 2nd to the 6th.

Based on the level of demand, many gas stations may place taxes per gallon, starting after the first of the month, to offset demand.

In April, Americans saw the national average peak at $3.70. Some states, such as in the southeast portion of the U.S. pay a bit less, while drivers in Alaska can see prices spike beyond $4.20 for a gallon.

With the Fourth of July weekend expected to see an increase in traffic, AAA and Gas Buddy.com, warn drivers not to be surprised to see higher than normal prices, than in previous years. It appears the increase is doing little to stem the travel plans of  millions of Americans.

Source:

www.viralglobalnews.com

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Consumer sentiment survey finds sunnier outlook

Consumers' mood brightened this month, despite other evidence that their spending is still cautious.

The Thomson Reuters/University of Michigan survey's consumer sentiment index for June rose to 82.5 from 81.9 in May.

That's below the survey's most recent high in April and June 2013 -- 84.1 for both months. Its 12-month high was 85.1 in July.

But Richard Curtin, director of the University of Michigan's consumer surveys, said it was significant that the sentiment index reading had stayed largely unchanged for six months despite the economy's sharp contraction early this year.

Consumers blame the decline on the harsh winter weather and instead have focused on the labor market's string of strong gains, he said. The U.S. has gained more than 200,000 jobs a month in February through May.

June's consumer sentiment survey found the highest share of households reporting making financial gains in nearly seven years, he said.

"The proportion of households that reported improved finances over the past year was 40% in June, up from 35% one month and one year ago," Curtin said in a statement.

But only a quarter of households expected their finances to improve in the year ahead. "The biggest concerns were focused on expected wage growth, which most households expected would not exceed the inflation rate, meaning that nearly half of all households anticipated declining living standards," he said.

The Thomson Reuters/University of Michigan's June survey also found half of all homeowners reporting home selling conditions as favorable for the first time in eight years.

Another survey this week also indicated consumers are feeling better about the economy. The Conference Board's consumer index reached its highest level in six years this month.

The Commerce Department reported Thursday that consumer spending rose 0.2% in May after no gain in April. Income rose 0.4% after a 0.3% gain in April.

The spending numbers were below some economists' forecasts, which in turn has raised doubts about the prospects for stronger growth in consumer spending in the current quarter.

The government reported this week that the economy suffered its worst setback in five years during the first quarter, shrinking at an annual rate of 2.9% from last year's final quarter. It was one of the worst falls in the nation's gross domestic product outside of a recession since 1960. A significant factor was weak consumer spending, which grew only 1% from the fourth quarter -- well below what economists had estimated earlier.

Strong consumer spending is critical for the broader economy's growth because it accounts for more than two-thirds of U.S. economic activity.

Source:

www.usatoday.com

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AAA forecasts most July 4 travel since 2007

AAA says about 34.8 million people will drive at least 50 miles on the Independence Day holiday weekend, despite pricey gas.

NEW YORK — AAA forecasts most July 4 travel since 2007

The highest number of Americans in seven years will travel by car over the Independence Day holiday weekend, and they’ll be paying for the most expensive fuel 

About 34.8 million people plan to drive 50 miles or more from home during the five days ending July 6, up from 34.1 million last year and the most since 2007, AAA said in a statement. Gas prices are at their highest for this time of year in six years, AAA data show.

“Steady improvement in the economy has spurred increased consumer confidence and spending,” said Marshall L. Doney, chief operating officer for the Heathrow, Fla.-based motoring organization. “ Optimistic Americans are more willing to take on debt this year.”

Drivers will account for more than 80 percent of the estimated 41 million people that will travel over the holiday, AAA said.

Travel volume this year is forecast to be 6 percent higher than the average of the past 10 years.

The average price of regular gasoline at the pump was $3.68 a gallon on June 24, according to AAA data. That’s up 12.7 cents from $3.55 a year ago.

Brent oil, the international benchmark that’s the basis for imported crude and fuel prices, had gained 4.2 percent this month to $114 a barrel as of Wednesday on the ICE Futures Europe exchange. Fighting in Iraq has raised concern that supplies from OPEC’s second-largest producer may be disrupted.

Pump prices have increased 1.2 cent this month, heading for the first June increase since 2010.

The overall number of travelers will increase by 1.9 percent this year, while air travel is set to climb 1.1 percent to 3.1 million people, AAA said.

Source:

www.dispatch.com

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Barnes & Noble tuns the page on Nook tablets

DIVESTED: US book retailer Barnes & Noble said Wednesday it would spin off its Nook division, which produces tablets and digital books, amid ongoing losses at the unit. — ©AFP/Relaxnews 2014

NEW YORK: US book retailer Barnes & Noble said Wednesday it would spin off its Nook division, which produces tablets and digital books, amid ongoing losses at the unit. 

The plan authorised by the board would separate the Nook unit by early 2015 and ends the effort by Barnes & Noble to directly challenge online giant Amazon and its Kindle devices. 

"We have determined that these businesses will have the best chance of optimizing shareholder value if they are capitalized and operated separately," B&N chief executive Michael Huseby said. 

The book retail operations and Nook Media "will continue to have long-term, successful business relationships with each other after separation," he added. 

The company said it engaged Guggenheim Securities as financial advisors and Cravath, Swaine & Moore LLP as legal counsel for the spinoff. 

The news came as Barnes & Noble announced a net loss of US$36.7mil (RM118.05mil) in its fiscal fourth quarter, narrowing the deficit from US$114.8mil (RM369.23mil) a year earlier. This was helped by a US$12.5mil (RM40.21mil) one-time tax benefit. 

Revenues in the period increased 3.5% to US$1.3bil (RM4.18bil). 

But the results were dragged down by weak performance in the Nook division, which saw a 22.2% drop in revenues and an operating loss of US$56mil (RM180.15mil). That offset improvements in the company's retail and university operations. 

"We're pleased with our improved financial performance in fiscal 2014," Huseby said, noting that earnings before certain charges such as taxes and depreciation were the highest in four years. 

Nook has failed to secure a major foothold in a tablet market dominated by Apple, Samsung and Amazon, and the continual losses have led to pressure from key shareholders to break off the loss-making Nook unit. 

Earlier this month, B&N said it would work with Samsung to produce a co-branded Nook tablet. 

Shares in Barnes & Noble rallied on the news, closing up 5.3% at US$21.65 (RM69.65). 

Paul Ausick of financial website 24/7 Wall Street said, however, that there appeared to be little to cheer about at the company. 

"Why B&N thinks dividing the company will save it is a reasonable question for which there does not appear to be a reasonable answer, other than B&N has to do something, anything," he said. 

"Investors like the move enough to ignore all the bad news on earnings." — ©AFP/Relaxnews 2014 

Source:

www.thestar.com.my

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IKEA gives its US employees a raise

Another major retailer in the United States is giving a boost to its base salary, although the size of the increase will vary from state to state. On Thursday morning, the Swedish furniture retailer IKEA announced that it would be adopting a new wage structure which is expected to increase pay for about 50% of its American employees. The change in company policy will take effect on January 1, 2015.

The new policy will base entry-level compensation on the MIT Living Wage Calculator, which estimates the wages required “to meet minimum standards of living” in each county of each state. IKEA’s new compensation system will offer different base wages at different store locations, depending on the cost of living in the surrounding area. The average minimum hourly wage across all store locations will become $10.59, a 17% increase from what it is now.

Rob Olson, the acting president and CFO for IKEA US, told msnbc that the policy change “goes back to the IKEA vision, which is to create a better everyday life for the many people.”

“We had always focused on making sure we were above average with our compensation rates, so whatever the average of our competitive set was, we wanted to be higher than that,” he said. “Now we’ve said, let’s not worry about where the competition is, let’s worry about where the co-worker is.”

Another major retailer, Gap Inc., unveiled a major wage hike of its own in February, when it announced that it would be increasing its nationwide base pay from $9 to $10. But the decision to peg a wage increase to the cost living is “a big step forward,” Demos senior policy analyst Amy Traub said over email.

“I predict that we’ll see more companies stepping forward to raise wages, as well as pressure continuing to mount for cities, states and federal government to raise the minimum wage across the board,” she said.

Olson denied that IKEA was raising wages in order to get ahead of state and local minimum wage increases.

“For us, it was less about that and more about doing the right thing for the co-worker,” he said. Yet he added the IKEA is prepared to comply with proposed minimum wage hikes across the country, including the suggested $15 minimum wage that will soon be implemented in Seattle and is currently being debated in San Francisco and Chicago.

“If movement is driven within local communities, we will definitely support that and be secure that we are above that level as well,” said Olson.

The MIT Living Wage Calculator bases its estimates on family size as well as region, but IKEA said its minimum hourly wage at all locations would be pegged to the cost living for a single, childless adult. According to Traub, that means working parents are likely to find their new compensation structure “to be very welcome, but it won’t be a living wage.”

Source:

www.msnbc.com

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U.K. Regulator Slaps Payday Lender Wonga

LONDON—The image of payday lending got another knock Wednesday as Wonga Group, Britain's biggest payday loan provider, was slapped by the Financial Conduct Authority for sending threatening letters from made-up law firms to late paying customers.

The FCA, which started regulating Wonga and other consumer credit companies in April, said the lender has agreed to pay £2.6 million ($4.4 million) in compensation to 45,000 customers who received letters from fictitious firms "Chainey, D'Amato & Shannon" and "Barker and Lowe Legal Recoveries" between 2008 and 2010. The regulator said the practice, meant to maximize Wonga's collections of delinquent loans, was unacceptable and pressured customers to repay debt that many of them couldn't afford.

But the FCA didn't take any enforcement action such as fining Wonga, since the activities took place before it had powers over Britain's £2 billion payday loan market. The Office of Fair Trading, which started investigating Wonga's debt collection practices in 2011, handed the case to the FCA in April and no longer exists.

"It's a shocking new low for the payday industry that is already dogged by bad practice and Wonga deserves to have the book thrown at it," said Richard Lloyd, executive director at Which?, a consumer protection group.

The FCA started a crackdown on payday lenders when it took over supervision of the industry and is working on a potential cap of the interest lenders can charge. The market more than doubled to £2 billion in 2012 from £900 million in 2008. In the U.S., the Consumer Financial Protection Bureau started supervising payday lenders in 2012. Some U.S. states ban the loans entirely while others have set up databases of customers' loan usage for payday lenders to check before extending new loans.

"Wonga's misconduct was very serious because it had the effect of exacerbating an already difficult situation for customers in arrears. We are pleased that Wonga has been working with us to put matters right for its customers and to ensure that these historical practices are truly a thing of the past," FCA Director of Supervision Clive Adamson said.

Wonga is Britain's biggest payday lender by volume and customer numbers, with around £1.2 billion lent through 4 million loans to 1 million customers in 2012. It boasts on its website that it can send up to £400 within five minutes of a loan being approved, and offers existing customers up to £1,000. Borrowing £400 for 30 days would cost £527.15, according to its online calculator.

Those high interest rates and heavy marketing through television advertising have drawn criticism from politicians and public leaders, including Archbishop of Canterbury Justin Welby, who is setting up a church-backed credit union to provide cheaper small loans. Wonga says it is a responsible lender providing a simple and transparent alternative to banks.

"This is not the proudest day in Wonga's business. We're a very different business now to the startup we were four or five years ago when this was occurring," Interim Chief Executive Tim Weller said. He apologized to customers and said the people who introduced the fake debt collection letters were no longer with the company. He declined to name any individuals involved.

Privately-held Wonga has undergone a number of management changes in recent months, including the departure of two CEOs since November. Mr. Weller took over from Niall Wass, who resigned in May after a six-month stint. Mr. Wass had replaced Wonga co-founder and former CEO Errol Damelin, who continued to be chairman before resigning from that post earlier this month.

Mr. Damelin and Jonty Hurwitz co-founded Wonga in 2006 with the aim of making short-term lending easier and more profitable by automating credit checks and bringing the process online. Mr. Hurwitz stepped down from the Wonga board in November.

Wonga also said Wednesday that it had discovered separate problems with its systems as it prepared to come under FCA regulation this year. It said it had overcharged around 200,000 customers on their loans and would contact them regarding repayment.

Source:

online.wsj.com

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Oracle to acquire Micros Systems for $5.3b

Oracle headquarters in Redwood City, California. Oracle announced plans to acquire Micros Systems for $5.3 billion. Photo / AP

Oracle announced plans on Monday to acquire a Columbia, Maryland-based maker of cash register and reservation systems for $5.3 billion in a deal that would allow the technology giant to gain a foothold in the retail and hospitality sectors.

Founded in 1977, Micros Systems counts 1,000 employees at its headquarters, and another 5,600 in offices around the country and globe. Its point-of-sale technology is installed at some 567,000 establishments worldwide, including department stores, restaurant chains, casinos, cruise ships and stadiums. Some of its brand-name customers include Marriott International, Starbucks, Burger King and Ikea.

Redwood City, California-based Oracle has become one of the world's largest business software concerns in part by acquiring companies that give it greater reach into new markets.

"Oracle has successfully helped customers across multiple industries harness the power of cloud, mobile, social, big data and the internet of things to transform their businesses," Oracle President Mark Hurd said in a news release.

"We anticipate delivering compelling advantages to companies within the hospitality and retail industries with the acquisition of Micros."

Under the deal, Micros stockholders would receive $68 for each share of common stock they hold, about a 3.4 per cent premium from Friday's closing price and a nearly 16 per cent premium from early last week, when word of a possible transaction began to circulate. The $5.3 billion deal would be worth $4.6 billion after accounting for the cash Micros holds.

An Oracle spokeswoman declined to comment beyond a news release.

Gil Luria, managing director at Wedbush Securities, said that in purchasing Micros, Oracle acquires a company that has seen its revenue and income grow in each of the past five years. Micros has also expanded, albeit slowly, into emerging markets beyond North America and Western Europe in recent years.

The company ended the first three quarters of the fiscal year with a net income of $56 million, a 13 per cent increase from $49.6 million during the same period last year. Micros is scheduled to release its annual financial report next month.

"They have the capacity to grow more if Oracle invests in geographic expansion and expansion into adjacent markets," Luria said.

Young, tech-savvy firms have been gradually chipping away at retail and hospitality markets as they serve up new ways to process payments, manage inventory and engage with guests on mobile platforms and through social media.

That competition has forced providers like Micros to come out with ever-more innovative products that can keep pace with technology trends, such as cloud computing, data analytics and mobile devices.

Read also: Court allows Oracle to pursue claim against Google

"In combination with Oracle, we expect to help accelerate our customers' ability to innovate and differentiate their businesses by utilising Oracle's technologies, cloud solutions and scale. We are very excited about the great opportunities this will create for our customers and employees," Peter Altabef, Micros president and chief executive, said in a news release. The company has not returned calls seeking comment.

The Micros board unanimously approved the acquisition and, pending regulatory approval, the deal is expected to close during the second half of the year.

This is the second local purchase for Oracle in the last two years. In December 2012, the company scooped up Vienna, Virginia-based Eloqua for $871 million. Eloqua helps companies analyse visitors to their website and identify those most likely to make a purchase.

- Washington Post

Source:

www.nzherald.co.nz

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