Sunday, July 31, 2016

Uber China will reportedly merge with archrival Didi Chuxing – TechCrunch

Huge news for China's ride-sharing industry, it appears that Didi Chuxing will gobble up rival Uber China in a merger deal that will value the combined entity in China at $ 35 billion.

The rumor has being doing the rounds for around a month now, with both sides denying but it looks like a deal is happening. Both Bloomberg and the Wall Street Journal cited sources claiming that a deal has been agreed. The timing is interesting, too, since last week the Chinese government released proposed regulations that will make taxi-hailing services legal from November 1.

Bloomberg reports that the deal will see Didi, which has more than $ 7 billion in cash on hand after extensive fundraising, invest $ 1 billion into Uber's global business for Uber China's operations. In exchange, Uber China and its investors, which include Baidu, will take a 20 percent stake in the newly-merged entity in China.

This deal means that Didi is now invested in every ride-sharing company of size on the planet, having previously put money into Lyft, Ola in India and Grab in Southeast Asia.

We've contacted Uber and Didi for comment and will update this story accordingly.

This is not the first mega merger in China's ride-hailing space. Didi Chuxing itself was created when Didi Dache and Didi Kuaidi called a truce on their capital intensive subsidies war in a merger last year that was valued at around $ 6 billion.

Uber has spent billions in China — a Bloomberg source said it is losing $ 2 billion in the country to date — so it looks like the same reasons are behind this second merger deal, albeit that the potential repercussions are very different. Offloading its Chinese unit could put Uber on track to finally list as a public company. The U.S. firm said last month that it is already profitable in Western markets and, with China its biggest money-drainer and weakest market from a competitive standpoint, a major question mark around its business will be removed if this deal goes through.

More to follow

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Fed’s Dudley Warns it is Premature to Rule out an Interest-Rate Increase This Year – Wall Street Journal

Federal Reserve Bank of New York President William Dudley argued for continued caution over the path of U.S. interest rates, given uncertainty over the global outlook, but warned that traders who have been ruling out an interest-rate increase later this year are growing too complacent.

In remarks prepared for a joint central-bank seminar in Bali between the New York Fed and Bank Indonesia, Mr. Dudley also laid out a defense of the Fed's communications to Wall Street amid recent criticism that they have left traders increasingly out of step with the central bank.

In recent months, Fed officials have signaled potential interest rate increases are possible this year, but not all traders have been convinced the central bank will act.

Mr. Dudley said this dynamic doesn’t show the Fed's inability to transmit policy guidelines to the market effectively, but rather highlight how expectations about the path of rates have shifted relative to one year ago.

At their rate-setting meeting last week, Fed officials left its short-term rates unchanged. But they opened to door to an increase later this year, possibly as early as September, concluding that risks to the outlook appear to have diminished.

Mr. Dudley attributed changing market bets partly to the Fed holding interest rates steady for longer than many expected. But he said his own baseline outlooks for growth and inflation had not changed notably in recent months.

"Compared to the start of the year, the expected timing of any further Fed interest rate hikes has been pushed back," he said in prepared remarks. "Directionally, the movement in investor expectations towards a flatter path for U.S. short-term interest rates seems broadly appropriate."

Mr. Dudley warned some traders were putting insufficient weight on the potential for near-term rate rises and said futures prices indicating the Fed will only be raise another quarter of a percentage point before the end of 2017 appeared "complacent."

Given the potential for faster adjustment in policy if financial conditions ease, he warned, "It is premature to rule out further monetary policy tightening this year."

The New York Fed official explained that it would be worse at this stage for the Fed to raise rates too soon and risk setting the economy off course, than moving slightly too late and having to adjust by raising rates more quickly.

He said the medium-term risks to the U.S. economic growth outlook were skewed to the downside. For one thing, he said troubles from the financial crisis haven’t fully dissipated seven years on, and "Evidence is accumulating that some of the headwinds are likely to prove more persistent."

Another issue for the Fed is that, as overseas economies pursue more expansive monetary policy to stimulate growth, it pushes up the value of the dollar to reflect the expectations for higher interest rates in the U.S. relative abroad. If the Fed did not adjust its response to these developments abroad, "the stronger dollar could result in an undesired tightening of U.S. financial conditions," he said.

Mr. Dudley said he expects annualized growth over the next 18 months of 2%, but there was no certainty his forecast would materialize. He said a sizable pickup in the pace of growth "seems unlikely," in part because there has been some leveling off in the improvement of the labor market. Even so, the pace of hiring bounced back in June to a gain of 287,000 jobs, from just 11,000 in May.

On the potential downside, he listed the difficulty in assessing the longer-term fallout from Britain's vote to exit the European Union in June, and how the so-called "Brexit" vote might impact international growth and trade, currency moves, and the perceived health of bank stocks.

"To date, the global financial market fallout from the Brexit vote has been short-lived," he said. "The potential aftershocks pose medium-term downside risks to the global economy, and that these risks need to be monitored."

He reiterated that U.S. monetary policy decisions are data dependent, saying policy makers have grown more transparent about their views and concerns. But he acknowledged there was "room for improvement" in official Fed guideposts, including in the uncertainty over individual officials' economic forecasts.

"We tend to make relatively few changes to the statement language each meeting because of the acute market sensitivity to such changes," Mr. Dudley said. "One could argue that this might not be the best practice to follow, but we should recognize that there would also be significant transition costs if we were to make more extensive revisions to the statement at each meeting."

Write to Katy Burne at katy.burne@wsj.com

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Saatchi & Saatchi chairman Kevin Roberts put on leave for comments on women – CNNMoney

kevin roberts  saatchi and saatchi
Kevin Roberts told a Business Insider reporter that the advertising industry doesn’t have a gender equality problem.

Kevin Roberts, the chairman of advertising giant Saatchi & Saatchi, has been put on leave after coming under fire for his comments about women in the profession.

Among other things, Roberts said more women don’t become bosses because they prize work satisfaction over moving up.

Publicis Groupe (PGPEF), which owns Saatchi & Saatchi, will “further evaluate his standing” with the firm, according to a Publicis statement, which invoked the “gravity” of Roberts’ remarks.

A Business Insider article published Friday quotes Roberts saying gender diversity is not a problem in advertising and “way worse” in other fields like financial services.

Roberts said companies are using “antiquated” ways of viewing success and that women at his firm are “happier” not taking on leadership roles.

“Their ambition is not a vertical ambition, it’s this intrinsic, circular ambition to be happy. So they say: ‘We are not judging ourselves by those standards that you idiotic dinosaur-like men judge yourself by,’” Roberts said.

His comments drew rebukes on social media.

Rodd Chant, whose career as an advertising executive includes a stint at Publicis Singapore, wrote on LinkedIn (LNKD, Tech30) that Roberts’ statements were “downright ridiculous.”

“So many advertising agencies, for as long as I have been involved in the business, have been boys clubs and that has to change,” the post reads.

Saatchi & Saatchi is a dominant player in the ad industry and has offices in 70 countries. Its clients include General Mills (GIS), Visa (V), Toyota (TM), T-Mobile (TMUS) and P&G (PG).

Roberts served as the company’s CEO for 17 years and stayed on as chief after Saatchi & Saatchi joined Publicis Groupe in 2000. He became Saatchi & Saatchi’s chairman in 2014.

The current Saatchi & Saatchi CEO, Robert Senior, rebutted Roberts’ comments. “The issue of gender diversity is not in any way over for our industry,” he said in a statement Saturday, adding it’s “vital” that companies promote executives to leadership roles solely on merit.

Senior also said Saachi & Saachi “is, and has always been, a meritocracy” — saying that 65% of its staff is female and include “women in senior leadership roles across our business.”

Saatchi & Saatchi’s owner, French-based Publicis Groupe, is among the largest agencies in the world.

“Promoting gender equality starts at the top and the Groupe will not tolerate anyone speaking for our organization who does not value the importance of inclusion,” Publicis said in a statement.

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RPT-Wall St Week Ahead-Data in focus as market struggles for direction – Reuters

(Repeats July 29 story without change)

By Rodrigo Campos

Wall Street, seeking direction as the S&P 500 has been stuck in a narrow trading range for 12 days, will next week shift its attention from second-quarter corporate earnings reports to economic data.

Investors will be looking for signs of economic strength to reinforce the positive direction hit Friday, when the S&P 500 hit an intraday record high. Data estimates for next week show the manufacturing and services sectors are expected to have expanded in July while the economy is seen having added a healthy 180,000 jobs this month.

“I think the economy in the U.S. is getting better and still can improve. The overall tone will be of an economy that is getting better at a reasonable pace,” said John Manley, chief equity strategist at Wells Fargo Funds Management in New York.

The U.S. stock market has been trading flat as second-quarter earnings have come in better than initially expected, but the outlook for third-quarter earnings has worsened. In fact, the S&P 500 traded in a less-than-1 percent range throughout the 12 sessions to Friday, a lull not seen in data going back to 1970, according to Ryan Detrick, the senior market strategist at LPL Financial.

It is no wonder that investors are suffering from a lack of resolve; they have been pushed and pulled by a slew of other factors, including worries about the global economy and the fact that shares have already been on a tear not well supported by several quarters of weak earnings. Stocks are pricey now, but so are other asset classes.

The S&P 500 is trading near its record high, at roughly 17.2 times the earnings of its component companies over the next 12 months, a valuation that is expensive when compared to its 15.5 median, according to Thomson Reuters data.

Selling is not an obvious choice either, since those who must remain invested face few other choices. Bonds sport high prices and near-record-low yields, and commodities, led by oil, hit a wall after a strong first half of the year. U.S. crude is down 14 percent this month alone.

The lack of direction in the S&P index as it sits near its record close of 2,175.03 hit July 22 could be an indication of strength, as these new highs are digested by the market.

If the jobs report data land far from expectations, that will likely give indexes a jolt on Friday, said Michael Yoshikami, CEO and Founder at Destination Wealth Management in Walnut Creek, California.

But neither that jolt nor the earnings reports still to come would be enough to set stocks on a new course, he said, because of the uncertainty brought on by the final stretch of the U.S. presidential election campaign leading up to the Nov. 8 vote.

“Between now and the election there’s going to be so many headlines that it’s going to be difficult for the market to really rally significantly,” Yoshikami said. (Reporting by Rodrigo Campos; Editing by Linda Stern and James Dalgleish)

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Improving flight delays: Is American Airlines charting the right course? – Christian Science Monitor

If you’re flying American Airlines, your pilot may be rushing to get there faster, according to allegations by the president of the Allied Pilot Association, and pushing the boundaries of safety, reports the Chicago Tribune.

Allegations that American Airlines managers are encouraging pilots to redraw flight plans and to push aircraft to their limits in order to avoid flight delays are raising concerns, despite the airline’s insistence that safety is their No. 1 priority.

"This initiative has the potential to place our licenses and," said Mr. Carey in a note to pilots, USA Today reported, "more importantly, our passengers at an increased risk.”

Airlines such as American lose money when flights are not on time, or if pilots go over the allowable federal work shift hours. According to federal regulations, pilots are only allowed to work between nine and 14 hours at a time, depending on a number of factors, including how many flights a pilot is responsible for each day.

If flying the last scheduled flight in their day means that pilots will go over the legal shift limit, airlines are forced to bring in new pilots or cancel flights, leading to delays. American Airlines has struggled in recent years to keep its flights on time.

In 2015, American Airlines ranked seventh out 10 North American airlines in terms of on time performance, with just over 80 percent of American flights arriving and departing on time.

Although American says that it is invested in the safety of both pilots and passengers, critics such as Carey say that rushing flights can be dangerous.

According to Carey, “these last-minute manipulations are used to make a flight appear legal when in reality it’s not or is, at best, on the ragged edge.”

Federal limits on pilot shifts went into place following the 2009 crash of Colgan Air flight 3407 to Buffalo, N.Y. The crash investigation showed that pilot fatigue likely played a role in the crash, NPR reported. Like many pilots with regional airlines, First Officer Rebecca Shaw said she made too little money to live near Colgan Air's Newark hub, and instead saved money by commuting (via airlines) from her parents' home near Seattle on the day of the flight. The pilot of the Colgan Air flight flew from his home in Florida and slept in the crew lounge the night before reporting to work.  

More recent airline surveys found that nine out of 10 pilots have at one point dozed off in the cockpit. In May, ABC News reported that NASA statistics indicate that up to 20 percent of airplane crashes are caused by pilot fatigue.

Critics like Carey are concerned that American's recent request that pilots speed up flight plans will sacrifice safety standards.

“We take safety very seriously," said American Airlines Group spokesman Joshua Freed, "and we are absolutely committed to working together with our pilots and all other employees.”

Delays may be set to get worse, as more people rely on airlines for transportation, Bloomberg News reported. Boeing released a report this week predicting that airlines will need to hire 617,000 new pilots by 2035, in order to handle the rising number of airline passengers.

While American Airlines hopes to improve its on time arrivals and departures, other airlines and flight hubs are also taking steps to improve their efficiency. Chicago's O'Hare airport recently announced expansion plans, complete with a terminal upgrade, in order to expand O'Hare's capacity and reduce chronic delays, The Christian Science Monitor reported.

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There is no such thing as hard or soft Brexit – Financial Times

Britain should look to leave the EU as swiftly and simply as possible, writes Bernard Jenkin

Should Britain go for "hard" or "soft" Brexit? It is a question laced with unspoken assumptions — the most important being that the UK must have so-called "access" to the single market in exchange for an agreement that means we do not take back control over migration of EU citizens.

Some have accused the Vote Leave campaign of failing to set out what Brexit looks like. In fact, Vote Leave has offered far more clarity than it is given credit for. Leaving the EU means taking back control of our own laws, trade and borders. The campaign was explicit that this means leaving the single market. When Theresa May, UK prime minister, says with admirable clarity that "Brexit means Brexit", she is committing to this principle. It is clear that the European Commission and other member states understand this, too.

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On this topic

IN Opinion

Leaving the EU is in principle straightforward; much easier, in fact, than joining since it is not necessary to change domestic laws and regulations. All the laws and regulations that apply by virtue of Britain's membership can remain perfectly aligned with those of the rest of the EU until they may be changed at a later date. This is how the UK gave independence to the countries of the British empire. 

There are two crucial legal components of Brexit. The first is Article 50, the procedure laid down by the EU treaties by which we disapply these treaties to the UK in international law. This is implemented by an act of Parliament, which is the second component. This need be no more than a few clauses, including one to repeal the European Communities Act of 1972, which currently implements EU law into our domestic law, and another to incorporate all the EU laws that apply directly in UK law into UK statute. That is what Brexit is; there is no "hard" or "soft" option. 

The real question is what kind of relationship the UK should develop with our EU partners after we leave. Some vainly advocate retaining features of EU membership after leaving but this is not practical. Concessions such as European Economic Area membership — the so-called Norway model — were conceived as a precursor to joining the EU, not as a reward for leaving. Jeremy Hunt, the health secretary, has correctly insisted that, if the UK were to enter into such intrusive obligations, another referendum would be needed. 

This is simply not going to happen. Nor is it attractive to spend as long as six years in this invidious state of uncertainty, waiting for the EU to decide the outcome of triggering Article 50 while also remaining subject to all the obligations of EU membership. It would take only one of the other 27 member states to say non at the end of the process to wreck the whole agreement. 

Some fear falsely that the UK must maintain access to the EU single market. But countries without any agreement export successfully to the EU. In the transitional agreement for trade, we should offer a zero tariff deal and maintain EU tariffs on all non-EU imports, until such time as the EU wants to make a long-term trade agreement with the UK. It would be perverse from their own point of view to impose tariffs, but if they do, the UK would benefit from billions in extra revenue from reciprocal tariffs on EU imports. This could be used to cut business and employment taxes and support industrial and science research.

As for financial services, passporting ,which allows banks and other financial institutions to ply their trade across the EEA without having to be separately authorised in each country, is a convenience but not a necessity. Freedom for the City of London from the more damaging aspects of EU regulation (as well as what is coming down the track) is far more important to our long-term global position than passporting. The UK financial services sector dwarfs that of the rest of the EU — Canary Wharf on its own is bigger than Frankfurt.

The only danger with Brexit is that we are too fearful of it. We should embrace it and aim to leave in months rather than years. This will put the UK in the strongest position, and we will secure the freedom to develop trade with non-EU countries much more quickly. A former Swiss trade minister recently exhorted a group of MPs: "You have no idea what a strong position you are in." Another from the old Commonwealth told me he never came to London because we had no influence. That will soon change. 

The writer is the Conservative MP for Harwich & North Essex and chair of the public administration and constitutional affairs select committee

Copyright The Financial Times Limited 2016. You may share using our article tools.
Please don’t cut articles from FT.com and redistribute by email or post to the web.

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Britain’s scientists are freaking out over Brexit – Washington Post

Britain has been a powerhouse of discovery since the age of science began. Newton, Darwin, Crick? They parted the curtain on gravity, evolution and DNA.

Now comes Brexit, and to use a non-scientific term, the scientists in the country are freaking out.

Since the vote to leave the European Union last month, leaders of Britain's scientific academies are making dire predictions about what could happen to research and innovation here.

Damage to British research, the scientists warn, could be among the cascade of unintended — and largely unappreciated — consequences of the vote to exit the bloc.

The researchers worry that Britain will not replace funding it loses when it leaves the E.U., which has supplied about $ 1.2 billion a year to support British science, approximately 10 percent of the total spent by government-funded research councils.

There is a whiff of panic in the labs.

Worse than a possible dip in funding is the research community's fear that collaborators abroad will slink away and the island's universities will find themselves isolated.

British research today is networked, expensive, competitive and global. Being part of a pan-European consortium has helped put Britain in the top handful of countries, based on the frequency of citations of its scientific papers.

Last week the heads of British academic societies posted a public letter reminding everyone that the country's universities, many of them among the best in the world, are staffed by legions of top-flight researchers from abroad.

Equally, the student bodies, especially graduate students in master's and doctoral programs, are populated by young scholars from the continent.

The community is asking: Will the foreigners continue to be welcome in British laboratories and will British researchers continue be partners with collaborators from abroad?

Dame Jocelyn Bell Burnell, president of the Royal Society of Edinburgh, said a third of the research staff at leading universities in Scotland are E.U. passport holders.

"They are all very twitchy right now," Burnell told a science and technology committee in Parliament earlier this month. "If good opportunities show themselves elsewhere in Europe, they will be off."

The new prime minister, Theresa May, vowed that preserving the country's innovation was "a priority" and that British negotiators would focus on scientific collaboration in any future talks in Brussels.

In a letter to Sir Paul Nurse, director of the Francis Crick Institute in London and a former president of the Royal Society, May wrote that Britain is "enriched by the best minds from Europe and around the world," according to a copy of the correspondence obtained by the BBC.

Anecdotal evidence suggests head-hunters may already be circling. Analysts with the Conference Board of Canada advised that Canadian universities try to lure talent across the ocean: "With Britain's wealth of talent facing an uncertain future after Brexit, we can reasonably expect them to consider their international options."

Spain's deputy prime minister, Soraya Sáenz de Santamaría, told the Financial Times her country would like to see the European Medicines Agency move from London to Madrid.

Some 15 percent of lecturers at British universities hold E.U. passports (and are not British). At the highest-ranked British universities, the number rises to 20 percent. In some academic departments at the London School of Economics, half of the teaching staff are from abroad.

Alexander Halliday, a professor of geochemistry at the University of Oxford, testified at the House of Lords. Britain, he said, is considered one of the most entrepreneurial places in the world. "It wasn't that way 10 years ago," he said, and pointed to a surge in E.U. science spending compared with flatline funding by Britain.

As one example of Britain's ability to draw talent, Halliday said a "staggering" one-fourth of the winners of the coveted Marie Curie Fellowship, awarded by the E.U. to scientists to study abroad, come to Britain.

Here in Canterbury, the University of Kent bills itself as "the U.K.'s European university," with outposts in Athens, Brussels, Paris and Rome. The vice chancellor, Dame Julia Goodfellow, said of her location in Kent, "We're surrounded by sea on three sides. It's an hour to London but almost as quick to Paris or Brussels. It just makes sense to look outside Britain."

Europeans make up 18 percent of Kent's graduate students and 22 percent of the faculty. The university pumps almost $ 1 billion a year into the local economy.

"One of our biggest issues right now is the uncertainty," Goodfellow said. Researchers and students want to know they'll get visas and funding. "Kent will push for an open-door policy," she said.

Harmonie Toros, 42, is a senior lecturer at the University of Kent, where her speciality is international conflict resolution. She is French-Turkish, and her husband is an Italian academic also at the university. They have two young children.

She said Brexit has hit her professionally and personally.

"Professionally, I would be planning to apply for a European Research Council grant now. It would be the right thing to do in my career. But it is a huge undertaking, 90 pages, will take a month and a half to do. And my chances of getting it are between 5 and 10 percent."

She's worried those odds may have fallen in the wake of Britain's decision to leave the European Union.

"I would understand if the European Research Council weren't particularly inclined to give us as much money as they used to," Toros said. "Do I put a month of my time or more into an application I will have even lesser chance of getting? There are quite a few of us in this kind of position asking, 'Is it really worth it?' "

On the personal side, Toros said that for the first few weeks after Brexit, she would eye people on the streets and wonder how they voted. The county of Kent came out strongly in favor of leaving the union.

"You look at neighbors, and you know some of your neighbors voted 'leave,' " she said. "My entire work is on dialogue. I'm not going to stop talking to people because they voted 'leave.' That would be crazy."

Vid Calovski is president of the Kent Graduate Student Association. He said, "We're scared the vote will change what makes the university such an eclectic community."

A friend, Paul Wong, 23, who is from Malaysia and is studying for a master's in actuarial science, said that in his class of 30 students, none are from Britain. Another graduate student, Ben Brown, 22, who is getting a master's in comparative politics, ticked off his roommates in a student apartment: "Four French, an American, one German, a Dutch — and me." He's the lone Brit.

Research in the 21st century is more collaborative than ever, the scientists say.

Anne Rosser is a professor at Cardiff University in Wales and a joint director of the Brain Repair Group there. Her focus is Huntington's disease, a rare neural disorder. With partners at eight other labs, the consortium is searching for ways to transplant stem cells into damaged brains.

"You can't do this kind of research in one country," Rosser said. She is especially worried about what will happen to funding and collaboration for investigating rare diseases.

Asked if Brexit could hurt her research, she said, "It could certainly slow down what we are doing."

Rosser said she will apply for European funding this year, but she added that scientists are growing anxious about eligibility.

"In science, the last thing you want is isolation," she said.

Chris Husbands, vice chancellor of Sheffield Hallam University, said 12 research groups at his institution were preparing to participate in grant applications for the E.U.'s Horizon 2020 money, due in August. He said that four of the teams on his campus were told by their E.U. partners that it was unhelpful now to have British collaborators.

The scientific journal Nature rightly pointed out that much of the anxiety in British science is so far based on anecdotal evidence — as well as mere emotions — which are unreliable for proving that British innovation is going to take a whack.

Regardless, Nature reported that Britain's science minister, Jo Johnson, has set up a specific email address (research@bis.gsi.gov.uk) for researchers to send him stories of lost opportunities.

william.booth@washpost.com

karla.adam@washpost.com

Adam reported from London.

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Saturday, July 30, 2016

Yahoo Can Still Be Broadband’s Future – Wall Street Journal

With loose change that might have been scraped from its few remaining pay phones, Verizon this week agreed to buy Yahoo YHOO -0.86 % 's core web businesses for $ 4.8 billion. Not to ruin anybody's day, but the lesson is worth noting for shareholders of Facebook FB -0.85 % and Google, which, like Yahoo, also don't sell anything directly to consumers and depend on aggregating fickle public eyeballs for their revenue.

Yahoo never came close to collecting earnings to justify the $ 60 billion market cap it averaged in 2000 (much less its $ 128 billion bubble peak that year). The stock market is an efficient discounting machine but it's not clairvoyant. And Yahoo's trajectory, for the first third of its life, looks a lot like the trajectory of today's internet darlings.

In the meantime, Verizon—boring old phone company—grew its market cap from $ 23 billion in 1994 to $ 224 billion today.

Verizon is the interesting story now: Its wireless business is maturing; its margins are shrinking; yet Verizon (and its rivals) must continue to invest heavily to meet its non-growing customer base's rapidly growing appetite for bandwidth.

The idea behind the latest deal is to use Yahoo's eyeball business, matched with Verizon's already-acquired AOL eyeball business, to create an internet advertising business like Google's or Facebook's to go with its telecom business. No, Verizon may never be in their league as an ad machine. Then again, those companies don't have Verizon's boatload of reliable monthly revenue from actual consumers. These customers will frequently keep paying their wireless bills even when they stiff their mortgages and student loans.

And social payoff for the rest of us? It will come if the Yahoo deal increases Verizon's incentive to keep investing in its core business. 5G is coming—the new wireless standard delivering speeds faster than most of us get at home—but not before 2020. Verizon, meanwhile, has been telling shareholders that it doesn't need to wait for a final 5G standard to deliver a "fixed" service now based on 5G. Already being tested near its Basking Ridge, N.J., headquarters is a network 58 times faster than today's average home broadband speed—without digging up the streets.

We're talking about a powerful replacement for home cable, not next decade but next year, revolutionizing home broadband deployment costs. "We've demonstrated . . . 1.8 gigs into the house without a wire," Verizon CEO Lowell McAdam told a J.P. Morgan JPM -0.20 % conference in May. "If I can do that, then virtual reality, all the other things, 3-D videoconferencing, the whole nine yards that we all grew up watching in Star Wars, actually might happen."

Now for the "but." There's no way old-style utility regulation, as layered on by the Obama administration, can be anything but a deterrent to such investment. Verizon may proceed based on hope the policy will be overturned or that future Federal Communications Commissions will "forbear" from exercising the regulatory powers now at their disposal. But every company in the broadband business now has to worry about regulators essentially annexing the assets and profits of future deployments.

This matters. Well do we remember a 2004 call from an aide to Ed Whitacre, then chief of SBC, saying its plan to roll fiber into thousands of neighborhoods would be stillborn if regulators did not waive elements of utility-style regulation then imposed on the Bell companies. Regulators did, and what's since become AT&T T 1.67 % 's U-verse now brings competitive broadband and TV service to millions of homes previously captive to a local cable operator.

Ditto mobile broadband—which took off in 2007 after the FCC officially declared it exempt from utility regulation.

As Friday's disappointing GDP report reminds us, the Achilles' heel of the recovery has been depressed business investment. No wonder. During last year's debate over so-called Title II utility regulation for the internet, the prevailing view in Silicon Valley was to keep its head down—"In five years, there will be so much bandwidth competition that Title II won't matter," one lobbyist prayed. As a result, companies like Verizon that are expected to build this competitive bandwidth utopia were left without allies in what proved a losing fight to keep the internet lightly regulated.

Likewise, those who cite today's FCC promise that future FCCs will refrain from regulatory meddling ignore the most-cited axiom in politics: Power corrupts. There's also a lesson here for the Trumpians, in the irreducibly shallow role that public opinion played. The childlike masses for whom net neutrality became a slogan roughly synonymous with "good," and who never received any correction from the companies that benefit most from the internet, can now expect an ugly surprise at all that utility regulation actually entails.

The point is, the few things that are visibly working in the U.S. economy can still be lost.

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Verizon’s acquisition could have positive impact for Yahoo users – Online Athens

NEW YORK | If you have a Yahoo email account or regularly visit services like Yahoo Finance and Yahoo Sports, you might be wondering what will happen to the once-venerable brand once Verizon takes over.

Neither company said much about the brand's future once the $ 4.83 billion deal closes early next year. In announcing the deal last week, Verizon merely said that the new Yahoo properties will become part of Verizon's AOL business, which the phone company bought last year for $ 4.4 billion. It's quite possible that Verizon will retain the Yahoo brand – as a sub-brand like AOL.

Here's what's known – and what isn't – about what Verizon's deal for Yahoo means for you:

THE REST OF THE YEAR

Nothing major will change until the deal closes. It's possible the companies will reveal their intentions sooner, but they might need some time as a single company to figure things out.

CEO Marissa Mayer said Verizon has told her it's interested in keeping the Yahoo brand.

"We haven't even scratched the surface," how things will be run after the takeover, Mayer said.

WILL MY EMAIL GO AWAY?

In the U.S., Yahoo is the second most-popular email service behind Google's Gmail. It's even more popular in Europe and Latin America. Because of that, it makes sense for Verizon to keep that brand affinity intact, eMarketer analyst Paul Verna said.

Look to what Verizon did with AOL as guidance. People with AOL addresses did not have to change their email address. In fact, Verizon upgraded AOL email accounts to give them unlimited storage and more room for email attachments.

With 225 million users worldwide, "they would be really foolish to do anything to mess that up at least in next six to 12 months," said Randy Giusto, lead analyst at Outsell.

But nothing is ever permanent when it comes to the internet. Both Yahoo and Google have closed down services that millions of people use when they don't fit with the companies' strategies. Giusto expects Verizon to eventually make changes, but the company will need time to assess its new properties.

WHAT ABOUT YAHOO SITES?

Verizon is buying Yahoo to strengthen its media and advertising platform, so the websites are a valuable part of that.

"Yahoo's content and advertising portfolio should vastly expand AOL's reach and technology," Jefferies analyst Mike McCormack said in a note to investors. Yahoo reaches over 1 billion active users each month, including 600 million mobile users, and McCormack said that scale is attractive when selling ad space.

Outsell analyst Giusto points out that Yahoo has already been closing its less popular digital magazines. For instance, Yahoo shuttered Yahoo Health, Yahoo Real Estate and five others in February. The ones that are left, including Yahoo Finance and Yahoo Sports, are more popular, so they may stick around.

Yahoo's Tumblr blogging site is another matter. The company took a big accounting write-down last week to reflect the declining value of Tumblr. As the nature of blogging itself changes, Tumblr faces competition from sites like Medium, which is increasing in popularity as a destination for longer-form writings.

WILL THE YAHOO
NAME STICK AROUND?

The enthusiastic name has been synonymous with the internet's rise in the 1990s, but now that the internet has matured, it's not clear whether Yahoo as a brand name will survive.

The parts Verizon isn't buying – Yahoo's stakes in Yahoo Japan and Chinese e-commerce giant Alibaba Group – will get a name change once the deal closes. Verizon bought the Yahoo brand as part of the deal and has the option to keep the name.

However, because Verizon is merging Yahoo with AOL's operations, it could also merge everything under the AOL brand name. Then again, The Huffington Post, TechCrunch and other sites kept their separate identities after AOL bought them years ago, and Verizon didn't change that approach.

"I think Yahoo becomes a sub-brand just like AOL has," Giusto said. "Maybe tailor that sub-brand with names toward products, like Yahoo Mail, Finance and Sports."

AP Technology Writer Michael Liedtke in San Francisco contributed to this report.

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Union chief says American pushing pilots to speed up flights – USA TODAY

American Airlines passenger planes are seen at Miami International Airport on June 8, 2015. (Photo: Robyn Beck, AFP/Getty Images)

DALLAS (AP) — The pilots’ union president said Thursday that American Airlines is reducing its safety margin by “manipulating” flight plans with tactics that include faster speeds.

The union official suggested that American is trying to avoid canceling flights when crews push the limits of their legally allowed work shifts.

American did not respond directly to the union leader’s claims. A spokesman said the airline takes safety and regulations seriously.

Dan Carey, who just started a three-year term as president of the Allied Pilots Association, said in a note to members that pilots were reporting pressure to approve faster flight plans.

Federal rules generally limit airline pilots to shifts of nine to 14 hours, depending on when the pilot’s work day started and the number of flights. They can exceed their limit for unexpected delays such as bad weather, but they can’t take off if they know they won’t complete the flight under the limit.

The rules were designed to prevent accidents caused by fatigue. They were adopted after a Colgan Air flight for Continental Airlines crashed in 2009, killing 50 people.

When crews don’t have enough time left in their shift to complete a flight, the airline must find replacement pilots or cancel the flight. Either option angers customers and can cause later flights to be delayed or canceled.

In the latest government figures, for May, American trailed Delta Air Lines, United Airlines and Southwest Airlines in on-time arrivals and had a higher cancellation rate.

Earlier this month, Chief Operating Officer Robert Isom outlined steps American was taking to operate on schedule during the busy summer season. He told employees in a memo that planners and pilots would “utilize ‘speed up’ flight plans to reduce delays involving crew duty times” on “critical flights.”

Carey said managers have been directing pilots to redraw flight plans to keep their shifts legal by insisting on faster speeds that are “nearing aircraft limitations,” even if routes go through turbulence, which usually forces pilots to slow down.

“These last-minute manipulations are used to make a flight appear legal when in reality it’s not or is, at best, on the ragged edge,” Carey said. He said the actions caused an “erosion of the safety margin.”

The spokesman for American Airlines Group Inc., Joshua Freed, said “We take safety very seriously and we are absolutely committed to working together with our pilots and all other employees.”

Robert Mann, a longtime aviation consultant and former American Airlines executive, said airlines have long used quicker flight plans to catch up when they fall behind schedule, “and it’s done safely.”

But, Mann added, he understood the union’s concern — pilots could face sanctions if they signed an unrealistic flight plan and then an accident occurred.

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Bud-Miller $105 billion deal is back on track – CNNMoney

Meet the guy who  invents new beers for Anheuser-Busch
Meet the guy who invents new beers for Anheuser-Busch

Cheers! It looks like the Bud-Miller mega merger is finally going to happen.

It’s been nearly a year in the making but the biggest ever beer deal cleared its last major hurdles Friday as SABMiller’s board accepted an improved £79 billion ($ 105 billion) takeover offer from Anheuser-Busch InBev (BUD).

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AIG Offers Brexit Coverage in UK for Anxious Executives – Insurance Journal

American International Group is coming out with new Brexit coverage in the UK for anxious executives, barely weeks after the fateful British vote to pull out of the European Union.

AIG division AIG UK will handle the product launch, which amounts to an addition to its existing directors & officers policies. It is with no additional cost and also no deductible.

AIG's Brexit cover amounts to planning for worst-case scenarios, even though Great Britain hasn't yet officially begun the Brexit withdrawal process.

For executives who are EU citizens covered by AIG UK's D&O cover, it would address costs a company doesn't handle involving legal challenges if an executive's permanent residency application is rejected before the United Kingdom pulls out of the European Union. Any legal costs relating to U.K. nationals whose application for permanent residency in an EU member state is rejected, post-Brexit, would also be addressed (specifically, post-Brexit repatriation orders).

"While the outcome of the discussions between the U.K. and EU are unknown, this addition to existing contract, which will be implemented at no additional cost, will give our clients peace of mind during a period of potential change," Anthony Baldwin, CEO of AIG Europe Ltd. and AIG UK explained in prepared remarks.

The U.K. voted on June 23 to leave the European Union, setting off financial market turmoil and uncertainty around the world.

This article first appeared in Insurance Journal's sister publication, Carrier Management.

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Friday, July 29, 2016

The Only Way for Republicans to Save Their Party Puts Them in a Pickle – Huffington Post

There is only one way for the Republicans to save their party. By voting for Hillary Clinton.

If Trump wins, its all over for the now-tarnished Republican brand. Trump will decimate its cherished policies for four years or more. Diehards will never be able to put it back on track. But if Trump loses…

IF TRUMP WINS, THE REPUBLICANS ARE NO LONGER THE PARTY OF,,,

A TRUMP ADMINISTRATION WILL BE THE PARTY OF…

After 4 or (shudder) 8 years of Trumpublicanism, how easy do you think it will be to revert to those bedrock principles?

The answer: It’ll be impossible. By then, those quaint Reaganesque ideas will be in the dustbin of history, replaced by Donald Trump’s wall, his authoritarian nature and his history of liberal social policies. Cozy up to Uncle Vladimir, why don’t your?

HOW ABOUT A VOTE FOR GARY JOHNSON?

A vote for Gary Johnson helps Trump win, because it takes a vote away from Hillary. Third parties are currently pulling more voters from Clinton than Trump, so a vote for Gary Johnson makes it more difficult for Hillary to win.

HOW ABOUT A VOTE FOR JILL STEIN?

HOW ABOUT A WRITE IN FOR TED CRUZ?

ONLY A VOTE FOR HILLARY CLINTON WILL PERMIT REPUBLICANS TO PICK UP THEIR BRAND AND POLISH IT AGAIN.

A vote for Hillary Clinton will keep the Republican brand alive. She is the candidate whose policies are most similar to Ronald Reagan who has a credible chance of winning. And if she wins, the Republican party will still be in control of statehouses and governorships who can keep the brand alive. But a President Trump will use the power of the purse and the threat of primarying Republican governors to keep them in line.

Many staunch Republicans have come out in support of Hillary. Barbara Bush. Laura Bush. Michael Bloomberg. They know, as we all do, that “lock her up” and Benghazi were all about political posturing. Hillary Clinton is a seasoned professional who can do the job and provide stability to the United States and the world.

But there’s one more major reason to keep Trump out of the White House in 2020. Reapportionment under Donald Trump will kill the Republican brand.

GAME, SET, MATCH: THE TRUMP REAPPORTIONMENT IN 2020.

If Trump and his Tea Partiers are in control in 2020, they’ll be in charge of reapportionment, and Katie bar the door. How do you think districts will be redrawn by Trumpistas? Answer: they’ll be gerrymandered to keep out both Republicans and Democrats. For ten more years.

The Republican party will have a better chance under a democrat administration than a Trump one. Democrats will do what they can, but they won’t be favoring the Tea Partiers, so the outcome is likely to be better under a Democrat administration than a Trump one.

So, Republicans. There you have it. Vote for anyone but Hillary and you help Trump win, and drive a stake through your party as you knew it. Vote for Hillary and you keep the party alive, first as the loyal opposition with a likely base of support in the states, and later as a credible alternative.

Voting for Hillary is the only way to discredit Donald Trump and reclaim the party.

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S&P 500 Caps Fifth Monthly Gain as Rally Shows Signs of Fatigue – Bloomberg

Bulls keep squeezing gains out of the U.S. equity market, sending the S&P 500 Index to its longest streak of monthly gains since 2014 just two weeks after reaching a record.

How much more juice is left in a rally that showed signs of lethargy as the month wore on is another question.

Powered by better-than-forecast earnings and weakening odds of a Federal Reserve interest rate increase, the S&P 500 jumped 3.6 percent in July, the biggest advance since March. Technology stocks led the way, climbing more than 7.8 percent thanks to strength in Alphabet Inc., EBay Inc. and Microsoft Corp.

The benchmark index for American equity is up 6.3 percent in 2016, erasing a loss that exceeded 10 percent at the depths of February's selloff. Almost $ 3.7 trillion has been restored to share values since that bottom as recession anxiety dissipated and commodities surged.

"July was a market that moved up because the underlying backdrop in the U.S. remained intact," said Alan Gayle, a senior strategist at Atlanta-based RidgeWorth Investments, which has about $ 37 billion in assets. "The global central banks voicing that they will continue to act as a backstop has helped the market rise to that all-time high, though it has settled for the last couple weeks."

The S&P 500 ended July at 2,173.60, two points below its all-time high. The Dow Jones Industrial Average added 502.25 points, or 2.8 percent, to 18,432.24, and the Nasdaq 100 Index surged 7.1 percent for its best month since October.

The prospects for additional central-bank stimulus continue to support equities, with the odds for a Fed rate hike by December falling to 34 percent. Better-than-forecast economic data and corporate earnings that broadly beat projections have also helped lift stocks. The gauge posted seven records in 10 days in a mid-month stretch, and it's rebounded 19 percent since its low in February. Its gain this year is one of the best among developed markets.

At the same time, the pace of gains is weakening, with stocks slipping in the final week and at one point alternating in the longest stretch of up and down days without a move of more than 0.5 percent ever recorded. Based on forward earnings estimates, the S&P 500's valuation is the highest since 2002. The Dow fell every day of the final week in its longest slump since mid-June.

After years of skepticism, signs of euphoria are emerging.

Investors poured cash into equities in July at the fastest pace since 2014. Economic growth remained tepid, as weakening business spending limited the second-quarter gain in U.S. gross domestic product to a 1.2 percent annualized rate, less than half of what economists were projecting.

To some analysts, it's a recipe for disappointment. One of the more reliable cheerleaders of the bull market, Thomas Lee, co-founder of Fundstrat Global Advisors, wrote in a note to clients July 22 that he was "scared about the month of August," a testament to the forces splintering sentiment in markets fixated on the pace of global growth and central-bank policy.

Investors waiting for the all-clear sign may need to brace themselves for another month of drama, if history is any guide. August is the most dangerous month out of the year, with the S&P 500 falling by 1.4 percent on average over the last 20 years, according to data compiled by Bloomberg.

While nothing says the pattern must be replicated, there are other clues to those seeking a direction in a market plagued with complacency. Among those cited by Lee include the CBOE Volatility Index's drop below the value of a similar indicator tied to options on an exchange-traded fund for Treasury bonds, a bearish indicator for equities.

"A few recent developments suggest August is likely to be a down month," wrote Lee. "Perhaps the greater message is that equities could be suffering from some complacency (VIX is awfully low at 12) and after five consecutive months of gains, we should not be surprised to see a pause ."

Still, with the earnings season almost half way through, more than 80 percent of S&P 500 companies have posted profit that beat projections, while almost 60 percent topped sales estimates. Analysts have eased their expectations for a drop in second-quarter net income to 3.2 percent.

Technology has been one of the brighter spots in second quarter earnings. From Google parent Alphabet to Apple Inc., quarterly results boosted companies in the S&P 500 to their best earnings period performance in 16 years. They capped the month with the biggest rally out of the S&P 500's 10 sector groups.

Seven of the industries rose in July, with raw-material and health-care companies advancing at least 4.7 percent. Freeport-McMoRan Inc. added 16 percent amid signs the company was making progress to get its balance sheet in order. Drugmaker Biogen Inc. surged 19 percent after beating earnings estimates and announcing the departure of it's chief executive.

Energy had the worst performance, falling 2 percent as crude fell to the precipice of a bear market from its June high.

"It's been a tale of two halves this month, with the first half being influenced by Brexit and international events, while the second half has been running on earnings," said John Carey, a Boston-based fund manager at Pioneer Investment Management Inc., which oversees about $ 230 billion. "The earnings haven't been too impressive, but it has helped to reassure investors that the economy is for the most part OK."

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SABMiller backs AB InBev offer for biggest-ever consumer takeover – Reuters

The board of brewer SABMiller (SAB.L) will recommend its shareholders approve a sweetened takeover offer by Anheuser-Busch InBev (ABI.BR), the company said on Friday, capping a week of high drama about the fate of the consumer industry’s biggest-ever merger.

The deal, worth 79 billion pounds ($ 104.9 billion), remains to be voted on by shareholders – a hurdle that could become harder to clear since the board intends to request that shareholders be divided into two classes, with each needing to approve the terms.

One prominent investor – Aberdeen Asset Management (ADN.L) – voiced opposition to the revised offer, saying it still undervalued the maker of beers including Castle Lager and Pilsner Urquell, which has a strong footprint in fast-growing markets of Latin America and Africa.

AB InBev added a pound-per-share to its cash bid on Tuesday to quash investor dissent over what would be the largest-ever takeover of a British company. Its earlier offer had been made less attractive by a sharp fall in sterling following Britain’s vote in June to leave the European Union.

“The board’s decision was difficult given changes in circumstances since the board originally recommended £44 per share in cash last November,” said SAB Chairman Jan du Plessis. “We believe the final cash consideration of £45 per share to be at the lower end of the range of values considered recommendable.”

“In reaching its decision, SAB’s board considered the best interests of the company as a whole, taking into account all salient facts and circumstances,” du Plessis said, adding that it had received extensive shareholder feedback.

Bernstein Research analyst Trevor Stirling said that at current exchange rates, he expects the deal to get approved.

“It’s better than walking away,” he said. “But if sterling falls another 5-10 percent then all bets are off.”

TWO CLASSES

AB InBev, the Belgium-based maker of Budweiser and Stella Artois, also raised by 88 pence a special cash-and-stock alternative aimed at SAB’s two largest shareholders, Altria (MO.N) and Bevco. That alternative had been at a discount to the cash offer last year, but given current exchange rates, is now at a premium.

The board said it plans to ask the UK court overseeing the process to treat Altria and Bevco as a separate class of shareholders. Under that scenario, three-quarters of both classes of voting shareholders would be needed to pass the deal.

If treated as a single class, the hurdle would be lower since Altria and Bevco have already pledged to vote in favour. Together they control about 41 percent of the company.

Societe Generale analyst Andrew Holland said SAB had effectively upped the requirement on backing for the deal to a potential 85 percent. “They appear to be cooperating but they’re doing it in a way that is somewhat unhelpful to ABI.”

AB InBev said it believes the proposed combination “represents a compelling opportunity for all SABMiller and AB InBev shareholders”.

AB InBev has secured conditional regulatory approval in China, its final pre-condition for the deal.

Aberdeen reiterated on Friday that it would vote against the deal but said it welcomed the decision to treat the shareholders as different classes.

The vote is likely to take place in October or November, and if the offer is approved, this would allow AB InBev to meet its target of closing the deal this year.

(Reporting by Martinne Geller in London; Editing by Elaine Hardcastle and David Stamp)

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US economy expected to pick up after weak growth in spring – U.S. News & World Report

By MARTIN CRUTSINGER, AP Economics Writer

WASHINGTON (AP) — A surprisingly lackluster economy last quarter served as a reminder of how choppy the pace of growth has been since the Great Recession ended seven years ago. Businesses pared their stockpiling and investment through the spring. But consumers — the heart of the U.S. economy — kept spending.

Most economists foresee faster, if still modest, growth the rest of this year.

The Commerce Department’s report Friday showed that gross domestic product — the broadest gauge of the economy — grew just 1.2 percent in the April-June quarter. That was far weaker than the forecasts of most analysts, who had expected growth of twice that pace in a bounce-back from a slump at the start of the year.

Earlier this week, a statement from the Federal Reserve had led many economists to conclude that a strengthening economy would lead the Fed to resume raising rates as soon as September. But after Friday’s tepid GDP report, many said a September rate hike was now probably off the table.

“The GDP data have significantly reduced the chances of a near-term rate hike,” said Paul Ashworth, chief economist at Capital Economics. Ashworth predicts only one interest rate increase this year, in December.

The biggest factor for the shortfall in GDP growth last quarter was that businesses reduced their restocking by the most since 2011. That pullback in stockpiling subtracted 1.2 percentage points from annualized growth in the April-June quarter — more than economists had expected. It was the fifth straight quarter in which weak inventory building has dampened the economy’s growth.

But most analysts say the efforts by businesses to adjust their stockpiles to more closely match their sales is probably ending and will be followed by increased restocking, which would deliver a boost to GDP in coming quarters.

“Businesses have overdone the inventory reductions, and that is likely to reverse in the third quarter, which will help growth,” said Nariman Behravesh, chief economist at IHS Global Insight.

Behravesh predicted that GDP will accelerate to an annual growth rate of around 2.5 percent in the second half of the year. Even with that rebound, growth for the full year would amount to a sluggish 1.5 percent. It would be the slowest pace since the recession ended.

For 2015, revisions that the government issued Friday showed that the economy grew 2.6 percent, more than its previous estimate of 2.4 percent.

Economists are counting on the consumer sector, which accounts for about 70 percent of economic activity, to remain solid in the second half of the year, boosted by continued job gains.

For the April-June quarter, consumer spending did not disappoint: It grew at a healthy annual rate of 4.2 percent, the fastest increase in more than a year and more than twice the first-quarter rate.

Last quarter’s overall GDP growth of 1.2 percent followed an even weaker pace of 0.8 percent in the first quarter. The fourth quarter of 2015 was also subpar, with GDP expanding just 0.9 percent.

Trade was a slight positive in the second quarter: It added 0.2 percentage point to growth, which may signify that export sales have stabilized after a slide resulting from global weakness and a strong dollar, which makes U.S. goods costlier overseas.

In the spring, the government sector contracted at an annual rate of 0.9 percent, led by weakness in state and local spending.

Business investment declined for a third straight quarter as the energy sector cut further in response to low oil prices. Analysts say these reductions may finally be tapering off, allowing investment to start rising again in the second half.

Housing construction, which had been a bright spot, shrank at an annual rate of 6.1 percent last quarter. But economists said this likely reflected a warmer winter, which brought forward building activity that normally would have occurred in spring.

Both Democrats and Republicans used the GDP report to make political points. House Ways and Means Committee Chairman Kevin Brady, R-Texas, called the report disappointing and said it “hardly inspires confidence that our economy will reach its full potential any time soon.”

Jason Furman, chairman of the president’s Council of Economic Advisers, said the report “underscores that there is more work to do” and said the Obama administration would keep pursuing policies to strengthen growth and boost living standards.

Republicans have largely blamed Obama administration policies for GDP growth that has averaged just 2.2 percent annual gains since the recovery began in June 2009, the weakest of any expansion in the post-World War II period. Democrats point instead to structural changes in the U.S. economy and to obstructionism by Republican leaders in Congress who have blocked spending initiatives.

The economy this year has withstood a host of problems, from market turbulence caused by fears over how an economic slowdown in China could weaken the global economy to a nosedive triggered by Britain’s vote to leave the European Union.

Economists, however, are mostly confident that the country is in no danger of toppling into a recession, in part because the job market, after a slowdown in April and May, came roaring back in June with the biggest monthly hiring gain since October.

Copyright 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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U.S. Economy Grew Less-Than-Forecast 1.2% in Second Quarter – Bloomberg

The U.S. economy expanded less than forecast in the second quarter after a weaker start to the year than previously estimated as companies slimmed down inventories and remained wary of investing amid shaky global demand.

Gross domestic product rose at a 1.2 percent annualized rate after a 0.8 percent advance the prior quarter, Commerce Department figures showed Friday in Washington. The median forecast of economists surveyed by Bloomberg called for a 2.5 percent second-quarter increase.

The report raises the risk to the outlook at a time Federal Reserve policy makers are looking for sustained improvement. While consumers were resilient last quarter, businesses were cautious — cutting back on investment and aggressively reducing stockpiles amid weak global markets, heightened uncertainty and the lingering drag from a stronger dollar.

"We're just muddling through,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, who had forecast a 1 percent gain in second-quarter GDP. "Consumer spending looks good, but the problem is that the rest of the economy is soft. The economy remains vulnerable to downside risks. The Fed is right to be cautious.”

Private fixed investment, which includes residential and business spending, dropped at a 3.2 percent pace in the second quarter, the most in seven years.

With Friday's report, the Commerce Department also issued its annual revisions, updating the data back through 2013. The first-quarter's reading was revised from a previously reported 1.1 percent gain.

For a story on U.S. GDP revisions, click here.

The new breakdown shows a more pronounced slowdown in the economy heading into 2016. The year-over-year growth rate cooled from 3.3 percent in last year's first quarter to 1.9 percent in the final three months of 2015, rather than the previous downshift from 2.9 percent to 2 percent.

The easing in growth continued into the first half of this year. The year-over-year pace for the first quarter of 2016 was revised down to 1.6 percent from 2.1 percent, the revisions showed. That revised trajectory has implications for Fed officials, as they're faced with an expansion that has been steadily losing steam.

Friday's report also showed that in the second quarter, GDP expanded at a 1.2 percent rate from the same period a year earlier.

Economists' second-quarter estimates for GDP, or the value of all goods and services produced, ranged from 1 percent to 3.2 percent, according to a Bloomberg survey. The growth estimate is the first of three for the quarter, with the other releases scheduled for August and September when more information becomes available.

Inventories were reduced by $ 8.1 billion in the second quarter, the most since third quarter of 2011 and subtracting 1.16 percentage points from the economy. At the same time, leaner inventories could set the stage for a pickup in production later this year should demand hold up.

Household consumption, which accounts for about 70 percent of the economy, grew at a 4.2 percent annualized rate, the biggest jump since the end of 2014 and adding 2.83 percentage points to growth. That followed a revised 1.6 percent increase from January through March. The Bloomberg survey median forecast for the second quarter was 4.4 percent.

Business Spending

Corporate spending on equipment, structures and intellectual property, decreased an annualized 2.2 percent after a 3.4 percent fall in the first quarter. Outlays for equipment dropped for the fourth time in the past five quarters. Spending on structures — everything from factories to shops to oil rigs — have increased in just one quarter since the end of 2014.

Inventories and the trade gap are two of the most volatile components in GDP calculations. To get a better sense of demand in the U.S., economists look at final sales to domestic purchasers, or GDP excluding inventories and net exports. That measure increased 2.1 percent last quarter after a 1.2 percent gain.

Also holding back economic growth in the second quarter was a decrease in residential investment, which fell at a 6.1 percent pace. That was the most since the third quarter of 2010 and marked the first decrease in two years.

Government spending also shrank last quarter, declining 0.9 percent, the most in more than two years as outlays for the military fell. States and municipalities also cut back.

The GDP report also showed price pressures remain limited. A measure of inflation, which is tied to consumer spending and strips out food and energy costs, climbed at a 1.7 percent annualized pace compared with 2.1 percent in the prior quarter.

Fed policy makers, who left interest rates unchanged this week, said risks to the U.S. outlook have "diminished" and the labor market is getting tighter, suggesting conditions are turning more favorable for an increase in borrowing costs.

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Amazon Posts Another Blockbuster Profit – Wall Street Journal

Amazon.com Inc. AMZN 2.16 % on Thursday reported in its third consecutive record profit, nearly doubling its prior high-water mark, and its fifth straight quarter in the black.

Amazon's revenue jumped 31% including a 58% gain at its Amazon Web Services cloud computing unit. The company also more than doubled its operating margin, which historically has been razor thin, and issued a cheery outlook for the coming quarter.

Shares of the company rose another 2% in after-hours trading after finishing up $ 15.94 at $ 752.61 in 4 p.m. trading on the Nasdaq Stock Market on Thursday.

"The accelerating revenue growth was a pleasant surprise," said Colin Sebastian, a Robert W. Baird & Co. analyst. "But people may be expecting quarters like this now."

The results show Amazon moving toward investors' long-held hope of consistent profitability after a lengthy period of heavy investments and quarterly losses. The Seattle company hasn't had five consecutive profitable quarters since 2012 as it pumped much of its revenue gains back into product development and operations, including massive warehouses to speed products to customers.

Chief Financial Officer Brian Olsavsky said Amazon isn't changing its investment philosophy, noting the company plans to add 18 new warehouses in the current quarter compared with six a year earlier. "We're very happy with the operational performance of the business," he said during a call with reporters.

Amazon's operating profit margin, a closely watched metric, was 4.2%. That is more than double the 2% year-earlier figure and a sign that the company is controlling costs.

Overall, Amazon posted a second-quarter $ 857 million profit, or $ 1.78 a share, compared with $ 92 million, or 19 cents a share, a year earlier. Sales rose to $ 30.4 billion from $ 23.19 billion. Analysts were expecting $ 1.11 a share on revenue of between $ 28 billion and $ 30.5 billion.

A big boost to results came from its Amazon Web Services cloud computing division, which sells access to computing power over the internet. AWS revenue in the quarter jumped to $ 2.89 billion, from $ 1.82 billion a year earlier. The unit appears on track to exceed Amazon Chief Executive Jeff Bezos's goal of reaching $ 10 billion in sales this year.

That business is central to many investors' faith in the company as it has become the go-to provider for startups, many government agencies and large corporations. Amazon has pushed to gain acceptance among large banks and technology firms, particularly as Alphabet Inc. GOOGL 0.51 % and Microsoft Corp. MSFT 0.04 % ramp up rival cloud computing services.

In retailing, Amazon's power is spilling over the confines of the online world. the company overtook Wal-Mart Stores Inc. WMT -0.11 % by market value a year ago and is pushing into brick-and-mortar outlets with a bookstore in its hometown of Seattle and several others planned across the U.S. The retailer is a major focal point for brands and manufacturers betting that consumers are willing to buy more staples online.

The $ 99-per-year Prime unlimited shipping membership has proven a big driver of online sales. Amazon has beefed up the program with exclusive streaming television shows and music as well as a one-hour delivery service for some goods in a number of cities. It said this month it will offer Prime for the first time to customers in India, where it has pledged $ 5 billion in investment since 2014.

It also rolled out month-by-month subscription offerings for both Prime and its streaming video service, which Mr. Olsavsky said had been performing well, without providing specifics. Amazon is expected to introduce a monthly unlimited streaming music service in coming months.

Amazon has been casting about to find new ways to contain shipping costs that have accelerated more quickly than sales in recent quarters. That expense jumped 42% jump in this year's first three months and 37% in 2015's holiday quarter. For the second quarter, Amazon reported a 44% rise in shipping expenses to $ 3.36 billion.

The company has taken over more of its own delivery, including the expensive final leg of a package's journey, known as the last mile. It is leasing 40 planes to carry goods and bought branded truck trailers.

As a result of its warehouse expansion, in particular, Amazon boosted its employment to 268,900, up 9.6% compared with the first quarter.

It forecast third quarter sales of between $ 31 billion and $ 33.5 billion, compared with analysts' views of $ 31.63 billion.

Write to Greg Bensinger at greg.bensinger@wsj.com

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