Ukraine PM tells Russia to accept "reality" of EU trade deal

Ukraine's Prime Minister Mykola Azarov gestures during a session of the parliament in Kiev April 19, 2013.

Credit: Reuters/Gleb Garanich

By Richard Balmforth

KIEV | Wed Aug 28, 2013 7:54am EDT

KIEV (Reuters) - Ukraine's prime minister, seeking to ward off Russian pressure, urged Moscow on Wednesday to accept his country's drive towards a new trade relationship with the European Union as a "reality".

Clearly alluding to Kremlin threats of possible retaliatory trade moves, Mykola Azarov said: "The whole world is changing, the global system of economic relations. But to build a fence to protect yourself from changes using artificial barriers is simply pointless."

The former Soviet republic hopes to sign key agreements with the European Union in November, including one on free trade, which will mark a shift in its traditional close economic relationship with Russia, its biggest single trading partner.

The prospect of EU goods entering Ukraine, free of import duties, and then being re-exported to Russia and posing competition for Russian goods has caused alarm in the Kremlin and calls for Kiev to halt its drive towards Europe.

Firing a warning shot towards Kiev, Russia this month imposed laborious extra customs checks on Ukrainian imports over several days, causing delays at the border.

Russian President Vladimir Putin said the Russia-led Customs Union, which also includes Belarus and Kazakhstan, might take "protective measures" to defend its markets.

A Kremlin aide told Ukraine on Tuesday it would lose its "strategic partner" status if it signs association agreements with the 28-member EU bloc at Vilnius, Lithuania, in November.

The pressure has led to talk of a trade war in Kiev and injected new tension into Moscow's relationship with Ukraine, which has pleaded unsuccessfully for a lower price for strategic supplies of Russian gas to bring relief to its economy.

It comes at a time when Ukraine faces record payments to service foreign debt, including to the International Monetary Fund, and when foreign currency reserves are below the safety threshold of three months worth of imports, analysts say.

Ukraine's economy relies on exports of steel, chemicals and grain. More than 60 percent of its exports go to the former Soviet market, with Russia, Belarus and Kazakhstan the most important.

But Ukrainian big business sees greater prosperity in European markets and has resisted entreaties by Moscow to join the Customs Union - a move which would be incompatible with a free trade deal with Europe.

DIVIDING LINES

Azarov, who met Russian Prime Minister Dmitry Medvedev in Moscow on Monday to try to calm Russian concerns over trade, told his cabinet that no matter what the circumstances were, Ukraine wanted to increase the volume and quality of trade with Russia in the future.

For that reason, he said, "drawing up new dividing lines is not in the interests of our peoples."

He said a 10-year grace period after the signing of the Association Agreement with the EU would give Ukraine and Russia the chance to adjust to the new reality, according to the principles of the World Trade Organisation of which both are members.

He said Ukraine had accepted the formation of the Customs Union on its borders and the plans to upgrade it from January 2015.

"In the same way, after signing the Association Agreement with the EU, Ukraine will create a free trade zone with the EU - this also has to be inevitably accepted as a reality," he said.

It is by no means a foregone conclusion that the association and free trade agreements will be signed in Vilnius in November.

Many EU member states are disappointed at the pace of democratic reform in Ukraine since President Viktor Yanukovich was elected in February 2010 and are pressing particularly for the release from jail of former Prime Minister Yulia Tymoshenko, his fiercest political adversary.

Tymoshenko was jailed in late 2011 for seven years for abuse of office after what the EU says was a politically-motivated trial.

Speaking in Brussels on Tuesday after meeting Yanukovich's point man on European integration issues, EU enlargement commissioner Stefan Fuele indicated the Tymoshenko question had been broached as well as Ukraine's progress on democratic reform to meet specific criteria laid down by the EU.

These relate to reforming the judiciary, ending politically-motivated prosecutions and improving electoral legislation.

"I have emphasized ... the need to ensure determined action and tangible progress on all the benchmarks set out," Fuele told journalists.

(Additional reporting by Justyna Pawlak in Brussels; Writing by Richard Balmforth, editing by Elizabeth Piper)

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Paralyzed Nasdaq opted for caution over speed in restoring trade

A woman holds an umbrella past the Nasdaq MarketSite in New York's Times Square, August 22, 2013.

Credit: Reuters/Lucas Jackson

By Jed Horowitz, Lauren Tara LaCapra and Herbert Lash

NEW YORK | Fri Aug 23, 2013 9:16am EDT

NEW YORK (Reuters) - Thirty minutes into the crippling outage that hobbled the Nasdaq stock market on Thursday afternoon, stopping all trading in $5.9 trillion worth of U.S. equities, exchange officials had the problem fixed.

Another two and a half hours passed, however, before they were ready to flip the switch and turn the all-electronic market back on.

Most of the 191 minutes that the exchange was dark was spent in sometimes frantic conversation with scores of banks, brokers, investment companies and rival exchanges that wanted the Nasdaq's assurance that a restoration of trading would be orderly and not lead to panic.

Nasdaq's first responsibility was to assure "fair and orderly markets," Nasdaq Chief Executive Robert Greifeld said on Friday on Fox Business Network, and exchange officials worked first to understand and fix the problem and then to communicate with the securities industry to ensure a smooth restart.

"There was active communication going on," Greifeld said.

Meanwhile, banks' trading desks were cautioning Nasdaq, operated by Nasdaq OMX Group Inc (NDAQ.O), not to rush to reopen, fearing that a restart full of technical errors would only sap more confidence from rattled markets, according to three sources at brokerages and banks who declined to be identified.

In the end, the reopening of trading did go relatively well.

Transactions first restarted at 3 p.m. EDT in a single microcap stock, Atlantic American Corp (AAME.O), a test case picked for its front-of-the-alphabet ticker. Twenty-five minutes later, the rest of the market opened, and, according to a Nasdaq statement, "The trading day finished in normal course."

Shares of Nasdaq itself, which initially fell by more than 5 percent when trading resumed, recovered some lost ground to close the day 3.4 percent lower. The widely tracked Nasdaq Composite Index .IXIC gained nearly 1.1 percent.

Ahead of the start of trading on Friday morning, Nasdaq said in a system status message that all of its markets, which include options trading platforms such as BX and Nasdaq Options, were operating normally.

PERSISTENT GLITCHES

While worst case outcomes may have been averted, the outage still is among the most serious in a series of recent technological failures to hit the U.S. securities business, including a software issue at the Chicago Board Options Exchange this spring that delayed the start of trading there for half a day.

It was also the latest black eye for Nasdaq, which in May agreed to pay $10 million, the largest penalty ever against a stock exchange, to settle U.S. Securities and Exchange Commission civil charges over its mishandling of Facebook's (FB.O) initial public offering in 2012.

Late Thursday Nasdaq identified the problem as a "connectivity issue between an exchange participant and the SIP," or Securities Information Processor - essentially the system that receives all traffic on quotes and orders for stocks on the exchange.

This problem "led to degradation in the ability of the SIP to disseminate consolidated quotes and trades," Nasdaq said in a statement. "The cause of the issue has been identified and addressed."

Whether it has been addressed to the satisfaction of regulators is another question. SEC Chair Mary Jo White called for a meeting of Wall Street leaders to help insure the "continuous and orderly" functioning of securities markets.

The incident "should reinforce our collective commitment to addressing technological vulnerabilities of exchanges and other market participants," she said.

Thursday's outage could well give White fodder to press ahead with new rules, proposed in March, that would hold exchanges, clearing agencies and certain "dark pool" trading venues more accountable for taking steps to prevent potential systems disruptions.

The rules, if adopted, would replace the current regulatory model in which exchanges rely on voluntary guidance known as "Automation Review Policies" to address security and stability issues with their systems.

The SEC rushed to roll out its proposal as a direct response to several high-profile software problems last year, including Nasdaq's debacle with the Facebook IPO and a near-collapse at Knight Capital, a major Nasdaq market maker, as well as the two-day shutdown of the U.S. equities market due to Superstorm Sandy.

Exchanges, including the Nasdaq and rival NYSE Euronext (NYX.N), parent of the New York Stock Exchange, pushed back, citing a number of concerns, including costs and an "unduly broad" requirement to disseminate information to member firms about certain incidents. "This requirement would likely have a chilling effect on communications," they wrote.

The SEC agreed to extend the comment period on the rule, effectively delaying it, but late Thursday after this latest incident, White said she will push to get it completed.

AVOIDING THE 'DOOMSDAY SCENARIO'

The problems surfaced at 12:14:03 p.m. EDT, when all traffic through Nasdaq stopped abruptly.

During the shutdown, trading of shares not listed on Nasdaq continued, but transactions could not be executed on the Nasdaq platform. Options trading was also halted. All rival exchanges agreed to halt trading of any Nasdaq-listed issue.

As soon as the outage struck, the Nasdaq's Transaction Services division went into emergency mode, a Nasdaq official said, requesting anonymity.

The team focused primarily on whether the exchange should reopen trading as the clock ticked toward the regular 4 p.m. close. They raised the doomsday scenario of reopening and not being able to execute a flood of orders.

"We asked all the what-if questions," the official said.

As frustrated as Nasdaq customers were by the outage, they were more concerned that the exchange have all its ducks in a row before attempting to restart.

"The general feedback given to Nasdaq was, 'Don't rush back to fix it. It will be 10 times worse to come back online in a rush than to take time and get it right,'" said one source.

At Nasdaq, coordination was tight between the exchange's technology staff, rival exchanges that had halted their trading of Nasdaq stocks, brokerage firm members and the firms' major customers.

"It's not an excuse, but anyone who understands the complexities of the trading and matching systems and the difficulties of having multiple exchanges operating and trading the same stocks can understand how difficult this was," the Nasdaq official said. "It worked. It looks like the customers and the public did not get hurt."

Not all will agree with that assessment, but it could be some time before the size of losses, if any, can be determined. And Nasdaq faces a reputational risk that could damage its listings business.

"If you're advising companies to really go public, are you advising them to go public on Nasdaq?" said one source.

Greifeld defended Nasdaq's technology track record on CNBC Friday morning.

"We aspire for perfection," he said. "We didn't get there yesterday."

(Writing by Dan Burns and Jonathan Stempel; Additional reporting by Rodrigo Campos in New York and Sarah Lynch in Washington; Editing by Lisa Shumaker)

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France wants mandate for EU-US trade talks published

PARIS (Reuters) - France called on Monday for the European Commission to make public its mandate to negotiate EU-U.S. free-trade talks, citing what it said was an atmosphere of mistrust over efforts to forge a landmark pact.

The U.S. and EU launched the negotiations earlier this month despite European concerns about U.S. spying that had threatened to delay the start after nearly two years of preparation. France moreover only agreed to the talks after securing assurances that its entertainment industry would be ringfenced.

"The first week of discussions on a transatlantic partnership agreement closed in a climate of doubt," Trade Minister Nicole Bricq wrote in French newspaper Liberation.

"The U.S. once again showed its splendid ambivalence. It is a country where everything seems possible and whose dynamism and energy we French envy. At the same time it is a prickly power incapable of resisting the temptations its supremacy gives it."

Stressing the need for transparency in the talks, Bricq said she had asked EU Trade Commissioner Karel De Gucht to break with usual procedure and make the EU's negotiation mandate public.

"It doesn't contain any secrets. It's a political statement that calls for an agreement that respects our values and interests. It deserves to be debated," she said.

The Commission's mandates to negotiate international trade deals are not made public because it could weaken the EU's hand by revealing its limits to Washington and U.S. lobbies. That said, unofficial leaks of the mandate are common.

"If the talks with United States are for a partnership, and if we are working as equals, then our practices need to change so that we speak the same language," she said.

Bricq also said the Commission should regularly inform the European Parliament of the progress of the talks. At present, the Commission must do so at the end of each round.

The first round of talks, which took place in Washington from July 8 to July 12, mainly set the stage for more substantive negotiations in the weeks and months ahead as the two sides strive to reach a deal by late 2014.

(Reporting by Leigh Thomas; editing by Mark John)

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Wall Street falls in early trade as market takes breather

Traders work on the floor of the New York Stock Exchange, July 26, 2013.

Credit: Reuters/Brendan McDermid

By Angela Moon

NEW YORK | Fri Jul 26, 2013 11:13am EDT

NEW YORK (Reuters) - Stocks fell on Friday as the market took a breather from a recent rally that has taken the S&P 500 up about 18 percent for the year and as investors digested major earnings.

Major U.S. stock indexes have advanced steadily this year with the S&P 500 hitting an all-time high earlier this week. The broad market index has ended higher 13 times in the past 16 sessions.

For the week, the S&P is down about 0.5 percent, its first down week in five, but the benchmark is up 4.8 percent so far this month, its best month since January. The Nasdaq is up 5.4 percent in July so far, its best monthly gain in a year and half.

"There were two days this week, Tuesday and Wednesday, when we came strikingly close to the 1,700 (on the S&P 500) but didn't quite move up. There is profit taking here and there as we face this resistance," said Randy Frederick, director of derivatives at the Schwab Center for Financial Research in Cincinnati, Ohio.

The Dow Jones industrial average .DJI was down 70.04 points, or 0.45 percent, at 15,472.20. The Standard & Poor's 500 Index .SPX was down 4.62 points, or 0.27 percent, at 1,681.32. The Nasdaq Composite Index .IXIC was up 0.34 points, or 0.01 percent, at 3,579.94.

Among the top decliners, Expedia Inc (EXPE.O) shares plunged 23 percent to $50.20, a day after the online travel agency reported a quarterly profit far short of market estimates, due to higher competition and poor performance in its discount website, Hotwire.com.

Zynga Inc (ZNGA.O) shares plunged 17.4 percent to $2.89 a day after the company announced it will largely abandon its efforts to build an online gaming business in the United States.

Amazon.com Inc (AMZN.O) shares lost 2.1 percent to $297.14 after its forecast disappointed on income and revenue. Amazon faces with a weaker international market, overshadowing improved profit and economic conditions in the United States.

Starbucks Inc (SBUX.O) shares rose 6 percent to $72.34, a day after the world's biggest coffee chain posted a bigger-than-expected jump in quarterly profit.

As of Thursday's close, 47 percent of the S&P 500 companies reported earnings, and about 68 percent of them have topped profit forecasts, above the historical average of 63 percent. About 56 percent have reported better-than-expected revenue, a rate that is below the historical average.

In M&A news, Vivendi (VIV.PA) plans to sell the bulk of its stake in Activision Blizzard Inc (ATVI.O) to the video games maker and its management for $8.2 billion, the French conglomerate's second blockbuster deal in a week.

Activision shares, one of the most traded in early session, were up 14.8 percent to $17.45.

Data showed U.S. consumer sentiment rose in July to the highest level in six years as Americans felt better about the current economic climate, though they expected to see a slower rate of growth in the year ahead. Market reaction was muted.

European shares edged lower on Friday. Germany's DAX .GDAXI market had already unsettled some investors this week with profit warnings from some of its leading companies. .EU

In Asia, Japan's Nikkei share average slid 3 percent and was near a three-week low on Friday, with blue-chip exporters and financials leading declines on the back of a stronger yen and profit-taking. .T

(Reporting by Angela Moon; Editing by Nick Zieminski)

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Wall Street falls in early trade as market takes breather

Traders work on the floor of the New York Stock Exchange, July 26, 2013.

Credit: Reuters/Brendan McDermid

By Angela Moon

NEW YORK | Fri Jul 26, 2013 11:13am EDT

NEW YORK (Reuters) - Stocks fell on Friday as the market took a breather from a recent rally that has taken the S&P 500 up about 18 percent for the year and as investors digested major earnings.

Major U.S. stock indexes have advanced steadily this year with the S&P 500 hitting an all-time high earlier this week. The broad market index has ended higher 13 times in the past 16 sessions.

For the week, the S&P is down about 0.5 percent, its first down week in five, but the benchmark is up 4.8 percent so far this month, its best month since January. The Nasdaq is up 5.4 percent in July so far, its best monthly gain in a year and half.

"There were two days this week, Tuesday and Wednesday, when we came strikingly close to the 1,700 (on the S&P 500) but didn't quite move up. There is profit taking here and there as we face this resistance," said Randy Frederick, director of derivatives at the Schwab Center for Financial Research in Cincinnati, Ohio.

The Dow Jones industrial average .DJI was down 70.04 points, or 0.45 percent, at 15,472.20. The Standard & Poor's 500 Index .SPX was down 4.62 points, or 0.27 percent, at 1,681.32. The Nasdaq Composite Index .IXIC was up 0.34 points, or 0.01 percent, at 3,579.94.

Among the top decliners, Expedia Inc (EXPE.O) shares plunged 23 percent to $50.20, a day after the online travel agency reported a quarterly profit far short of market estimates, due to higher competition and poor performance in its discount website, Hotwire.com.

Zynga Inc (ZNGA.O) shares plunged 17.4 percent to $2.89 a day after the company announced it will largely abandon its efforts to build an online gaming business in the United States.

Amazon.com Inc (AMZN.O) shares lost 2.1 percent to $297.14 after its forecast disappointed on income and revenue. Amazon faces with a weaker international market, overshadowing improved profit and economic conditions in the United States.

Starbucks Inc (SBUX.O) shares rose 6 percent to $72.34, a day after the world's biggest coffee chain posted a bigger-than-expected jump in quarterly profit.

As of Thursday's close, 47 percent of the S&P 500 companies reported earnings, and about 68 percent of them have topped profit forecasts, above the historical average of 63 percent. About 56 percent have reported better-than-expected revenue, a rate that is below the historical average.

In M&A news, Vivendi (VIV.PA) plans to sell the bulk of its stake in Activision Blizzard Inc (ATVI.O) to the video games maker and its management for $8.2 billion, the French conglomerate's second blockbuster deal in a week.

Activision shares, one of the most traded in early session, were up 14.8 percent to $17.45.

Data showed U.S. consumer sentiment rose in July to the highest level in six years as Americans felt better about the current economic climate, though they expected to see a slower rate of growth in the year ahead. Market reaction was muted.

European shares edged lower on Friday. Germany's DAX .GDAXI market had already unsettled some investors this week with profit warnings from some of its leading companies. .EU

In Asia, Japan's Nikkei share average slid 3 percent and was near a three-week low on Friday, with blue-chip exporters and financials leading declines on the back of a stronger yen and profit-taking. .T

(Reporting by Angela Moon; Editing by Nick Zieminski)

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EU, China resolve solar dispute - their biggest trade row by far

By Robin Emmott and Ben Blanchard

BRUSSELS/BEIJING (Reuters) - China and the European Union defused their biggest trade dispute by far on Saturday with a deal to regulate Chinese solar panel imports and avoid a wider war in goods from wine to steel.

After six weeks of talks, the EU's trade chief and his Chinese counterpart sealed the deal over the telephone, setting a minimum price for panels from China near spot market prices.

European solar panel makers accuse China of benefitting from huge state subsidies, allowing them to dump about 21 billion euros ($28 billion) worth of below-cost solar panels in Europe last year, putting European firms out of business.

Other European industries that have accused China of dumping have faced imports of about 1 billion euros a year.

Europe planned to impose hefty tariffs from August 6 but, wary of offending China's leaders and losing business in the world's No. 2 economy, a majority of EU governments - led by Germany - opposed the plan, which led to the compromise deal.

"We found an amicable solution," EU Trade Commissioner Karel De Gucht said. "I am satisfied with the offer of a price undertaking submitted by China's solar panel exporters," he said, referring to the minimum price for China's imports.

Chinese Commerce Ministry Spokesman Shen Danyang welcomed the deal, hailing a "positive and highly constructive outcome".

An EU diplomatic source said that in the solar agreement, the agreed price was 0.56 euro cents per watt, near the spot price for Chinese solar panels in July in Europe, according to solar exchange pvXchange.

Under the terms of the deal, China will also be allowed to meet about half Europe's solar panel demand, if taken at last year's levels. EU consumption was about 15 gigawatts in 2012, and China will be able to provide 7 gigawatts without being subject to tariffs under the deal, the EU source said.

COURT CHALLENGE

That did not satisfy some EU solar manufacturers who said the minimum import price agreed still constitutes dumping and accused the European Commission of breaking EU law by failing to protect European industry.

European solar panel manufacturer association EU ProSun said it will go to the European Court of Justice in Luxembourg to challenge the deal.

"Even the biggest EU trade conflict ever must still be resolved on the basis of the applicable law," said EU ProSun's president, Milan Nitzschke.

However, China has sold solar panels for as little as 0.38 cents a watt, according to the European Commission, which handles trade issues for EU states, and tariffs would also hurt EU panel installers, who benefit from cheaper Chinese panels.

Chinese manufacturers such as U.S.-listed Trina Solar , Yingli Green Energy and Suntech Power Holdings are among those exporting to Europe.

Chinese solar panel production quadrupled between 2009 and 2011 to more than the world's entire demand as it took advantage of a growing market for renewable energy in the face of concerns about climate change.

But the global financial crisis and ensuing euro zone crisis have forced European governments to withdraw generous subsidies for solar energy. That, along with Chinese imports pushing down prices, have sent many European solar companies into bankruptcy.

German group Conergy filed for insolvency this month.

Still, those concerns have become secondary to the much larger EU-China trade relationship at stake over the panels dispute.

Europe is China's most important trading partner, while for the EU, China is second only to the United States. Chinese exports of goods to the bloc totaled 290 billion euros last year, with 144 billion going the other way.

Responding to the EU's move to impose duties, China launched an anti-dumping inquiry into European wine sales, which may have led to exporters in France, as well as Spain and Italy, being hit with retaliatory duties.

EU and Chinese diplomats now expect that case to be dropped as a goodwill gesture, although officials declined to comment on Saturday.

(Additional reporting by Martin Santa in Brussels; Editing by Louise Ireland)

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U.S. outlines steps for Bangladesh to restore trade benefits

WASHINGTON | Fri Jul 19, 2013 6:33pm EDT

WASHINGTON (Reuters) - The U.S. Trade Representative's Office on Friday outlined a series of steps that it urged Bangladesh to take to improve factory conditions and workers rights in order to have U.S. trade benefits restored.

President Barack Obama revoked longtime trade benefits for Bangladesh following a garment factory collapse in April and a factory fire in November that together killed more than 1,200 people.

The USTR plan urges Bangladesh to increase the number of labor, fire and building inspectors, improve their training and establish clear procedures for independent and credible inspections.

It also calls for increased fines and other sanctions, including loss of import and export licenses, for failure to comply with labor, fire, or building standards.

Bangladesh should enact and implement labor law reforms to address concerns related to freedom of association and collective bargaining, USTR said.

The U.S. trade office also endorsed a "compact" between the European Union, Bangladesh and the International Labor Organization to improve working conditions in the country.

"The United States looks forward to working as a full partner with the EU, Bangladesh, and the ILO to implement the goals of the Compact, many of which are broadly consistent with the GSP (Generalized System of Preferences) action plan we are releasing today," the USTR said.

It did not specifically mention a private sector plan to protect worker safety announced earlier this month by North American retailers, including Wal-Mart (WMT.N), Target (TGT.N) and Gap (GPS.N). But it acknowledged "the importance of efforts by retailers and brands to ensure that the factories from which they source are compliant with all fire and safety standards in Bangladesh."

Some groups have criticized the North American retailers' plan as not being strong enough.

The United States privately gave Bangladesh its "action plan" last month.

"Today, the Administration is making this action plan public as a means to reinforce and support the efforts of all international stakeholders to promote improved worker rights and worker safety in Bangladesh," the trade office said.

(Reporting by Doug Palmer; Editing by Eric Beech)

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