UPDATE 3-McDonald's quits Crimea as fears of trade clash grow

* Says leaving due to reasons beyond its control

* Operates over 400 outlets across Russia

* Russia's Zhirinovsky calls for restaurant pickets (Adds background)

By Natalia Zinets

KIEV, April 4 (Reuters) - McDonald's announced on Friday it had closed its restaurants in Crimea, prompting fears of a backlash as a prominent Moscow politician called for all the U.S. fast food chain's outlets in Russia to be shut.

Crimea's annexation by Russia, which Ukraine and the West do not acknowledge, has worried companies with assets in the Black Sea peninsula as it is unclear how the change may impact their business.

While McDonald's did not mention the political situation in its statement, its decision to leave the region is likely to be seen as emblematic of the rift in Western-Russian relations, now at their lowest ebb since the end of the Cold War.

"Due to operational reasons beyond our control, McDonald's has taken the decision to temporarily close our three restaurants in Simferopol, Sevastopol and Yalta," a spokeswoman said.

The Crimean outlets are not franchises, but owned and operated by McDonald's itself.

The closures follow Geneva-based Universal Postal Deutsche Post's announcement that it was no longer accepting letters bound for Crimea as delivery to the region was no longer guaranteed.

Economic relations between Russia and Ukraine have worsened since Russia annexed Crimea last month in response to the ousting of Russian-backed president Viktor Yanukovich after months of street protests in Kiev.

Targeted sanctions imposed on a number of prominent Russians by the United States and the European Union have alarmed some foreign investors.

Russia raised the price it charges Ukraine for gas on Thursday for the second time this week, almost doubling it in three days and piling pressure on its neighbour as it teeters on the brink of bankruptcy.

Moscow has frequently used energy as a political weapon in dealing with its neighbours, and European customers are now concerned Russia might again cut off deliveries.

ECONOMIC PRESSURE

Moscow is applying economic pressure in other areas, while Ukraine has responded.

Russian riot police last month took control of a factory belonging to a Ukrainian confectionery magnate in the city of Lipetsk as part of an investigation into the company's affairs, the Ukrainian government has said.

Petro Poroshenko, a billionaire oligarch known as the "Chocolate King", is the front-runner in Ukraine's presidential election, which is set for May 25.

Ukraine this week temporarily banned seven Russian food companies from selling some of their products on Ukrainian territory.

McDonald's said it hoped to resume work as soon as possible but said it would help relocate staff to work in mainland Ukraine, signalling it did not expect its Crimean businesses to reopen in the near future.

The company's decision was welcomed by the deputy speaker of the Russian parliament, Vladimir Zhirinovsky, known for his anti-Western rhetoric, who demanded that McDonald's pull its business out of Russia entirely.

"It would be good if they closed here too ... if they disappeared for good. Pepsi-Cola would be next," Russian media quoted Zhirinovsky as saying.

Zhirinovsky, whose nationalist Liberal Democratic party largely backs President Vladimir Putin in parliament, said the party would organise pickets at McDonald's restaurants across the country.

McDonald's, which currently operates more than 400 restaurants in Russia, was the first international fast-food chain to tap the Russian market when it opened in Moscow's Pushkin Square before the collapse of the Soviet Union.

That branch had the highest sales and served the most customers of any McDonald's outlet in 2012.

A Russian backlash again McDonald's products would have a significant impact on company profits. McDonald's sees Russia as one of its top seven major markets outside the United States and Canada, according to its 2013 annual report.

However Russian moves to shun McDonald's burgers could easily backfire, according to Russian newswire RBK, which detailed Russian food suppliers to McDonald's that would suffer as a result.

(Reporting by Natalia Zinets, Alessandra Prentice; Additional reporting by Elizabeth Piper; Editing by Giles Elgood)

Source:

www.reuters.com

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German Consumer Sentiment Stays at Seven-Year High

FRANKFURT—Consumer sentiment in Germany remains at a seven-year high, a leading market research institute said Wednesday, but it warned that a further escalation of the crisis in Crimea would likely sap consumer confidence in Europe's largest economy.

GfK's forward-looking consumer sentiment indicator was 8.5 points in April, the same level as in March, when it reached its highest point since January 2007. The results matched forecasts from analysts polled by The Wall Street Journal.

"It remains to be seen just how the current events in Crimea will affect the mood amongst consumers," GfK said in its monthly survey of roughly 2,000 German consumers, acknowledging that the survey was conducted before the crisis escalated.

"It cannot be ruled out that this event will unsettle consumers in the coming weeks," the research institute added.

Optimism about the economy and a stable job market have helped boost economic expectations for Germans, but the Russian-led referendum and subsequent annexation of the Crimean peninsula could spook consumers at a time when domestic demand is a key driver of economic growth in Germany. Were the crisis to spread to other parts of Ukraine, resulting in further sanctions from the West, it would likely hurt consumers' mood, the survey said.

More than one-third of Germany's gas and crude-oil imports come from Russia.

Tension between Russia and the European Union appear to have already hurt business confidence in Germany. German business confidence weakened in March in part as a result of Russia's takeover of the Crimean peninsula, according to a survey of 7,000 companies from the Ifo institute released Tuesday. The ZEW indicator published last week also flagged the crisis in Ukraine as the reason for lackluster investor confidence.

Despite the tension in Ukraine, German households are increasingly optimistic about the economic outlook, the survey found, as the corresponding GfK indicator for March rose to 33.2. Record-low interest rates in the euro zone also have Germans buying more, the survey showed, while Germans' income expectations fell in March, but remained at a very high level.

—Todd Buell and Andrea Thomas contributed to this article.

Write to Christopher Lawton at christopher.lawton@wsj.com

Source:

online.wsj.com

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S&P 500 ends at record on jobless data

New York - US stocks mostly rose on Thursday, with the S&P 500 closing at yet another record on better-than-expected jobless claims data and the European Central Bank's move to keep rates unchanged.

But the overall sentiment was cautious ahead of Friday's all-important US nonfarm payrolls report and tensions between Ukraine and Russia.

The CBOE Volatility Index or VIX, Wall Street's so-called fear gauge, ended up 2.3 percent at 14.21.The VIX generally moves inversely to the performance of the S&P 500 and is often used to hedge against a market decline.

Trading volume was also lower than average, with about 6.4 billion shares traded on US exchanges, according to data from BATS Global Markets, below the daily average of about 7 billion in the past month.

“We had a bit of a selloff in midday session and late afternoon, but the fact the S&P 500 managed to set another record shows how much resistance this market has to geopolitical overhang that is clearly not over, resistance to bad news,” said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.

Thursday's milestone marked the S&P 500's fourth record closing high over the past six sessions.

Weekly applications for US unemployment insurance fell to 323,000, the lowest in three months, a sign of strength in a labour market that has been hobbled by severe weather. New orders for US factory goods, however, fell more than expected in January and shipments also slipped, adding to signs of a recent slowdown in manufacturing activity.

Friday's nonfarm payrolls report, due at 8.30am EST (13h30 GMT), is likely to show job growth in the United States picked up enough in February to encourage the Federal Reserve to continue scaling back its monetary stimulus. But the gain was likely to be tepid, given the unrelentingly harsh winter.

The day's biggest gainers were stocks in basic materials, financial and industrial sectors, often associated with strong economic fundamentals. The S&P basic materials index was up 0.4 percent, the S&P financial index was up 0.7 percent and the S&P industrials index was up 0.6 percent.

But the Nasdaq 100 fell 0.2 percent, led lower by Staples, which lost 15.3 percent to $11.35. The largest US office supplies retailer forecast a decline in sales. Staples also said it would close up to 225 stores in the United States and Canada by 2015.

The Dow Jones industrial average rose 61.71 points or 0.38 percent, to end at 16,421.89. The S&P 500 gained 3.22 points or 0.17 percent, to finish at 1,877.03. The Nasdaq Composite dropped 5.848 points or 0.13 percent, to close at 4,352.125.

Crimea's parliament voted to join Russia and its Moscow-backed government set a referendum for 10 days' time on the decision in a dramatic escalation of the crisis in the Ukrainian Black Sea peninsula.

US President Barack Obama took steps to punish those involved in threatening Ukraine while European Union leaders agreed to suspend visa and investment talks with Russia.

An index of Moscow stocks lost more than 2 percent after the vote in Crimea, but pared the losses and closed down 1 percent. The rouble weakened 0.3 percent versus the US dollar. A US-traded Russian ETF fell 1.1 percent to $23.37.

The European Central Bank decided not to take any action at its meeting on Thursday because economic and monetary conditions had not changed enough to warrant it. The euro hit its highest level against the US dollar since late December.

Among individual stocks, Costco Wholesale dropped 2.8 percent to $113.26 after the warehouse retailer reported a bigger-than-expected 15 percent decline in quarterly profit as unusually deep discounting in the holiday shopping season hurt margins. - Reuters

News Source: www.iol.co.za

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Yen Rises With Swiss Franc as Ukraine Tension Fuels Haven Demand

The yen and the Swiss franc strengthened after Russia took control of Crimea, intensifying concern of a conflict with Ukraine’s new government and boosting demand for haven assets.

Japan’s currency climbed at least 0.5 percent against all of its 16 major peers as U.S. Secretary of State John Kerry is traveling to Kiev after discussing sanctions against Russia. European Union foreign ministers will hold an emergency meeting. The Swiss franc advanced to a one-year high versus the euro while the Russian central bank unexpectedly raised interest rates as the ruble plunged to a record. A measure of global foreign-exchange price swings jumped to the most in three weeks.

“We have seen some safe-haven demand given the Ukrainian crisis and the geopolitical event risk that it entails,” said Alvin Tan, a currency strategist at Societe Generale SA in London. “Traditional havens like the yen and the Swiss franc are up. How this evolves depends on how the U.S. and European Union respond to the Russian action in Ukraine.”

STORY: A Humiliated Putin Plans His Next Move in Ukraine

The yen climbed 0.5 percent to 101.24 per dollar as of 7:09 a.m. in New York after reaching 101.20, the strongest level since Feb. 5. It jumped 0.8 percent to 139.37 per euro, the biggest increase since Jan. 31. The 18-nation currency slid 0.3 percent to $1.3764.

The Swiss franc gained 0.2 percent to 1.21247 per euro after appreciating to 1.21044, according to data compiled by Bloomberg, the strongest level since Jan. 10, 2013.

Obama Response

President Barack Obama contacted overseas leaders on how to respond to the Russian incursion, which prompted Ukraine to mobilize its army reserves as it seeks international economic aid. Ukraine said over the weekend an invasion would be “an act of war.”

STORY: Putin’s Gamble: Crimea Land Grab Will Be Met with Western Inaction

“It’s going to be a classic flight-to-quality move,” Ian Lyngen, a bond strategist at CRT Capital Group LLC in Stamford, Connecticut, said in a phone interview. “The market is more focused on the extent to which Russia is willing to press their case and how escalated the conflict becomes. They just want to make sure that if there is some big move that has bigger implications that they’re not caught on the wrong side of it.”

The ruble weakened 1.7 percent to 42.7536 against Bank Rossii’s target basket of dollars and euros after touching a record-low 42.754. Russia’s central bank raised its benchmark one-week auction rate to 7 percent from 5.5 percent effective 11 a.m. Moscow time.

‘High Volatility’

“The decision is intended to prevent inflation and financial-stability risks connected with the recent high volatility in the financial markets,” the central bank said.

STORY: In Crimea's Capital, Gratitude for a Russian Takeover

JPMorgan Chase & Co.’s Global Volatility Index rose as much as 31 basis points, or 0.31 percentage point, to 8.05 percentage points, the highest since Feb. 10.

South Korea’s won fell after the country’s defense ministry said the communist north fired two short-range missiles off its east coast today. The won fell 0.2 percent to close at 1,070.13 per dollar in Seoul after depreciating to 1,075.14, the weakest level since Feb. 24.

Australia’s dollar was little changed at 89.16 U.S. cents after falling to 88.91, the lowest since Feb. 5. It depreciated 0.7 percent to 90.26 yen after weakening as much as 0.9 percent to 90.059, also the lowest since Feb.5. New Zealand’s currency dropped 0.4 percent to 83.57 U.S. cents.

STORY: Seven Reasons Putin Won't Give Up Ukraine

To contact the reporters on this story: Neal Armstrong in London at narmstrong8@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

STORY: Ukraine’s Protesters May Soon Gain Power—and Regret It

News Source: www.businessweek.com

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