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Update on the latest in business:

February 2, 2018

FINANCIAL MARKETS

Asian shares lower as investors mull earnings, yields weigh

HONG KONG (AP) — Asian shares were mostly lower today as investors evaluated the latest earnings reports while worries about rising U.S. bond yields weighed on sentiment.

The yield on U.S. 10-year Treasury notes, which are the benchmark for interest rates, has risen swiftly, stoking investor concerns that higher rates could weigh on company earnings and equity prices. This week yields hovered at their highest level since April 2014, fueled by the prospect of stronger economic growth in the U.S. and abroad.

Manufacturing expanded again in January but at a slower pace than the previous month, according to a monthly index, while a Commerce Department report found construction spending rose at its weakest pace since the end of the global financial crisis. Monthly job data are due today providing another indicator for the U.S. economy, the world’s biggest.

Major U.S. benchmarks ended mostly lower yesterday. The Standard & Poor’s 500 index fell 0.1 percent to 2,821.98. The Dow Jones industrial average climbed 0.1 percent to 26,186.71. The Nasdaq composite lost 0.3 percent to 7,385.86.

Benchmark U.S. crude oil rose above $66 a barrel.

The dollar rose against the yen and the euro.

GERMANY-EARNS-DEUTSCHE BANK

Tax issue pushes Deutsche Bank to third straight annual loss

FRANKFURT, Germany (AP) — Deutsche Bank, Germany’s largest, is reporting its third straight year of net losses due to a 1.4 billion-euro charge resulting from new U.S. corporate tax legislation.

The net loss was 497 million euros. The bank said Friday it would have shown a net profit of 900 million euros if it hadn’t been forced to revalue deferred tax assets by the U.S. tax law, which cut the corporate tax rate. The bank said the new tax regime would be positive for its earnings in the future.

The results showed the bank, a pillar of Germany’s economy, still struggling to turn solid profits after years of wrenching restructuring and legal trouble.

Deutsche Bank has seen its earnings eroded by a low interest rate environment that squeezes interest margins; by charges for past misconduct, including a $7.2 billion settlement with U.S. authorities over complex securities based on house mortgages, and by new regulatory and compliance burdens aimed at stabilizing the banking system after the global financial crisis. It has also taken write-downs and losses on businesses and investments that it decided to shed as it refocused its business and reduced risky holdings. The bank has slashed its workforce and withdrawn from doing business in some countries.

The bank’s fourth-quarter loss of 2.2 billion euros reflected the tax charge — but also weakness in key businesses such as bond and currency trading, where income fell 29 percent.

JAPAN-EARNS-HONDA

Honda’s profit more than triples on sales growth, tax cut

TOKYO (AP) — Honda Motor Co.’s profit for the fiscal third quarter more than tripled from what it earned last year as its sales grew and profits got a perk from a U.S. tax cut, the Japanese automaker said Friday.

Tokyo-based Honda, which makes the Accord sedan, Odyssey minivan and Asimo robot, reported October-December profit totaling 570.2 billion yen ($5.2 billion), up from 168.8 billion yen the previous year.

Quarterly sales grew 13 percent to 3.96 trillion yen ($36 billion).

Honda lifted its annual forecast through March to 1 trillion yen ($9 billion), up from 616.5 billion yen the previous fiscal year on continued sales growth and a favorable exchange rate.

Honda previously projected fiscal year profit of 585 billion yen ($5.3 billion).

Honda’s results have been hammered by costs related to a massive recall of air bags made by Takata Corp.

Takata has been forced into bankruptcy. Although almost all the global automakers were affected by the Takata recalls, Honda had been among its biggest customers.

The worldwide death toll linked to the defective Takata air bags rose to 22 in January. Honda Malaysia said a person in that country died New Year’s Day from a crash of a vehicle that had a faulty Takata air-bag inflator. The Honda vehicle had been sold and so the recall was not completed, the company said.

JAPAN-SONY

Sony taps CFO Yoshida as new president, replacing Hirai

TOKYO (AP) — Sony Corp. named Chief Financial Officer Kenichiro Yoshida as its new president and CEO today, replacing Kazuo Hirai, who led a turnaround at the Japanese electronics and entertainment company and will stay on as chairman.

Yoshida has experience in Sony’s U.S. operations, as well as its network, financial and investor relations businesses. Yoshida and Hirai are set to talk to reporters later Friday.

Sony’s board members said they were surprised Hirai wanted to step down. But Hirai said in a statement the timing was right to “pass the baton” to the next leadership.

Hirai became president and CEO in 2012, taking over from Howard Stringer, an American. He turned around an embattled Tokyo-based Sony, which had sunk into losses as its once prized TV business lost out to rivals such as Samsung Electronics Co. of South Korea. Sony is now headed to booming profits because of its successful chips business, outpacing company targets.

Yoshida, who now also serves as executive deputy president, promised to forge ahead with the changes Hirai had led to realize sold profits and growth to stay globally competitive.

RESULTS-MATTEL

Mattel’s 4Q results reflect Toys R Us woes, sales slide

NEW YORK (AP) — Mattel Inc. reported a surprise loss and disappointing sales in the fourth quarter as the nation’s largest toy company still reels from troubles at Toys R Us and a weak appetite for some of its brands.

Its stock fell more than 8 percent in after-hours trading after the earnings report Thursday.

Like many toy companies, Mattel has been struggling with shoppers’ increasing shift online and children’s growing appetite for video games and mobile devices. Moreover, the bankruptcy of Toys R Us last fall has put more pressure on Mattel and others.

Toys R Us announced last month that it was closing up to 182 stores after struggling during the holiday season. It operates about 900 stores including Babies R Us stores. Toys R Us accounts for about 11 percent of Mattel’s annual sales, according to Stephanie Wissink, an analyst at Jefferies LLC.

Mattel’s efforts to overhaul the Barbie brand, however, have led to sales improvements. It has worked hard to add more diversity to the Barbie lineup, adding such dolls as hijab-wearing models. The company said that Barbie had the strongest brand performance, rising 9 percent in the quarter. However, sales at Fisher-Price and Thomas & Friends fell in the quarter.

The company based in El Segundo, California, reported a loss of $281.3 million, or 82 cents per share for the period. That compares with a profit of $173.8 million, or 50 cents per share, in the year-ago period. Sales fell 12 percent to $1.61 billion. Its loss adjusted for one-time items was 72 cents a share

FactSet says analysts expected an adjusted profit of 16 cents per share on sales of $1.69 billion.

Shares of Mattel fell $1.31to $14.01 in extended trading.

ECONOMY-THE DAY AHEAD

Major business and economic reports due out today

WASHINGTON (AP) — Economists are generally bullish in their outlooks for 2018 and today the government’s jobs report for January will provide an early look at whether that bright outlook is starting to come into view.

Analysts forecast that American employers added 165,000 jobs, and the unemployment rate stayed at 4.1 percent.

Also today, the Commerce Department releases factory orders for December

Two major companies report earnings today.

Merck & Co. and Exxon Mobil Corp. report quarterly financial results before the market opens.

TRUMP-ARCTIC REFUGE

Trump explains support for oil drilling in Arctic refuge

ANCHORAGE, Alaska (AP) — President Donald Trump says he didn’t really care about opening Alaska’s Arctic National Wildlife Refuge to oil drilling but pushed the issue for inclusion in the tax bill passed in December at the urging of others.

Trump spoke Thursday at a Republican retreat in West Virginia.

Trump says he was told of the refuge’s importance by a friend in the petroleum business. Trump says the refuge is one of the world’s great potential fields.

The refuge is also home to birthing grounds for a large caribou herd and threatened polar bears.

Native Alaskans who hunt caribou and environmental groups strongly oppose drilling.

Alaska Wilderness League director Adam Kolton says Trump’s remarks show that jamming Arctic Refuge drilling in the tax bill was always about politics and not thoughtful energy policy.

MITSUBISHI RECALL

Mitsubishi recalls SUV and car models; belt can come loose

DETROIT (AP) — Mitsubishi is recalling about 640,000 cars and SUVs worldwide because the accessory drive belt can come loose and cause engines to stall.

The recall covers Outlander SUVs from 2008 through 2012, Outlander Sport SUVs from 2011 through 2012, Lancer cars from 2009 through 2012 and Lancer Sportbacks from 2010 through 2012. All have Mitsubishi’s 4B11 or 4B12 engines, according to a document posted Thursday by the U.S. National Highway Traffic Safety Administration.

The automaker says a flange that automatically adjusts the belt tension can crack, causing the belt to detach. That will drain the battery and cause the engine to stall. Mitsubishi says it has no reports of crashes or injuries.

Dealers will replace the belt tensioner with an improved one at no cost to owners. The recall is to begin in the U.S. on March 27.

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