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Wall Street totters after mixed earnings, trade halt glitch

  • SEC investigating NYSE opening bell glitch
  • 3M slides on downbeat Q1 forecast
  • J&J falls on sales warning; GE down on weak profit view
  • Microsoft to report quarterly earnings after market close
  • Indexes: Dow up 0.18%, S&P 500 off 0.13%, Nasdaq down 0.25%

NEW YORK, Jan 24 (Reuters) – Wall Street was mixed on Tuesday as a raft of mixed earnings took some wind out of the sails of the recent rally.

The session got off to an rocky start, as a spate of NYSE-listed stocks were halted at the opening bell due to an apparent technical glitch, which caused initial price confusion and prompted an investigation by the U.S. Securities and Exchange Commission (SEC).

More than 80 stocks were affected by the glitch, which caused wide swings in opening prices in stocks, including Walmart Inc (WMT.N) and Nike Inc (NKE.N).

“It looks like NYSE got on it real early,” said Joseph Sroka, chief investment officer at NovaPoint in Atlanta. “Now they’re trying to determine what opening trade prices were.”

“Everyone involved in trade settlements is going to have a long day today.”

All three indexes sputtered near the starting line, with little apparent momentum in either direction.

Fourth quarter earnings season is in full swing, with 72 of the companies in the S&P 500 having reported. Of those, 65% have beaten consensus, just a hair below the 66% long-term average, according to Refinitiv.

On aggregate, analysts now expect S&P 500 earnings 2.9% below the year-ago quarter, down from the 1.6% year-on-year decline seen on Jan. 1, per Refinitiv.

“Earnings don’t make a bull or bear case for the market yet, but there’s an anxiousness among investors to be long when the Fed is done raising rates,” Sroka added. “We’re hitting a ramp in the earnings cycle, and by next week we’ll have a lot more information on the direction of the market.”

Economic data showed shallower-than-expected contraction in the manufacturing and services sector in the first weeks of the year, suggesting that the Federal Reserve’s restrictive interest rates are dampening demand.

The Dow Jones Industrial Average (.DJI) rose 60.69 points, or 0.18%, to 33,690.25, the S&P 500 (.SPX) lost 5.36 points, or 0.13%, to 4,014.45 and the Nasdaq Composite (.IXIC) dropped 28.39 points, or 0.25%, to 11,336.03.

Among the 11 major sectors of the S&P 500, industrials was down the most.

Intercontinental Exchange Inc (ICE.N), owner of the New York Stock Exchange, dropped 2.5% as SEC investigators searched for the cause of Tuesday’s opening bell confusion.

Alphabet Inc (GOOGL.O) shares dipped 1.8% after the Justice Department filed a lawsuit against Google for abusing its dominance of the digital advertising business.

Johnson & Johnson’s (JNJ.N) profit guidance came in above analyst expectations. Even so, its stock softened 0.3%.

Industrial conglomerates 3M Co (MMM.N) and General Electric Co (GE.N) both provided underwhelming forward guidance due to inflationary headwinds.

3M’s shares were off 5.1% while General Electric’s were modestly lower.

Aerospace/defense companies Lockheed Martin Corp (LMT.N) and Raytheon Technologies Corp (RTX.N) were a study in contrasts, with the former issuing a disappointing profit forecast and the latter beating estimates on solid travel demand.

Lockheed Martin and Raytheon were up 1.5% and 2.5%, respectively.

Railroad operator Union Pacific Corp missed profit estimates as labor shortages and severe weather delayed shipments. Its shares shed 2.7%.

Microsoft Corp (MSFT.O) is due to report after the bell.

Advancing issues outnumbered declining ones on the NYSE by a 1.16-to-1 ratio; on Nasdaq, a 1.06-to-1 ratio favored decliners.

The S&P 500 posted 27 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 69 new highs and 21 new lows.

Reporting by Stephen Culp; Additional reporting by Shreyashi Sanyal and Johann M Cherian in Bengaluru; Editing by Aurora Ellis

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New suppliers race to plug in to electric car market

WOKING, England, Jan 23 (Reuters) – The global auto industry has committed $1.2 trillion to developing electric vehicles (EVs), providing a golden opportunity for new suppliers to grab contracts providing everything from battery packs to motors and inverters.

Startups specialising in batteries and coatings to protect EV parts, and suppliers traditionally focused on niche motorsports or Formula One (F1) racing, have been chasing EV contracts. Carmakers design platforms to last a decade, so high-volume models can generate large revenues for years.

The next generation of EVs is due to hit around 2025 and many carmakers have sought help plugging gaps in their expertise, providing a window of opportunity for new suppliers.

“We’ve gone back to the days of Henry Ford where everyone is asking ‘how do you make these things work properly?’,” says Nick Fry, CEO of F1 engineering and technology firm McLaren Applied.

“That’s a huge opportunity for companies like us.”

Bought from McLaren by private equity firm Greybull Capital in 2021, McLaren Applied has adapted an efficient inverter developed for F1 racing for EVs. An inverter helps control the flow of electricity to and from the battery pack.

The silicon carbide IPG5 inverter weighs just 5.5 kg (12 lb) and can extend an EV’s range by over 7%. Fry says McLaren Applied is working with around 20 carmakers and suppliers, and the inverter will appear in high-volume luxury EV models starting January 2025.

Mass-market carmakers often prefer to develop EV components in-house and own the technology themselves. After years of pandemic-related parts shortages, they are wary of over-reliance on suppliers.

“We just can’t afford to be reliant on third parties making those investments for us,” said Tim Slatter, head of Ford (F.N) in Britain.

Traditional suppliers, such as German heavyweights Bosch and Continental (CONG.DE), are also investing heavily in EVs and other technologies to stay ahead in a fast-changing industry.

But smaller companies say there are still opportunities, particularly with low-volume manufacturers that cannot afford huge EV investments, or luxury and high-performance carmakers seeking an edge.

Croatia’s Rimac, an electric hypercar maker part-owned by Germany’s Porsche AG (P911_p.DE) that also supplies battery systems and powertrain components to other automakers, says an undisclosed German carmaker will use a Rimac battery system in a high-performance model – with annual production of around 40,000 units – starting this year, with more signed up.

“We need to be 20%, 30% better than what they can do and then they work with us,” CEO Mate Rimac says. “If they can make a 100-kilowatt hour battery pack, we must make a 130-kilowatt pack in the same dimensions for the same cost.”

NO TIME TO LOSE

Some suppliers like Cambridge, Massachusetts-based Actnano have had long relationships with EV pioneer Tesla (TSLA.O). Actnano has developed a coating that protects EV parts from condensation and its business has spread to advanced driver-assistance systems (ADAS), as well as other carmakers including Volvo (VOLCARb.ST), Ford, BMW (BMWG.DE) and Porsche.

California-based startup CelLink has developed an entirely automated, flat and easy-to-install “flex harness”, instead of a wire harness to group and guide cables in a vehicle. CEO Kevin Coakley would not identify customers but said CelLink’s harnesses had been installed in around a million EVs. Only Tesla has that scale.

Coakley said CelLink was working with U.S. and European carmakers, and with a European battery maker on battery wiring.

Others are focused on low-volume manufacturers, like UK startup Ionetic, which develops battery packs that would be too expensive for smaller companies to make themselves.

“Currently it costs just too much to electrify, which is why you see some manufacturers delaying their electrification launch,” CEO James Eaton said.

Since 1971, Swindon Powertrain has developed powerful motorsports engines. But it has now also developed battery packs, electric powertrains, e-axles and is working with around 20 customers, including carmakers and an electric vertical take-off and landing (eVTOL) aircraft maker.

“I realized if we don’t embrace this, we’re going to end up working for museums,” said managing director Raphael Caille.

But time may be running out.

Mate Rimac says major carmakers scrambled in the last three years to roll out EVs and now have strategies largely in place.

“For those who haven’t signed projects, I’m not sure how long the window of opportunity will remain open,” he said.

($1 = 0.8226 pounds)

Reporting by Nick Carey
Editing by Mark Potter

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S&P 500 ends at highest in month, indexes gain for week as earnings kick off

  • JPMorgan, Wells Fargo shares jump
  • U.S. consumers’ inflation expectations ease – survey
  • Tesla falls after price cuts on electric vehicles
  • Indexes: Dow up 0.3%, S&P 500 up 0.4%, Nasdaq up 0.7%

NEW YORK, Jan 13 (Reuters) – The S&P 500 and Nasdaq finished at their highest levels in a month on Friday, with shares of JPMorgan Chase and other banks rising following their quarterly results, which kicked off the earnings season.

All three major indexes also registered strong gains for the week, leaving the S&P 500 up 4.2% so far in 2023, and the Cboe Volatility index (.VIX) – Wall Street’s fear gauge – closed at a one-year low.

On Friday, financials (.SPSY) were among sectors that gave the S&P 500 the most support.

JPMorgan Chase & Co (JPM.N) and Bank of America Corp (BAC.N) beat quarterly earnings estimates, while Wells Fargo & Co (WFC.N) and Citigroup Inc (C.N) fell short of quarterly profit estimates.

But shares of all four firms rose, along with the S&P 500 banks index (.SPXBK), which ended up 1.6%. JPMorgan shares climbed 2.5%.

Still, Wall Street’s biggest banks stockpiled more rainy-day funds to prepare for a possible recession and reported weak investment banking results while showing caution about forecasting income growth. They said higher rates helped to boost profits.

Strategists said investors will be watching for further guidance from company executives in the coming weeks.

“This has shifted the focus back to earnings,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

“Even though the earnings were basically OK, people are just kind of stepping back, and you’re going to see a wait-and-see attitude with stocks” as investors hear more from company executives.

Year-over-year earnings from S&P 500 companies are expected to have declined 2.2% for the quarter, according to Refinitiv data.

Also giving some support to the market Friday, the University of Michigan’s survey showed an improvement in U.S. consumer sentiment, with the one-year inflation outlook falling in January to the lowest level since the spring of 2021.

The Dow Jones Industrial Average (.DJI) rose 112.64 points, or 0.33%, to 34,302.61, the S&P 500 (.SPX) gained 15.92 points, or 0.40%, to 3,999.09 and the Nasdaq Composite (.IXIC) added 78.05 points, or 0.71%, to 11,079.16.

The S&P 500 closed at its highest level since Dec. 13, while the Nasdaq closed at its highest level since Dec. 14.

For the week, the S&P 500 gained 2.7% and the Dow rose 2%. The Nasdaq increased 4.8% in its biggest weekly percentage gain since Nov. 11.

The U.S. stock market will be closed Monday for the Martin Luther King Jr. Day holiday.

Thursday’s Consumer Price Index and other recent data have bolstered hopes that a sustained downward trend in inflation could give the Federal Reserve room to dial back on its interest rate hikes.

Money market participants now see a 91.6% chance the Fed will hike the benchmark rate by 25 basis points in February.

Among the day’s decliners, Tesla (TSLA.O) shares fell 0.9% after it slashed prices on its electric vehicles in the United States and Europe by as much as 20% after missing 2022 deliveries estimates.

In other earnings news, UnitedHealth Group Inc (UNH.N) shares rose after it beat Wall Street expectations for fourth-quarter profit but the stock ended down on the day.

Shares of Delta Air Lines Inc (DAL.N) dropped 3.5% as the company forecast first-quarter profit below expectations.

Volume on U.S. exchanges was 10.77 billion shares, compared with the 10.81 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 1.79-to-1 ratio; on Nasdaq, a 1.78-to-1 ratio favored advancers.

The S&P 500 posted 12 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 105 new highs and 8 new lows.

Additional reporting by Shubham Batra, Ankika Biswas and Amruta Khandekar in Bengaluru; Editing by Subhranshu Sahu, Shounak Dasgupta and Grant McCool

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Fierce fighting in Ukraine’s Soledar leaves battlefield strewn with corpses – Zelenskiy

  • Zelenskiy says no walls left standing in Soledar
  • Wagner Group sending waves of fighters, Ukraine says
  • Fight for cavernous salt mining tunnels beneath town

KYIV/SIVERSK, Ukraine, Jan 10 (Reuters) – Russia has stepped up a powerful assault on Soledar in eastern Ukraine, officials in Kyiv said, forcing Ukrainian troops to repel waves of attacks led by the Wagner contract militia around the salt mining town and nearby fronts.

Soledar, in the industrial Donbas region, lies a few miles from Bakhmut, where troops from both sides have been taking heavy losses in some of the most intense trench warfare since Russia invaded Ukraine nearly 11 months ago.

Ukrainian forces repelled an earlier attempt to take the town but a large number of Wagner Group units quickly returned, deploying new tactics and more soldiers under heavy artillery cover, Ukrainian Deputy Defence Minister Hanna Malyar said on Monday on the Telegram messaging app.

“The enemy literally step over the corpses of their own soldiers, using massed artillery, MLRS systems and mortars,” Malyar said.

Russia’s defence ministry did not mention either Soledar or Bakhmut in a regular media briefing on Monday, a day after facing criticism for an apparently false claim of a missile strike on a temporary Ukrainian barracks.

Wagner was founded by Yevgeny Prigozhin, an ally of Russian President Vladimir Putin. Drawing some recruits from Russia’s prisons and known for uncompromising violence, it is active in conflicts in Africa and has taken a prominent role in Russia’s war effort in Ukraine.

Prigozhin has been trying to capture Bakhmut and Soledar for months at the cost of many lives on both sides. He said on Saturday its significance lay in a network of cavernous mining tunnels below the ground, which can hold big groups of people as well as tanks and other war machines.

Ukrainian military analyst Oleh Zhdanov said fighting in Bahkmut and Soledar is “the most intense on the entire frontline”, with little advancement by either side in the freezing conditions.

“So many (pro-Russian fighters) remain on the battlefield … either dead or wounded,” he said on YouTube.

“They attack our positions in waves, but the wounded as a rule die where they lie, either from exposure as it is very cold or from blood loss. No one is coming to help them or to collect the dead from the battlefield.”

Reuters could not immediately verify battlefield reports.

NO BUILDINGS INTACT

Ukrainian President Volodymyr Zelenskiy said in nightly video remarks on Monday that Bakhmut and Soledar were holding on despite widespread destruction.

He cited new and fiercer attacks in Soledar, where he said no walls have been left standing and the land is covered with Russian corpses.

“Thanks to the resilience of our soldiers in Soledar, we have won for Ukraine additional time and additional strength,” Zelenskiy said. He did not spell out what he meant by gaining time or strength.

But Ukrainian officials, led by the commander in chief General Valery Zaluzhniy, have warned that Russia is preparing fresh troops for a new, major offensive on Ukraine, possibly on the capital Kyiv.

Zelenskiy also appears to be banking on securing more, sophisticated weapons from Ukraine’s Western partners to beat off attacks and eventually expel Russian troops.

On Monday, he pressed on with diplomatic efforts, speaking to Petr Fiala, Prime Minister of the Czech Republic, current chair of the 27-member European Union.

“I am certain that our soldiers at the front will get these weapons and equipment. Very soon,” he said.

France, Germany and the United States all pledged last week to send armoured fighting vehicles, fulfilling a long-standing Ukrainian request. Britain is considering supplying Ukraine with tanks for the first time, Sky News reported, citing a Western source. Britain’s Defence Ministry did not comment.

Iran could be contributing to war crimes in Ukraine by providing drones to Russia, White House national security adviser Jake Sullivan said on Monday.

The United States has imposed sanctions on companies and people it accused of producing or transferring Iranian drones used by Russia. The White House said last week it is considering ways to target Iran’s production of the unmanned weaponised aircraft through sanctions and export controls.

WAVES OF ATTACK

Military analysts say the strategic military benefit for Russia of capturing Bakhmut and Soledar would be limited.

Taras Berezovets, a Ukrainian journalist, political commentator and officer in the Ukrainian army, said capturing Soledar made little sense, except as a personal victory for Prigozhin, however it would be easier to take than Bakhmut.

“It’s his personal war,” Berezovets said on YouTube.

A U.S. official has said Prigozhin is eyeing the salt and gypsum from the mines, believed to extend over 100 miles underground and contain auditorium-scale caverns.

Berezovets said Ukrainian troops fighting in Bakhmut and Soledar say attacks come in waves of small groups, no more than 15, with the first wave usually wiped out. The pro-Russian forces retrench and leave white ribbons for the next wave to follow.

“The complexity of fighting in cities like Bakhmut and Soledar is that it is hard to determine who is with you and who is the enemy,” he said.

In an evacuee centre in nearby Kramatorsk, Olha, 60, said she had fled Soledar after moving from apartment to apartment as each was destroyed in tank battles.

“There isn’t one house left intact. Apartments were burning, breaking in half,” said Olha, who gave only her first name.

Reporting by Reuters bureaus; Writing by Frank Jack Daniel, Doina Chiacu and Michael Perry; Editing by Grant McCool, Lincoln Feast and Himani Sarkar

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Exclusive: US says Russia’s Wagner Group bought North Korean weapons for Ukraine war

WASHINGTON, Dec 22 (Reuters) – The private Russian military company, the Wagner Group, took delivery of an arms shipment from North Korea to help bolster Russian forces in Ukraine, a sign of the group’s expanding role in that conflict, the White House said on Thursday.

“Wagner is searching around the world for arms suppliers to support its military operations in Ukraine,” John Kirby, spokesperson for the White House National Security Council, told reporters.

“We can confirm that North Korea has completed an initial arms delivery to Wagner, which paid for that equipment. Last month, North Korea delivered infantry rockets and missiles into Russia for use by Wagner,” Kirby said.

The news was first reported by Reuters. The Wagner Group was founded in 2014 after Russia seized and annexed Ukraine’s Crimea peninsula and sparked a separatist insurgency in Ukraine’s eastern Donbas region.

The United States estimates that Wagner has 50,000 personnel deployed in Ukraine, including 10,000 contractors and 40,000 convicts recruited from Russian prisons, Kirby said.

The U.S. assessment is that the amount of material delivered by North Korea will not change the battlefield dynamics in Ukraine, but more military equipment was expected to be delivered by Pyongyang.

In November, after the White House said Pyongyang was covertly supplying Russia with a “significant” number of artillery shells, North Korea said it had never had arms dealings with Russia and has no plans to do so.

The Russian and North Korean missions to the United Nations in New York did not immediately respond to a request for comment on Thursday’s news.

The United States accused Pyongyang and Moscow of violating U.N. sanctions on North Korea and will share its information with the U.N. Security Council’s North Korea sanctions committee, U.S. Ambassador to the United Nations, Linda Thomas-Greenfield, said in a statement.

Pyongyang has built ballistic missiles capable of striking almost anywhere on earth, weapons experts say, as well as shorter-range weapons.

Kirby said Russian President Vladimir Putin has increasingly turned to the Wagner Group, owned by Putin’s ally Yevgeny Prigozhin, for help in Ukraine, where Russian forces have stumbled in their bid to topple the Kyiv government.

The European Union has imposed sanctions on the Wagner Group, accusing it of clandestine operations on the Kremlin’s behalf.

Putin has said the group does not represent the Russian state, but that private military contractors have the right to work anywhere in the world as long as they do not break Russian law.

SANCTIONS ON WAGNER

The Biden administration on Wednesday unveiled new curbs on technology exports to the Wagner Group in a bid to further choke off its supplies.

More sanctions are coming in the weeks ahead against the company and its support group in countries around the world, Kirby said.

Russian businessman Prigozhin is spending more than $100 million per month to fund Wagner’s operations in Ukraine, but has encountered problems recruiting Russians to fight there, Kirby said.

The Wagner Group, staffed by veterans of the Russian armed forces, has fought in Libya, Syria, the Central African Republic and Mali, among other countries.

U.S. intelligence indicates that Wagner has played a major role in the battle for the Ukrainian city of Bakhmut and has suffered heavy casualties there with about 1,000 Wagner fighters killed in recent weeks, most of them convicts, Kirby said.

Inside Russia, Prigozhin’s influence is expanding, and his group’s independence from the Russian Defense Ministry “has only increased and elevated over the course of the 10 months of this war,” Kirby said, without providing evidence.

Kirby said that in some instances, Russian military officials in Ukraine were subordinate to Wagner forces.

In addition, Prigozhin has criticized Russian generals and defense officials for their performance since the invasion.

Reporting by Steve Holland; Additional reporting by Idrees Ali, Michelle Nichols and Jarrett Renshaw; Editing by Ross Colvin, Heather Timmons and Daniel Wallis

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Ex-Theranos president Balwani sentenced to nearly 13 years for fraud

Dec 7 (Reuters) – A U.S. judge on Wednesday sentenced former Theranos Inc President Ramesh “Sunny” Balwani to 12 years and 11 months in prison on charges of defrauding investors and patients of the blood testing startup led by Elizabeth Holmes, a spokesperson for the U.S. attorney’s office confirmed.

U.S. District Judge Edward Davila in San Jose, California, imposed the sentence on Balwani, who was convicted by a jury on two counts of conspiracy and 10 counts of fraud in July.

Prosecutors said Balwani, 57, conspired with Holmes, 38, to deceive Silicon Valley investors into believing the company had achieved miniaturized machines that could accurately run a broad array of medical diagnostic tests from a small amount of blood.

Meanwhile, the company secretly relied on traditional methods to run tests and provided patients with inaccurate results, prosecutors said.

Holmes, who started the company as a college student and became its public face, was indicted alongside Balwani, her former romantic partner, in 2018.

Davila later granted each a separate trial after Holmes said she would take the stand and testify that Balwani was abusive in their relationship. He has denied the allegations.

Holmes was convicted in January on four counts of fraud and conspiracy but acquitted of defrauding patients.

Davila sentenced Holmes to 11-1/4 years in prison at a hearing last month, calling Theranos a venture “dashed by untruths, misrepresentations, plain hubris and lies.”

Prosecutors subsequently argued Balwani should receive 15 years in prison, saying he knew Theranos’ tests were inaccurate from overseeing the company’s laboratory operations, and decided to “prioritize Theranos’ financial health over patients’ real health.”

The probation office had recommended a nine-year sentence.

Balwani’s attorneys asked for a sentence of probation, arguing that he sought to make the world a better place through Theranos and was not motivated by fame or greed.

Once valued at $9 billion, Theranos promised to revolutionize how patients receive diagnoses by replacing traditional labs with small machines envisioned for use in homes, drugstores and even on the battlefield.

The company collapsed after a series of Wall Street Journal articles in 2015 questioned its technology.

The case is U.S. v. Balwani, U.S. District Court, Northern District of California, No. 18-cr-00258.

Reporting by Jody Godoy in New York;
Editing by Noeleen Walder and Bill Berkrot

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Jody Godoy

Thomson Reuters

Jody Godoy reports on banking and securities law. Reach her at jody.godoy@thomsonreuters.com

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OPEC+ weighs rollover against small production cut, sources say

The logo of the Organization of the Petroleum Exporting Countries (OPEC) is pictured at its headquarters in Vienna, Austria, August 21, 2015. REUTERS/Heinz-Peter Bader/File Photo

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  • OPEC+ meets on Monday to set policy
  • Iran nuclear deal could boost oil supply
  • Russia’s gas supplies to Europe cut further
  • Brent crude falls to $95 from $120 in June

LONDON, Sept 4 (Reuters) – OPEC+ is likely to keep oil output quotas unchanged for October at a meeting on Monday, six OPEC+ sources said, though some sources would not rule out a small production cut to bolster prices that have slid on fears of an economic slowdown.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known collectively as OPEC+, are expected to roll over existing policies, six OPEC+ sources said on Sunday and Monday.

However, three of the sources said the producer group could also discuss a small cut of 100,000 barrels per day (bpd).

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Monday’s OPEC+ meeting is set against a complex backdrop including a potential supply boost from Iranian crude returning to the market if Tehran is able to revive its 2015 nuclear deal with global powers.

Russia, meanwhile, has said it will stop supplying oil to countries that support the idea of capping the price of Russian energy supplies over the its military conflict in Ukraine.

Its gas deliveries in Europe, meanwhile, have been cut further, which is likely to spark more price spikes. read more

Brent crude oil has dropped to about $95 a barrel from $120 in June on fears of an economic slowdown and recession in the West.

Iran is expected to add 1 million barrels per day to supply or 1% of global demand if sanctions are eased, though the prospects for a nuclear deal looked less clear on Friday. read more

Last month, top OPEC producer Saudi Arabia flagged the possibility of output cuts to address what it sees as exaggerated oil price declines. read more

Signals from the physical market, however, suggest that supply remains tight and many OPEC states are producing below targets while fresh Western sanctions are threatening Russian exports.

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Additional reporting by Rowena Edwards and Olesya Astakhova
Writing by Dmitry Zhdannikov
Editing by David Goodman

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Philips parts ways with CEO in midst of massive recall

  • Van Houten to leave after almost 12 years at helm
  • To be replaced on Oct. 15 by Connected Care head Jakobs
  • Shares up 2%, but down more than 50% since product recall

AMSTERDAM, Aug 16 (Reuters) – Philips (PHG.AS) Chief Executive Frans van Houten will leave the company in October, the Dutch health technology firm said on Tuesday, after a key product recall cut its market value by more than half over the past year.

Philips said Van Houten would be replaced on Oct. 15 by Roy Jakobs, head of the company’s Connected Care businesses. Van Houten’s third term as CEO had been due to end in April.

Jakobs, 48, is currently overseeing the company’s recall of millions of ventilators and machines for the treatment of sleep apnea. That process has lopped almost $30 billion off Philips’ value as investors fear large claims.

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“The time is right for the change in leadership,” Philips said in a statement.

Philips shares were up 2% in afternoon trading, but are still down almost 60% since its warning in June 2021 that foam used for sound dampening might release toxic gases that could carry cancer risks. read more

When it started the recall in September last year, Philips said it expected to complete the replacement and repair of all affected machines within a year.

But after broadening the scope of the operation to around 5.5 million devices worldwide, Philips in June said the work was only around halfway done.

ADDITIONAL TESTS

The U.S. Food and Drug Administration (FDA) in January classified the recall as Class 1, or the most serious type, posing a threat of injury or death.

The FDA said on Tuesday it had received 48,000 new Medical Device Reports containing complaints about potential injuries related to the Philips devices, including 44 deaths, between May 1 and July 31 this year. read more

That is more than twice as many reports as it received for the entire year to April 30, 2022, which totalled over 21,000. They included 124 deaths.

CEO Frans van Houten from the Dutch health technology company Philips presents the company’s financial results for the fourth quarter and full year 2018, in Amsterdam, Netherlands, January 29, 2019. REUTERS/Eva Plevier

The FDA said it would analyse the reports and examine the possible reasons for the increased number.

The complaints do not prove causality, but are an indicator of the severity of the problem.

Philips in June said it had supplied the FDA with evidence from independent tests on the recalled devices which showed foam degradation was mainly linked to the use of aggressive, unauthorised ozone-based cleaning products. read more

It has promised to run additional tests to determine the potential toxicity of degraded foam parts, even though the tests so far had shown that the parts did not leave the machine.

Philips estimated the costs of the recall at 900 million euros ($915 million). That sum does not cover the possible costs of litigation. The company is facing more than a hundred class action suits.

“If you have three recalls in 10 years, it’s too much. His (Van Houten’s) position had become untenable,” said analyst Jos Versteeg of InsingerGilissen. He was referring to a defibrillator recall in 2017 and problems with medical scanners in 2014.

“This situation is not really under control, I think, because we’re still waiting for the definite conclusion of the (safety) studies.”

Although the blow to Philips’ reputation could have led it to pick an outsider for the top job, supervisory board chairman Feike Sijbesma said Jakobs was the right man to fix the company’s problems.

“He led the ramp up of production following the recall and knows very much about patient safety and product quality, so also from that perspective he is the right person,” he said.

During his almost 12 years at the helm, 62-year old Van Houten oversaw the disposal of Philips’ lighting and consumer electronics divisions.

Philips now focuses on medical imaging, monitoring and diagnostic equipment and competes against General Electric (GE.N) and Siemens Healthineers (SHLG.DE).

($1 = 0.9833 euros)

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Reporting by Bart Meijer; Additional reporting by Ahmed Aboulenein in Washington; Editing by Matt Scuffham, Emelia Sithole-Matarise and Richard Pullin

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Amazon’s connected device cart grows with $1.7 billion deal for Roomba maker

Aug 5 (Reuters) – Amazon.com Inc (AMZN.O) will acquire iRobot Corp (IRBT.O), maker of robotic vacuum cleaner Roomba, in an all-cash deal for about $1.7 billion, in the latest push by the world’s largest online retailer to expand its stable of smart home devices.

Amazon will pay $61 per share, valuing iRobot at a premium of 22% to the stock’s last closing price of $49.99.

iRobot’s shares rose 19% in early Friday trading to $59.56. At its peak during pandemic lockdowns, iRobot was trading at more than twice that price as hygiene-conscious consumers invested in premium vacuum cleaners.

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Amazon already owns virtual assistant Alexa, Ring, which monitors homes, and a smart thermostat, giving it a range of products in the “internet of things” category, said Ethan Glass, an antitrust expert with law firm Cooley LLP.

He said the U.S. Federal Trade Commission, which is already investigating Amazon, would likely review the transaction.

“I would say there is a three out of four chance of a deep investigation and a one out of four chance of a challenge,” he said. “The political appointees have made clear that they would rather go to court and lose than let a deal through that later is criticized as anti-competitive, especially as they seek to change the laws.”

Charlotte Slaiman of Public Knowledge added that antitrust enforcers now saw the risk of under-enforcement as an issue rather than just over-enforcement. “The costs of inaction are much higher than antitrust experts used to think,” she said.

Besides sweeping up dirt, Roomba vacuums that cost as much as $1,000 collect spatial data on households that could prove valuable to companies developing smart home technology.

But iRobot’s fortunes took a hit as consumers started rethinking how they spend their money amid rising inflation. Its second-quarter revenue fell 30% on weak demand from retailers in North America and Europe, Middle East and Africa.

The deal comes at a time analysts expect cash-rich technology companies to go on an M&A spree to take advantage of low valuations due to growth pressures. Amazon currently has cash and cash-equivalents of more than $37 billion.

Devices make up a fraction of overall sales at Amazon, but include smart thermostats, security devices and it has recently launched a canine-like robot called Astro.

“It seems like (CEO) Andy Jassy is going to employ M&A more than (predecessor) Jeff Bezos and it makes more sense to me now that Amazon is bigger and has more cash,” said D.A. Davidson analyst Thomas Forte.

If the deal falls through, Amazon would be required to pay iRobot a $94 million termination fee. On completion of the deal, Colin Angle would remain as the chief executive of iRobot.

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Reporting by Akash Sriram and Nivedita Balu in Bengaluru Additional reporting by Diane Bartz in Washington
Editing by Arun Koyyur and Mark Potter

Our Standards: The Thomson Reuters Trust Principles.

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Inside the super-secure Swiss lab trying to stop the next pandemic

SPIEZ, Switzerland, July 31 (Reuters) – The setting is straight from a spy thriller: Crystal waters below, snow-capped Swiss Alps above and in between, a super-secure facility researching the world’s deadliest pathogens.

Spiez Laboratory, known for its detective work on chemical, biological and nuclear threats since World War Two, was tasked last year by the World Health Organization to be the first in a global network of high-security laboratories that will grow, store and share newly discovered microbes that could unleash the next pandemic.

The WHO’s BioHub program was, in part, born of frustration over the hurdles researchers faced in getting samples of the SARS-CoV-2 virus, first detected in China, to understand its dangers and develop tools to fight it.

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But just over a year later, scientists involved in the effort have encountered hurdles.

These include securing guarantees needed to accept coronavirus variant samples from several countries, the first phase of the project. Some of the world’s biggest countries might not cooperate. And there is no mechanism yet to share samples for developing vaccines, treatments or tests without running afoul of intellectual property protections.

“If we have another pandemic like coronavirus, the goal would be it stays wherever it starts,” Isabel Hunger-Glaser, head of the BioHub project at Spiez, told Reuters in a rare media interview at the lab. Hence the need to get samples to the hub so it can help scientists worldwide assess the risk.

“We have realised it’s much more difficult” than we had thought, she said.

SAFETY IN THE MOUNTAINS

Spiez Lab’s exterior provides no hint of the high-stakes work inside. Its angular architecture resembles European university buildings erected in the 1970s. At times, cows graze on the grassy central courtyard.

But the biosafety officer in charge keeps his blinds shut. Alarms go off if his door is open for more than a few seconds. He monitors several screens showing security camera views of the labs with the greatest Biosafety Level (BSL) precautions.

SARS-CoV-2, the virus causing COVID, is studied in BSL-3 labs, the second-highest security level. Samples of the virus used in the BioHub are stored in locked freezers, said Hunger-Glaser. A system of decreasing air pressure means clean air would flow into the most secure areas, rather than contaminated air flowing out, in a breach.

Scientists working with coronavirus and other pathogens wear protective suits, sometimes with their own air supply. They work with samples in a hermetically sealed containment unit. Waste leaving the lab is super-heated at up to 1,000 degrees Celsius (1,830 F) to kill pathogens clinging to it.

To date, Spiez has never had an accidental leak, the team say. That reputation is a key part of why they were chosen as the WHO’s first BioHub, said Hunger-Glaser.

The proximity to WHO headquarters, two hours away in Geneva, helped too. The WHO and Swiss government are funding the annual 600,000 Swiss franc ($626,000) budget for its first phase.

Researchers have always shared pathogens, and there are some existing networks and regional repositories. But the process is ad hoc and often slow.

The sharing process has also been controversial, for instance when researchers in wealthy countries get credit for the work of less well-connected scientists in developing nations.

“Often you just exchanged material with your buddies,” said Hunger-Glaser.

Marion Koopmans, head of the Erasmus MC Department of Viroscience in the Netherlands, said it took a month for her lab to get hold of SARS-CoV-2 after it emerged in the central Chinese city of Wuhan in December 2019.

Chinese researchers were quick to post a copy of the genetic sequence online, which helped researchers begin early work. But efforts to understand how a new virus transmits and how it responds to existing tools requires live samples, scientists said.

EARLY CHALLENGES

Luxembourg was the first country to share samples of new coronavirus variants with the BioHub, followed by South Africa and Britain.

Luxembourg sent in Alpha, Beta, Gamma and Delta variants, while the latter two countries shared Omicron, WHO said.

Luxembourg got Omicron samples from South Africa, via the hub, less than three weeks after it was identified, enabling its researchers to start assessing the risks of the now-dominant strain. Portugal and Germany also received Omicron samples.

But Peru, El Salvador, Thailand and Egypt, all of which signalled in early 2022 that they wanted to send in variants found domestically, are still waiting, chiefly because it is unclear which official in each country should provide the necessary legal guarantees, Hunger-Glaser said.

There is no international protocol for who should sign the forms providing safety details and usage agreements, she added. None of the four countries responded to requests for comment.

Both WHO and Hunger-Glaser stressed the project is a pilot, and they have already sped up certain processes.

Another challenge is how to share samples used in research that could lead to commercial gain, such as vaccine development. BioHub samples are shared for free to provide broad access. However this throws up potential problems if, for example, drugmakers reap profits from the discoveries of uncompensated researchers.

WHO plans to tackle this longer-term, and bring labs in each global region online, but it is not yet clear when or how this will be funded. The project’s voluntary nature may also hold it back.

“Some countries will never ship viruses, or it can be extremely difficult – China, Indonesia, Brazil,” said Koopmans, referring to their stance in recent outbreaks. None of the three responded to requests for comment.

The project also comes amid heightened attention on labs worldwide after unproven claims in some Western countries that a leak from a high-security Wuhan lab may have sparked the COVID-19 pandemic, an accusation China and most international scientists have dismissed.

Hunger-Glaser said the thinking around emerging threats must change post-COVID-19.

“If it is a real emergency, WHO should even get a plane” to transport the virus to scientists, she said.

“If you can prevent the spreading, it’s worthwhile.”

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Reporting by Jennifer Rigby; Editing by Michele Gershberg and Nick Macfie

Our Standards: The Thomson Reuters Trust Principles.

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