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Yellen Words to be Parsed for Clues to Rates, Her Future

When Janet Yellen delivers her testimony on the Federal Reserve’s semiannual report to Congress on Wednesday, investors may listen as much for clues to her own future – and the Fed’s – as they will to what she says about interest rate policy.

The Fed chair is likely to repeat a message she has been sending about rates: That further gradual increases will follow the three rate hikes the Fed has made since December. She is expected to say that even though inflation has slowed further below the Fed’s target level, the job market appears healthy enough to justify slightly higher borrowing costs.

But lawmakers may prod Yellen about her own plans and about the potential reshaping of the Fed itself resulting from a forthcoming influx of new board members selected by President Donald Trump. During last year’s presidential campaign, Trump was critical of the central bank for its low-rate policies, which he said were helping Democrats, and for its efforts to enact tougher regulations on banks in response to the 2008 financial crisis.

On Monday, the administration announced that it had chosen Randal Quarles, a Treasury Department official under two Republican presidents, to serve as vice chairman for supervision, the Fed’s top bank regulatory post.

Including the post Quarles would fill, the Fed has three vacancies on the seven-member board. Trump has yet to announce his other choices, though at least one person –  Marvin Goodfriend, an economist, a former staffer at the Federal Reserve Bank of Richmond and now a professor at Carnegie Mellon University – is considered a leading candidate for one of the spots.  All of Trump’s nominations will require Senate approval.

Yellen so far has deflected questions about whether she would accept a second four-term term as chairman if Trump asked her to remain after her term ends in February. But lawmakers may try to glean some insight into her own wishes and about how the Fed could potentially change under the influence of Trump’s nominees.

On Wednesday, Yellen will address the House Financial Services Committee and on Thursday the Senate Banking Committee. She will be testifying on the Fed’s Monetary Policy Report, with one wrinkle this time: For the first time, the Fed released the report five days before Yellen’s testimony. In the past, the two had occurred the same day.

The central bank explained the change by saying Fed officials wanted to give lawmakers more time to review the semiannual monetary report before Yellen addressed questions about it.

The report said the Fed “expects that the ongoing strength of the economy will warrant gradual increases in the federal funds rate,” referring to its benchmark short-term rate.

The Fed had slashed that rate to a record low near zero in December 2008 to combat the worst economic downturn since the 1930s – and kept it there for seven years until nudging it up modestly in December 2015. It then left the rate unchanged for another year until raising it again in December of last year, followed by increases in March and June this year. Even so, the rate remains in a still-low range between 1 percent and 1.25 percent.

The Fed’s report noted that officials had affirmed at their June meeting that they foresee a total of three rate increases in 2017, if the economy performs as they expect. If so, that would mean one additional increase before year’s end. The Fed also expects to raise rates three times in 2018 if economic conditions evolve as they expect.

This week, Yellen will surely face questions about sticking to that pace, given that while job growth has been solid, inflation has slowed this year rather than edging closer to the Fed’s 2 percent target.

In a speech Tuesday, Lael Brainard, a Fed board member who has often argued for a go-slow approach to rate hikes, said she wanted to “monitor inflation developments carefully and to move cautiously on further increases” in the Fed’s key rate.

Brainard suggested that she would support a move soon to begin paring the Fed’s $4.5 trillion balance sheet, which swelled to five times its previous size after the Fed bought Treasury and mortgage bonds to hold down long-term borrowing rates in the aftermath of the 2008 financial crisis.

At its June meeting, the Fed signaled that it could begin shrinking its balance sheet later this year, a step that could put gradual upward pressure on longer-term rates for such items as home mortgages.

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Twitter Hires ex-Goldman Managing Director as CFO

Twitter on Tuesday hired Ned Segal, senior vice president of finance at Intuit and a former managing director at Goldman Sachs Group, as its chief financial officer beginning in late August.

Anthony Noto, who has been serving as Twitter’s CFO and chief operating officer since November, will remain at the company as COO, Twitter said in a statement.

The appointment of Segal, 43, comes as investors are demonstrating renewed optimism in Twitter, which still lags rival social network Facebook in terms of size and profitability.

Twitter shares rose 3 percent on Tuesday, before the announcement of Segal’s hiring after the market’s close. The stock is up 32 percent since April 17, when it hit the low of the year at $14.12.

In April, Twitter reported better-than-expected user growth in the first quarter of the year, partly related to heightened user interest in political news and comment.

Before joining Intuit, Segal was the CFO of RPX Corp , which helps companies manage patent risk, and earlier spent some 17 years at Goldman, according to a biography provided by Twitter.

From 2009 to 2013, Segal was a Goldman managing director and head of its global software investment banking unit, advising tech companies on mergers, acquisitions and initial public offerings, Twitter said.

Twitter Chief Executive Jack Dorsey said Segal was an ideal fit because of the range of his experience.

“He brings a principled, engaging and rigorous approach to the CFO role, with a track record of driving profitable growth,” Dorsey said in a statement.

Segal said in a statement he was committed to helping Twitter “continue toward its goal of GAAP profitability.”

Segal is entitled to receive a signing bonus of $300,000 and his annual salary will be $500,000, Twitter said in a securities filing. He will also be eligible to receive 1.2 million shares in the company, subject to conditions and vesting, according to the filing.

Twitter is scheduled to report earnings for the second quarter on July 27.

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Report: Financial Sector Not Using its Full Power to Fight Human Trafficking

The global financial sector is not fully using tools it has at hand to help fight human trafficking, from reporting suspicious credit card activity to seizing assets, said a report released Tuesday by a United Nations think tank.

The United Nations University (UNU) said financial tools were a powerful means to disrupt the flow of money generated from human trafficking with the illegal industry estimated to be worth about $150 billion a year.

As many as 45.8 million people, most of them women and girls, are estimated to be enslaved globally, according to the 2016 Global Slavery Index by rights group Walk Free Foundation.

They are typically forced to work in factories, mines and farms, sold for sex, trapped in debt bondage or born into servitude.

Money generated by human trafficking comes from crime and handling those funds can be considered money laundering or, in some cases, financing terrorism, the UNU report said.

“Human trafficking is both big business and a serious crime,” said James Cockayne, head of the UNU Office at the United Nations and author of the report, in an accompanying statement.

“Disrupting the associated financial flows associated with these crimes will make a powerful contribution to improving these lives and preventing future crimes.”

Financial institutions could help identify money couriers as well as so-called “straw men” used to conceal identities and cash-intensive businesses that typically play roles in human trafficking networks, the report said.

Risk assessment maps, due diligence procedures, information sharing and protecting whistleblowers are among the tools available to banks, private investors, credit risk agencies, institutional investors and regulators, it said.

Obstacles may include laws protecting privacy and confidentiality, technical issues or rules regarding defamation or libel, said the report, entitled “25 Keys to Unlock the Financial Chains of Human Trafficking & Modern Slavery.”

In the United States, legislation was introduced in Congress in May that would boost financial regulations to help identify and report trafficking and help deny traffickers access to the financial system.

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Report: Small Satellites Driving Space Industry Growth

Small satellites used for observing conditions on the earth are the fastest growing segment of the $260.5 billion global satellite industry, the Satellite Industries Association said in an annual report released on Tuesday.

Small satellites, some no bigger than a shoe box, generated an 11 percent jump in annual revenue for Earth imagery in 2016 and a growing share of the 1,459 operating spacecraft that circled the planet at the end of the year, the report said.

The orbital fleet includes 499 satellites that weigh up to 1,323 pounds (600 kg), many of them used for Earth observation and remote sensing, said Carissa Christensen, chief executive of Bryce Technology and Space, which wrote the report for the trade association.

Small satellite launchers

Satellite services, including home television, broadband and Earth observation services, collectively generated $127.7 billion of revenue in 2016, the biggest single piece of the industry, according to the report.

Satellites used for earth imagery accounted for just $2 billion of the total industry but accounted for 11 percent of the sector’s growth, according to the report.

“That’s expected to continue to grow, given the new companies coming into the industry,” association President Tom Stroup said in an interview.

The report found at least 33 dedicated small satellite launchers in development worldwide, including privately owned Rocket Lab, which debuted its Electron booster in May, and Richard Branson’s Virgin Orbit, which is expected to fly its LauncherOne rocket this year.

Revenue from Earth observation services would have been higher, but the launches of many small satellites were delayed after a SpaceX Falcon 9 launch pad accident in September 2016, the report said.

SpaceX, owned and operated by entrepreneur Elon Musk, returned its Falcon fleet to flight in January and has launched 10 times so far this year.

126 satellites launch in 2016

In all, 126 satellites were launched last year, including 55 shoe-box-sized spacecraft known as CubeSats. About twice as many CubeSats were launched in 2015, the report said.

The number of small satellite launched during the first half of 2017 already has surpassed last year’s flight rate, Christensen said.

In February, a single Indian Polar Satellite Launch Vehicle rocket put 103 small satellites into orbit, along with a larger Earth-imaging spacecraft called Cartosat.

 

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Trump to Nominate Quarles to Be Fed’s Top Banking Regulator

U.S. President Donald Trump plans to nominate former Treasury official Randal Quarles to be the Federal Reserve’s top banking regulator, the White House said on Monday.

If confirmed by the Senate, Quarles would be the first vice chair of supervision at the Fed, a role created after the 2008 financial crisis but never filled during the Obama administration.

Quarles is viewed as an industry-friendly figure who will likely listen to banks that have complained about the impact of regulations implemented since the financial meltdown. His nomination has been widely expected since April.

Former Fed Governor Daniel Tarullo effectively ran banking supervision until he stepped down in February, overseeing a strict implementation of the 2010 Dodd-Frank Wall Street reform law and administering rigorous “stress tests” annually to banks on how prepared they are to withstand unexpected shocks.

Quarles currently runs a private investment firm that he founded, the Cynosure Group, from Salt Lake City, Utah. He was previously a partner at private equity firm the Carlyle Group.

He was also under secretary for domestic finance at the Treasury under President George W. Bush and was the U.S. executive director of the International Monetary Fund.

In an opinion piece in The Wall Street Journal in March 2016, Quarles and Lawrence Goodman, another former U.S. Treasury official, argued against breaking up big banks because it would risk damaging the wider economy. He has also talked about refining Obama-era financial rules, introduced after the financial crisis.

Quarles will be a central figure in pushing the Trump administration’s plans to loosen the leash put on Wall Street banks following the crisis.

Trump laid out his plans last month but he needs officials at key regulatory posts to carry out his agenda. He has gradually been nominating heads of financial agencies, but only Treasury Secretary Steven Mnuchin and Securities and Exchange Commission Chairman Jay Clayton have been approved by Congress.

Other agencies are either awaiting presidential picks or are operating under “acting” chiefs. Others have leaders appointed by Trump’s Democratic predecessor, President Barack Obama.

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US Expected to Scrap Visa Program for Entrepreneurs

President Donald Trump’s administration is postponing and plans to drop a program to provide visas for foreign entrepreneurs who launch companies in the United States.

The visa program, proposed last year by former President Barack Obama, was intended to give entrepreneurs who are not eligible for other types of visas permission to live in the U.S. for 30 months to get their enterprises up and running.

Leading figures in the technology industry had lobbied strongly for the visa program as a way for immigrants to come to the U.S. to start companies, contribute to the economy and create more jobs. The Department of Homeland Security (DHS) has estimated that nearly 3,000 entrepreneurs would be eligible for such visas each year.

The so-called startup visa program was to have taken effect next week, but DHS will issue a notice Tuesday postponing implementation of the International Entrepreneur Rule until March 14, 2018.

A draft of the notice posted online by the Federal Register said DHS plans to rescind the rule, but is requesting public comments before issuing a final decision.

The program would permit non-U.S. citizens to stay in the country for renewable 30-month terms if they have $250,000 in capital investments or win $100,000 in government grants to support their proposals.

The president of the National Venture Capital Association, Bobby Franklin, said Monday the administration’s decision was “extremely disappointing.”

“At a time when countries around the world are doing all they can to attract and retain talented individuals to come to their shores to build and grow innovative companies,” Franklin said, “the Trump administration is signaling its intent to do the exact opposite.”

U.S. Citizenship and Immigration Services, part of the DHS, has said it decided to delay the rule to ensure it is consistent with an executive order Trump issued during his first days in office, limiting federal officials’ authority to grant permission for foreign nationals to remain in the U.S., except on a case-by-case basis.

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Tanzania’s President Signs New Mining Bills into Law

Tanzanian President John Magufuli said on Monday he has signed into law new mining bills which require the government to own at least a 16 percent stake in mining projects.

The laws, which also increase royalties tax on gold and other minerals, were passed by parliament last week despite opposition from the mining industry body.

Magufuli reiterated on Monday that no new mining licenses would be issued until Tanzania “puts things in order” and that the government would review all existing mining licenses with foreign investors.

“We must benefit from our God-given minerals and that is why we must safeguard our natural resource wealth to ensure we do not end up with empty mining pits,” Magufuli told a rally in his home village in Chato district, northwestern Tanzania.

The president has sent shock-waves through the mining community with a series of actions since his election in 2015, which he says are aimed at distributing revenue to the Tanzanian people.

The new mining laws, which were fast-tracked through parliament, raise royalties tax for gold, copper, silver and platinum exports to six percent from four percent.

They also give the government the right to tear up and renegotiate contracts for natural resources like gas or minerals, and remove the right to international arbitration.

“I would like to thank parliament for making the legislative changes. I signed the bills into law the same day Parliament concluded its session on July 5,” Magufuli said.

Passage of the new legislation also followed months of  wrangling between the government and the country’s biggest gold miner, London-listed Acacia Mining Plc, over mining contracts after Magufuli decided in March to ban exports of gold and copper concentrates to push for the construction of a domestic mineral smelter.

Magufuli said on Monday that talks between Tanzania and Barrick Gold Corp., Acacia’s majority owner, would begin in two days to try to resolve allegations of tax evasion against Acacia.

Tanzania accused Acacia of tax evasion in 2016 in a case that is ongoing.

Acacia, which denies all allegations, said on July 4 it was seeking an adjudicator to resolve its dispute with the Tanzanian government.

Tanzania is also pushing for the mandatory listing of mining companies on the Dar es Salaam Stock Exchange (DSE) by August as part of measures aimed at increasing transparency and spreading wealth from the country’s natural resources.

Other major foreign-owned mining companies in Tanzania include AngloGold Ashanti and Petra Diamonds.

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China’s COSCO to Buy Orient Overseas for $6.3 Billion

China’s biggest shipping company, state-owned COSCO Shipping Holdings Co., is creating the world’s No. 3 container shipping giant by acquiring rival Orient Overseas (International) Ltd.

Shares in both companies surged Monday following the announcement of the $6.3 billion deal.

A wave of consolidation has created huge competitors in a global shipping industry that is struggling with sluggish trade and depressed prices.

On Monday, COSCO’s shares traded in Hong Kong jumped 4.7 percent while Orient Overseas’ shares soared 19.5 percent.

On its own, COSCO ranks No. 4 globally with 317 ships and 8.4 percent of container traffic, according to Alphaline, an industry database. Adding Orient Overseas would give it market share of 11.7 percent, moving it ahead of Marseilles, France-based CMA CGM Group.

The No. 1 shipper is Denmark’s AP Moeller-Maersk with 643 ships and 16.4 percent of container traffic.

Orient Overseas, with 103 ships, is controlled by the family of former Hong Kong Chief Executive Tung Chee-Hwa.

The transaction is subject to antitrust review by Chinese, European and U.S. authorities, according to a filing with the Hong Kong Stock Exchange.

The filing said COSCO will pay $10.07 per share (HK$78.67), a premium of 38 percent over Orient’s Friday share price on the Hong Kong Exchange. The total price tag for the deal will be $6.3 billion (HK$49.2 billion).

AP Moeller-Maersk acquired Hamburg Sud of Germany in December. CMA CGM bought Singapore-based Neptune Orient Lines last year.

Orient Overseas reported a loss of $219.2 million last year. It blamed a glut of capacity, slow growth and rising fuel prices as well as freight rates that sometimes dipped below those seen in 2009 during the financial crisis.

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Rural Amazon Violence Rises Amid Bureaucracy Over Land Titles

For a farmer in Brazil’s Amazon, Manoel Freire Camurca was doing pretty well for himself until a local power broker burned down his house and took the surrounding fields he had poured his life into.

Camurca’s eviction eight months ago happened as officials were finalizing his claim to 500 hectares of land in southwestern Amazonas state where he had spent nearly three decades growing corn, sugar and beans.

“I lost everything,” 61-year-old Camurca told the Thomson Reuters Foundation, wiping away tears. “I went into town and when I came back everything was burned and destroyed.”

Half a dozen other small farmers in his village suffered the same fate after a large rancher said he was the rightful owner of the land.

Camurca’s story highlights an increasingly violent environment in parts of rural Brazil which government officials say is fueled by unclear property title deeds, local corruption and a system where competing state agencies work on land regularization.

‘Death in the Countryside’

At least 36 people died in land conflicts in the first five months of this year, according to the Brazil-based Pastoral Land Commission watchdog.

One government official said 2017 had so far been the most violent year for land fights this century.

“Land conflicts in the Amazon have gotten worse,” said Ronaldo Santos, an official with the National Institute of Colonization and Agrarian Reform (INCRA), a government body responsible for managing and demarcating rural land.

“Big farm operators have the power to dispense injustice,” Santos told the Thomson Reuters Foundation following a public meeting with hundreds of angry farmers embroiled in land conflicts in Amazonas in northwestern Brazil.  “We have assassinations and death in the countryside.”

Conflicting Titles

Recent violence has led officials from different government agencies and privately owned land registration agents known as cartorios to trade blame over who is responsible for the conflicts.

Across Brazil, land must be registered by cartorios. They maintain property records and transfer deeds in specific regions. There is no single, centralized system for checking who owns what nationwide.

Inherited from Portuguese colonialists, the cartorio system is confusing and widely abused by wealthy land owners, government officials told the Thomson Reuters Foundation.

They said unclear property ownership makes it easier for large ranchers to displace small farmers like Camurca.

“The cartorios hold the biggest responsibility for legalizing grilagem [land grabs],” said Miguel Emile, a senior official with Terra Legal, a government program for regularizing small farmers’ land titles in the Amazon.

There are an estimated 5 million landless families in Brazil, according to a 2016 Canadian study. Government officials say they are working to speed-up property allocations for the rural poor who often live on land they do not formally own.

But even lands demarcated and distributed by government officials from INCRA and Terra Legal must be registered at private cartorios to be fully legal, Emile said.

Small farmers often cannot afford cartorio services, he said, and the system itself faces widespread abuse.

Wealthy ranchers can bribe cartorios to register someone else’s land, Emile told the Thomson Reuters Foundation.

A common scam involves elites legally buying a small piece of property and then having a cartorio register a far larger surrounding area in their name, he said.

As a result of this type of fraud in Para, a neighboring Amazon state, four times more land has been privately registered than the state’s total area, said Jeremy Campbell, an expert on land rights in Brazil at Roger Williams University in the United States.

Trading Blame

Cartorios, however, say they are not responsible for most of the problem, blaming government agencies for weak Amazon property rights and the resulting violence.

“Grilagem is not done by cartorios,” said one cartorio in Amazonas who spoke on condition of anonymity.

His office, which is responsible for maintaining local land records, is full of yellowed, time-worn books of property deeds, along with some digitized documents.

Corruption in government agencies, including INCRA, is a major driver of land scams, the cartorio said, as property owners can bribe officials to hand them swaths of state land.

The government is moving to geocode new property registrations so the land is digitally registered through satellite maps but this process has been slow, he added.

Proving Ownership

Forced evictions in Camurca’s village of Bom Lugar in Boca do Acre municipality exemplify the problems with Brazil’s rural property system.

INCRA had provided Camurca with a certification of possession, known locally as a “posse title.” But the farmer said he couldn’t register this as a formal title with a cartorio as the process of property demarcation had not been finalized.

This meant that despite a government agency granting Camurca rights to the land where he had lived since 1988 he still did not formally own it.

The rancher who Camurca says was behind the burning of his house could not be reached for comment.

The federal prosecutor for Amazonas state said he was investigating house burnings and displacement across Boca do Acre.

Amazonas senior security official, Sergio Fontes, said the violence affecting Camurca and thousands of others across Brazil’s largest state was due to poor management by officials.

“INCRA should resolve the farmers’ disputes with ranchers before distributing lands, otherwise all these problems happen,” Fontes told the Thomson Reuters Foundation. “[Officials] have to take responsibility for who was placed there.”

Travel support for this story was provided by the Society of Environmental Journalists (SEJ).

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At France’s Davos, French Bosses Laud Impact of New President

Top French company bosses who have for years lamented their country’s slow pace of reforms at an annual summer gathering in Provence offered glowing praise this year for the first steps taken by newly elected President Emmanuel Macron.

Sixty days after Macron became France’s youngest ever president, the CEOs gathered in the southern town of Aix-en-Provence said they had sensed a radical change in the country’s image abroad.

“The whole world admires France today. There is renewed confidence, optimism about the country,” Patrick Pouyanne, the head of oil major Total, France’s largest company, told reporters.

“What I expect from this government is that it maintains this confidence, this optimism so the French start spending more and companies start investing.”

Although Macron’s government has yet to pass any concrete measures, it outlined its action plan in policy speeches last week, and has begun talks with unions to pass an extensive reform of French labor regulations.

“I think this new president and his government are making an extremely positive start,” Isabelle Kocher of gas utility ENGIE told Reuters at the summit often referred to as a “mini-Davos”.

“They are changing France’s image abroad, I see it everywhere I go, it’s really striking and has happened very quickly,” she said.

“France went from being labeled the sick man of Europe to being seen as the savior of Europe,” a politician who sits on the board of several French companies told Reuters at one of the cafes lining the town’s sunny streets.

Tax cut debates

Even the government’s announcement earlier this week that some tax cuts would be delayed — including exemptions to a wealth tax and the introduction of a flat tax on capital income of 30 percent — did not draw much criticism.

“There are some debates about the government’s tax measures, if they’ll be done now or if it’ll wait because it has no money,” UBS’s head of French operations Jean-Frederic de Leusse told Reuters.

On Sunday, Finance Minister Bruno Le Maire seemed to suggest the delays were still the subject of discussions in government.

But when pressed, French CEOs who had in previous gatherings complained loudly about a tax burden which was the EU’s heaviest last year, refused to blame the government.

“Let’s not start criticizing,” Total’s Pouyanne said. “Let’s give them a bit of time. If there were a magic potion, it would have been used a long time ago.”

The CEO of the country’s flagship airline, Air France-KLM, concurred.

“Like all decision-makers, the government has to deal with contradicting demands. Respecting a certain number of European rules, so that our partners can take us more seriously, is important,” Jean-Marc Janaillac told Reuters.

“If the price we have to pay is a slightly delayed timeframe, that doesn’t seem to be a major inconvenience for me compared to its advantages,” he added.

France’s top central bankers agreed the government was right to prioritize deficit reduction over tax cuts so that France can, for the first time in a decade, bring its deficit below the European Union’s 3 percent of GDP ceiling.

ECB Executive Board member Benoit Coeure said France’s respect for the rules would help discussions the government hopes to launch about common budget measures in the euro zone.

“We’re all for tax cuts, but let’s not equate reform with immediate, unfunded tax cuts,” Bank of France Governor Francois Villeroy de Galhau told the conference on Sunday.

“We’ve already paid a heavy price for this kind of liability on the future.”