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DJIA 17000.36 À 0.21%
What’s
News
Business & Finance
C hina is trying to slow a
yuan exodus, monitor-
ing individuals and asking
banks to reduce foreign-
currency transactions. A1
 Publicis is streamlining
media operations and con-
solidating its ad-purchas-
ing power as part of a
sweeping restructuring. B1
 VW’s U.S. chief is leav-
ing the auto maker, a move
that comes in the wake of
the emissions scandal. B1
 Metals prices have been
climbing this year, but
skeptics doubt the recov-
ery will last for long. B5
 The ECB may start buy-
ing corporate debt under its
quantitative-easing pro-
gram, some investors say. B5
 Saudi Arabia wants to
borrow up to $8 billion from
foreign banks as its deficit
widens due to cheap oil. B5
 Zara parent Inditex said
it would slow the expan-
sion of its retail stores and
step up online sales. B1
 Burberry stock tumbled
after takeover speculation
that boosted shares turned
out to be mistaken. B1
 Amazon plans to lease up
to 20 Boeing 767 aircraft
from ATSG in an effort to
cut its shipping costs. B2
 BMW reported strong
2015 sales and profit but
its stock fell on a lower-
than-expected dividend. B2
World-Wide
 Balkan nations closed
their borders to migrants
coming from Greece, adding
pressure on the EU to com-
plete a deal with Turkey. A1
 Poland’s top court re-
jected legislation that would
boost government influence
over court rulings. A1
 Saudi Arabia began di-
rect talks with Houthi reb-
els over the nearly year-
long war in Yemen. A4
 French students and
unions held demonstrations
against government plans
to overhaul labor laws. A3
 The EU warned six coun-
tries, including Spain and
Italy, that their budgets risk
breaking spending rules. A3
 Biden criticized Palestin-
ian leaders’ silence over at-
tacks on Israeli Jews and the
killing of an American. A4
 The U.S. military cap-
tured and questioned an Is-
lamic State chemical-arms
expert, officials said. A4
 A Japanese court issued a
ruling to halt two of four re-
started nuclear reactors. A4
 Buckingham Palace de-
nied a claim that the queen
backed Britain’s EU exit. A3
 North Korea said it has
made nuclear warheads for
ballistic missiles. A6
 Died: George Martin,
90, legendary music pro-
ducer for the Beatles. A9
CONTENTS
Arts & Ent............... A9
Business & Tech. B1-4
Capital Account.... A2
Crossword.............. A12
Heard on Street.... B8
Markets Digest..... B6
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U.S. Military (Eur.) $2.20
s Copyright 2016 Dow Jones &
Company. All Rights Reserved
Fashion Frisson
At Paris Fashion Week, the runways
offered glimpses of the future
* *
S&P 500 1989.26 À 0.51% NIKKEI 16642.20 g 0.84%
Bid to Change Labor Laws Spurs Demonstrations in France
PATRICK HERTZOG/AGENCE FRANCE-PRESSE/GETTY IMAGES
TAKING TO THE STREETS: Young people rallied in Strasbourg during nationwide protests Wednesday against a plan to overhaul labor
laws, highlighting a widening rift between President François Hollande and the Socialists who swept him to power in 2012. A3
China Crimps Businesses
Yuan crackdown hurts
firms that need to trade
the currency for dollars
BY WEI GU
AND CHUIN-WEI YAP
Chinese officials are trying
anew to slow a money exodus
from the country, clamping
down on individuals seeking to
flee the yuan and making life
Beatles Producer George Martin
OPHER FURLONG/GETTY IMAGES
LEGENDARY: A condolence book on display for Sir George Martin,
who has been called the ‘fifth Beatle,’ at The Beatles Story in
Albert Dock, Liverpool, England. He died Tuesday at age 90. A9
Poland’s
Crisis Over
Constitution
Deepens
BY MARTIN M. SOBCZYK
WARSAW—Poland’s top
court rejected legislation that
would boost the government’s
influence over court rulings,
deepening a constitutional
standoff that is worrying the
nation’s allies.
Money & Inv...... B5-8 The Constitutional Tribunal
Opinion.............. A10-11
annulled legislation passed by
Personal Journal.. A12
Technology............... B3 Poland’s right-leaning govern-
U.S. News............. A7-8 ment that has divided Poland
Weather................... A12 for months and sparked oppo-
World News....... A2-6
sition protests. The court on
Wednesday said that the legis-
lation, which parliament ap-
proved in December, would un-
dermine its ability to dispense
justice and was therefore un-
constitutional.
The government has re-
mained defiant, with Prime
Minister Beata Szydlo saying in
advance of the ruling that she
Please see POLAND page A8
PERSONAL JOURNAL | A12
THURSDAY, MARCH 10, 2016 ~ VOL. XXXIV NO. 29
STOXX 600 339.14 À 0.49% OIL 38.29 À 4.90% GOLD 1256.60 g 0.44% EURO 1.1023 À 0.09%
tougher for companies that activity spikes, according to
need to trade the currency for executives at Chinese and for-
dollars to do business. eign lenders.
China’s foreign-exchange Banks, in turn, have in-
regulator in recent months has creased scrutiny of foreign-
deployed a new system to currency transactions by busi-
monitor individual purchases nesses ranging from Chinese
of foreign funds and has asked entrepreneurs investing
banks to reduce foreign-cur- abroad to companies paying
rency transactions. It has sum- overseas bills.
moned bankers to its offices to A European chemicals man-
give guidance and has grilled ufacturer recently faced delays
them when foreign-exchange in Shanghai in obtaining U.S.
Disaffected White Males
Propel Trump and Sanders
BY GERALD F. SEIB
Tuesday’s primary elections
underscored an emerging, cen-
tral reality of the 2016 presi-
dential campaign: This is the
year of the angry white male.
Those white
ANALYSIS males are the
voters who pro-
pelled Donald
Trump to convincing victories
Tuesday in Michigan and Mis-
sissippi, as they have else-
where. And they may deter-
mine whether he can roll on
next week in a series of big in-
dustrial states.
No Love From Russia
For This American Pundit
i i i Oracle #1
When TV hosts need a punching bag,
he gets the call; ‘We’ll bomb you to hell!’
BY JAMES MARSON Mr. Bohm’s biggest appeal,
though, is his good-natured
MOSCOW—When Russians willingness to be bashed for
want to see their country sock the perceived wrongs that the
it to America, they tune in to a U.S. visits upon Russia and the
former insurance executive rest of the world.
from a St. Louis suburb named “We’re tired of you ruling
Michael Bohm. the whole world,”
The Cold War- Pyotr Tolstoi, the
style confrontation host of “Politics”
between Russia and and “Time Will
the U.S. has made Tell,” jabbed at Mr.
Mr. Bohm, 50 years Bohm in one show.
old, into a star on When Mr. Bohm
popular political talk questioned a com-
shows here, such as ment by a Russian
“Time Will Tell” and political analyst on
“Special Correspon- another show, the
dent,” which attract Michael Bohm man blared: “We’ll
millions of viewers. bomb you to hell!”
He speaks fluent, slightly ac- Mr. Bohm usually stands im-
cented Russian, has lived in the passively, waits his turn to try
country for about 20 years and to score a few points and tries
is a former opinion-page editor not to be “an ugly American,”
at the Moscow Times, an Eng- as he puts it.
lish-language newspaper. Please see PUNDIT page A8
Greg Ip
The President’s
Power on Trade
CAPITAL ACCOUNT | A2
WSJ.com
dollars, threatening its dead-
line for an overseas licensing
payment. The Bank of Tianjin
is having trouble getting funds
from mainland investors for a
planned Hong Kong public
stock offering. A water-treat-
ment company struggled to
withdraw $2,000 for an engi-
neer to travel to the U.S.
“There appears to be a real
crackdown on money flowing
Please see YUAN page A2
Here’s what is less noticed:
Dissatisfied white males also
helped propel Sen. Bernie
Sanders to a stunning victory
over Hillary Clinton in the
Democratic contest in Michi-
gan and may keep him in the
game for many weeks to come.
All of this further suggests
they may be the swing voters
who decide the general elec-
tion in November, when the
critical question could well be
whether Democrats can win
enough of them to supplement
their big advantages among
women and minority voters.
The effect was most obvi-
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Balkan
Migrant
Trail Is
Cut Off
BY STELIOS BOURAS
ATHENS—The Balkan trail
taken by migrants was com-
pletely shut down Wednesday,
officials from several countries
said, adding to pressure on the
European Union to complete a
deal with Turkey to stem the
flow of people.
In recent weeks, Austria and
Balkan countries to its south
have coordinated a tightening of
their borders, moves that have
effectively limited the number
of people able to continue north
from Greece to fewer than a
hundred a day. The restrictions
have left tens of thousands of
migrants stranded in Greece af-
ter crossing the Aegean Sea
from Turkey.
By Tuesday, Macedonia said
it had completely closed its bor-
ders to migrants crossing from
northern Greece—part of a
chain reaction after further bor-
der restrictions in Slovenia
prompted Serbia to effectively
shut down its southern and
eastern borders to anyone with-
out a proper visa or passport.
While Slovenia and Greece are
part of the EU, Serbia and
Macedonia, which lie between
them, aren’t.
“Bearing in mind that the
new regime is implemented by a
member of the European Union
(Slovenia), Serbia cannot afford
to become a collection center
for refugees,” Serbia’s Interior
Ministry said late Tuesday.
Some 8,500 people are cur-
Please see BALKAN page A3
ous in watching Mr. Trump
roll up two more big wins
Tuesday. In Michigan, 52% of
the Republican primary elec-
torate was male, exit polls in-
dicated. Mr. Trump won them
going away, 43% to 23% for
Ohio Gov. John Kasich. Mean-
time, he lost among women,
30% for Sen. Ted Cruz to 28%
for Mr. Trump.
The story was similar in
Mississippi. Mr. Trump won
men by 20 percentage points,
exit polls indicated. There, he
won women, but by a mere
nine percentage points.
Please see MEN page A8
207
Workday Cloud
ERP Customers
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A2 | Thursday, March 10, 2016
Powerful Pair: Presidency and Protectionism
W
ith an overvalued
dollar and a grow-
ing trade deficit,
the Republican president
needed to fulfill an election
promise to protect manufac-
turers from foreign imports.
So he stunned the world by
imposing a 10% across-the-
board tariff on imports.
A scene
from a future
Donald Trump
presidency? Ac-
tually, it’s what
Richard Nixon
CAPITAL did in 1971.
ACCOUNT As Mr.
GREG IP Trump closes
in on the Re-
publican presi-
dential nomination by prom-
ising voters he’ll crack down
on foreign competitors, the
rest of the world should take
stock of the extraordinary
power a president has to
take the country in a protec-
tionist direction.
Mr. Trump says he’s for
free trade and not a protec-
tionist. Nonetheless, he has
threatened steep tariffs on im-
ports from China and Mexico
and disparages trade pacts,
from the North American Free
Trade Agreement to the
signed but unratified 12-na-
tion Trans-Pacific Partnership.
Many of Mr. Trump’s pol-
icy positions are inconsis-
tent, seemingly formed on
the fly. But his antipathy to
YUAN
Continued from Page One
out of China,” said Jean Fran-
cois Harvey, global managing
partner at Hong Kong law firm
Harvey Law Corp., whose cli-
ents have had difficulty re-
cently transferring money out
of China for equipment pur-
chases and investment. “Even
normal business transactions
which are ongoing are getting
delayed.”
Mr. Harvey said a Chinese
client is having problems wir-
ing $15 million to a Hong Kong
company that for two years
has been helping it buy equip-
ment for a South American
factory. “There’s no indication
that the money will go
through,” he said, “and we
heard from our client that it
was due to restrictions on
money transfer.”
The clampdown comes atop
Beijing’s steps after last sum-
mer to stem outflows, from re-
stricting cross-border yuan
business at foreign banks to
cracking down on individuals
who are flouting the country’s
strict foreign-currency quotas.
Economists say tightened
capital controls are one reason
China’s foreign reserves fell
only $28.6 billion in February,
less than a third the drops of
the two previous months.
Spooked by slowing growth
and a declining currency, Chi-
nese businesses and consum-
ers are trying to move money
abroad where its value might
hold up. Last year, some $700
billion to $1 trillion is esti-
mated to have fled China.
That is more than the econ-
omy of Switzerland and equiv-
alent to as much as 10% of
China’s massive GDP. China’s
foreign-currency reserves fell
by a record $107.9 billion in
December from November and
another $128 billion in Janu-
ary and February combined,
putting reserves 20% lower
than their June 2014 peak.
The outflows destabilize
the currency and make China’s
decelerating economy harder
to guide. The government is
already wary about loosening
Losing Currency
China's slowing economic growth and falling yuan are driving businesses
and consumers to move money out of China, helping reverse the
nation's capital flows and driving down foreign-exchange reserves.
China’s capital flows,
quarterly*
$200 billion
100
0 3
–100
–200
–$220.8 billion
–300 3Q 2015
2013 ’14 ’15
*Total capital flow is net change in reserve assets minus trade surplus
Sources: CEIC Data; State Administration
of Foreign Exchange
GOP presidential candidate Donald Trump, in Florida on Tuesday.
foreign trading partners is
deep-rooted. In 1987, he
wrote that Japan became
wealthy “by screwing the
United States with a self-
serving trade policy.” In 1999,
while flirting with a presi-
dential run, he called Nafta
“a disaster.” The Korea-U.S.
free trade pact, he said in
2010, was “something that
only a moron would sign.”
Moreover, unlike his views
on torture or banning Mus-
lims from entering the U.S.,
Mr. Trump’s position on
trade is not an outlier. Demo-
cratic candidate Bernie Sand-
ers is equally skeptical of free
monetary policy to stimulate
growth, as that could weaken
the yuan further and send
more money abroad.
Chinese regulators have
said they aren’t too concerned
about the outflows and that
they aren’t imposing new or
additional capital controls.
Central bank Vice Governor Yi
Gang over the weekend told
reporters China’s recent for-
eign-reserve declines are
“within our expectations.” The
central bank didn’t respond to
inquiries on outflows; its for-
eign-exchange arm said it
hadn’t introduced new capital
controls.
Much money has left
through legitimate channels,
which are broader after years
of gradual currency liberaliza-
tion that makes it harder for
authorities to tamp down.
China lets each individual buy
up to $50,000 of foreign cur-
rency a year, for example.
Jun Wan, a Shanghai insur-
ance-company executive, said
he was concerned by the
weakening yuan and wanted to
move some savings abroad be-
fore it slipped further. In De-
cember, he used his quota, his
wife’s and his 7-year-old
daughter’s to buy a $120,000
U.S.-dollar insurance policy in
Hong Kong. “People don’t have
faith,” he said, “in what China
will become in 10 years.”
If 5% of China’s roughly 1.4
billion people used their full
quotas, the $3.5 trillion in for-
eign-currency demand would
drain its reserves.
Some have found creative
ways to get around those quo-
tas. Shanghai-based collector
Liu Yiqian said that late last
year he bought an oil portrait
of a nude woman by Italian
artist Amedeo Modigliani for
$170 million. He used his
American Express Centurion
card to pay for the painting.
Many card purchases are ex-
empt from China’s foreign-cur-
rency caps.
Of $550 billion in China’s
net capital outflows in the
2015 second half, about 60%
was from Chinese residents
and companies buying foreign
currency for everything from
travel to acquisitions, while
China’s foreign-exchange
reserves, monthly
$5 trillion
$3.2 trillion
4 the year-earlier period.
February 2016
2 Registered as a newspaper at the Post Office.
1 surplus in 2015. China had $3.2
0 twice Japan’s holdings.
2013 ’14 ’15
THE WALL STREET JOURNAL.
WORLD NEWS
suit the temper of the times.
The Smoot-Hawley tariff of
1930, which sharply raised im-
port tariffs and worsened the
Depression’s impact on trade,
is often cited as a cautionary
tale about protectionism. But
in one respect the analogy is
flawed. Smoot-Hawley was
largely the product of horse
trading between individual
legislators to protect favored
industries. As a result, in 1934,
Congress decided to forgo
“the business of tariff logroll-
JOE RAEDLE/GETTY IMAGES
ing,” as trade historian Doug
Irwin writes, and delegated
most authority over tariff ne-
gotiations to the president.
This division of power has
insulated the world trading
system from Congress’s paro-
chial tendencies. By the same
token, it puts the world more
trade, lambasting front-run- at the mercy of presidents
ner Hillary Clinton last Sun- whose latitude over trade has
day for supporting “virtually steadily expanded.
every one of the disastrous Presidential appointees at
trade agreements written by the Commerce Department
corporate America.” Mrs. adjudicate complaints that
Clinton and Republicans Ted foreign imports are being ille-
Cruz and Marco Rubio have gally sold at below cost, below
all backed away from past home-country price or subsi-
support for the TPP. dized. They almost always
Protectionist actions are find in favor of the domestic
on the rise globally, accord- industry. Whether those find-
ing to a tally compiled by ings actually merit penalties
Global Trade Alert, a watch- is up to the independent In-
dog group, led by India and ternational Trade Commis-
Russia. Britons will soon vote sion, whose members are
on whether to leave the Euro- nominated by the president
pean Union. In short, a pro- and confirmed by Congress.
tectionist president would While the candidates ha-
A bank employee checked banknotes in Lianyungang, China, in January. China’s foreign-exchange
regulator in recent months has asked banks to reduce foreign-currency transactions.
another 30% was from Chinese capital controls. Others esti-
companies repaying dollar mate China needs a reserve
debt, Goldman Sachs esti- cushion of at least $2.6 trillion
mated in a January report. to $3 trillion, given the size of
Beijing property developer its money supply and foreign
Soho China Ltd. decided to debt. At the rate China’s for-
pay down some of its dollar- eign reserves were dropping
denominated debt after the at last year’s end, they could
yuan started weakening dip below those levels in less
sharply. Late last year, it than a year.
bought back some of its $400 Chinese regulators began
million offshore bonds due tightening their grip on out-
2022 in a tender offer and re- flows after last summer’s mar-
deemed $600 million in 2017 ket turmoil and increasing
notes. Earlier this year, it is- signs of a growth slowdown.
sued new yuan debt onshore China’s foreign-exchange regu-
at a much lower rate to re- lator, the State Administration
plenish its funds. of Foreign Exchange, or SAFE,
Soho CEO Zhang Xin told in September put limits on the
The Wall Street Journal that amount of money Chinese
the company decided to repay bank-card holders could with-
foreign-currency debt because draw from ATMs abroad.
“all of our revenue is denomi- In January, it rolled out a
nated in yuan, so a falling new system to monitor indi-
yuan would have been a big vidual purchases of foreign
foreign-exchange risk for us.” currency. Credit-card compa-
Ms. Zhang said Soho’s foreign- nies in February began to
currency-denominated debt make it harder to charge the
now accounts for just 16% of purchase of overseas insur-
its total debt, so “we don’t ance policies.
have to worry about the for-
eign-exchange risk anymore.”
SAFE said in an email to
The Wall Street Journal that it
Chinese firms’ net repay- hasn’t introduced new capital
ment of foreign-currency controls, and that the “effec-
debts inside and outside China tiveness of capital controls is
amounted to $41 billion in the limited, and not suited for the
third quarter, which partly ex- country’s strategic direction.”
plains the rapid fall of re- The regulator also said its in-
serves, according to Bank for spections found some banks
International Settlements. weren’t complying with re-
Chinese companies are also quirements to show legal for-
sending more money overseas eign-exchange receipts, and
through investments, making some were even advising cus-
$85.8 billion in outbound ac- tomers on how to flout the
quisitions announced through law, so it will continue to
March 7, according to Dealogic, “strictly supervise” banks’ im-
almost eight times the value in plementation of foreign-ex-
change rules.
Some experts, such as Tao Then there is the stealth
Wang, China economist for clampdown. SAFE officials
UBS, agree with the govern- have told banks to reduce for-
ment that the outflows aren’t eign-currency transactions,
alarming. The country contin- starting with large state-
ues to earn dollars from ex- owned and foreign lenders at
ports, logging a record trade the end of 2015 and moving on
to midsize lenders this year,
trillion in foreign reserves at according to several bank ex-
the end of February, more than ecutives who got the orders,
which weren’t released offi-
Some economists calculate cially.
the country could get by with “Those were all verbal re-
$2 trillion in reserves or less, quests,” said an official at a
especially if it strengthens Chinese bank. “No paper trail
THE WALL STREET JOURNAL.
ven’t delved into the details used to embargo trade with
of trade enforcement, a pres- Nicaragua and Iran.
ident has enormous leverage The main deterrent to
through several broader such unilateral trade barriers
powerful tools, such as Sec- is the threat of retaliation
tion 301 of the Trade Act of under one of the many trade
1974, which authorizes the treaties to which the U.S. be-
president to take “all appro- longs. After George W. Bush
priate and feasible steps” slapped tariffs on steel in
against any “unjustifiable or 2002 under Section 201, the
unreasonable” discrimination World Trade Organization
against U.S. exports, and granted the European Union
Section 201, under which he the right to retaliate. Mexico
can seek to protect industry could drag the U.S. to a
from surging imports. Nafta tribunal.
Mr. Trump has promised
T
to brand China a “currency he U.S. could stand
manipulator.” The relevant fast and accept retalia-
legislation specifies no pen- tion. Though the law
alty—only consultations with is murky, a president can
the alleged manipulator. Mr. probably pull the U.S. out of
Trump says that would “bring the WTO or Nafta on six
China to the bargaining table” months’ notice, says Gary
or “face tough countervailing Horlick, a veteran trade law-
duties.” There’s precedent for yer, though that would leave
such tactics. Four months af- in place many of the laws
ter Mr. Nixon imposed his im- enacting their provisions,
port surcharge, the rest of the such as on tariff cuts and in-
world agreed to devalue the tellectual-property rights.
dollar. In the 1980s, Ronald Mr. Trump’s advisers
Reagan forced Japan to ac- would no doubt warn him of
cept voluntary restraints on the economic and diplomatic
automobile exports. havoc that a trade war would
Mr. Trump claims an im- entail, as would U.S. compa-
port tariff could force Mexico nies that sell or source
to pay for a border wall. abroad. Congressional Re-
Some have speculated he publicans, who remain
could seek national-security largely supportive of free
justification under one of two trade, might rebel. The ques-
laws: Section 232 of the Trade tion for Mr. Trump would
Expansion Act of 1962, or the then be, how much of a back-
International Emergency Eco- lash is he willing to endure
nomic Powers Act, previously to hold fast to his threats?
in giving out cash, they said.
The Bank of Tianjin, which
hopes to raise up to $1 billion
from an initial public offering
in Hong Kong this month, is
having trouble securing funds
from large mainland investors,
said people familiar with Tian-
jin. Some channels those in-
vestors had typically used to
send money overseas are dry-
ing up, said bankers. The
lender declined to comment.
In January, the chief finan-
cial officer of a big European
chemicals manufacturer in
Shanghai noticed that obtain-
ing U.S. dollars for an overseas
XINHUA NEWS AGENCY/GETTY IMAGES
payment was taking much lon-
ger than usual. China’s capital-
control rules require compa-
nies to get approval before
exchanging yuan for foreign
currencies.
The company was trying to
procure $610,000 to pay an
annual technology-licensing
fee, which normally took 20
days. China’s foreign-exchange
regulator kept asking for more
documentation on matters
has been left.” such as the purpose of the
The regulators asked lend- funds to details on the prod-
ers to stop advertising for- ucts and technology involved,
eign-currency deposits and dragging the approval process
services, the bank executives far beyond that and making
said. One banker said SAFE of- her anxious the company
ficials called regularly to ask wouldn’t meet its payment
why the bank was buying so deadline.
much foreign currency for Earlier this year, a Fujian-
their clients and sometimes based water-treatment com-
brought bankers to SAFE’s lo- pany wanted to withdraw
cal branches to give them in- $2,000 travel expenses for an
structions. engineer being sent to the U.S.
SAFE officials asked to install equipment for a cli-
whether the bankers had ent. In the past, that could be
checked the purpose and au- done with one day’s notice at
thenticity of the transactions, the Bank of China, said the
requesting that they “take company’s chief financial offi-
measures to control” the cer. This time, it took a week.
amount of foreign currency Government officials have
they bought, the bank execu- maintained they are simply
tives said. asking banks and financial in-
To comply, many banks have stitutions to apply the letter of
come up with stalling tactics, the law to cross-border trans-
from asking customers to pro- actions.
duce written statements about —Shen Hong,
the purpose of their transac- Kersten Zhang and Kane Wu
tions to delays of up to a week contributed to this article.
THE WALL STREET JOURNAL.
CORRECTIONS  Europe Edition ISSN 0921-99
The News Building, 1 London Bridge Street,
AMPLIFICATIONS London, SE1 9GF
Thorold Barker, Editor, Europe
Bruce Orwall, Senior Editor, Europe
Cicely K. Dyson, News Editor, Europe
Israeli Arabs and Israeli Margaret de Streel, International Editions Editor
Darren Everson, Deputy International Editor
Jews live in Jaffa, Israel. A
World News article Wednes- Joseph C. Sternberg, Editorial Page Editor
day about a visit to Israel by Anna Foot, Advertising Sales
U.S. Vice President Joe Biden Jacky Lo, Circulation Sales
Stuart Wood, Operations
incorrectly referred to Jaffa Jonathan Wright, Commercial Partnerships
as an Arab port.
Katie Vanneck-Smith,
Global Managing Director & Publisher
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THE WALL STREET JOURNAL.
Protests Erupt Over French Labor Plan
Unions, students stage
rallies in Socialist
backlash against
Hollande’s reform bid
BY WILLIAM HOROBIN
PARIS—Students and labor
unions held nationwide dem-
onstrations on Wednes-
day against the French gov-
ernment’s plans to overhaul
labor laws, highlighting a wid-
ening rift between President
François Hollande and the So-
cialists who swept him to
power in 2012.
In Paris, protesters gath-
ered near the headquarters of
France’s largest business
lobby, Medef, which has
backed Mr. Hollande’s plans to
make it easier to dismiss
workers and circumvent
France’s rigid laws on working
hours. Later in the afternoon,
the demonstrations converged
on the Place de la République,
northeast of the center.
The protesters—between
27,000 and 29,000 in Paris, ac-
cording to police estimates—
waved flags and brandished
placards saying that they re-
fuse to negotiate and demand-
ing that the draft bill be abol-
ished.
Jean-Gabriel Chambon, a
master’s graduate of Sciences
Po university, joined the dem-
onstration with fellow former
EU Warns Six Members on Budgets
BY VIKTORIA DENDRINOU
BRUSSELS—European Union
authorities on Wednesday
warned six countries including
Spain and Italy that their bud-
get plans for the coming years
risk breaking the EU’s spend-
ing rules and called on them to
take measures to reduce their
deficits.
The warnings, which are
part of a process aiming to en-
sure eurozone economies keep
their public finances in order,
come at a time when several
European countries such as It-
aly have called for more flexi-
bility within the rules, arguing
that they can hold back the
bloc’s flagging economies.
The European Commission,
the EU’s executive arm, said it
notified Spain, Belgium, Croa-
tia, Finland, Italy and Romania
of its concerns regarding their
compliance with their fiscal
obligations.
“We have identified six
countries whose budgetary
strategies may entail risks to
respecting their commitments
under the Stability and Growth
Pact,” said European Commis-
sion Vice President Valdis
Dombrovskis.
“There is still time to take
necessary measures,” he
added, “and this is why we are
sending an early warning sig-
‘Brexit’ReportDraws Royal Complaint
BY JENNY GROSS
LONDON — Buckingham
Palace registered a rare com-
plaint to the U.K.’s press
watchdog on Wednesday, say-
ing a tabloid newspaper arti-
cle claiming Queen Eliza-
beth II backed Britain’s exit
from the European Union was
inaccurate.
With a front-page headline
of “Queen Backs Brexit,” the
Sun newspaper published a re-
port that the queen had ex-
pressed opposition to the EU
on two occasions, citing un-
identified sources. One of the
purported instances occurred
over lunch during the previous
government at Windsor Castle,
a royal residence, where she
Buckingham Palace denied the Sun newspaper’s report.
Thursday, March 10, 2016 | A3
WORLD NEWS
Business leaders are wor- “This bill will not resolve
ried that Mr. Hollande may unemployment but it will in-
succumb to the pressure from crease job insecurity,” said An-
the street just as the govern- dré Guisti, a 59-year-old build-
ment of Jacques Chirac did ings-maintenance worker. “I’ve
when it scrapped plans to had a job all my life and I’d
change labor laws in 2006 af- like the same for young peo-
ter mass demonstrations. ple.”
The labor bill echoes Demonstrations were also
changes that Spain and Italy taking place in major cities
have made over the past four across the country.
years. While unemployment Surveys this year showed
rates are higher in those coun- strong appetite for overhauls
tries than in France, they have of France’s complex labor
begun falling from peaks re- code. But that initial support
corded during the eurozone evaporated as Socialist party
debt crisis. heavyweights and moderate
If the French bill is enacted, trade unions accused Mr. Hol-
it would cap court-ordered lande of going too far in pick-
severance packages and create ing apart fundamental princi-
ROBERT PRATTA/REUTERS
a clearer template for compa- ples of the French left.
nies to lay off workers. The According to a survey of
French government says that 1,021 people by Odoxa on
the current system of ironclad March 3 and 4, 70% of them
safeguards in work contracts opposed the labor bill and 57%
discourages businesses from said they backed the decision
Students and workers faced off with police at a demonstration in Lyon, France, on Wednesday. hiring in the first place. of labor and student groups to
Mr. Hollande also plans to organize Wednesday’s pro-
students. He said that he felt country’s moribund economy. May 2012. Unions are threat- make it easier for companies tests.
betrayed after voting for Mr. The Socialist leader is ening further action, including to negotiate directly with em- In an attempt to head off
Hollande in 2012. After a se- scrambling for initiatives to strikes, if the government ployees on working hours and the resistance, Mr. Hollande
ries of temporary work place- spur job creation after pledg- doesn’t back down. overtime pay. That would po- delayed the formal presenta-
ments, he said that the new ing not to run for re-election “This first demonstration tentially cut out labor unions tion of the bill to the end of
law would do nothing to im- in May 2017 if the double-digit was a success,” leftist union and lift restrictions imposed March to make time for emer-
prove his job prospects. unemployment rate doesn’t Force Ouvrière said. It said by sacrosanct national laws, gency talks with different la-
“I’ve no idea who I’ll vote decline. But if Mr. Hollande that 400,000 people joined the such as the 35-hour work- bor and business groups. The
for in 2017. I’ll probably cast a pushes ahead with the latest different protests around the week. government said that it would
blank ballot,” he added. plans, he risks divorcing his country. According to interior But the protesters said the present any changes to the
The conflict reveals deep traditional supporters before ministry estimates, 195,000 overhauls would deal a fatal draft bill Monday.
fault lines in France and un- the campaign even begins. people took part in 175 dem- blow to French job security “We are looking for the
derscores the political risks It is already the fiercest onstrations across the country, that labor unions and the So- right balance,” Labor Minister
Mr. Hollande faces in enacting backlash Mr. Hollande has not including the Paris pro- cialist Party have spent de- Myriam el Khomri said Tues-
painful reforms to repair the faced since he took office in tests. cades defending. day in a radio interview.
they could be put in the EU’s
so-called Excessive Deficit Pro-
cedure, which would imply
FREDERICK FLORIN/AGENCE FRANCE-PRESSE/GETTY IMAGES
stricter monitoring of the
economy by the bloc’s authori-
ties. The procedure, which
Spain is already subject to, can
result in fines for countries
that don’t take action to meet
their fiscal goals.
Still, the warnings may not
necessarily lead all countries
to revise their budget plans.
Rather than cut projected
spending, Spain is likely to ask
the EU to relax the country’s
3%-of-GDP deficit target for
this year—a position shared
Commissioner Dombrovskis spoke Wednesday in Strasbourg. across the country’s political
spectrum but certain to raise
nal today.” supposed to work toward concern in Brussels.
YANNIS BEHRAKIS/REUTERS
The EU introduced stricter bringing government debt Spain has been run by a
fiscal rules for countries using down to 60% of GDP. But the caretaker conservative govern-
the euro in 2013 as a response rules allow some budget items ment while political leaders
to the sovereign-debt crisis, to be stripped out, including struggle to form a new one ac-
which put the future of the eu- the cost of extraordinary ceptable to the fragmented
rozone into doubt. events. parliament elected on Dec. 20.
Officials in Brussels get to The warnings sent on A joint governing proposal
review eurozone budgets be- Wednesday aim to alert coun- by the Socialist party and busi- Some of the thousands of migrants stranded in Greece begged
fore they are adopted by na- tries that they need to revisit ness-friendly Ciudadanos Macedonian police to let them cross the border on Wednesday.
tional parliaments. If they their medium-term spending would call on the European
identify major problems, au-
thorities can issue formal rec-
ommendations that can lead to
fines against governments that
plans to address any devia-
tions from the bloc’s rules. The
countries will submit these
spending plans in April while
Commission to allow Spain an
extra year to meet the 3% tar-
get. Acting Prime Minister
Mariano Rajoy said he, too,
BALKAN stuck on its territory. The €700
million fund would be disbursed
over the next three years, with
€300 million for the first year
refuse to follow them. the commission will decide was open to seeking an easier Continued from Page One potentially being sent in the
Under the pact, EU govern- whether they have taken target. rently stranded in the Greek vil- coming days following European
ments have to bring their defi- enough measures in May. —Richard Boudreaux lage of Idomeni, on the northern Parliament approval.
cits to below 3% of gross do- If the six member states the in Madrid border with Macedonia, accord- A spokeswoman for the Eu-
mestic product, and are commission notified fail to act, contributed to this article. ing to Greek officials, out of a ropean Commission, the bloc’s
total of some 36,500 migrants in executive, said the Balkan bor-
the country. der measures were in line with
A Macedonian government EU agreements to stop waving
official said that its border migrants through from one
checkpoint with Greece has country to another. She said
been off-limits to migrants since that the commission was aware
told Britain’s former deputy impeccable sources and pre- launched in 2014. Tuesday, while Greek police said of the risk that new migrant
prime minister, Nick Clegg, sented in a robust, accessible The palace has registered no refugee had left the country routes could open up and was in
that the EU was heading in the fashion,” a spokesman said. complaints on behalf of other via Idomeni since Monday permanent consultations with
wrong direction, according to The Sun is owned by News members of the royal family morning. EU leaders had antici- countries in the region, includ-
the Sun. Corp, the publisher of The to IPSO, including last year af- pated the full closure of the Bal- ing Albania, Bulgaria and Roma-
Buckingham Palace vigor- Wall Street Journal. ter the Daily Mail newspaper kan trail at a summit in Brussels nia.
ously denied the report and The dispute comes amid an chartered a helicopter to fly on Monday, saying that the ille- In response to the moves,
declined to comment on the increasingly heated public de- over the home of Prince An- gal flow of migrants through Hungary extended a declaration
details of what it referred to bate in the U.K. over its rela- drew, the queen’s son, to take Southeastern Europe was com- of a crisis situation that is al-
as “spurious, anonymously tionship with the EU, ahead of photographs of preparations ing to an end. ready in place in several border
sourced claims,” according to a June 23 referendum on its for his daughter’s 25th birth- The leaders of the EU and counties, increasing the number
a statement. “The queen re- continued membership. British day party. IPSO found the Turkey agreed at the meeting of police patrols and giving au-
mains politically neutral as Prime Minister David Cameron Daily Mail in breach of its on the outlines of a deal in thorities more leeway to act.
she has for 63 years,” it said. is spearheading the campaign code of conduct and required which Ankara would take back The closure of the Balkan
Mr. Clegg said the story for the U.K. to remain in the the newspaper to publish the migrants who arrive in Greece corridor “means for Hungary
was “nonsense” and that he bloc, while other senior politi- watchdog’s decision. from Turkish shores, including that we don’t know what reac-
had no recollection of that cians—including several mem- An IPSO spokesman said Syrian refugees. But they cau- tion this will prompt from the
conversation. bers of his cabinet—support the organization doesn’t com- tioned they wouldn’t hammer illegal migrants already there,”
The Sun said it would de- Britain’s exit. The British pub- ment on individual complaints out some important aspects of Hungarian Interior Minister
fend the complaint vigorously. lic is divided, with opinion while they are under assess- the accord until late next Sandor Pinter said at a news
“The Sun stands by its story, polls generally showing more ment. The body had received a week. conference, expressing concern
which was based upon two support for remaining in the number of complaints about The deal would operate un- that migrants could try to travel
bloc than leaving. the Sun article, he said. der a one-for-one principle in through Hungary.
The queen is the U.K.’s offi- The organization typically which EU countries would take Hungary has had one of the
cial head of state but is ex- encourages parties to resolve Syrian refugees from camps in most hawkish responses to the
pected to remain politically disputes among themselves. Turkey for every Syrian refugee crisis. The route through Serbia,
neutral and can’t vote in gen- When that isn’t possible, IPSO Turkey takes back from Greece. Croatia and Slovenia had be-
eral elections or the EU refer- will conduct its own investiga- In return, the EU agreed to come the main thoroughfare for
endum. She has occasionally, tion and make an assessment. speed up its work on Turkey’s migrants since Hungary closed
however, made subtle inter- If the complaint is upheld, it EU membership application and off its borders with Serbia and
ANDY RAIN/EUROPEAN PRESSPHOTO AGENCY
ventions. Days ahead of a 2014 will then determine how the Ankara’s bid for visa-free access Croatia last year with a razor-
referendum on Scottish inde- media outlet should respond, for its citizens to the bloc. The wire fence.
pendence, she told members whether through a correction EU is also set to increase the €3 Hungary also plans to ensure
of the public outside a church, or some other action. billion ($3.3 billion) it had al- nighttime lighting along its bor-
“I hope people will think very ready committed to help Turkey ders in the south and is ready to
carefully about the future.” cope. extend its razor-wire fence
Wednesday’s complaint is Also on Wednesday, Euro- along its border with Romania
the first Buckingham Palace pean governments approved a within 10 days if needed, Mr.
has made related to the queen See the story develop. new emergency fund for human- Pinter said.
since Britain’s press watchdog, itarian crises, which is most im- —Margit Feher in Budapest
the Independent Press Stan- Download on the App Store mediately aimed at helping and Valentina Pop in Brussels
dards Organization, was Greece cope with the migrants contributed to this article.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A4 | Thursday, March 10, 2016
Yemen Rebels and Saudi Arabia Hold Talks
Prisoners swapped
between Houthis and
Saudi-led coalition, but
scope of talks unclear
Saudi Arabia has begun di-
rect talks with Houthi rebels
over the nearly yearlong war
in Yemen, which has become a
test of Riyadh’s determination
to defend its interests aggres-
sively in the region.
By Mohammed al-Kibsi
in San’a, Yemen, and
Asa Fitch in Dubai
The Saudi-led military co-
alition and an official for the
rebels said on Wednesday the
talks were taking place near
the Saudi-Yemeni border. But
the two sides appeared to dif-
fer over the agenda of the ne-
gotiations, which began Mon-
day.
“The talks focus on ways of
ending the war and starting an
immediate cease-fire,” Houthi
spokesman Mohammed al-
Shire’i said. The coalition indi-
cated only that the negotia-
tions had created a “state of
Japanese
Court Halts
2 Nuclear
Reactors
BY MAYUMI NEGISHI
TOKYO—A Japanese court
issued an injunction to halt
two of the four nuclear reac-
tors restarted by the country’s
utilities, backing local resi-
dents who were worried about
a repeat of the March 2011
Fukushima nuclear disaster.
Kansai Electric Power Co.
failed to show the public that
its Takahama No. 3 and No. 4
reactors are safe for opera-
tion, the Otsu District Court
said on Wednesday.
The ruling requires an im-
mediate halt to the No. 3 unit.
The No. 4 unit, restarted just
last month, had been shut
down due to a coolant leak
and an irregularity in electric
power transmission.
The two reactors had met
stricter safety standards set
by Japan’s nuclear regulator in
the wake of the Fukushima ac-
cident. By calling those safety
standards into question, the
ruling deals a blow to the
country’s tentative push to tap
nuclear power again after the
Fukushima meltdowns forced
all nuclear plants around the
country offline. It also under-
lines the failure by both utili-
ties and the government to ad-
dress widespread distrust of
nuclear power.
“Taking into consideration
the plant design and emer-
gency measures required at
Fukushima, and how it was
imperative to secure an out-
side source of power, ques-
tions persist both about quake
safety standards and measures
prepared in the event of tsu-
nami or if evacuation were
needed,” Judge Yoshihiko Ya-
mamoto said in the ruling.
The plaintiffs were resi-
dents of Shiga prefecture liv-
ing within 43 miles of the
plant, which is located in Fu-
kui prefecture. They argued
that an accident would affect
the neighboring prefecture
and possibly contaminate
drinking water from Lake
Biwa, a large lake in central
Japan.
The shutdowns derail Kan-
sai Electric’s plans to cut
prices ahead of a liberalization
of Japan’s retail power market
starting in April. Kansai Elec-
tric said it would appeal the
decision, which it called unac-
ceptable.
“We have proven the reac-
tors’ safety, referring to expert
opinion as well as scientific
and technological fact,” the
company said.
Japan has few fossil-fuel re-
sources and depends almost
entirely on imports. Before the
Fukushima meltdowns, Japan
relied on nuclear plants to
meet about 30% of its energy
needs.
The nation now has 43 nu-
clear reactors. Before Wednes-
day’s decision, four were in
operation—the two Kansai
units and two others on the
southern island of Kyushu that
aren’t directly affected by the
latest ruling.
HK JP KO ML SI IN UK FR MN PR THE WALL STREET JOURNAL.
WORLD NEWS
also as a theater in the heated for a negotiated settlement of
rivalry between the region’s the conflict after the break-
pre-eminent Sunni power, down of several mediation at-
Saudi Arabia, and its leading tempts by the United Nations.
Shiite power, Iran. “The kingdom remains
The Houthis adhere to the committed to reach a political
Zaidi offshoot of Shiite Islam. solution in Yemen,” Saudi For-
Iran supports the Houthis po- eign Minister Adel al-Jubeir
litically but denies sending said in the capital Riyadh,
them weapons. adding that the kingdom
Yet despite Iran’s vocal sup- would continue to support
port, a Houthi official on U.N. efforts to end the conflict.
Wednesday tried to distance Farhan Haq, the deputy
the movement from the Is- spokesman for U.N. Secretary-
lamic Republic amid the talks General Ban Ki-moon, said the
with Saudi Arabia. U.N. didn’t play a role in ar-
KHALED ABDULLAH/REUTERS
Senior Houthi official ranging the talks on the bor-
Yousuf al-Faishi wrote in a der but that U.N. envoy Ismail
Facebook post that Iranian of- Ould Cheikh Ahmed was con-
ficials “should keep silent,” a tinuing his efforts to arrange
day after an Iranian military further face-to-face negotia-
official suggested it could as- tions.
sist the Houthis in a manner Ibrahim Fraihat, a senior
A Houthi militant guarded a January protest in San’a against U.S. support for Saudi-led airstrikes. similar to its involvement in foreign-policy fellow at the
Syria. Iran has sent military Brookings Institution in the
calm” in the border area to al- It was unclear if the Yemenis Since then, however, Yemen advisers and financial support Qatari capital Doha, said direct
low the delivery of humanitar- were rebels. has become engulfed in a pro- to President Bashar al-Assad talks offered better chances
ian aid. Supported by the U.S., a tracted, seesaw war also in- as he counters a five-year for a political solution than
Both sides said they had Saudi-led coalition of mostly volving ground forces from challenge to his rule. earlier rounds of indirect ne-
swapped prisoners, with the Sunni Arab states launched an Saudi Arabia, other Sunni In its statement, the coali- gotiations.
coalition adding that the air campaign against the monarchies of the Gulf, Sudan tion said Yemeni tribes inhab- “It’s a humble step in the
Houthis had released a cap- Houthis in March, aiming to and Egypt. And rather than iting the Saudi-Yemeni border right direction of trying to
tured Saudi soldier and freed quickly unseat the rebels and merely being a local conflict region were mediating the reach a solution,” he said.
seven Yemenis detained in a reinstall President Rabbo Man- involving some outside par- talks. The development could —Ahmed Al Omran in Riyadh
combat zone near the border. sour Hadi to power. ties, it has come to be seen represent a possible avenue contributed to this article.
Biden Criticizes Palestinians Over Attacks
BY RORY JONES tacks, according to Israel’s for-
eign ministry. More than 150
TEL AVIV—U.S. Vice Presi-
dent Joe Biden criticized the
silence of Palestinian leaders
Palestinians, mostly alleged
attackers, have also been
killed by Israeli security
following a wave of Palestinian
gun and knife attacks against
Israeli Jews, along with the
forces, according to Palestin-
ian officials.
Following months of vio-
stabbing death of an American lence and deteriorating pros-
tourist. pects for a two-state solution
The visiting vice president to the Israeli-Palestinian issue,
on Wednesday said that there the Obama administration is
was no justification for Pales- considering one last push to
tinians attacking Israelis and revive the peace process be-
that the U.S. stood behind Is- fore the president leaves office
rael in defending itself. The in January, though the vice
U.S. “condemns these attacks president isn’t expected to
and condemns the failure to launch any major initiatives
condemn these attacks,” said while in Israel.
Mr. Biden, standing alongside The two sides had been
DEBBIE HILL/PRESS POOL
Benjamin Netanyahu at the Is- publicly trying to move the re-
raeli prime minister’s official lationship back onto an even
residence in Jerusalem. keel after disagreements on
In a separate statement, Mr. the Iranian nuclear negotia-
Netanyahu said, “While Israel tions last year. Iran intruded
has many partners in this de- on Wednesday, however, as it
cisive battle, we have no bet- U.S. Vice President Biden, left, met with Israeli Prime Minister Netanyahu in Jerusalem on Wednesday. test-fired two midrange ballis-
ter partner than the United tic missiles despite U.S. pres-
States of America. ” American identified by the Wednesday morning. Two Pal- separation barrier between Is- sure on Tehran to curtail its
Mr. Biden met with Pales- State Department as Taylor estinians opened fire near Je- rael and the Israeli-occupied missile program.
tinian Authority President Allen Force. rusalem’s Old City, wounding West Bank. A day after carrying out
Mahmoud Abbas later in the Palestinian officials couldn’t one, before being shot and Israeli officials also said several missile tests, the Ira-
West Bank city of Ramallah, be reached to comment on the killed by security forces, police they would withdraw work nian military fired Qadr-H and
but the two statesmen didn’t alleged Fatah statement. said. A Palestinian was also permits in Israel for families Qadr-F missiles from sites in
make any public remarks. Mr. Biden’s arrival on Tues- shot and killed by Israeli secu- of Palestinians who perpetrate northern Iran and traveled 870
In his comments, Mr. Ne- day coincided with a surge of rity forces at a checkpoint attacks and said they planned miles to the country’s sparsely
tanyahu said Fatah, the Pales- Palestinian stabbing attacks in near East Jerusalem after at- to shut Palestinian media out- populated southeastern coast,
tinian political faction headed Jerusalem and Tel Aviv, as tempting to stab a soldier, the lets perceived to incite vio- the semiofficial Tasnim News
by Mr. Abbas, had issued a well as Jaffa. Israeli police military said. lence. Agency reported.
statement praising a stabbing said more than a dozen people In response to the attacks, Since September, Palestin- Mr. Biden warned on
spree on Tuesday in the Israeli were wounded in assaults on Israeli officials said the gov- ian assailants have killed more Wednesday that the U.S. would
port of Jaffa. One of those Tuesday. ernment would complete con- than 30 Israeli civilians and act if Iran breaks the nuclear
killed in the assault was an The attacks continued on struction of gaps in Israel’s soldiers in more than 300 at- deal.
Iran Continues Missile Tests U.S. Captures Islamic
In Defiance of U.S. Pressure State Weapons Expert
BY DAMIAN PALETTA providing further details. His
AND GORDON LUBOLD actual role in the organization
BY ASA FITCH was disclosed Wednesday.
WASHINGTON—The U.S. The development came as
DUBAI—Iran test-fired two military captured one of Is- U.S. and Western officials
types of midrange ballistic lamic State’s top chemical- have grown increasingly con-
missiles on Wednesday, ex- weapons experts in a recent cerned about the terror net-
tending a barrage of tests this raid in northern Iraq and has work’s plans to use chemical
week following vows by offi- spent several weeks interro- weapons against enemies and
cials to press ahead with its gating him about the terror in the U.S.
missile program despite U.S. network’s capabilities and Director of National Intelli-
pressure to curtail it. planning, U.S. officials said gence James Clapper told
The Islamic Revolutionary Wednesday. Congress last month that Is-
Guard Corps fired off “Qadr-H” The detainee, identified as lamic State already has used
and “Qadr-F” missiles that Sulayman Dawud al-Bakkar by chemical weapons “numerous
traveled 870 miles from sites those familiar with the opera- times” in Iraq and Syria, add-
OMID VAHABZADEH/ASSOCIATED PRESS
in mountainous northern Iran tion, was expected to be re- ing that “aspirationally, they
to the country’s sparsely popu- leased to the Iraqi government would like to do more.”
lated southeastern coast, the at the end of this week.
semiofficial Tasnim News The chemical-weapons ex-
Agency reported. pert had previously worked at
Officials have grown
The tests followed tests of Iraq’s Mosul University, later concerned about the
several ballistic missiles from joining Islamic State, one of
silos in central Iran, the coun- those people said.
group’s plans to use
try’s first since the U.S. Trea- The capture was among re- chemical weapons.
sury Department sanctioned 11 cent U.S. advances in a con-
Iranian entities in January Iran test-fired a ‘Qadr-H’ long-range ballistic missile Wednesday. tinuing, though uneven, effort
over alleged links to the mis- to counter Islamic State, The U.S. military has now
sile program. one of the missiles bore the There are also substantial U.S. which has maintained a at least twice managed to
Wednesday’s tests drew an slogan in Hebrew, “Israel military assets in the region. stronghold in Iraq and Syria capture and interrogate a per-
immediate rebuke from the should be wiped off the earth.” Mohammad Ali Jafari, the while also recently expanding son with valuable intelligence
White House and State Depart- The State Department said commander of the Islamic Rev- into parts of Libya. about Islamic State’s opera-
ment, while also drawing close it couldn’t confirm that the olutionary Guard Corps, said In one airstrike last week tions.
attention in the U.S. presiden- missiles had graffiti threaten- most of Iran’s arsenal of mis- in Syria, Pentagon officials In May, U.S. special-opera-
tial campaign. ing Israel, but Mr. Kirby said siles was capable of reaching believe they killed Abu Umar tions forces conducted a raid
Secretary of State John the U.S. condemns “all threats Israel, Tasnim reported. Ira- al-Shishani, a top Islamic in Syria that killed Abu
Kerry voiced concerns about to Israel” and pledged to de- nian enemies “should be in State commander known Sayyaf, considered to be one
the missile tests in a call to fend the country. panic about the roar of the fairly widely by the nickname of the group’s financial chiefs.
Iranian Foreign Minister Javad Israel’s foreign ministry IRGC missiles,” he said. “Omar the Chechen.” His wife, Umm Sayyaf, was
Zarif, State Department condemned the tests and Iranian missile launches Mr. al-Bakkar was captured detained and interrogated by
spokesman John Kirby said. called on the international were a point of debate after during an operation more the U.S. military.
Mr. Kirby said the U.S. would community to act decisively Iran reached the nuclear deal than a week ago that the Pen- The intelligence from that
consider unilateral and inter- against further test launches. with six world powers includ- tagon acknowledged last raid helped U.S. officials run
national measures to respond The U.S. sees Iranian mis- ing the U.S. in July. week. numerous operations against
to the tests. siles as a threat to Israel, its —Felicia Schwartz Officials at the time said the group and crack down on
Iran’s semiofficial Fars key Middle Eastern ally, and to in Washington they had captured a high- its access to money, officials
News Agency reported that Arab allies in the Persian Gulf. contributed to this article. ranking operative, without have said.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
a quarter point to 2.25% as it
World took action to lift stalling prices
and support the economy.
Watch “Further policy easing may be
required to ensure that future
average inflation settles near the
middle of the target range,” said
Reserve Bank of New Zealand
Gov. Graeme Wheeler.
NEW ZEALAND Uncertainty about the global
outlook, concerns about the con-
Bank Surprises With tinued strength of the New Zea-
Interest-Rate Cut land dollar, and a desire to boost
New Zealand’s central bank inflation all likely played a part
unexpectedly cut rates Thursday, in the central bank’s decision.
lowering the official cash rate by —Kate Geenty
Escale Time Zone.
WORLD NEWS
FRANCE
Investigators Raid
FIFA’s Paris Office
Investigators carrying out the
criminal inquiry into former FIFA
President Sepp Blatter seized
documents from the headquar-
ters of the French soccer federa-
tion in Paris.
The Swiss Office of the At-
torney General said on Wednes-
day it had received assistance
from the French Financial Prose-
cution Office in carrying out the
operation on Tuesday.
Documents were taken in
connection with a suspect pay-
ment of 2 million Swiss francs
($1.98 million) that is part of the
investigation, the OAG said in a
statement.
Swiss criminal proceedings
against Mr. Blatter started in
September on suspicion of crimi-
nal mismanagement and misap-
propriation on the part of the
former chief of world soccer
amid other investigations into
misconduct at FIFA.
Mr. Blatter denies any wrong-
doing. —John Revill
Thursday, March 10, 2016 | A5
HUNGARY
President Weighs In
On Central-Bank Law
Hungary’s president asked the
country’s constitutional court to
review an amendment to legisla-
tion that would curb access to
information about the use of
central bank money.
The move on Wednesday
came amid controversy regard-
ing the way one of the central
bank’s educational foundations
was spending money.
The amendment to the Cen-
tral Bank Act, passed by the
governing-party-dominated par-
liament, stipulates that money
the bank allocates to its vari-
ous educational foundations
“loses its nature as public
funds,” thus public access to in-
formation about its use can be
limited.
The amendment “isn’t in line
with the constitution’s stipula-
tions on handling public funds
and on public information,” Presi-
dent Janos Ader, said in a state-
ment on why he didn’t sign the
bill into law. —Margit Feher
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A6 | Thursday, March 10, 2016 THE WALL STREET JOURNAL.

WORLD NEWS

China Offers Expanded Aid Pyongyang Says

It Has Advanced
To Afghanistan’s Military Warhead Ability
BY JESSICA DONATI and faces a threat of terrorism
AND EHSANULLAH AMIRI at home, which it fears could
be aggravated by chaos across BY ALASTAIR GALE was possible the device was a
KABUL—China has offered its western border. nuclear explosive, either a
the Afghanistan army ex- “Over the past few years SEOUL—North Korea said it stand-alone fusion bomb or a
panded military aid to combat China’s interest in Afghanistan has successfully made nuclear trigger for a more powerful

MASSOUD HOSSAINI/ASSOCIATED PRESS

the Taliban, according to the
Afghan Defense Ministry, a
move that reflects Beijing’s
deepening engagement with
the war-torn country.
The offer was made during
a rare, high-level visit in Feb-
ruary by a Chinese military
delegation headed by Gen.
Fang Fenghui, chief of the
Joint Staff Department of the
People’s Liberation Army, Af-
ghan officials said.
China has been wary of
publicly supporting the Af-
ghan military against the Tali-
ban, as it nurtures relations
with the militant group in an
effort to be seen as a neutral
party and help the peace pro-
cess. Deteriorating security
and the emergence of Islamic
State, however, have prompted
China to take a more active
role in Afghanistan.
The timing of Gen. Fang’s
An Afghan woman at the site of a suicide attack in Kabul on Feb. 27.
trip was seen as a show of
support for the Afghan gov-
ernment at a time when it is
losing control over parts of
the country following the
withdrawal of most foreign
troops in 2014. The Taliban
now control nearly a third of
the country, according to U.S.
and allied officials.
The Afghan military’s wish
list might include light weap-
ons, aircraft parts and uni-
forms, said Mohammad Rad-
has increased dramatically,”
said Barnett Rubin, former
U.S. State Department adviser
on Afghanistan and senior fel-
low at New York University. “It
now considers the security
and stability of Afghanistan as
important both for the domes-
tic security of China and for
the continuing growth of its
economy.”
The Chinese Defense Minis-
manish, the Afghan defense try has said that relations be-
minister’s deputy spokesman. tween the two militaries have
China’s total military aid of- been improving and that more
fered to Afghanistan amounts cooperation is in the offing,
to just over $70 million. The including in training.
sum is small compared with “Both sides are willing to
aid provided by others, includ- further deepen military ex-
ing the U.S., which has in- changes in various fields and
vested tens of billions of dol- strengthen pragmatic coopera-
lars in Afghan security forces. tion in counterterrorism,
But China’s stakes in Af- training and training of per-
ghanistan’s future are grow- sonnel in order to contribute
ing. China has substantial in- to safeguarding regional secu-
vestments planned in Pakistan rity,” the ministry said.
warheads for ballistic missiles,
a claim that, if true, would
represent a clear threat to the
U.S.
Military officials and ana-
lysts outside North Korea have
debated for years the isolated
nation’s ability to make nu-
clear explosives small enough
to mount on missiles. The
opacity of its nuclear program
makes it difficult to determine
progress.
In a report from Pyong-
yang’s state news agency on
Wednesday, North Korea said
leader Kim Jong Un was
briefed by scientists about ad-
vances in nuclear-missile tech-
nology. “The nuclear warheads
have been standardized to be
fit for ballistic missiles by
miniaturizing them, he noted,
adding this can be called true
nuclear deterrent,” the Korean
Central News Agency para-
phrased Mr. Kim as saying.
The report said the war-
heads were able to generate a
thermonuclear reaction, mak-
ing a more powerful form of
explosion if a hydrogen-based
weapon is used. North Korea
said its latest nuclear bomb on
Jan. 6 was a hydrogen-based
explosive, although outside ex-
perts said the relatively small
size of the blast made it un-
likely that it was caused by a
typical hydrogen bomb.
Photos released by North
Korea’s state media showed
Mr. Kim talking with officials
while standing close to a large
thermonuclear device.
Also shown in the photos
were missiles that appeared to
be similar to long-range ballis-
tic missiles known as KN-08,
which were first displayed by
North Korea in 2012. A modi-
fied version of the KN-08 was
shown at a parade in Pyong-
yang last year with a blunter
end that experts said could be
designed to carry a nuclear
warhead. The KN-08 hasn’t
been tested by North Korea
but analysts estimate it would
have a range of several thou-
sand kilometers.
There was no way to verify
the claims made in the latest
report, which follow other
threatening statements made
by North Korea in recent days
as it has responded to interna-
tional sanctions over its latest
nuclear and rocket tests.
North Korea has a track re-
cord of using its state media
to make bold claims about its
military power. Mr. Kim re-
cently called for the nation’s
nuclear weapons to be ready
for immediate use, and the top
military body said it was pre-
pared to take a pre-emptive
nuclear strike on the U.S.
mainland and South Korea.
Such rhetoric is common
during military drills in South
Korea at this time of year,
which Pyongyang describes as
a rehearsal for invasion.
U.S. military officials say
North Korea likely has the
ability to mount a nuclear ex-

Advancing the Science metal sphere. Melissa Han-

ham, a senior research associ-
ate at the James Martin Cen-
plosive on a ballistic missile
that could threaten the Ameri-
can mainland but also note

of Smart Energy ter for Nonproliferation

Studies in California, said it
that it hasn’t demonstrated
such a capability.

Can a ‘Go’ Pro Slow

Google’s Gaming Roll?
BY ALASTAIR GALE
AND JONATHAN CHENG
SEOUL—In the battle to de-
fend humans from another
humbling by computers, has
mankind got the right repre-
sentative?
The ancient Chinese board-
game of Go was the last pro-
fessionally played game in
which top pros were unchal-
lenged by machines. Not any
longer.
South Korean grandmaster
Lee Se-dol was beaten in the
first game of a best-of-five Go
tournament against Google-
developed artificial intelli-
gence project AlphaGo on
Wednesday in Seoul.
“I am in shock. I never
thought I would lose,” Mr. Lee
said after the match.
Go is a simple looking but
hugely complex game using
A global consortium of leading universities, the Siebel Energy black-and-white counters to
win territory on a 19-by-19
Institute fosters innovative and collaborative energy research. grid of lines. It is played by
around 40 million people,
mostly in East Asia.
The Institute funds research grants in data analytics, including It represents a quantum
leap for computers from when
statistical analysis and machine learning, to accelerate IBM’s Deep Blue beat world
chess champion Garry Kasp-
advancements in the safety, security, reliability, cost efficiency, arov in 1997, and when the
Watson supercomputer tri-
and environmental integrity of modern energy systems. umphed over flesh-and-blood
contestants in the TV quiz
show “Jeopardy” in 2011.
Mathematicians have long
studied Go and some say that
within just the first 40 moves,
there are more possible legal
A D V I S O R Y B O A R D
positions than atoms in the
observable universe, a number
roughly 80 digits long.
The babyfaced 33-year-old
Mr. Lee has been on the front
of almost every national news-
paper as South Korea has be-
come transfixed.
The downtown hotel where
the match is being played has
been turned into a Las Vegas
Strip hotel on prizefight night,
with public figures coming and
going to soak in the slow-mov-
ing action.
Mr. Lee is by far the most
successful active Go profes-
sional, with 18 world titles
since he turned pro in 1995.
But he has had less success in
recent years, winning only one
tournament last year.
The rising star of Go is an
18-year-old Chinese player, Ke
Jie, a younger player who has
dominated in the past few
years.
Mr. Ke is undefeated
against Mr. Lee, having beaten
him twice this year. In 2015,
he became the first player
since Mr. Lee to win two world
titles in one year.
Mr. Ke made his thoughts
known about Mr. Lee’s loss
soon after play finished. “Al-
phaGo may have defeated Lee
Se-dol, but it can’t beat me,”
he wrote on his Weibo ac-
count, a Twitter-like social-
media service in China.
Demis Hassabis, founder of
Google DeepMind, the devel-
oper of AlphaGo, said before
the tournament that Mr. Lee
was the ideal professional to
test the program against be-
cause of his pedigree, but fu-
ture matches might include
Mr. Ke and other professionals
from China and Japan, where
Go is also popular.
Go experts generally agreed
Mr. Lee failed to recover from
a bad move early in the open-
ing game. “Is he going to bring
his A game tomorrow? He’d
better,” said Andrew Jackson,
vice president of operations at
the American Go Association.
GOOGLE DEEPMIND/AGENCE FRANCE-PRESSE/GETTY IMAGES

The Siebel Energy Institute is a project of the Thomas and Stacey Siebel Foundation.
All research results will be shared in the public domain. With some of the greatest minds in
engineering and computer science, the Siebel Energy Institute will push the boundaries of
innovation to address today’s pressing energy challenges.

www.SiebelEnergyInstitute.org

Lee Se-dol, right, makes a move during the Go match Wednesday.

For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL. Thursday, March 10, 2016 | A7

U.S. NEWS
Split Levels for Housing Market Stem-Cell Research
Lower-price homes
sell quickly while
Some low-price homes on
the market have been fore-
closed on, have been vacant
Promising for Eyes
inventory on the and need extensive work,
driving potential buyers to BY KAT LONG something that we always
higher end piles up the even smaller subset of thought was possible,” he said.
homes that are ready to live The best treatment options More than 20 million peo-

STUART PALLEY FOR THE WALL STREET JOURNAL

BY JOE LIGHT
A two-bedroom house in Los
Angeles listed for $585,000 re-
ceived 10 offers in the first
week it hit the market, with
the winner agreeing to pay
$640,000.
Meanwhile, a four-bedroom
house a few miles away, priced
at $3 million, sat on the mar-
ket for more than a month
with no offers before selling
for $2.75 million in January.
The divide in Los Angeles is
typical of what is happening
across the nation. Housing has
become a tale of two markets,
brokers and economists said,
with lower-price homes selling
quickly even as inventory of
expensive ones piles up.
Nationwide, the number of
homes for sale priced below
$100,000 fell 8.6% in January
from a year earlier, while the
number of homes above $1 mil-
Home builders’
reluctance to tackle
the entry-level market
hasn’t helped.
lion rose 15%, according to the
National Association of Real-
tors. Price bands in between
those levels show a similar
trend: The lower the price, the
smaller the growth in the num-
ber of homes on the market.
Economists cite a number
of factors. On the low end, af-
ter a slow recovery from the
housing bust, first-time buyers
are finally returning to the
market, bolstered by still-
cheap mortgages. But after
years of little new construc-
Real-estate agent Alec Traub at a Los Angeles home listed at $533,000
that went under contract within a week after getting 13 offers.
“In certain price points, it’s
really tough for buyers right
now. There’s limited inventory
and lots of demand,” said Los
Angeles real-estate agent Alec
Traub. But for high-price
homes, Mr. Traub said, “things
may be sitting on the market a
little longer.”
At January’s sales pace, it
would take about four months
to exhaust the supply of exist-
ing homes for sale, according
to the National Association of
Realtors, compared with 4½
months in January 2015. About
six months is considered a bal-
anced market.
Mark Cospito, 58 years old,
plans to close on a newly built
condominium in Naples, Fla., in
mid-April. In October, he visited
the wealthy city for the first
time, and before the trip was
over, he paid asking price for a
$240,000 condominium in a
building now under construc-
tion. That is below Naples’s me-
dian price of $340,000.
“When we visited, there
were people in the sales office
with checkbooks. They were
buying,” said Mr. Cospito. “I
did feel a little bit pressured.”
Mr. Cospito said he received
an email three weeks later say-
in, said Sam Khater, an econo-
mist for CoreLogic.
While the percentage of
homes sold within 30 days is
back to its housing-boom peak,
Mr. Khater said, the percent-
age that has been on the mar-
ket for more than six months
is eight points higher than in
the boom years.
Home builders’ reluctance
to tackle the entry-level mar-
ket hasn’t helped. In 2015, the
average home size rose to
2,720 square feet, according to
willing to pay more than $2 the National Association of
million have much more to Home Builders, from 2,660
choose from than they did a square feet in 2014.
year ago. Tim Lewis, a luxury-home
“There’s so much coming out builder in Northern California
of the ground in those higher and Nevada, said he has seen
price ranges,” Mr. Duffy said. sales slow for homes priced
According to the Naples above $500,000 and is starting
Area Board of Realtors, while to search for lots on which he
the number of homes for sale can build cheaper homes. He
priced below $300,000 fell 9% said buyers in expensive com-
between January 2015 and munities are still coming in to
January 2016, the number of look but are more hesitant to
homes for sale listed above buy.
$300,000 rose 23%. “They’re more conservative.
Phoenix real-estate agent They wonder if we’re entering
Cami Elliott said one buyer she a recession,” Mr. Lewis said.
recently worked with who The few large builders, like
wanted a home for about D.R. Horton Inc., that have
$750,000 had more than 45 tackled the starter-home mar-
potential homes to look at. If ket are seeing success.
that buyer were looking for a “Certainly, the entry level of
home priced closer to the market is the strongest
$400,000, she said there right now, and any time we see
would only be three or four. that in the market, we expect
While rising prices typically further competition,” D.R. Hor-
draw more home sellers and ton Chief Operating Officer Mi-
builders to the market, that chael Murray told analysts ear-
trend has been slow for low- lier this year.
price homes. According to Barclays analyst Stephen
real-estate broker Redfin, Kim said other large builders
prices in the bottom third of have so far been content
homes rose 38% between 2012 watching and waiting but that,
and 2015, while the number of as the luxury-home market
homes for sale fell 39%. For stalls, more will be driven to
the upper third of homes, construct cheaper homes.
for cataracts and corneal
blindness today involve possi-
bly risky surgical implants, but
new research may point to the
growing potential for less-in-
vasive stem-cell therapies.
An international team of
scientists, led by researchers at
the University of California San
Diego, successfully treated cat-
aracts in 12 human infants by
employing their stem cells to
heal the eye, according to a pa-
per published online Wednes-
day in the journal Nature.
In a separate study also pub-
lished in Nature, researchers
from Japan and the U.K. treated
corneal blindness in six rabbits
with lab-grown stem cells,
which they said may one day re-
duce the need for corneal trans-
plants with donated tissues.
Successful results in animals
often can’t be replicated in hu-
mans, but researchers none-
theless said they found both
studies encouraging. James
Tsai, president of the New
York Eye and Ear Infirmary of
Mount Sinai, who wasn’t in-
volved with the studies, said
the techniques illustrated the
possibilities for stem-cell ther-
apies for which physicians
have been hoping. “This is
ple around the world suffer
from cataracts, which cloud
the eye’s lens. Surgery to in-
sert artificial replacement
lenses can help restore sight.
But the procedure can also
damage cells around the inser-
tion site, said Kang Zhang,
chief of ophthalmic genetics at
UC San Diego, who helped lead
the first study.
Most cataract sufferers are
elderly, but Dr. Zhang and his
colleagues conducted their
study in 12 human infants born
with congenital cataracts whose
developing eyes didn’t take well
to artificial replacement lenses.
The researchers made a rela-
tively small incision in the in-
fants’ eyes and removed the
damaged lenses, which allowed
stem cells present in the infants’
eyes to generate new lenses.
Transparent lenses grew in
both eyes, and the small inci-
sion healed within three
months. The team observed
fewer side effects in the 12 in-
fants, compared with a control
group that underwent the arti-
ficial-lens implants.
Dr. Tsai of Mount Sinai said
further research is needed to
test whether the procedure
would work in older patients.

tion, inventory is still tight.
High-end buyers, mean-
while, are more sensitive to
stock-market struggles this
year.
ing the condominium project
had sold out.
On the other hand, Brendan
Duffy, Mr. Cospito’s real-estate
agent, said buyers in Naples
GETTY IMAGES
prices rose 23%, while inven- “If you continue to see first-
tory jumped 36%. “It feels like time home buying grow faster
the laws of supply and demand than the industry overall, it
are broken,” said Redfin Chief will happen,” Mr. Kim said.
Executive Glenn Kelman. “It’s only a matter of time.” Stem cells helped infants, but more research is needed on older people.

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For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A8 | Thursday, March 10, 2016
For Kasich, Fiscal Success—at Some Cost
Ohio governor plugged
state’s budget shortfall,
but local governments
have paid the price
BY BOB DAVIS
John Kasich says he fixed
Ohio’s ailing economy and he
can fix the nation’s. But his
statehouse success came at
the expense of many of Ohio’s
cities and towns, which had to
raise taxes or cut services.
The Ohio governor’s central
argument in his bid for the Re-
publican nomination is that he
is the only candidate left who
has the experience and wiles to
run the government properly.
It is a pitch he has made at
every GOP debate. Exhibit
number one, he says, is that
he turned an $8 billion budget
shortfall into a $2 billion sur-
plus. “I’ve done it in Ohio,” he
said at a presidential debate
last month. “And I will go back
to Washington and do it again
for the American people.”
But Mr. Kasich’s accom-
plishment—and even his crit-
ics back home acknowledge he
did turn a big looming deficit
into a surplus—involves a fair
amount of luck as well as
some controversial decisions.
He kept dollars in the state
Treasury that once flowed to lo-
calities and then cut taxes
rather than replenish the local
funds. Now Cleveland and To-
ledo are asking voters for in-
come-tax increases to make up
for some of the money they used
to receive from the state before
Mr. Kasich took office in 2011.
“We in local government
MEN
Continued from Page One
So, the more male the Re-
publican electorate, the better
for Mr. Trump. Also, the an-
grier, as well.
In Mississippi, 41% of Re-
publicans described their feel-
ings toward the federal gov-
ernment as “angry”—and Mr.
Trump won a whopping 57%
of them. Meanwhile in Michi-
gan, 32% of Republican voters
said they were angry at the
federal government, and Mr.
Trump won 48% of them, com-
pared with 24% for Mr. Cruz.
And what are these folks
angry about? Here’s a pretty
good clue: When voters were
asked in Michigan whether
trade with other countries
creates jobs or takes away
jobs, just over half of GOP re-
spondents said it takes away
jobs—this is in the Republican
Party that once was the bas-
PUNDIT
Continued from Page One
“Michael, go for it!” said the
host of top-ranked “Evening
with Vladimir Solovyov” with a
fist pump three Sundays ago.
“First of all, may I ask: Is it
true that Russia is at fault for
everything?”
Mr. Bohm responded: “Well,
not for everything, of course.”
Always outnumbered and
outshouted, Mr. Bohm has ap-
peared almost every day in re-
cent months on Russian televi-
sion channels brimming with
propaganda that lauds the
Kremlin and lashes the White
House.
He says the punishment is
worth it for the opportunity to
respond to “one-sided cover-
age” that casts the U.S. as a
relentlessly malevolent force.
“Do we want to reach the 80%
to 90% of Russians who don’t
read or watch liberal media?”
asks Mr. Bohm. “We can either
refuse to participate in a farce
or accept the challenge.”
Mr. Bohm first came to Rus-
sia in 1987 and returned a de-
cade later to work for a large
insurer. The job bored him, so
he went to Columbia University
in New York to study interna-
tional relations and then wrote
a book about the Russian char-
acter titled “The Russian Spe-
cific.” It sold few copies.
He worked at the Moscow
Times from 2007 to 2014. His
ex-wife and 2-year-old daugh-
ter live in Russia, and he says
he loves living there and being
able to indulge his fascination
with Russian politics and inter-
national relations.
He won’t comment on
Even critics acknowledge that John Kasich turned Ohio’s big looming deficit into a surplus.
laughed when [Kasich] said he
balanced the budget and came
up with new money,” said
James O’Reilly, a Democratic
city councilman in Wyoming,
Ohio. “It was our money,” said
Mr. O’Reilly, a retired Univer-
sity of Cincinnati law professor.
Tough times require tough
decisions, responds Mr. Kasich’s
budget director, Timothy Keen.
“Funding local governments
won’t grow Ohio’s economy.
Cutting taxes will grow Ohio’s
economy, in the governor’s
view,” said Mr. Keen, who Mr.
Kasich’s campaign tapped to
answer questions for this story.
Douglas Holtz-Eakin, a for-
mer director of the Congres-
sional Budget Office, said Mr.
Kasich’s record shows his will-
ingness to confront issues di-
rectly, and a certain political
deftness. “It’s good politics to
tion of strong belief in free
trade. And among those who
see trade as a job killer, Mr.
Trump won going away, 42%
to 23% for Mr. Cruz.
Here’s a bit more evidence
that the Trump army is made
up of people angry over the
belief the economy has left
them behind: Among white
college graduates in Michigan,
he lost to Mr. Kasich. But
among whites without a col-
lege degree, he won by almost
20 percentage points.
Perhaps more interesting,
angry white males are sustain-
ing the Sanders campaign, not
just the Trump campaign.
In Michigan, they offset
Mrs. Clinton’s big advantage
among women and minorities.
Among women, exit polls indi-
cate, he finished just behind
Mrs. Clinton. But among men,
he won easily, 54% to 44%.
Like Mr. Trump, he seemed
to do especially well among
those who consider them-
selves stuck outside the eco-
whether he is paid for the TV
appearances. He also contrib-
utes to a liberal radio station’s
blog and taught a journalism
course last year at Russia’s top
diplomatic school.
In 2013, Mr. Bohm said in
one of his first TV appearances
that Russia was “at a primitive
stage” on gay rights.
A journalist on the program
demanded that Mr. Bohm
apologize to Russia. A nation-
alist lawmaker proposed to
“kick his a—.”
The explosive exchange “is
how I made my name as an
enemy of the people,” says Mr.
Bohm.
U.S.-Russia relations soured
rapidly following Russia’s mili-
tary interventions in Ukraine
and Syria. Sharply lower prices
for crude oil, the main export
from Russia, have mired it in a
deep economic slump.
A November survey by Le-
vada-Center, an independent
research organization in Mos-
cow, found 70% of Russians
have a negative attitude to-
ward the U.S., up from less
than 40% two years earlier.
Mr. Solovyov, who taught
economics at the University of
Alabama in Huntsville in the
early 1990s, says he welcomes
different viewpoints on “Eve-
ning with Vladimir Solovyov”
but has trouble getting for-
eigners or liberals to come on
the show. “We cherish him,”
he says of Mr. Bohm.
Last month, six Kremlin-
friendly commentators faced
off against Mr. Bohm and a lib-
eral Russian politician. Produc-
tion assistants in the audience
encouraged applause at the
right moments, usually after
Mr. Solovyov zinged a one-liner
that maligned the U.S. or
U.S. NEWS
get others to do the tough
job”—in this case raising
taxes, said Mr. Holtz-Eakin,
who is now president of the
American Action Forum, a
conservative think tank.
When Mr. Kasich was inau-
gurated, his team estimated
that the state faced a budget
hole of $7.7 billion over the fol-
lowing two years. That number
shrank significantly just two
months later when the team
discovered $822 million in rev-
enue as it prepared the state
budget. Ohio’s economy
bounced back more rapidly
than expected from the deep
recession of 2009, especially
the state’s large auto industry.
The new revenue reduced
the budget gap to $6.9 billion.
Mr. Kasich made two major
decisions to fix the problem.
He cut $3.2 billion in Med-
Democratic presidential candidate Sen. Bernie Sanders campaigning in Miami on Tuesday.
nomic mainstream. Among
those who considered income
inequality the top issue, Mr.
Sanders beat Mrs. Clinton 60%
to 39%. And among those who
FROM PAGE ONE
boosted the Kremlin.
Some of Mr. Bohm’s friends
in Moscow’s liberal journalist
community say the American is
being used as a punching bag
whose presence gives legiti-
macy to bombastic TV shows.
“It’s not a serious debate. It
turns into an emotional ba-
zaar,” says Yury Pronko, a na-
tional radio host who gener-
ally avoids going on the
shows. “They distract people
from the problems in their
own country.”
MICHAEL BOHM
Michael Bohm says
he tries not to be
‘an ugly American’
on Russian TV.
Mr. Solovyov concedes that
his show’s ratings decline
when it turns its attention to
domestic issues.
Mr. Bohm defends his ap-
pearances as a form of cultural
diplomacy and says he pays
little attention to the hate
messages he gets on Facebook,
ranging from “Yankee go
home” to threats.
Most of his on-air rivals are
good-natured once the cam-
eras are off, says Mr. Bohm.
THE WALL STREET JOURNAL.
bankroll smaller townships fiscal houses in order. “It’s a
with elderly populations. The get-out-of-jail card for local
estate tax had been divided be- officials,” he said. “If you’re a
tween the state and the locality Democrat, you also can criti-
where the deceased had lived. cize the Republican governor.”
In suburbs like Wyoming The Ohio governor’s fiscal
and Amberley, Ohio, adminis- strategy also has backing at
trators reduced police and fire home. Ned Hill, an Ohio State
staff or slowed plans to fill po- University economic-develop-
sitions. In big cities such as ment expert, said it was im-
TANNEN MAURY/EUROPEAN PRESSPHOTO AGENCY
Cleveland and Toledo, garbage portant for the state to replen-
collections were cut back, ish its so-called rainy-day
maintenance was reduced and fund, an account used to help
roads went unrepaired. balance the budget during re-
“We’re trying to satisfy the cessions. When Mr. Kasich
hue and cry from the citizens took office, the fund drained.
to fix the streets,” said Tom Now it contains about $2 bil-
Waniewski, a Toledo Republi- lion—the “surplus,” Mr. Kasich
can city-council member who talks about on the stump.
says he is a Kasich supporter. Businesses look for fiscal
Mr. Waniewski has been stability when they are decid-
lobbying Mr. Kasich, with no ing where to invest, said Mr.
luck so far, to give cities a Hill, and Ohio has scored a
larger share of the state gaso- number of wins in recent
line tax. Mr. Keen said the years.
icaid and social-service spend- state already provides signifi- They include Honda Motor
ing, mainly by reducing reim- cant funds to help cities main- Co.’s decision to expand oper-
bursements to nursing homes, tain their roads. The state also ations in the state and Fiat
hospitals and other institu- has urged localities to pool Chrysler Automobiles NV’s
tions. Instead, the state en- services and make other choice to keep assembling
couraged less-expensive in- changes to improve efficiency. Jeep Wranglers in Toledo.
home or community-based In Cleveland, revenue-shar- “Gov. Kasich and the state
care, Mr. Keen said. ing funds targeted by Mr. Ka- of Ohio have been perceptive
Mr. Kasich also shifted $2.2 sich have declined by about about the changing nature of
billion in costs to localities, a $30 million a year, said Kevin manufacturing,” Honda said in
decision that continues to dog Kelly, the Democratic city- a statement.
those governments. Specifically, council president, which is Mr.. Kasich’s campaign web-
he slashed the amount of per- roughly the size of the pro- site says the fiscal turnaround
sonal income tax and business jected budget gap. To fill the helped make Ohio one of “top
taxes that had traditionally been budget hole, Cleveland wants job-creating states in the na-
shared with local governments. to increase income taxes, mak- tion,” which analysts say is a
That reduced the projected defi- ing it hard to calculate stretch.
cit by about one-third. whether residents come out Ohio’s payroll employment
Mr. Kasich followed the rev- ahead overall from the state has grown 7.6% annually since
enue-sharing changes with $5 tax cut. “They should rework 2011, making it 24th among
billion in tax cuts, some of the math,” Mr. Kelly said. states, according to Moody’s
which also sapped local reve- Mr. Keen, the Ohio budget Analytics. That is below the
nue. In 2014, for instance, he director, said the state is a national average of 9.4%,
eliminated the $300 mil- convenient target for local though higher than the Mid-
lion estate tax, which helped politicians who didn’t get their west’s 7%.
marginalized their jobs and
prospects, are leading the way.
In the end, it may well be
that these voters are sufficient
to propel Mr. Trump to the
GOP nomination; we may well
know for sure after primaries
next week in the big industrial
states of Ohio, Illinois and
Missouri. But they probably
aren’t enough to carry Mr.
Sanders to the Democratic
nomination.
Which would set up a fasci-
nating battle in the fall. In a
PEDRO PORTAL/TNS/ZUMA PRESS
new Wall Street Journal/NBC
News poll, Mrs. Clinton beats
Mr. Trump in a hypothetical
general-election matchup, 51%
to 38%. But among white men?
He wins comfortably, 53% to
35%.
Could he hold on to such an
advantage, and build up else-
where?
think trade takes away jobs, come, in the 1990s, something Or would she eat into and
he won 56% to 43%. of a bipartisan consensus in undermine his clearest pillar
Together, in other words, favor of free trade. of strength? On such ques-
Messrs. Trump and Sanders And angry white males, tions may November’s out-
are collapsing what had be- many of whom feel trade has come be decided.
On the streets and subway in
Moscow, “people come and say
thanks for telling your side of
the story.”
POLAND
Continued from Page One
Union and the U.S., Law and
Justice leader Jaroslaw Kac-
zynski on Monday rejected for-
eign pleas to reverse the
Frequent TV sparring part- wouldn’t abide by it. The gov- changes, comparing them to
ner Igor Korotchenko, a hawk- ernment contests the court’s pressure put on Poland’s gov-
ish, silver-haired defense ana- right to rule on the matter. ernments by the Soviet Union
lyst, regularly posts photos of The Polish government during the communist era.
Mr. Bohm online, adding cap- faces international pressure, “We will be solving Polish
tions. One says: “We’re making including from Washington, to matters and disputes on our
fun of Michael Bohm, but recognize the court’s deci- own,” he told a party rally.
maybe he’s a colonel in U.S. sions, however. Foreign gov- “We can do it without foreign
military intelligence or a CIA ernments have mostly sided intervention.”
officer in deep cover. I’d love with Poland’s opposition, “And let nobody cite ties of
to see his file!” which argues that the govern- friendship here,” he said.
A book publisher tried to ment’s recent moves weaken His party has considered
cash in on Mr. Bohm by print- checks and balances and bor- Washington its closest ally and
ing a collection of his TV mus- der on autocratic. the only real guarantor of Po-
ings titled “President Putin’s U.S. diplomats visiting Po- land’s military security after
Mistake.” Mr. Bohm says he land recently told government the collapse of communism in
found out about the book only officials they expected Poland Europe in 1989. All Polish gov-
when a friend congratulated to abide by recommendations ernments over the past decade
him on its publication. from Europe’s top interna- have pushed for more military
Mr. Bohm has filed a law- tional human-rights organiza- engagement by the North At-
suit against the publisher, who tion and reverse the moves. lantic Treaty Organization to
told a Moscow radio station The court on Wednesday deter any possible attacks by
last year that he hoped to threw out most of the bill’s Russia, Poland’s historical foe.
reach an agreement. provisions, including one that Poland will host a NATO
The American has an espe- cases be reviewed in the order summit in July when it hopes
cially devoted following among they arrive and another re- to secure bigger rotations of
Russian babushkas. They send
Mr. Bohm supportive messages
quiring the court to make rul-
ings based on a two-thirds ma-
the bloc’s forces on its terri-
tory. An open disagreement
on social media, praising his jority of its members rather with the U.S. over the Consti-
calm demeanor, effort to get
across another point of view
than a simple one.
Since sweeping to power in
tutional Tribunal threatens to
upset those hopes.
and knowledge of Russian. November after promising Ms. Szydlo said on Tuesday
“He is an intelligent, good- higher welfare spending and a her administration wouldn’t
natured man who speaks the more independent role for Po- publish the court’s ruling in an
truth with humor,” says Ekat- land in international relations, official gazette, a move Polish
erina Devyatkova, a 69-year- Poland’s Law and Justice gov- law requires for the decision
old pensioner who tunes in ernment has moved to install to be binding.
regularly from a small town its own Tribunal judges. The government insists the
just outside Moscow. “I don’t The governing camp also very bill that the court an-
like the loudmouths who yell reversed appointments made nulled should have been ap-
at him.” before it took office, saying the plied in the procedure verify-
When Mr. Bohm is running previous government tried to ing its constitutionality. The
to catch the last subway of the pack the court with political court said applying the bill’s
night, the elderly ladies who rivals to undermine its elec- provisions would delay pro-
guard the ticket barriers usu- toral mandate for change. ceedings by many months and,
ally let him dart through even In the strongest sign to date in light of confusion over the
when they’re closed. “They of his willingness to risk open status of its judges, make a
feel sorry for me,” he says. conflict with the European ruling impossible.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Thursday, March 10, 2016 | A9

ARTS & ENTERTAINMENT

George Documenting
Frank Zappa
FILM

Martin BY MIKE AYERS

1926-2016
THE ROAD TO the first official docu-
mentary about Frank Zappa could end
up being as wild as his music.
Director Alex Winter is using a
monthlong Kickstarter campaign, which
BY CHARLIE WELLS AND ANNA RUSSELL
kicked off Tuesday, to fund the film.
Contributors will be rewarded with ran-
GEORGE MARTIN, the legendary music pro- dom possessions once owned by
ducer who has been called the “fifth Beatle” Zappa, who died in 1993, as well as re-
because of his influential work with the band cording sessions with the musician’s
he signed in 1962, died at home on Tuesday. guitar and producer credits for the film.
He was 90. And for one lucky superfan who wants
Mr. Martin produced the majority of the to part ways with $9 million, Zappa’s
Beatles’ recordings and is credited with helping home will be available.
guide their evolution from a basic rock group Mr. Winter is seeking to raise at least
into a creative, experimental force that rede- $500,000 over the next 30 days. In less
fined popular music and culture. In the process, than 24 hours he had raised more than
the English record producer, arranger and com- $120,000. In addition to the film, the
poser—who created his own production com- George Martin funds will be used to help catalog and
pany in 1965—helped change and expand the shaped the music preserve Zappa’s archives, which remain
role of producers within the music industry. industry through in the artist’s Los Angeles home.
“Sir George Martin passed away peacefully his work with the For the project, the Zappa Family
at home yesterday evening,” his management Beatles and as an Trust has given Mr. Winter unrestricted
company, Career Artist Management, said in a independent access. “I went down in that basement
statement released Wednesday. “The family producer. and had a minor heart attack,” says Mr.
would like to thank everyone for their Winter, best-known for his role opposite
thoughts, prayers and messages of support.” Keanu Reeves in “Bill and Ted’s Excellent
Former Beatles drummer Ringo Starr re- Adventure.” “It was combined elation
ported Mr. Martin’s death early Wednesday and horror. Priority one is going to be
morning, writing on Twitter, “God bless getting it persevered, immediately.”
George Martin peace and love to Judy and his From there, he plans to get into the
family…George will be missed.” material itself and start to weave to-
Born in London in 1926, Mr. Martin culti- gether the narrative for the film. And it
vated an interest in classical music from a isn’t going to be your standard “rock-doc”
young age. He played the piano and oboe, and fare. “[I am] looking at him as a human
studied at London’s Guildhall School of Music being who happens to make music, art,
& Drama after a stint in the Fleet Air Arm, be political,” says Mr. Winter. “His philo-
ANL/ZUMA PRESS

Britain’s naval aircraft unit, during World
War II. Mr. Martin’s understanding of musical
composition helped him guide the Beatles’ ar-
rangements, introducing classical elements
such as strings or brass.
Mr. Martin’s seven-decade career in the
music industry began in 1950 when he was
hired by British music company EMI to assist
the head of Parlophone, its smallest record la-
bel. In his early years as a producer, he
worked on comedy records with Peter Sellers
and Spike Milligan. In 1961, he scored his first
number one hit with the Temperance Seven, a
British jazz band.
The following year, Mr. Martin met Beatles
manager Brian Epstein and signed the group
to Parlophone. As producer, he pushed the
band to switch drummers from Pete Best to
Mr. Starr and change the tempo for a more up-
beat sound. The Beatles’ first single, “Love Me
Do,” did well in the U.K., but it was their first
U.S. single, “Please Please Me,” that caused a
sensation and introduced the band to a
broader public. Mr. Martin, who was inducted
into the Rock and Roll Hall of Fame in 1999,
went on to produce dozens of hits for the
Beatles and other musicians. The six-time
Grammy winner still holds Billboard’s record
for producing the most No. 1 pop singles at 23.
“A producer’s role is still a mystery to
most music-listeners, isn’t it?” Mr. Martin
said in a 2012 interview with The Wall Street
Journal. “Put simply, my job was to make
sure recordings were artistically exceptional
and commercially appealing, maximizing the
qualities of artists and songs.”
His influence can be heard in many of the
Fab Four’s songs, from the frolicking early
radio, you’d have them,” he said in 2012.
“George Martin had a very broad musical
background before he met the Beatles. He had
produced classical music, light opera, jazz,”
said Mark Lewisohn, author of several books
on the history of the Beatles. “The obvious
contribution from classical was that he was a
skilled orchestrator. If they needed something
scored for strings, they didn’t need to go and
find someone else, they could use George.”
On Wednesday, Paul McCartney recalled one
such time. “I brought the song ‘Yesterday’ to a
recording session and the guys in the band
suggested that I sang it solo and accompany
myself on guitar,” he wrote in a statement on
his website. “After I had done this George Mar-
tin said to me, ‘Paul I have an idea of putting a
string quartet on the record.’ I said, ‘Oh no
George, we are a rock and roll band and I don’t
think it’s a good idea’. With the gentle bedside
manner of a great producer he said to me, ‘Let
us try it and if it doesn’t work we won’t use it
and we’ll go with your solo version’. ” The song
went on to become “one of the most recorded
songs ever,” the musician added.
In 1965, Mr. Martin left Parlophone to form
his own production company, Associated Inde-
pendent Recordings. As a free agent, no longer
tied to a record label, he was hired by EMI and
other labels to produce songs for the Beatles
and musicians including Elton John, Sting,
Carly Simon and Celine Dion—in the process,
helping to change the role of a producer.
sophical world views, the sexual politics
of who he was during the sexual revolu-
tion, and being a devoted family man—
these [characteristics] were very pro-
nounced in him, and this movie is about
Covach, director of the Institute for Popular these very polarizing cultural influences.
Music at the University of Rochester in New People love him or really don’t get him at
York. “As they became more creative rather all. And that’s compelling, too.”
than administrative people, producers began Mr. Winter has started work on the
to think they needed to work within the struc- film, most notably by interviewing
ture that artists work under.” Zappa’s wife, Gail, before she died this
Through the years, Mr. Martin continued to past October. He’s also filmed in the
be at the forefront of the music industry, even vault and started to go through some
as the Internet changed its trajectory. In 1999, of the materials Zappa left behind, such
at the height of the dot-com boom, he agreed as sculptures, paintings, clothes he
to serve as advisory board chairman to garage- made, numerous musical recordings
band.com, a San Francisco startup that aimed and films he shot. “I have a story in my
to find new talent based on listeners’ ratings. head,” he says. “But I’m also hopeful
“The music business generally has a prob- that I can throw most of that away be-
lem in that it’s become less aural,” Mr. Martin cause I see something else in the ar-
said in a 1999 interview with The Journal. chives that points me in the direction.”
“Nowadays people like a song not because it’s
a great song, but because the singer is beauti-
ful or nicely dressed…It’s unfair to the music,
but we’ve got to contend with that, and this
is one way of dealing with that.”
Mr. Martin’s final studio recording was in
1998, but he stayed active until his final days.
In 2002 he arranged music for the Queen’s
Golden Jubilee. With his son, Giles, he pro-
duced “Love,” the 2006 soundtrack for a
Cirque du Soleil show of the same name fea-
turing music from the Beatles.
As news of his death reached fans and
friends around the world Wednesday, tributes
poured in on social media. “I’m so gutted I
don’t have many words,” John Lennon’s son
Sean Ono Lennon wrote on Instagram. On Twit-
ZAPPAMOVIE.COM

drumroll in “She Loves You” to the first “It used to be in the U.S. and the U.K. that a ter, British musician Mark Ronson, meanwhile,
plaintive cry on “Help.” For Mr. Martin, first producer was basically a salaried employee called Mr. Martin “the greatest British record
impressions were important. “If you could whose job it was to make sure the company’s producer of all time,” adding “We will never
grab teens’ imaginations right away over the studio time was being used wisely,” said John stop living in the world you helped create.” Alex Winter in his Kickstarter pitch.

A Master’s Impact Botticelli himself.

REVIEW
RICHARD CORK
London
NOW THAT Sandro Botticelli is so pop-
ular, we can hardly believe he was for-
gotten for over 300 years, re-emerging
only in the 19th century as an out-
standing Renaissance painter and
draftsman. Visitors to the Uffizi in Flor-
ence marvel today at its two Botticelli
masterpieces: “Primavera” and “Birth of
Venus.” And the Victoria & Albert Mu-
seum’s major survey begins by reveal-
ing how widespread his influence be-
came in the modern era.
The very first exhibit is a clip from
“Dr. No,” where Sean Connery gazes at
Ursula Andress emerging from the
waves clutching a conch shell. The
homage to Botticelli’s far larger shell,
from which Venus is born, becomes
even stronger in a clip from Terry Gil-
liam’s “The Adventures of Baron
Munchausen,” where the near-naked
Uma Thurman poses in a colossal shell
while extravagantly costumed men
gawp at her with slavering lust. René
Magritte chose a woman from “Primav-
era,” instead, when he made his bizarre
colored drawing in 1957. Weirdly, she is
placed on the back of a bowler-hatted
man seen from behind. He seems obliv-
ious, and yet Andy Warhol made sure
Heaven” transforms the Venus into a
hermaphrodite. As for David LaChapelle,
he imagines the Venus as a vacuous
blond model adored by two muscular
heroes, one of whom hides her modesty
with a shell shaped like a fig leaf. But
Valie Export in “Expectation” made a
more serious point back in 1976, by plac-
ing a photograph of herself on Botticelli’s
“Madonna of the Pomegranate.” Ms. Ex-
port holds a vacuum cleaner, implying
that patriarchal oppression had forced
her to adopt a menial role far removed
from Renaissance glory.
The second section in this carefully
researched show explores the rediscov-
ery of Botticelli by Pre-Raphaelites like
John Ruskin and Dante Gabriel Rossetti
in the 19th century. Several purchased
his work, and William Morris even de-
signed a tapestry called “The Orchard”
where four robed women inspired by
“Primavera” symbolize the four seasons.
A prominent banner held by the women
displays his specially written poem. It
declares that “the world without is
waste and worn,” before going on to cel-
ebrate the organic life sprouting “here
within our orchard close.”
At Kelmscott Manor, Morris’s country
house, Rossetti paid tribute to Botticelli
in sensuous paintings like “La Ghirland-
ata,” where a flame-haired woman plays
music. She is flanked by two angelic,
dreamy girls, both based on Morris’s 11-
year-old daughter, May. In 1867 Rossetti
In the final section, devoted to the
artist in his own time, the outstanding
works include “The Mystic Nativity,” his
only surviving signed and dated paint-
ing. Executed in 1500, a decade before
Botticelli’s death, it shows the infant
Christ as a plump, energetic little figure
who kicks a leg in the air while gestur-
ing to the Virgin with his equally bois-
terous arms. His vigor is matched by
the winged angels who clasp their com-
panions fervently in the foreground.
The climax of this superbly organized
composition occurs high above, where a
dozen angels join hands and float in an
ecstatic circle across the limpid sky.
A lyrical painting of “The Virgin and
Child With Two Angels” shows the
baby stumbling eagerly across his
mother’s lap while clasping her out-
stretched hand with ardent fingers.
Both are caught up in the most heart-
felt devotion, and the angels look on
with awe.
As well as being a masterly colorist,
Botticelli was a superb draftsman. His
well-preserved drawing “Allegory of
Abundance or Autumn” is a miracle of
vivacity, helping to explain why the in-
novative U.S. dancer and choreographer
Isadora Duncan was so entranced by
“Primavera” when visiting Florence
around 1902. She later explained that
her radical “Dance of the Future” was
inspired by Botticelli’s painting, and de-
scribed how she wanted to “dance this
picture and give to others this message
of love.” The V&A show includes a
magical four-second film of Duncan
VICTORIA AND ALBERT MUSEUM

that the face of Botticelli’s Venus be-
came a Pop icon flaunting brash acrylic
colors in 1984.
After a while, the tributes seem in
danger of becoming merely hilarious.
Cindy Sherman wears a false nose and
breast while posing as the woman in
Botticelli’s “Allegorical Portrait of a Lady.”
Joel-Peter Witkin’s “God of Earth and
acquired Botticelli’s “Portrait of a Lady
Known as Smeralda Bandinelli.” Posing
at a window, she appears at once impe-
rious and shy. After this painting en-
tered the V&A’s collection in 1901, many
experts wondered if her brilliant red hair
had been over-painted by Rossetti. But
restoration has now disclosed that this
luminous color was indeed devised by
performing outdoors, the only surviving
footage of her at work. It sums up the
combined dynamism and gracefulness
that makes Botticelli, at his best, such
an irresistible artist.
Mr Cork’s latest book, “Face to
Face: Interviews with Artists”
(Tate), was published in 2015 Botticelli’s ‘Portrait of a Lady Known as Smeralda Bandinelli’ (1470-1480).
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A10 | Thursday, March 10, 2016 THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK
Can Donald Trump
The GOP’s Trump Divide Start a Trade War?
D
onald Trump scored three more pri- A pair of national polls released Tuesday
mary victories on Tuesday even as two showed that Mr. Trump is increasingly disliked Donald Trump is a and lowering barriers, but presidents
businessman who gets have used it to justify trade-restricting
new national polls revealed the deep- in his own party. In the Wall Street Journal/NBC
things done, he keeps actions by invoking unrelated laws in-
ening Republican Party divide survey, his net negative rating telling us. His prowess structing the executive to pursue some
over his candidacy. Political Three more wins for the is now up to minus-39%. A as a negotiator is cen- definition of the national interest.
parties don’t usually nominate front-runner disliked by new Washington Post/ABC tral to his pitch for Though such proclamations can be
someone whom half of their poll found that only 45% of Re- granting him the pow- overturned by Congress, they never are.
own voters view unfavorably, half of his own party. publicans consider him “hon- BUSINESS
ers of the presidency And President Trump would find no
WORLD
but that is where the GOP now est and trustworthy” and only By Holman W.
to “make America shortage of recent statutes—having to
finds itself. 51% say they’d be satisfied great again.” do with terrorism, pollution, cybersecu-
Jenkins, Jr.
Mr. Trump’s impressive victories in Missis- with him as the nominee. Not that he actually rity, consumer safety, labor rights—that
sippi and Michigan underscored his unmovable The other striking result, in the Michigan reminds us of any he could cite as an excuse for unilateral
support with at least a third of the GOP elector- exit polls and the two national surveys, is that business great we’ve heard of. Nor does action against trade partners.
he attract endorsements from any. His He would invoke an impeccable prec-
ate across the country. His Mississippi win was Mr. Trump nearly always loses a hypothetical
latest claim to fame, in fact, was a TV edent in Ronald Reagan, who, within
especially resounding with 47%, as he won in one-on-one matchup with each of the other GOP show in which he acted out a lowbrow weeks of taking office in 1981, imposed
a rout among voters who decided more than a contenders. None of the three wants to get out parody of a business titan. sweeping “voluntary” restraints on Jap-
month ago. He lost late-deciders to Ted Cruz, of the race, however, and none of them seem to Countless emails have suggested that anese cars that amounted to price fixing.
who finished second with 36%, but Mr. Trump be practicing the strategic campaigning that any doubts voiced about President Trump Reagan further “negotiated” unilat-
again won in a conservative state that was sup- Mitt Romney advised last week to deny Mr. are but the wailing of a deranged and im- eral restraints on memory chips, fork-
posed to be the Texas Senator’s home field. Trump more delegates. potent “establishment.” Countable—in lifts, motorcycles, color TVs, machine
The race was closer in Michigan, where Mr. Marco Rubio must win his home state of Flor- fact, zero—have been those laying out an tools, textiles, steel, Canadian lumber
Trump was held to 37% but still won comfort- ida, but Mr. Cruz wants Mr. Trump to win there actual case for a Trump presidency. and even mushrooms—any one of which
ably by taking nearly half of those who had de- to knock out the Florida Senator. Yet that could As the polls keep telling us, Trump today would likely hit our more interde-
voters are Reagan Democrats—that is, pendent and currently fragile global
cided more than a month earlier. He lost late- end up being against Mr. Cruz’s long-term inter-
not conservatives but people who landed economy like a bombshell.
deciders to Mr. Cruz and John Kasich, according est since it would mean 99 more delegates in the in the Republican Party because they
to the exit polls, but they were only a quarter winner-take-all state for Mr. Trump. were tired of being looked down on by
of the Wolverine State electorate. Mr. Kasich must win in Ohio, where he is a liberals. From his first moment in
This timing matters because the rest of the popular Governor, and he came on strong in President Obama’s most immortal
GOP field began to address Mr. Trump’s politi- Michigan with 24% to contest second-place Mr. phrase may turn out to be one he didn’t
office, he can take the world
cal vulnerabilities only in the past two weeks. Cruz’s 25%. But Mr. Kasich trails badly in the mean for us to hear, accusing these vot- economy on a wild ride.
According to the Cook Political Report, citing overall delegate count and he’d need a rush of ers of clinging to guns and religion.
the media consultants at CMAG, only 9% of all new money to be competitive in the later states. “What’s the matter with Kansas?” Demo-
ads in the GOP race targeted Mr. Trump in the All of which leaves Republicans with a front- cratic gurus once asked, referring to the Reagan never campaigned as a pro-
first week of February. That changed in the runner in Mr. Trump who divides his party al- alleged blindness of the white working tectionist. He didn’t argue that America’s
class to their own economic interests. problems were caused by other coun-
first week of March when nearly half of such most as much as President Obama has divided
In Donald Trump these voters have tries. Privately, his team excused his be-
ads hit Mr. Trump. the country for more than seven years. Mr. found a champion. His lip service to havior as necessary to defuse protection-
The businessman derided the attacks in his Trump once again called himself “a unifier” on their social values may be perfunctory, ist rage in Congress while waiting for tax
hour-long, free-association press conference Tuesday, but only after deriding, in no particu- but he gives full voice to their distrust of cuts and deregulation to waken Amer-
Tuesday night that covered everything from his lar order, “lyin’ Ted,” “little Marco,” Lindsey foreigners, minorities and the panoply ica’s animal spirits. And Reagan made
golf prowess to defending the quality of Trump Graham, Mitt Romney and more. Mr. Trump of protected identity groups that Demo- sure his “voluntary” restraints were pal-
Steaks. But the real test of the message and im- may win the nomination, but he’ll need more crats worship. He also serves up the atable to the Japanese, who, in return for
pact of the ads against him will come next week than opposition to Hillary Clinton to close this complete menu of protectionism-plus- going along, were rewarded with a share
in Ohio and Florida. Republican chasm. welfare for the traditional working class of the price-fixing profits at the expense
that Democratic Party populists of the of American consumers.
“Kansas” school once urged on their Mr. Trump would be launching his
Donald Trump’s Mexican Imports own party.
Which brings us to an increasingly
trade war in a very different world, and
as a solution to America’s ills, so we can

D
onald Trump is going to build a wall,
and it’s going to be a beautiful wall,
and everyone will love it—but it’s also
going to have one notable side entrance. To
wit, the GOP frontrunner won’t let Mexicans
into America but he’ll make an exception for
Mexican drugs.
Mr. Trump released a 10-paragraph health
plan last week, perhaps in response to the criti-
cism that he has no policy details. We’ll discuss
the complete outline at a later date, but one de-
tail that leapt out for comment is his endorse-
ment of foreign pharmaceutical importation—
an idea even liberals left for dead a decade ago.
His campaign promises to “remove barriers to
entry into free markets,” because “allowing
consumers access to imported, safe and de-
pendable drugs from overseas will bring more
options to consumers.”
Sorry, it won’t. The U.S. maintains a “closed”
drug-distribution network of manufacturers,
suppliers and pharmacies—precisely because
overseas drugs often aren’t safe and depend-
able. Recent years have seen a proliferation of
pill mills and forgery rings that slip counterfeit
or adulterated products into global supply
chains. The World Health Organization esti-
mates 10% of drugs world-wide are bogus.
In the case of Mexico, the U.S. State Depart-
ment warns travellers that as many as 25% of
the medications available south of the border
are fake. The Los Zetas, Sinaloa and Juárez
cartels have diversified their portfolios into
A China Sanctions Warning
deceptive pharmaceuticals. The modern
“closed” U.S. system was created in 1999 be-
cause Southern California was awash with
fraudulent black-market compounds smuggled
from Mexico.
But even the Canadian market is contami-
nated with counterfeits from China, India and
Pakistan, where cooking pseudo-medicines is
a cottage industry. Countries that don’t respect
intellectual property also tend not to invest in
the security and enforcement to protect it—
with patient safety as collateral damage.
We suppose we should be grateful to see
Mr. Trump discover a trading relationship he
can support, but this one wouldn’t cut drug
costs. Almost nine of 10 U.S. prescriptions are
already bargain-priced generics, and in free
markets consumers typically decline to buy
potentially life-threatening drugs of unknown
origin and quality.
New drugs are price-controlled in foreign
markets, but drug makers aren’t going to ramp
up sales in Ireland or Mexico so their products
can be diverted to the U.S. Journal contributor
Scott Gottlieb also points out that the money to
inspect imports—and translate the labels into
English—erases any modest savings.
Mr. Trump is a business nationalist without
a core philosophy of government, so his policy
arc is going to be an adventure. But some of his
voters might be surprised to learn that he
wants to flood the U.S. with cheap Mexican
goods and other dangerous foreign imports.
urgent question. What would President
Trump do in office?
His wall with Mexico may or may not
be an intentionally symbolic figment of
his imagination, but isn’t immediately
actionable. Whereas President Trump
would have considerable power to pro-
voke trade wars to create an instant op-
portunity for his negotiating acumen.
As Brandon Rottinghaus and Elvin
Lim point out in a 2009 paper, the Con-
stitution may reserve for Congress the
power to regulate international trade,
but presidents increasingly have claimed
“delegated unilateral powers” to issue
proclamations under the 1974 Trade Act.
That law is aimed at expanding trade
Behind Hillary Clinton’s
Lock on Black Support
The dynamic of the
Democratic presidential
contest is clear, and
Sen. Bernie Sanders
cannot prevail unless
he changes it. He can
win in states with be-
POLITICS low-average shares of
& IDEAS black voters. But in the
By William
states with substantial
A. Galston
African-American elec-
torates, he loses badly
to Hillary Clinton. In recent days, she
has received 81% of the African-Ameri-
can vote in Georgia, 83% in Texas, 84%
start “winning again.” Since Reagan’s
day, the U.S. economy has grown 2.5-fold,
but trade has grown eightfold. Interna-
tional capital flows, once a fraction of
global GDP, now are a multiple of global
GDP. Plus, today’s economies are bogged
down with debt. Markets likely would re-
spond to Trump’s economic war in
chaotic ways Reagan didn’t have to worry
about until the 1987 crash.
Anybody who believes that a President
Trump would land in office bound by
checks and balances, unable to do much,
is kidding himself. He would have all the
powers he needs to take the U.S. and
world economy on a wild ride from the
moment he sets foot in the Oval Office.
remain controversial within the black
community—none more than the 1994
Violent Crime Control and Law Enforce-
ment Act. This lengthy and complex leg-
islation expanded the death penalty to
cover drug-trafficking crimes; added 50
new federal offenses; made drug testing
mandatory for those on probation for
federal crimes; provided nearly $10 bil-
lion for prison construction while elimi-
nating federal funding for inmate educa-
tion; and financed the hiring of 100,000
additional police officers.
Two-thirds of the Congressional
Black Caucus voted in favor of the bill,

A
in Virginia, 86% in South Carolina, 89% representing the culmination of decades
fter a four-year investigation, the U.S. supply chain of U.S. products.” in Tennessee, 90% in Arkansas and 91% of advocacy by African-American lead-
has decided to sanction Chinese telecom The memo didn’t detail the Iran trade in ques- in Alabama. Mrs. Clinton also racked up ers for tougher law-and-order policies.
giant ZTE for trade violations with Iran. tion, but in 2012 Reuters reported that a $130 71% of the Latino vote in Texas, an omi- Consider the passage in 1986 of the
This provides reason to hope nous sign for Mr. Sanders’s prospects in Anti-Drug Abuse Act that toughened
million ZTE contract to help
The U.S. cites Florida on March 15. federal mandatory-minimum-sentencing
that at last the Obama Admin- Iran’s leading telecom carrier Yes, Mrs. Clinton has a civil-rights re- law for drug offenders (including those
istration may also crack down ZTE for trade monitor Internet, text and cord stretching back decades, but so caught with marijuana) and established
on Chinese firms benefiting voice communications in- does Mr. Sanders. No doubt her frequent a 100-1 disparity in punishments for
from other illicit conduct such violations with Iran. cluded a “Packing List” with visits to African-American churches and crack cocaine compared with the pow-
as cybertheft. hardware and software from civic organizations are part of the story. dered form of the drug.
The U.S. Commerce Depart- the likes of Microsoft, Oracle But more than that: Bill Clinton’s two The Congressional Black Caucus sup-
ment said Monday that it will block American and and Dell. ZTE responded at the time by promis- terms were years of rapid progress for ported the Anti-Drug Abuse Act, and
foreign companies from shipping U.S.-made ing to “curtail” its Iran business, but U.S. officials African-Americans, who hope that a sec- most African-American members of the
equipment to ZTE without applying for a special opened investigations. ZTE said this week that ond Clinton presidency can deliver more House co-sponsored it. In his signing
export license that will face a “presumption of de- it fully complies “with the laws and regulations of the same. remarks, President Reagan singled out
During Mr. Clinton’s eight years in Rep. Charles Rangel among the handful
nial.” This will effectively bar ZTE from buying in the jurisdictions in which it operates” and
office, median household income rose of congressional leaders on the bill.
from suppliers such as Qualcomm, Broadcom and “will continue to cooperate and communicate to $57,700 from $50,700. Among Afri- Two years later, President Reagan
Intel. The Shenzhen-based firm buys technology with all U.S. agencies as required.” can-Americans, it rose by even more, to signed the Anti-Drug Control Act, which
and components from U.S. suppliers for its phones One issue is whether ZTE’s behavior reflects $40,800 from $31,000. While the overall toughened narcotics penalties, imposed
and other communications equipment. Chinese state policy. The company doesn’t have poverty rate fell by 3.5 percentage the death penalty for certain drug-re-
An internal ZTE document seen by Reuters the typical profile of a state-owned enterprise, but points, it fell for African-Americans by lated crimes and established the office
describes how ZTE schemed to buy export-con- a 2012 investigation by the U.S. House Intelligence 10.9 points, the most since the 1960s. headed by the “drug czar.” Of the 15
trolled U.S. technologies via shell companies and Committee was unable to “allay concerns that The national homeownership rate rose members of the Congressional Black
re-export them to Iran in ways that make it ZTE is aligned with Chinese military and intelli- by 3.7 percentage points, but by an even Caucus who participated in the final
“harder for the U.S. government to trace it or in- gence activities or research institutes.” Its Ira- larger 5.2 points for black families. vote on the bill, 10 supported it.
vestigate the real flow of the controlled com- nian-export shell game fits China’s extensive re- The teen pregnancy rate (ages 15 to As Americans across partisan, ideo-
19) during the Clinton years fell by 25% logical and racial lines now rethink the
modities.” Another internal memo, addressed to cord of undermining sanctions on rogue regimes
overall and by 29% for blacks, while country’s sentencing policies and police
“company leaders” and marked “no spreading with sales of everything from mobile missile births in that age group declined by 21% practices, it is worth remembering that
abroad without permission of ZTE,” describes launchers to uranium-enrichment tools. overall, and by 30% for African-Afri- today’s problems are in part the prod-
“projects in all five major embargoed coun- Last April President Obama issued an execu- cans. The abortion rate for the 15 to 19 uct of yesterday’s solutions. No one, not
tries—Iran, Sudan, North Korea, Syria and tive order declaring a “national emergency” over age group fell by 28% for blacks and by even presidential candidates, should be
Cuba.” It notes that “all of these projects depend “malicious cyber-enabled activities.” That order 32% overall. judged by past commitments made in
on U.S.-procured items to some extent, so export threatened measures harsher than the export Meanwhile, American communities very different circumstances.
control obstacles have arisen.” ban now faced by ZTE, including financial became safer places to live. According By overwhelmingly supporting Mrs.
The memo, dated August 2011, further reveals freezes on those involved in hacking and third to the Bureau of Justice Statistics, dur- Clinton despite the changed climate for
that “employees at the U.S. Research Centers of- parties doing business with them, from banks to ing the Clinton presidency Americans criminal-justice reform, African-Ameri-
ten travel between China and the U.S. carrying suppliers—effectively a financial embargo. So as a whole became 54% less likely—and cans are signaling their willingness to
African-Americans 57% less likely—to make such distinctions. Unless Mr.
R&D data,” which “severely violates the law.” far the threat has proved empty. be victims of violent crimes other than Sanders, who voted for the 1994 act as
ZTE “needs to take preventative measures im- The move against ZTE is nonetheless wel- homicide, and the probability that Afri- well as several other tough-on-crime
mediately,” it says, or “face the risk of being in- come, not least as a signal that the U.S. will en- can-Americans would be either homi- bills in the 1990s, can find another way
vestigated anytime.” Trade with Iran, the memo force what are left of the sanctions against Iran cide victims or perpetrators fell by to drive a wedge between Mrs. Clinton
admitted, “can potentially put us at risk of being in the wake of the nuclear deal. Let’s hope this nearly half. and her black supporters, he has little
put on the Blacklist by the U.S.” and “losing the isn’t a one-time action. Some aspects of the Clinton agenda hope of winning his party’s nomination.
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THE WALL STREET JOURNAL.
Democratic Fictions About the GOP and Trump
By Jason L. Riley
T
he prospect of Republi-
cans nominating Donald
Trump for U.S. president
has the party of Lincoln
and Reagan teetering on
the edge of the abyss. Democrats are
enjoying the spectacle, but that
doesn’t mean they should be allowed
to revise history.
The conventional wisdom on the
left is that the GOP brought the
Trump phenomenon on itself. For
years, insists the New York Times,
Republican leaders have embraced
and exploited “the darkest elements
Liberals are savoring his
rise, pretending that
Republicans invited it and
blithely ignoring history.
of the party’s base.” The Washington
Post adds that the party “has subtly
and not so subtly played on racial
resentment.” Other liberal pundits
have cited the tea party movement
as evidence of supposedly ascendant
GOP white nationalism. Republican
leaders, in other words, have
greased the skids for this New York
vulgarian and now want to feign
shock at his success.
The tea party charge might be the
most absurd, and not just because
the movement abetted the election of
racial and ethnic minorities such as
Tim Scott, Nikki Haley and Marco
The Arctic Front in the Battle to Contain Russia
By Scott Borgerson
And Michael Byers
C
anadian Prime Minister Justin
Trudeau arrived Wednesday
in Washington for a state
visit with President Obama. Much
has been made of Mr. Trudeau’s
“movie star” good looks and liberal
credentials. But top on the two
men’s list of priorities should be a
far less attractive subject: Russian
President Vladimir Putin and his
pivot toward the Arctic.
In addition to Mr. Putin’s mili-
tary intervention in Syria’s civil
war and his 2014 “annexation” of
Ukraine’s Crimea region, he sees
global warming as a benefit along
Russia’s northern frontier and is re-
aligning his country’s strategic pri-
orities toward the Arctic.
Tensions with Russia provide a
new reason for the U.S. to resolve
the Northwest Passage dispute
with Canada. Ottawa claims that
the channels between its Arctic is-
lands that connect the Atlantic
Ocean to the Beaufort Sea north of
Alaska are the country’s “internal
waters.” The U.S. maintains that
the waterway is an “international
strait” through which ships and
By Allysia Finley
I
Orlando, Fla.
t’s a warm, sunny Saturday after-
noon. More than 10,000 people
have gathered here at the Uni-
versity of Central Florida’s CFE
Arena—one mother and her high-
school son had driven five hours Fri-
day evening—to hear Donald Trump
speechify.
The crowd, a sea of red, white and
blue, waves placards that say “The
Silent Majority Stands with Donald
Trump.” Many have donned “Make
America Great Again” trucker caps
and “Trump 2016” T-shirts.
At a bazaar outside, vendors hawk
unofficial Trump merchandise, such
as shirts with the candidate’s face
superimposed on Superman.
The depth and range of Mr.
Trump’s support has been reflected
in polls and exit surveys, which gen-
erally show him leading the Republi-
can field among voters of all ages,
and all levels of education and in-
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Rubio. Liberals who are eager to
ascribe racial motivations to the tea
party are ignoring activists’ pre-
Obama anger at George W. Bush’s
spending policies.
In truth, the GOP leadership has
made concerted efforts in recent
years to expand the party’s appeal to
nonwhites. More can and should be
tried, but the notion that the GOP
has been waiting and hoping for a
Trump figure to lead the way is an
MSNBC fantasy. Mr. Trump’s com-
manding lead in the polls can be
attributed primarily to his celebrity
status and strong support among
economically anxious working-class
voters who don’t trust professional
politicians.
In 2002, after Sen. Trent Lott of
Mississippi lauded Strom Thurmond’s
1948 Dixiecrat presidential bid, Presi-
dent Bush condemned the statements
before a group of black ministers in
downtown Philadelphia and then
helped orchestrate Mr. Lott’s ouster
from his leadership post. In 2006 Mr.
Bush addressed the NAACP’s annual
convention and spoke openly about
his party’s racial history.
As head of the Republican Na-
tional Committee (RNC) from 2005 to
2007, Ken Mehlman spoke to more
than 50 black audiences nationwide,
including the major civil-rights or-
ganizations. He acknowledged that in
the past the party had tried “to bene-
fit politically from racial polariza-
tion” and that “we were wrong.” In
2009 Michael Steele became the first
black chairman of the RNC.
This is rather odd behavior for a
party playing to the darkest elements
aircraft from all countries have a
right of uninterrupted “transit
passage.”
With the U.S. becoming more
engaged on Arctic issues as a result
of its chairmanship of the eight-
nation Arctic Council, and the
Obama administration’s focus on
climate change, this is an oppor-
tune time to address what has be-
come a shared vulnerability to na-
val vessels from Russia and other
unfriendly nations passing through
the Northwest Passage, or terror-
ists and smugglers seeking to enter
North America from there.
In 1988 President Ronald Rea-
gan and Prime Minister Brian Mul-
roney resolved a crisis precipitated
by a U.S. Coast Guard icebreaker
entering the waterway without re-
questing Canada’s permission. Rea-
gan agreed that all such ships
would seek Canada’s consent, in re-
turn for Mr. Mulroney promising
that consent would always be
granted.
But this agreement was made
before climate change opened the
Northwest Passage to ships other
than icebreakers. Arctic passages
may never fully compete as cargo
routes with the Suez or Panama
What Donald Trump’s Believers See in Him
come. In Mr. Trump, many GOP pri-
mary voters have found a sort of
messiah—or false prophet, if you ask
his opponents—who promises to re-
store American leadership and
strength in the world.
“The country is a mess, and he’s
the only one who can help us,” says
Susan Muchacho, a retired woman
who attended the rally with her
brother.
Kori Duval, an African-American
mother of two who recalls the Rea-
gan and both Bush presidencies
fondly, shares similar sentiments:
“He will make America a country
that other countries will look to
again for support.”
The Trump disciples I encounter
aren’t angry so much as they are agi-
tated by what they perceive to be
America’s fall from greatness. They
complain about the country’s slow-
growing economy, aimless leaders,
lawless government and uncontrolled
southwestern border. And they
sincerely believe that only Mr. Trump
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OPINION
of its base. So is the fact that the
Republican presidential nominee was
John McCain in 2008 and Mitt Rom-
ney in 2012—hardly the first choices
of immigration hard-liners.
Mr. McCain denounced the
birthers, and Mr. Romney refused to
make an issue of Mr. Obama’s con-
troversial pastor, Jeremiah Wright.
Both men acted in the interest of ra-
cial comity, and if they hadn’t,
charges of racism surely would have
ensued. That those charges ensued
anyway says something about the
left’s heads-I-win-tails-you-lose ra-
cial politics.
After Mr. Romney’s defeat in 2012,
the RNC released a 100-page assess-
ment of its missteps and outlined a
strategy for moving forward. “The
Republican Party must focus its
canals, but they are much shorter
for certain journeys, and they will
attract further interest as the sea
ice retreats.
The U.S. and Canada could strike
a deal on the Northwest Passage
that both protects the U.S. Navy’s
legitimate concern for freedom of
Given Putin’s threat, the
Obama-Trudeau talks need
to address the U.S.-Canada
Northwest Passage dispute.
the seas and recognizes Canada’s
internal-waters claim. This would
take the form of a bilateral treaty,
which could then be multilateral-
ized through the conclusion of sim-
ilar treaties between Canada and
other U.S. allies.
This approach has already
proved successful with the many
bilateral treaties concluded be-
tween the U.S. and Caribbean coun-
tries for drug interdictions at sea.
But to make such a deal possible,
Canada would have to address two
fundamental U.S. concerns.
can fix these problems. The irony is
that they seem to demonstrate more
conviction and resolution than the
mercurial Mr. Trump.
By 10:30 Saturday morning, thou-
sands had already lined up for
blocks around the arena. The rally
had been scheduled to begin at
noon, but it was postponed to 2:30
after Mr. Trump abruptly canceled a
Saturday morning appearance at the
Conservative Political Action Con-
ference to campaign in Kansas. Even
so, Mr. Trump arrived nearly an-
other hour late.
During the long prelude, Elton
John’s “Tiny Dancer” and the Roll-
ing Stones’ “You Can’t Always Get
What You Want” repeatedly played.
A prayer was said asking God for
“divine intervention” in the election
and to give Mr. Trump “the wisdom
of Solomon.”
A laid-off Disney employee spoke
about having to train foreign work-
ers, purportedly hired on H-1B vi-
sas, to replace her. (During last
week’s debate on Fox News, Mr.
Trump repudiated his earlier oppo-
sition to high-skilled immigration—
and then repudiated his new posi-
tion an hour later.)
Trump adviser Stephen Miller
lambasted Marco Rubio’s immigra-
tion bill, saying it would have al-
lowed “12 million illegal immigrants
to take jobs from every single work-
ing American in this country” and
given “amnesty to drunk drivers,
sex offenders, gang members, crimi-
nal aliens.”
By the time Mr. Trump finally
took the stage, the crowd was rest-
less. He received a rock-star wel-
CORRECTION
Tuesday was the fourth day of
Nadya Savchenko’s hunger strike.
“Putin’s Ukrainian Hostage” (Review
& Outlook, March 9) misstated the
duration.
Thursday, March 10, 2016 | A11
media are much more eager for Mr.
Trump to be the face of the GOP than
are Republicans, even if liberal pun-
dits are pretending otherwise.
Today, it is the Democratic Party
that stands to gain the most politi-
cally from racial and ethnic division.
And no one knows this better than
the Obama administration. The pres-
ident counts Al Sharpton as an ad-
viser; has dispatched Vice President
BRYNN ANDERSON/ASSOCIATED PRESS
Joe Biden to tell black audiences
that conservatives want to put them
“back in chains”; and used his attor-
ney general to stir up the Demo-
cratic base by claiming that Republi-
cans are trying to disenfranchise
black voters.
Most people who follow politics
assumed that Mr. Trump would fade
eventually if he didn’t implode first.
The window is closing but it’s still a
efforts to earn new supporters and possibility.
voters in the following demographic A new ABC News/Washington Post
communities: Hispanic, Asian and polls finds that just 42% to 45% of
Pacific Islanders, African-Americans, voters who lean Republican “call
Indian Americans, Native Americans, Trump honest and trustworthy, say
women, and youth,” the report said. he understands their problems, think
“The pervasive mentality of writing he has the right personality and tem-
off blocks of states or demographic perament, or say he has the right
votes for the Republican Party must experience to be president.” Ted Cruz
be completely forgotten. The Repub- and Marco Rubio score much higher
lican Party must compete on every on those attributes, from 50% to 64%.
playing field.” Mr. Trump’s lead is shrinking. The
Donald Trump is not the answer more voters learn about him, the less
to the GOP’s problems. He was not they seem to like.
part of their future plans. He wasn’t
really invited to this party. He Mr. Riley, a Manhattan Institute
crashed it. And judging from the senior fellow and Journal contribu-
primary election results so far—he’s tor, is the author of “Please Stop
winning pluralities, not majorities— Helping Us: How Liberals Make It
most Republicans want him to leave. Harder for Blacks to Succeed” (En-
Democrats and their friends in the counter Books, 2014).
A compromise on the Northwest vast and challenging frontier. How-
Passage might create a precedent ever, provision for these invest-
for other waterways such as the ments could be written into the
Strait of Hormuz, where oil tankers agreement, and made a condition
exit the Persian Gulf, or the Qiong- for it remaining in force.
zhou Strait between the Chinese There is a long history of U.S.-
mainland and Hainan Island. U.S. Canada cooperation on security
claims to a right of uninterrupted matters, including through the joint
transit passage are contested in North American Aerospace Defense
both places. Command, established in 1957 to
Fortunately, lawyers and diplo- detect and track Soviet bombers in
mats can easily distinguish the the Arctic. There has also been mu-
Northwest Passage from these tually beneficial cooperation on
straits, on the basis of its consider- shipping through waters under na-
able length, the still-frequent pres- tional jurisdiction, such as the St.
ence of sea-ice and the current low Lawrence Seaway, which passes
level of shipping. The concern seamlessly through the sovereign
about a precedent could be allevi- territory of both nations.
ated further by the new agreement Now is the time to negotiate a
stating that it is “without preju- Canada-U.S. agreement on the
dice” to the legal status of other Northwest Passage—before it is
waterways. too late. The sea-ice is melting,
The second concern is that Can- foreign ships are coming, and
ada, after having its internal-waters there is little to stop an increas-
claim recognized, might not invest ingly assertive Russia from send-
in the infrastructure, services and ing a warship through.
other capabilities needed to protect
U.S. security and economic inter- Mr. Borgerson, an American, is
ests. These include improved the CEO of CargoMetrics. Mr. Byers,
charts, navigation aids, ports of a Canadian, holds the Canada Re-
refuge, weather and ice forecasting, search Chair in Global Politics and
search and rescue, surveillance, and International Law at the University
a credible security presence along a of British Columbia in Vancouver.
come, which was fitting since his a friend of mine,” says John Young of
speech was a remix of his debate Melbourne, Fla., “but I work with a
lines and news conferences, deliv- lot of people I don’t like.”
ered in a faux-folksy manner. Most aren’t swayed by attacks on
“The last thing that you people Mr. Trump’s business record, such as
are going to take is having a light- his bankruptcies and the allegations
weight like Marco Rubio” or “lyin’ of fraud at Trump University. His op-
Ted Cruz or some kind of politician ponents are “grasping at straws to
in charge of this country,” he in- try to find something against him,”
veighed. At one point, he slipped, says Jennifer Howland of Indian Har-
saying “we gonna protect our Sec- bour Beach. Many even view his
ond Amendment, me more than business failures as a testament to
anyone else up here.” No one else his resilience. As Mr. Young sees it,
was on stage. “Sometimes you’re going to fail.
That’s life.”
According to rational choice
In Orlando, the yearning theory—a model used to explain
for American greatness economic behavior and outcomes—
people make logical decisions that
seemed real—and fervent. optimize their interests after con-
sidering the costs and benefits. This
may help explain voting behavior:
There were dog whistles intended Trump supporters seem to consider
to bait the barbarians and bigots his pugnacity a positive attribute
whom he ostensibly believes are and view the other Republican can-
among his supporters. For example: didates as inferior.
“We have a terrible president who They want a fighter who won’t
happens to be African-American.” sugarcoat the truth or accept Amer-
There were very few blacks and ica’s slide toward mediocrity. Yet Mr.
Hispanics in the crowd. Mr. Trump’s Trump has avoided discussing per-
critics sometimes deride his fans, haps America’s biggest long-term
which has the effect of alienating problem: exploding entitlement
them. But Mr. Trump’s invective spending. Neither Mr. Rubio nor Ted
evinces his own contemptuous opin- Cruz, despite presenting more de-
ion of his “base.” tailed policies, projects the frustra-
The speech was repeatedly inter- tion that Trump voters feel. So
rupted by muted protesters who, af- they’re perceived to not “get it.”
ter being flagged by the crowd, were While Trump supporters seem to
hauled out by security. “He’s lucky be motivated by genuine patrio-
it’s not 10 years ago. Ten years ago tism—a real desire to make America
it’d be a different situation for him,” great—it’s hard not to detect an un-
Mr. Trump said of one, before derlying strain of religiosity to the
launching into a discussion of water- campaign. At the end of the rally, Mr.
boarding and torture. Trump asks his followers to take an
Many supporters claim to be ener- oath swearing to vote for him in
gized by his bombast. “Trump says
what people are thinking,” explains
Florida’s primary on March 15. “This
isn’t a campaign,” asserts Regina Re-
Bill Montgomery, a money manager ifinger of Palm Coast. “It’s a move-
who believes the country needs some ment.” Whatever you want to call it,
tough love. “No pain, no gain.” these people are true believers.
But there are also plenty who back
Mr. Trump in spite of his provocative Ms. Finley is an editorial writer
rhetoric. “Personally, he wouldn’t be for the Journal.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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A12 | Thursday, March 10, 2016 THE WALL STREET JOURNAL.

PERSONAL JOURNAL.

The Many Highs and Lows of Paris Fashion Week

In unusually eventful week,
lots of new trends and
glimpses of the future
BY CHRISTINA BINKLEY

Paris
Someone must have sent a
memo around the European
houses declaring a number of mi-
cro trends. Leopard print appeared
in dozens of collections in coats,
CLOCKWISE FROM TOP LEFT: GETTY IMAGES (3); MULBERRY; PIERRE HARDY

bags, shoes and virtually anywhere

a bit of print can go. Khaki trench
coats were a thing—
ON STYLE done best at Chanel
by Karl Lagerfeld who
did one with a plain
khaki-colored upper attached to a
lower half woven from strips of
variously shaded browns and tans
like raffia. Source of Debate
The glitz-filled 80s made their A cast of all white models at Balenciaga detracted from designer Demna
appearance, where brassy colors, Gvasalia’s stylish debut and sparked debate among fashion followers..
tiger stripes and leopard spots,
and roomy-shouldered silhouettes
reigned. The platform heel is mak-
ing a notable reappearance, often
with zany colorful details. Jewelry
is big, often more sculpture than
bracelet or necklace.
A case in point came with Brassy Belles
Kenzo, where tiger stripe suits and Troubled Transition Heidi Slimane dove into Yves Saint
Little Bo Peep dresses walked the Lanvin showed a confused collection Laurent’s haute-couture archives.
border between cool and camp. after firing its head designer last fall.
There were plenty of beautiful warrior-femme, the clothes have
clothes to be had such as the ease blouses, and long tunics look ultra sex appeal without resorting
of Loewe’s gathered skirts and comfy enough to meditate in. to over-reveals, and they’re con-
Dries Van Noten’s bathrobe coats. Backstage, Ms. Philo said she was Funky Heels The Bag structed with studious French sav-
Nina Ricci took a turn for the bet- momentarily at a loss to find Pierre Hardy exemplified this A snakeskin Mulberry bag drew raves ior faire.
ter, after two disappointing sea- words for what she was aiming trend at several shows on the runway in London. Balmain is loud. It’s in your
sons, with some of Paris’ prettiest for. Then she found some words: face vavavoom. It’s selling when
dresses in gloriously muted grays, “Stillness. It’s a busy time in the secret to street cool with his over- spirit for the brassy age that pro- others aren't. Heads up: Balmain is
greens and lilac. There was a spec- world.” size, hoodies and re-cut vintage duced disco. But this wasn’t the la- embarking on a U.S. expansion.
tacular blue sequined suit from So- After Lanvin owner Shaw-Lan jeans. Mr. Gvasalia’s reshaping fits bel’s standard remade pea coats There was no re-recreated air-
nia Rykiel. Wang fired designer Alber Elbaz Balenciaga, a brand long based on and black leather jackets. This was port hanger, iceberg, or supermar-
Phoebe Philo’s collection for last fall, most of his team dis- toying with volume. His suits for full on, in your face, handmade ket for Chanel this season. Instead,
Celine presented sturdy sandals, persed, leaving a few to muster up Balenciaga with creases down the artistry. It won’t be made-to-mea- all of the roughly 3,000 guests had
sleeveless dresses, and breezy cot- a collection. Wiser management back should appeal to daring fash- sure for clients, and can’t bear the a front-row seat, as is done at
tons for her fall collection. Mecca would have taken a hiatus from ion lovers, and the cool factor official haute couture label, but haute couture shows. From the la-
Prada presented light silks and the runway. The house sent down should infect the high-margin ac- the workmanship was extreme. A bel’s chic daytime tweeds to an or-
cottons at Prada and furry flip-flop ill-fitting, awkwardly executed cessories. red fur cape poofed into the shape ganza extravaganza for brides,
sandals and glittery shorts at Miu- clothing in fabrics that managed It doesn’t bode well, though, of a huge heart. many looks were hung with Coco’s
Miu. Summer clothes in “fall” col- to look cheap. This is as bad as a that a designer seeking urban Riot police held back crowds famous swinging pearls, enough to
lections make sense, since the col- designer-transition can go. Mr. El- street cred would cast only white outside the Balmain show on Paris’ start a likely trend of their own all
lections will begin shipping into baz’s head of womenswear Alithia models. His all-white casting was Right Bank. Possibly the most de- over again. It seemed to be making
stores in July. Spuri-Zampetti went to Paule Ka, previously controversial at Vete- rided brand showing at Paris fash- a point that Coco’s style remains
Celine took its place as an anti- where she is executing a remake ments and is noticeable amid the ion week, Balmain also generates the heart of the label no matter
dote to anything disco or even tied that should draw former Lanvin strikingly more balanced racial some of the most obsessive fan- who designs it. A spokesman for
to an era, proving that there is clients, at one third the price. mix of many runways. dom. Kanye West strutted back- the label declined to address ru-
something for everyone in these At the Balenciaga show, we saw Hedi Slimane took a deep dive stage in a fully pearled sweater mors that this was the final show
collections. Long, loose khaki why designer Demna Gvasalia’s Ve- into Yves Saint Laurent’s haute and bear-hugged designer Olivier for 82-year-old Karl Lagerfeld, say-
trench coats, oversize white tements line became an insider’s couture archives with uncanny Rousteing. Body-conscious and ing only, “No comment.”

Weather The WSJ Daily Crossword | Edited by Mike Shenk

Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.
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48 49 50 51 52 mammoth than 39 Eating nothing
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58 59 60 shrubs (“The Young
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T-storms
61 62 63 8 Chemist’s pinch Restless”
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Ath
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Flurries
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Ice T MOBILE | By Ethan Erickson Queens stadium 49 Expulsion
Global Forecasts City
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s...sunny; pc... partly cloudy; c...cloudy; sh...showers; 1 Way stoked sheet or music 46 Bud’s place 13 Magazine for electrical
Geneva 10 1 s 9 2 pc Ottawa 5 -3 pc 5 -3 s
t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice Hanoi 18 14 c 18 14 c Paris 10 3 c 11 1 pc 6 2011 Home Run 24 Shell rival 48 Lav, to a chav which Stanley resistance
Havana 29 18 s 30 18 s Philadelphia 27 15 pc 20 5 pc Derby champ 25 Circulation Kubrick was a
Today Tomorrow 49 Pub order 51 We’re all in it
Hong Kong 15 10 r 14 13 r Phoenix 30 15 s 31 14 s
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City Hi Lo W Hi Lo W 50 Dominate, together
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Anchorage 2 -3 s 4 -2 pc Istanbul 16 10 sh 16 9 pc Portland, Ore. 14 5 sh 13 6 r to buyers 18 Onion Ringers
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that covers the 43 Ovaltine 63 Flagpole finial, A R E L I T T L E J O H N
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Edinburgh 9 1 c 10 5 c Omaha 21 5 pc 21 7 s Washington, D.C. 28 14 pc 20 7 pc V I C L E A N S O N E E L
Solve this puzzle online and discuss it at WSJ.com/Puzzles.
s

Frankfurt 10 0 s 9 0 pc Orlando 30 16 s 29 18 pc Zurich 9 -1 s 8 0 c E S E O D D EWE E S S

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BUSINESS & TECH.
Once-Hot Supercell Cools
Growth at ‘Clash of Clans’ game maker slows TECHNOLOGY | B3
SUPERCELL
© 2016 Dow Jones & Company. All Rights Reserved.
Publicis Streamlines Groups VW’s U.S. Chief
To Leave Company
BY SUZANNE VRANICA
In a sweeping reorganiza-
tion, Publicis Groupe SA is
streamlining its media opera-
tions by eliminating divisions
such as Vivaki and merging
some of its ad buying groups.
The advertising holding com-
pany is also consolidating its
ad purchasing power at Publi-
cis Media, a recently formed
division.
The move is the next phase
of the Paris-based ad giant’s
companywide restructuring
plan that it unveiled in Decem-
ber, as the company tries to
reinvigorate its business. Pubi-
cis’s troubles have been exac-
erbated recently by the loss of
media business from some big
Zara Parent Inditex Cuts Store Growth, Focuses onWeb
BY JEANNETTE NEUMANN
AND ANA GARCÍA
MADRID—Inditex SA is
slowing the breakneck expan-
sion of stores that has made its
marquee brand, Zara, a global
household name, and stepping
up online sales to stay apace of
customers’ shifting shopping
habits.
Executives of the fast-fash-
ion giant said in an annual re-
sults presentation on Wednes-
day that its retail space would
grow by 6% to 8% over the next
several years, down from a pre-
vious target of 8% to 10%.
The slowdown coincides
with “an increasing contribu-
tion from organic growth and
online sales,” Chief Executive
Pablo Isla told analysts on a
conference call, without provid-
ing a breakdown. Inditex said
all its brands will be available
online in Europe and Turkey by
the end of this year.
The shift is slight but signifi-
cant for Inditex, which became
the world’s largest retailer by
sales thanks to its rapid store
expansion around the world. In-
dustria de Diseño Textil SA,
better known as Inditex, grew
to 7,013 stores in its fiscal year
ended Jan. 31 from 2,692 in
2005. That success made its
now-retired founder, Amancio
Ortega, one of the richest men
in the world.
Mr. Isla said the company
would prioritize larger, em-
blematic stores in prime real-
estate areas in major cities—
such as its flagship shops in
New York City’s SoHo district,
which is 4,400 square meters,
or 47,361 square feet, and on
Oxford Street in London, which
is 4,500 square meters—over
smaller stores.
Investors welcomed the
move, sending Inditex shares
1.7% higher to €29.92 ($32.95)
in Madrid Wednesday. The
company’s market capitaliza-
tion is about €93 billion, or
roughly $102 billion, making it
the most valuable public com-
pany in Spain.
“Online does the job of
smaller stores,” said Société Gé-
Lufthansa Budget Unit Has Bumpy Start Deal Talk at Burberry
BY ROBERT WALL
BERLIN—When Deutsche
Lufthansa AG set up its bud-
get long-haul carrier, it was
meant to signal the airline’s
fight back against aggressively
expanding Middle East carri-
ers. Instead, it has come to
symbolize the challenges Ger-
many’s largest airline faces to
restore competitiveness.
Lufthansa established the
Eurowings long-haul service
last year to lure back passen-
gers from flying on rivals such
as Emirates Airline and Qatar
Airways, which have stolen
business by offering lavish on-
board amenities and low fares.
Eurowings targets price-sensi-
tive fliers by offering fares
Lufthansa can’t match.
Services are operated by
SunExpress, a joint venture
* *
clients, such as Procter & Gam-
ble Co., Coca-Cola Co. and Wal-
Mart Stores Inc.
Publicis will at times con-
centrate its media buying cen-
trally, in a way that is similar
to how other ad holding com-
panies such as WPP PLC cur-
rently work, in an effort to
give it more leverage in the
marketplace with media ven-
dors. Publicis, however, main-
tains that its individual agency
brands will continue to play an
important role, and in some
cases will do media-buying
deals at the individual agency
level.
“Across all practices includ-
ing trading, data, analytics,
and content, I want to try and
ensure that we are leveraging
A Zara store in Nice, France. Inditex, the brand’s owner, now expects its retail space to rise 6% to 8% over the next several years, off from an earlier goal of 8% to 10%.
nérale SA analyst Anne Critch-
low. Over the past couple of
years, Ms. Critchlow said, Indi-
tex had begun to focus on build-
ing flagship stores, but Wednes-
day’s downshift in its retail-
space target reinforced what
she called a sensible strategy
shift. “Sales per square meter
are higher in large, prime stores
than smaller stores.”
Less retail space should
bring cost savings, which
means that “the longer-term
revenue outlook remains un-
changed,” Exane BNP Paribas
analyst Simon Bowler wrote in
a research report after Inditex
reported its results on Wednes-
day. “Future sales growth
should be achieved at lower
capital intensity.”
Inditex’s slowdown on store-
space expansion doesn’t mean
A Eurowings plane at Cologne-Bonn airport in Germany last year.
between Lufthansa and Turk-
ish Airlines, and would have
40% lower costs than the main
airline, the German carrier has
said. The flights from Cologne-
THE WALL STREET JOURNAL.
that scale as much as possi- timates from research firm
ble,” said Steve King, chief ex- RECMA.
ecutive officer of Publicis Me- In terms of leadership, Tim
dia. He was named in Jones, currently CEO of Ze-
December to lead the media nithOptimedia North America,
restructuring. has been named regional CEO
of the Americas for Publicis
Media, while Dave Penski,
The move is the chief commercial officer at Vi-
next phase of a plan vaki, will become chief invest-
ment officer for the U.S. at
Publicis unveiled in Publicis Media. Stephan
December. Beringer, currently CEO of Vi-
vaki, will head data and
technology at Publicis Media.
Publicis, currently the sec- The company said Publicis
ond-largest ad buyer in the Media will eventually name ex-
world behind WPP, was re- ecutives who will handle
sponsible for purchasing buying by categories such as
roughly $79 billion in ads on video.
behalf of marketers around the Until now, Publicis has kept
world in 2015, according to es- Please see PUBLICIS page B4
the company is playing down their in-person purchases.
the importance of brick-and- Online and physical-store
mortar locations, Mr. Isla said. sales are so fluid, Mr. Isla said,
“We will continue opening that the company doesn’t pro-
stores in a significant way,” he vide a breakdown of the source
said. “We are talking about of sales. Case in point: Around
prime locations, very high-qual- two-thirds of online purchases
ity store openings, combined are returned to a physical store,
with increasing our online he said.
sales.” “In many cases this is an on-
The company plans to open line return but a store sale be-
280 to 360 stores this year, in- cause the customer goes to the
cluding inaugural stores in five store and is changing the size,”
new markets: Vietnam, New Mr. Isla said. Online buyers pick
Zealand, Paraguay, Aruba and up one-third of their purchases
Nicaragua. The company, which in person at a store, he added.
has Zara and seven other store Inditex’s success is based on
concepts including Massimo reacting quickly to changing
Dutti, Pull & Bear and Bershka, consumer tastes through an ef-
opened 330 stores around the ficient supply chain, while
world last year. keeping stocks low, investors
But consumers’ demand for and analysts say. That encour-
clothes online has increasingly ages shoppers “to buy now or
supplemented or supplanted miss out,” said Berenberg Bank
The effort has been beset
by problems, though. It suf-
fered a shortage of crew mem-
bers to operate the flights, and
technical faults have disrupted
operations. A lack of reserve
planes compounded opera-
tional hiccups. A flight from
Cuba landed in Germany with
68 hours of delay. With only
two planes in its fleet right
WOLFGANG RATTAY/REUTERS
now, the airline has had little
backup when things go wrong.
Eurowings chief Karl Ulrich
Garnadt acknowledges the car-
rier has suffered teething
problems and said new desti-
nations will be added more
slowly. “In the startup phase,
due to a combination of fac-
Bonn airport are using rented tors, we suffered bottlenecks,”
Airbus Group SE A330 wide- he said.
body planes to destinations Flights to Boston and Mi-
such as Phuket, Thailand, and ami will commence later than
Varadero, Cuba. Please see BUDGET page B2
INSIDE:
MONEY &
INVESTING
New ECB Bet: Buy
Corporate Bonds
FINANCE | B5
Thursday, March 10, 2016 | B1
BY JOHN D. STOLL
Volkswagen AG said the
head of its U.S. operation will
leave in a mutual agreement
with the company, a move
coming about six months after
the Environmental Protection
Agency said the German auto
maker cheated on diesel-emis-
sions tests.
Michael Horn, an executive
instrumental in helping the
auto maker steer through the
early days of the cheating
scandal, will pursue other op-
portunities immediately, the
company said. Hinrich Woeb-
cken, recently named the new
head of North American re-
analyst Michelle Wilson in a re-
cent research note.
Sales in its current fiscal
year appear to have acceler-
ated, growing 15% in local cur-
rencies from Feb. 1 to March 7,
Inditex said on Wednesday.
For the full year through
Jan. 31, Inditex said net profit
rose 15% to €2.88 billion, com-
pared with the previous year,
boosted by a strong pickup in
sales at its Zara, Zara Home and
Stradivarius stores.
Sales at its more than 2,000
Zara stores world-wide rose
18% in the year ended Jan. 31,
compared with the previous
year.
Analysts have also cheered
the company’s effective rollout
of online stores, which haven’t
shown signs of cannibalizing its
brick-and-mortar sales.
Dries Up; Stock Slides
BY SAABIRA CHAUDHURI
LONDON—Who is the mys-
tery Burberry Group PLC in-
vestor? There isn’t one.
The takeover speculation
that drove the British luxury
retailer’s shares 6.6% higher
on Tuesday turned out to be
mistaken, according to a per-
son familiar with the matter,
sending the stock tumbling in
Wednesday trading.
The shares had soared after
a Financial Times article re-
ported on a routine share-
holder filing made in February,
showing that HSBC Holdings
PLC had accrued a stake of
more than 5% in Burberry on
behalf of what appeared to be
an undisclosed investor. That
fueled speculation about a
gional operations and chair-
man of the U.S. business, will
take Mr. Horn’s place on an in-
terim basis.
Volkswagen said Mr. Horn’s
efforts are appreciated. “I
want personally to say ‘thank
you’ to Michael Horn for the
great work he has done for the
brand and with the dealers in
the United States,” said Her-
bert Diess, CEO of the Volks-
wagen brand.
Mr. Horn, 54 years old, ran
the U.S. operation since the
beginning of 2014 and spent
25 years at Volkswagen in var-
ious roles. He has been widely
praised by dealers for his
management approach.
ERIC GAILLARD/REUTERS
A Retail Boom
Number of Inditex stores,
world-wide
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2007 ’09 ’11 ’13 ’15 ’17*
Note: Fiscal years end Jan. 31 *estimate
Source: the company
THE WALL STREET JOURNAL.
possible takeover bid or activ-
ist investment, after the FT
said Burberry had called on its
bankers to help.
On Wednesday, the person
familiar with the matter said
Burberry had learned that the
stake had been accumulated
by several HSBC entities on
behalf of multiple, separate in-
vestors, triggering the 5%
threshold.
The person said Burberry
didn’t believe that HSBC had
acted incorrectly by reporting
several trades in a manner
that would breach the thresh-
old.
HSBC declined to comment
Wednesday.
Burberry shares fell 6.7% to
1,364 pence ($19.39) in London
on Wednesday.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B2 | Thursday, March 10, 2016 * * THE WALL STREET JOURNAL.

INDEX TO BUSINESSES BUSINESS NEWS

These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.

A
Airbus Group...............B1
Alphabet......................B3
Amazon.com..........B3,B5
Aspect Capital ............ B7
Audi.............................B2
Auriel Capital
Management.............B7
B Emirates Airline ......... B1
Bank of Tianjin...........A1
Barclays.......................B5
Barclays Africa Group B5
BMW ........................... B2
Burberry Group...........B1
C-D
Daimler........................B2
Deutsche Lufthansa...B1
Dollar General.............B5
Dollar Tree .................. B5
D.R. Horton.................A7
E Qatar Airways.............B1
easyJet........................B2
E.ON ............................ B2
Eurowings ................... B1
G-I
General Electric .......... B3
HSBC ........................... B1
Microsoft.....................B3
Pioneer Investments..B5
Prudential....................B8
BMW Shares Fall, Despite Gains
Publicis Groupe...........B1
BY WILLIAM BOSTON
Q BMW AG reported strong
2015 earnings and sales gains
but its shares fell nearly 2% on
R
Wednesday after the German
Robert Bosch .............. B3 premium car maker disclosed
Ryanair Holdings ........ B2 a lower-than-expected divi-
S dend increase.
Net profit in 2015 rose 10%
Salesforce ................... B3
to €6.4 billion ($7.05 billion),
SAP..............................B3
compared with €5.8 billion a
Siemens.......................B3 year earlier. Revenue in-
Sky...............................B4 creased 15% to €92.2 billion

KRISZTIAN BOCSI/BLOOMBERG NEWS

Casino Guichard-
Perrachon..................B8
China Film Group........B4
Cisco Systems.............B3
Credit Agricole............B8
CSX..............................B2
Inditex.........................B1
International Business
Machines...................B3
L-P
Le Vision Pictures ...... B4
Mercialys.....................B8
T-W
Turkish Airlines .......... B1
Uber Technologies ...... B3
Vice Media..................B4
Volkswagen.................B2
Wal-Mart Stores.........B5
from €80.4 billion, helped by
favorable currency rates.
The Munich-based auto
maker, which produces the
namesake BMW brand sedans
and sport-utility vehicles,
Rolls-Royce, the MINI luxury
compact car, and BMW’s iconic

INDEX TO PEOPLE motorcycles, forecast another

record year in sales in 2016 af-
ter selling 2.25 million vehi-
BMW forecast another record year in sales in 2016 after selling 2.25 million vehicles last year.

A H R cles last year. But investors “We understand that the by BMW family owners Stefan public appearances have raised
Adam, Michael............B7 Hynes, Daniel..............B5 Ramos, Maria..............B5 noted that BMW is losing lack of any special dividend Quandt and his sister Susanne questions about his ability to
B I Reithofer, Norbert......B2 ground against rivals Daimler and flat payout disappoint,” Klatten to take the wheel last lead BMW’s masculine culture.
Isla, Pablo ................... B1 S AG, the owner of Mercedes- Arndt Ellinghorst, head of au- year and steer the company’s In September, as he took the
Block, Carson..............B8
K Saout, Tanguy Le........B5 Benz cars, and Audi AG. tomotive research at Evercore development of new technol- stage at the Frankfurt Motor
Bohm, Michael............A1
Krüger, Harald.............B2 Spohr, Carsten............B2 “The numbers presented to- ISI, said in a note. “Manage- ogy such as electric vehicles, Show, Mr. Krüger fainted and
Bowler, Simon.............B1
L T day reflect the past,” Frank ment has indicated to do more in-car digital services, and into was taken to a hospital for ex-
C Lachin, Anoosh ........... B7
Critchlow, Anne..........B1 Lambert, Eugene ........ B7
Todd, Anthony.............B7 Schwope, analyst at Nord/LB, for shareholders for quite new business models like car- amination. Since then, he has
Lueck, Martin..............B7 Trump, Donald............A1 said in a note to clients. “In some time.” sharing. made few public appearances.
D W
M the present and future [BMW] Investors will be listening He has been hailed as a Under Mr. Reithofer, BMW
Denner, Volkmar.........B3 Mukuru, Kato..............B7 Wilson, Michelle.........B1 is likely to face increased pres- closely next week when BMW bright, young executive more took the lead in the premium
G N Y sure from the competition.” Chief Executive Harald Krüger at home in the digital econ- segment from Mercedes-Benz
Garnadt, Karl Ulrich ... B1 Noor, Asif....................B7 Yarbrough, Brian.........B5 BMW said it would propose presents the company’s new omy than his predecessor, and took a big risk on electric
to shareholders to raise the strategy. In addition to hear- Norbert Reithofer, who BMW vehicles, developing the i3
dividend on common shares to ing how the CEO plans to steer insiders say refused to deal battery-electric compact urban

Amazon Starts Own €3.20 from €2.90, and on pre-

ferred shares to €3.22 from
€2.92. Nominally, the dividend
the company through the chal-
lenges facing the global auto
industry, investors are hoping
with email.
But Mr. Krüger isn’t seen as
much of a driving force as his
vehicle and the i8 hybrid
sports car. Mr. Krüger takes
charge at a time when BMW’s

Air-Cargo Service is higher, but investors noted

that the payout is flat as a
percentage of earnings.
for a more generous dividend
policy, Mr. Ellinghorst said.
Mr. Krüger was handpicked
predecessor, who had a power-
ful, commanding presence.
Mr. Krüger is quieter and his
rivals are gaining ground and
he will have to work hard to
keep the company out front.
BY GREG BENSINGER familiar with the matter.
UPS couldn’t be reached for
Amazon.com Inc. is taking to
the air with a fleet of planes,
part of a broader effort to re-
duce its inflated shipping costs.
comment.
Amazon’s effort is already
visible. White delivery vans
with Amazon’s familiar “a”
E.ON to Review Dividends Amid Losses
The Seattle retailer will logo are an increasingly com- BY MONICA HOUSTON-WAESCH ity and commodity prices. In The company is pessimistic est, taxes, depreciation and
shuttle merchandise around mon sight in larger U.S. cities, Germany, an energy policy that for 2016, noting further de- amortization would decline fur-
the U.S. using as many as 20 and customers say they are re- FRANKFURT—E.ON SE said favors renewables over conven- clines in gas prices and persis- ther to between €6 billion and
Boeing Co. 767 aircraft it will ceiving more packages directly on Wednesday it would review tional power also has hurt E.ON, tently weak foreign-exchange €6.5 billion, after falling 10% in
lease from Air Transport Ser- from uniformed Amazon deliv- its investment targets and fu- as has uncertainty surrounding rates in the first weeks of the 2015 to €7.56 billion. “The 2016
vices Group Inc. erymen. ture dividend payments after liabilities connected to the coun- year. “Looking ahead, we need guidance is offering further
Amazon has taken steps to Over time, Amazon is likely the German utility’s net loss try’s nuclear exit. In response, to realize that the first couple confirmation of the weakness
reduce its reliance on carriers to turn its delivery network ballooned last year due to as- E.ON said in 2014 it would split months of 2016 haven’t of- of the key business of power
such as United Parcel Service into a business in its own right, set write-downs and poor in- into two companies in a move to fered any signs that our mar- generation,” said Credit Suisse
Inc. and FedEx Corp. by build- charging other shippers to dustry conditions. attract investors. ket environment is improv- analyst Vincent Gilles.
ing out a ground network of ferry packages and drop off “The difficult market envi- E.ON’s net loss last year ing,” said Chief Financial If shareholders approve the
couriers and new warehouses merchandise. In China, for in- ronment will cause, in particu- widened to €7 billion ($7.71 bil- Officer Michael Sen. plan to spin off most of E.ON’s
near or within urban centers stance, it is seeking to serve as lar, free cash flow to be below lion) from €3.16 billion in 2014. The company will pay a conventional power operations
for faster and cheaper delivery. a middleman for shippers send- earlier assumptions; future in- The company had warned it €0.50 dividend for 2015 as into a new company, Uniper,
The deal with ATSG would give ing goods by boat to the U.S. vestments and dividends will would be in the red after book- planned, but future payouts the outlook would be accord-
Amazon control over roughly Baird Equity Research esti- have to reflect this,” E.ON said ing an €8.3 billion impairment must reflect the business envi- ingly adjusted, it added.
15% of the packages it ships an- mates the delivery and logistics in a statement. charge in the third quarter, ronment, he said. “We’ll adopt Berenberg analyst Lawson
nually, according to Stephens market to be roughly $400 bil- Given a bleak industry out- primarily due to conventional a focused, disciplined, and Steele said he had forecast a 36%
Inc. analyst Jack Atkins. lion. Amazon counts shipping look, E.ON said it remains com- power asset write-downs and purposeful approach to those cut in the dividend for 2016, but
costs as one of its fastest- mitted to restructuring. The regulatory uncertainty. Total matters that are under our noted the company’s problems
growing expenses, totaling company and its peers have seen impairments charges in the control,” Mr. Sen added. will become more visible over
Amazon’s plans for a 12.5% of sales in last year’s traditional business deteriorate second half of the year For this year, E.ON forecast the longer term, after most of its
logistics network fourth quarter, up from 10.9% a under the weight of low electric- amounted to €8.8 billion. adjusted earnings before inter- electricity price hedges expire.
year earlier. And the company
gained urgency after paid $4.17 billion to service its
delays in gift orders.

“Amazon clearly wants to

shipping needs in the period,
37% higher than the year be-
fore.
Discussing the results in
Munoz Is a Veteran of Past Board Battles
grow, and they need capacity January, Amazon Chief Finan- BY DOUG CAMERON 2008, two hedge funds pro- hearings as the railroad opera-
to do so,” said Mr. Atkins. “UPS cial Officer Brian Olsavsky said posed an alternative slate of five tor touted itself as a national
and FedEx are hesitant to build Amazon had to take matters Oscar Munoz has been here directors to the 12-member CSX security asset. CSX executives
it out solely for one customer.” into its own hands when its before. board. The funds accused the at the time claimed TCI and
RYAN LOWRY FOR THE WALL STREET JOURNAL

He said demonstrating an air- partners, such as UPS, FedEx As the chief executive of company’s leadership team of 3G lacked railroad experience,
cargo effort would also give and the U.S. Postal Service, United Continental Holdings underperforming amid a boom a mirror image of the current
Amazon some additional nego- couldn’t handle it all. Inc. gears up for a battle for in the U.S. railroad business. allegations from United’s pur-
tiating leverage with its part- The lease deal with ATSG control with two of his largest United, with Mr. Munoz at suers—PAR Capital Manage-
ners. spans five to seven years, and shareholders, he will be able the helm, now stands accused of ment Inc. and Altimeter Capi-
Amazon has been planning the agreement to operate the to draw on a similar experi- lagging its peers in terms of tal Management LP.
an in-house logistics network aircraft is for five years. ATSG ence eight years ago when he profitability, five years after its Mr. Bethune said Tuesday
for years, but the project took said on a call with investors it was a senior executive at U.S. creation in a 2010 merger. that United’s top leaders lack
on added urgency when some has been using five aircraft for railroad operator CSX Corp. Two hedge funds, which own airline industry chops.
customers received gift orders a test with Amazon and will ac- Mr. Munoz in interviews 7.2% of United’s stock, said on United on Tuesday called the
late, after the Christmas holi- quire eight more Boeing has often cited the relevance Tuesday they want to elect six proxy fight “a hostile action”
day in 2013. Amazon blamed 767-300 passenger jets to con- of his CSX experience in run- directors to the company’s 12- that could distract the com-
the carriers for the embarrass- vert to freighter use, and ning United. person board and name former United CEO Oscar Munoz once pany from executing the new
ing episode and offered some source seven from existing cli- The year-long feud between Continental Airlines CEO Gor- fought for control of CSX. chief executive’s strategic plan.
customers refunds on shipping ents. ATSG said it would con- CSX and two shareholders was don Bethune, a seasoned indus- United declined to comment on
and $20 credits. tinue its existing relationship one of the messiest in U.S. try fixer, as chairman. bruising contest that included a CSX’s proxy fight Wednesday.
Executives at Amazon feel with DHL, another package de- corporate history, but may of- Mr. Munoz was CFO of Jack- too-close-to-call shareholder At CSX, as with United, the
UPS’s traditional hub-and- livery operator. fer investors an insight into sonville, Fl-based CSX when U. vote in the company’s New Or- two sides engaged in ulti-
spoke system is growing obso- —Doug Cameron, the playbook United could K-based Children’s Investment leans Gentilly rail yard. mately unsuccessful talks to
lete and is a particular liability Laura Stevens and adopt in its tussle. Fund Management, or TCI, and The spat spawned dueling secure an agreement before
during the crucial holiday sell- Joshua Jamerson United’s CEO ended up on 3G Capital Partners ultimately court battles about investment launching investor offensives
ing season, according to people contributed to the article. the losing side of that battle. In won four board seats after a tactics and congressional ahead of a shareholder vote.

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For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Uber Wins Round
For Its App in France
BY SAM SCHECHNER
PARIS—Car-hailing com-
pany Uber Technologies Inc.
won a loosening of France’s
strict transport rules Wednes-
day when a court overturned a
decree banning car services
from showing the locations of
available vehicles, a well-
known feature of Uber’s app.
France’s Conseil d’État, the
country’s highest administra-
tive court, struck down the
part of a government decree
that banned the showing of lo-
cations of available cars. The
court said providing the loca-
tions represents an “informa-
tion society service.”
Under European Union law,
countries must notify the EU
before regulating such services.
The decision is a victory for
Uber against one of the more
emblematic provisions of a
new transport law that it has
challenged in a flurry of ap-
peals both in France and at
the EU level. It comes as a
criminal court is deliberating a
case that charges Uber and
two top executives in France
with violating transit and
data-protection laws.
It is also a turnaround from
last May, when France’s Con-
Toyota Beefs Up
Its Research Staff
BY MIKE RAMSEY
Toyota Motor Corp., look-
ing to gain an edge in the auto
industry’s race for technology
talent, has recruited the staff
at a small Massachusetts-
based autonomous-vehicle
company to work on its ad-
vanced projects.
The move reflects a trend
among auto industry compa-
nies, including car-hailing and
other fast-growing startups, to
rapidly build their research
and development skills by tak-
ing over small and specialized
companies, or raiding a com-
pany’s workforce. In cases like
Toyota’s, the acquisitions
aren’t hostile.
Toyota hired Jaybridge Ro-
botics Inc.’s 16 employees, in-
cluding software and hardware
engineers, the auto maker dis-
closed on Wednesday. Jay-
bridge Chief Executive Jeremy
Brown said in a news release
its staff will help the Japanese
auto giant “reduce the nearly
1.25 million traffic fatalities
each year.”
Executives weren’t immedi-
ately available to comment. It
was unclear if Jaybridge, a
seven-year-old company that
spun out of Massachusetts In-
stitute of Technology, will
continue to operate. Toyota
said it didn’t buy the company.
Jaybridge employees will be-
come part of the Toyota Re-
search Institute.
Toyota last year pledged to
invest $1 billion in artificial in-
telligence research, with a big
focus on autonomous vehicles.
TRI is run by Gill Pratt, a for-
mer MIT professor and pro-
gram manager at the Defense
Advanced Research Projects
Agency. With the latest hir-
ings, TRI now has about 40
employees, many of whom are
graduates of MIT and Stanford
University.
The Jaybridge group
“brings decades of experience
developing, testing, and sup-
porting autonomous vehicle
products which perfectly com-
Business
Watch
GROUPE CASINO
Brazil Slowdown
Hurts French Retailer
Groupe Casino SA, the
French retailer in the crosshairs
of short seller Carson Block,
swung to a net loss for 2015,
hurt by a slowdown in Brazil.
The group reported a net loss
of €43 million ($47.4 million) in
2015 having made a profit of
€253 million a year earlier, hit by
a sharp decline in its Latin Amer-
ican nonfood retail business.
stitutional Council, its top
constitutional authority, up-
held the ban on showing loca-
tions of available cars, saying
it didn’t violate France’s con-
stitution.
Uber executives hope the
new decision could serve as a
precedent for invalidating
other parts of the French
transport law, which it also
has appealed to the EU on
similar grounds.
But Wednesday’s decision
in France left in some other
elements of the same law. It
didn’t specifically consider
those provisions that were
used to charge the Uber execu-
tives.
The decision, which
stemmed in part from a case
Uber launched last October,
isn’t likely to lead to a big
change to Uber’s smartphone
application, which has never
stopped showing cars on a
map in France.
In response to the decree,
Uber executives said the app
had started showing some
Uber cars that already were
booked, as well as those that
were available, sidestepping
the rule that banned showing
both availability and location
of vehicles.
plements the world-class re-
search team at TRI,” Mr. Pratt
said in a statement.
Last year, Uber Technolo-
gies Inc. hired 40 scientists,
engineers and professors from
Carnegie Mellon University in
Pittsburgh, in what is becom-
ing a common tactic to recruit
for a rare skill set.
The competition for talent
in robotics and software engi-
neering, particularly geared
toward vehicle autonomy, is so
fierce that it has led to re-
cruiting battles in Silicon Val-
ley. Elon Musk, chief executive
of electric car maker Tesla
Motors Inc., used his Twit-
ter account and 2 million fol-
lowers to recruit for his au-
tonomous-vehicle program.
General Motors Co., in De-
cember bought the assets of a
ride-sharing company, Sidecar,
and hired 20 of its employees
to work out of its Silicon Val-
ley office.
Andrew Moore, the dean of
Carnegie Mellon University’s
School of Computer Science,
said the college was sent
scrambling for staff after the
Uber mass-hire in 2015, but
the exposure for its top-level
programs paid big dividends a
year later.
Enrollment in CMU’s com-
puter science program rose 35%
in the fall of 2015 compared
with the previous year, and its
robotics program enrollment
increased 30%. The school
hired 17 new faculty members.
Mr. Moore said the school
has had to adjust its employ-
ment agreements to allow pro-
fessors to leave for business
ventures with hopes of them
returning after a few years.
“There is definitely a world-
wide battle for talent,” said
Mr. Moore, who was a Google
Inc. engineering vice president
before his CMU appointment.
“In the computer science
world right now, administra-
tors and leadership are be-
coming more like recruiters
for high-powered sports teams
or executives.”
Casino said its earnings be-
fore interest and taxes last year
dropped to €1.45 billion from
€2.23 billion the year before. An-
alysts polled by the company
had forecast €1.43 billion.
Casino is under pressure to
deliver a turnaround in France as
asset sales and weakness in Bra-
zil have left it more dependent
on its home market.
Casino reported net sales of
€46.15 billion, boosted by a re-
covery in France in the second
half.
—Nick Kostov
SIEMENS
Materials Squeeze
Forces Job Cuts
Siemens AG said on Wednes-
day it would cut about 2,500
jobs at its Process Industries and
TECHNOLOGY
Tokyo Game Show visitors with ‘Clash of Clans’ characters last year. Revenue at ‘Clash of Clans’ maker Supercell rose 37% in 2015.
‘Clash of Clans’ Game Firm
Says Its Growth Cooled Off
Supercell, like other
developers, is seeking
to secure a steady
stream of revenue
BY SARAH E. NEEDLEMAN
Rampant growth at Super-
cell Oy has cooled in recent
years, pointing to the fast-
moving nature of the fledgling
mobile-game industry and the
challenge of converting avid
players into customers.
The Finnish maker of “Clash
of Clans” on Wednesday said
its revenue increased 37% to
€2.11 billion ($2.32 billion) last
year from €1.55 billion in 2014.
Earnings before interest,
taxes, depreciation and amorti-
zation—a measure of profit-
ability that excludes a wide
range of expenses—rose 63% to
€838 million from €515 million.
A year ago, the company said
that its revenue had tripled
and its earnings doubled from
2013.
Mobile games are still hot.
Bosch Launches a Cloud Network
BY CHRISTOPHER ALESSI
BERLIN—Robert Bosch
GmbH said it is launching its
own cloud computing network
for the Internet of Things, the
latest step in the German engi-
neering group’s transition
from a traditional industrial
company to equal parts manu-
facturer and information-tech-
nology group.
The Bosch IoT cloud opera-
tion, located near the com-
pany’s headquarters in Stutt-
gart, will initially be used for
in-house purposes and then
will be available as a service
for other companies starting
in 2017. Other data centers for
the Bosch IoT Cloud will even-
tually be located across the
globe.
The Internet of Things, or
IoT, is a phrase used to de-
scribe the trend to add sen-
sors, computing and communi-
cations capability to many
kinds of products, such as
light bulbs, cars and industrial
equipment.
The Bosch cloud will allow
the company to accelerate its
efforts to develop smartcars
and smart homes, as well as
Drives division, most of them in
Germany, in response to intense
competition in the oil and gas,
metals and mining sectors.
“Plunging demand in raw ma-
terials markets has led to a signif-
icant intensification of competi-
tion, particularly in Asia,” said
Juergen Brandes, head of the Pro-
cess Industries and Drives division.
The sprawling technology and
engineering company plans to
consolidate certain activities and
adjust the size of manufacturing
locations in Europe to improve
competitiveness, it said. About
2,000 of the job reductions are
in Germany, and half of those
will result from bundling specific
product lines at individual loca-
tions, Siemens said.
The cuts come against a
backdrop of wider hiring at the
company. The company plans to
They generated $30.13 bil-
lion in revenue world-wide last
year and they are projected to
reach $38.86 billion by 2018,
according to industry tracker
SuperData Research Inc. But
the industry is seeking its sec-
ond breath as many game pub-
lishers are straining to release
new hit titles and secure
steady streams of revenue
from volatile players.
Struggling to broaden its
lineup beyond “Angry Birds,”
Finnish developer Rovio En-
tertainment Ltd. has had to
cut staff and is trying to re-
shape itself into a media com-
pany.
Sweden’s King Digital En-
tertainment PLC, which has
struggled to repeat the success
of its “Candy Crush Saga”
game, was acquired by Activi-
sion Blizzard Inc. month.
“It’s so early days for this
market,” Supercell Chief Execu-
tive Ilkka Paananen said in a
telephone interview.
The company doesn’t charge
money to download its games.
Instead, it generates revenue
intelligent manufacturing.
Some applications include sen-
sors that help drivers identify
available parking spaces; a
system that lets users connect
their home’s heating, lighting,
smoke alarms and appliances
on one platform that is con-
trolled by a smartphone or
tablet computer; and sensors
that track and measure the
quality of products after they
leave the shop floor.
“The Bosch IoT cloud is the
final piece of the puzzle that
completes our software exper-
tise,” Chief Executive Volkmar
Denner said during a confer-
ence on Wednesday.
Mr. Denner also said Bosch
would invest €500 million
($550.6 million) annually in
new technologies, including
the Internet of Things, going
forward.
He added that closely held
Bosch decided to locate the
cloud network in Germany to
address security concerns, a
likely nod to some German
companies’ fears about shar-
ing their data with U.S. tech-
nology firms in Silicon Valley
that also offer cloud services
such as Salesforce.com Inc.,
hire at least 25,000 new employ-
ees in the coming years, it said,
including 3,000 in Germany.
—Sarah Sloat
CATHAY PACIFIC
Oil Prices Give Boost
To 2015 Profit
Cathay Pacific Airways Ltd.’s
2015 net profit nearly doubled
from a year earlier as lower fuel
prices and strong demand offset
steep fuel-hedging losses.
The airline said its net profit
was six billion Hong Kong dollars
(US$773 million), up 90% from
HK$3.15 billion a year earlier. Its
2015 net profit was the carrier’s
best results since 2010, when it
recorded a net profit of
HK$14.05 billion on the back of a
rebound in air-travel demand.
Cathay Pacific Chairman John
Thursday, March 10, 2016 | B3
by selling virtual goods de-
signed to enhance players’ ex-
periences.
Supercell has become expert
at this “free-to-play” business
model, which has become the
standard in mobile games.
In addition to Nordic rivals
Rovio and King, Supercell com-
petes with Machine Zone Inc.,
the maker of the “Game of
War: Fire Age,” and Asian pow-
erhouses such as GungHo On-
line Entertainment Inc. and
Mixi Inc.
In the U.S., those who play
on mobile devices spent an av-
erage of more than two hours a
day playing games in 2014, up
from one hour and 20 minutes
in 2012, according to research
firm NPD Group.
Supercell said it now has
100 million daily active users
across its four games, though
the company didn’t provide a
comparison with a year ago,
making it tough to see how
rapidly it is growing engage-
ment.
King Digital doesn’t disclose
the same metric.
Amazon.com Inc., Alphabet
Inc.’s Google, Microsoft Corp.
and International Business
Machines Corp.
Unlike some leaders in Ger-
man government and business
that have viewed U.S. tech
companies as a threat, Mr.
Denner has long viewed Sili-
con Valley as a partner—it has
provided Google with much of
its autonomous driving tech-
nology—and said that German
industry can learn from their
speed and adaptability.
In recent years, Mr. Denner
has been betting the future of
Bosch, which has products
that range from auto parts and
industrial tools to home appli-
ances to monitoring systems,
rests on the Internet of
Things.
He has built up the group’s
software capabilities through
acquisitions, including that of
Cologne-based ProSyst Soft-
ware GmbH last year, and em-
ploys roughly 3,000 software
engineers to work on projects
related to the Internet of
Things.
The “software core” of Bo-
sch’s new cloud is its IoT
Suite, a software platform that
Casino is under pressure to deliver in France as weakness in
Brazil has left it more dependent on its home market.
Slosar said he expects the car-
rier’s business to do well in 2016,
even though rising competition
in Asia, currency volatility and
@wsjd | wsjd.com
CHRISTOPHER JUE/EUROPEAN PRESSPHOTO AGENCY
Activision Blizzard has said
the completion of the King Dig-
ital acquisition means it now
has more than 500 million
monthly active users across
196 countries.
Majority-owned by Soft-
Bank Group Corp. of Japan,
Supercell said it paid a total
dividend of €603 million, or
€14 a share, on its 2015 earn-
ings.
The company didn’t disclose
a net profit. Though it is
closely held, Supercell is re-
quired to disclose some finan-
cial data to the public under
Finnish rules.
Founded in 2010, the com-
pany became profitable a year
later, according to Mr.
Paananen. It now has about
180 employees, up from about
150 a year ago.
In October 2013, SoftBank
bought a 51.4% interest in Su-
percell for $1.5 billion.
As of late last year, SoftBank
said it held 77.8% of voting
rights at Supercell after buying
additional shares in the Finnish
company.
has been used for smart facto-
ries that lets companies con-
nect production machinery on
a secure cloud and analyze
large amounts of data.
Competitors including U.S.-
based General Electric Co.
and business software pro-
vider SAP SE are also working
on similar efforts in this field.
The IoT Suite platform has
been central to Bosch’s efforts
in driving a German public-
private initiative known as
“Industrie 4.0,” which seeks to
bring about a “fourth
industrial revolution” by con-
necting the Internet of Things
to traditional industrial manu-
facturing. Other leading
German industrial companies
such as Siemens AG, which
are also digitizing, are driving
forward the Industrie 4.0 ini-
tiative.
In the U.S. there is a similar
effort known as the Industrial
Internet Consortium, which
was founded by companies in-
cluding GE and Cisco Systems
Inc. Bosch last year became
the first foreign company to
join the IIC and has since tried
to bridge the U.S. and German
initiatives.
JACKY NAEGELEN/REUTERS
weak demand for first- and busi-
ness-class seats will continue to
weigh on yields.
—Joanne Chiu
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B4 | Thursday, March 10, 2016
Viceto
Launch
Channel
WithSky
BY KEACH HAGEY
Less than two weeks after
launching its Viceland channel
in the U.S. with A+E Networks,
Vice Media has begun its roll-
out of Viceland channels
around the world.
On Wednesday, Vice and
Sky PLC announced a distribu-
tion deal that would make the
channel available in September
on Sky’s three platforms in the
U.K. and Ireland: the tradi-
tional Sky TV pay-TV package,
the NOW TV skinny bundle,
and the newly launched Sky Q
home entertainment system.
The international channel
will feature a mix of the life-
style shows that appear on the
American Viceland channel,
such as “Gaycation” and
“Weediquette,” and the news
programming that is exclusive
to HBO in the U.S.
The channel marks the first
of 10 to 15 international chan-
nels that Vice plans to launch.
While the channel in the U.S. is
jointly owned by A+E Net-
works and Vice, Vice has re-
tained the international rights
to the programming, and will
own the channels it launches
internationally.
This international strategy is
part of the reason that Vice,
which has asked Nielsen to hold
off on releasing its ratings for six
months in the U.S., says it isn’t
getting hung up on U.S. ratings.
“Will the network work in
America? That’s not even a
question for us,” said Shane
Smith, chief executive of Vice
Media. “TV, we look at it as a
content creation engine” that
feeds multiple platforms, in-
cluding online and mobile.
For Sky, Vice’s chief appeal
is what Stephen Van Rooyen,
Sky’s chief marketing, sales
and digital officer, called their
“avant garde” programming
that will help Sky serve a
younger audience.
WHERE: THE MAY FAIR HOTEL THEATRE, LONDON W1J 8LT
*Nor thern Ireland and Republic of Ireland release date is March 18, 2016.
‘Ghosts’ Haunt China’s Box-Office Tallies
BY LAURIE BURKITT
BEIJING—China is poised to
overtake the U.S. as the big-
gest movie market in the
world, but how many people
are really in the audience?
After “Ip Man 3”—a Chinese
martial-arts movie in which
Mike Tyson plays a crooked
property developer—pulled in
470 million yuan, or $72 mil-
lion, over its opening weekend,
Chinese regulators said this
week they are investigating
whether the distributor tried
to boost the movie’s box office
by buying tickets for “ghost
screenings.”
Ticket buying in bulk to cre-
ate buzz around a movie is a
marketing strategy widely
used in China, according to in-
terviews with nearly two
dozen industry insiders. The
practice adds to the murkiness
around China’s box-office
numbers, much of which tends
to put foreign films at a disad-
vantage.
Though bulk buying is now
under scrutiny, insiders say it
has been an under-the-radar
practice by Chinese companies
to get a leg up in a market
which in February reached
$1.05 billion, overtaking North
American ticket sales by al-
most $250 million for the
month, according to China’s
State Administration of Press,
Publication, Radio, Film and
Television.
Global film studios increas-
ingly look to China for growth
even though foreign movies
PUBLICIS
Continued from page B1
its media buying largely within
the different agency holding
groups, such as Starcom Medi-
avest and ZenithOptimedia.
Mr. King said the explosion
in the number of media ven-
dors and the ability to do
global ad deals makes this new
approach a better way to go to
market at this time.
The move could have big
implications for how Publicis
negotiates during the coming
Attend a VIP Screening of “Zootropolis”
WSJ+ members and their families can enjoy a special private screening of Walt Disney
Animation Studios’ “Zootropolis” before it opens in cinemas on March 25th.* From the
creators of “Frozen” and “Big Hero 6,” go on a comedy-filled adventure with the city’s first
bunny police officer, Judy Hopps (Ginnifer Goodwin), as she teams up with a fast-talking
fox, Nick Wilde (Jason Bateman), to crack a case and prove herself along the way.
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BUSINESS NEWS
Moving Pictures
As China moves toward overtaking North America as the world's
biggest movie market, foreign films are losing ground at the
Chinese box office.
Box office revenue
China North America
$12 billion
10
8 midnight in the same the-
6 Foreign Domestic
4 2010
2 62
0 2015
2010 ’11 ’12 ’13 ’14
Source: EntGroup
are subject to strict quotas
and barred from screening
during peak periods such as
the Lunar New Year, which this
year was a big factor in the
high box office in February.
The restrictions are aimed
at giving Chinese films a
larger share of the box office.
Regulators recently extended
the screening of “Mermaid”—
the top-grossing Chinese film
of all time, with a box office
over $500 million—to an un-
precedented three months be-
yond the typical month of
screening that films get in
China, virtually ensuring that
no foreign film will surpass
“Mermaid” in China in the
near future.
Despite the restrictions,
TV upfront, when advertisers
commit a big portion of their
annual ad budgets in advance
of the new television season.
“Because we are right in
front of the upfront, the thing
I don’t want to do is say how
we are negotiating, but we
have the ability now to lever-
age our scale,” Mr. King added.
In an effort to drive cost
savings and foster more col-
laboration, Publicis is also
eliminating and combining
some of its ad groups. Pubi-
cis’s digital ad technology divi-
sion, Vivaki, will be folded into
WSJ + EX P E R I E NC E
EXCLUSIVE TO SUBSCRIBERS
Share of China’s box office
44
%
38
56%
%
% other showtimes, with such
’15
THE WALL STREET JOURNAL.
foreign films accounted for
more than half of box-office
sales as recently as 2012. Since
then, Hollywood has lost
ground and accounted for only
38% of $6.7 billion in Chinese
ticket sales last year, accord-
ing to China’s movie regulator.
The Chinese regulator in
January announced a renewed
crackdown on box-office
cheating. On Monday, in a rare
move, it asked to see ticketing
contracts between “Ip Man 3”
distributor Dayinmu Film Dis-
tribution and online ticket
sellers, according to a notice
seen by The Wall Street Jour-
nal. The official Xinhua News
Agency also said the regulator
has questioned the distributor
about the film’s sales revenue.
Publicis Media, while Mediav-
est, which has been the most
hampered by account losses,
will be merged with Spark, a
smaller ad-buying firm that
has outperformed many of its
rivals. Optimedia will be com-
bined with Blue 449.
The company’s two largest
ad groups—Starcom and Ze-
nith—will remain separate en-
tities. Umbrella companies
such as Starcom Mediavest
and Zenith Optimedia will also
be disbanded.
“The big focus is to make
the business leaner, simpler
| WHEN: SUNDAY, MARCH 13, 10:00 AM
THE WALL STREET JOURNAL.
Dayinmu didn’t respond to
requests for comment on the
regulatory probe. The regula-
tor didn’t immediately re-
spond to requests for com-
ment.
The move came after local
media posted screenshots of
film-ticketing sites purporting
to show that some theaters
had sold-out screenings of “Ip
Man 3” every 10 minutes after
ater—an impossibility for a
movie that lasts 105 minutes—
and that tickets had sold for as
much as $31 a seat, several
times the price of tickets at
prices helping to drive up the
total box office.
The theater-management
branch of China Film Group,
the largest state-backed dis-
tributor, acknowledged in a
statement that one of its the-
aters in the central Chinese
city of Wuhan launched over-
lapping, “invalid” screenings
of “Ip Man 3” on Sunday, and
said it will punish the theater
owners.
Industry insiders say many
film companies believe bulk
buying is more cost effective
than advertising, because tick-
ets are often resold to online
discounters so that some of
the distributors’ outlays are
recouped.
“It’s a short-term strategy,”
said Christopher Bremble,
chief executive of Beijing-
based visual-effects company
Base FX, who works closely
with studios and distributors
and more scaled,” Mr. King
said.
Publicis Media currently
employs about 13,500 people
around the world and the
company said that there are no
planned layoffs at this time.
Still, agency insiders say
they are bracing for job cuts
because of the new structure
and because of the recent cli-
ent defections. Last week,
Starcom Mediavest Group laid
off about 80 employees,
roughly 3% of its workforce in
the U.S. Variety first reported
the job cuts.
© 2016 Dow Jones & Co., Inc. All rights reserved. 6DJ3326
in film releases. “Audiences do
eventually decide a picture’s
success.”
In November, China’s Le Vi-
sion Pictures said in a letter
to theater owners reviewed by
The Wall Street Journal about
the release of its film “The
Vanished Murderer” that it
had spent 10 million yuan to
purchase tickets, roughly 13%
of the film’s final gross. Le Vi-
sion declined to comment on
the letter.
The practice has created
concern in Hollywood, where
studios that don’t bulk buy are
worried their movies are being
pushed off Chinese screens by
local movies whose producers
are artificially boosting their
box office.
The opaqueness is an extra
challenge for Hollywood as its
market share in China drops,
said Rob Cain, a film producer
and entertainment industry
consultant to Hollywood stu-
dios operating in China.
Foreign distributors and
studios also have complained
to regulators of losing out on
revenue when Chinese the-
aters underreport revenue to
avoid paying taxes or to avoid
paying film companies their
share of the box office.
Theaters, especially those
in smaller cities, regularly un-
derreport ticket sales, accord-
ing to blacklists released by
the state-backed China Film
Distribution and Exhibition In-
dustry Association.
—Lilian Lin
contributed to this article.
At the agency level there
will also be executive changes.
Lisa Donohue, currently chief
executive of Starcom USA, is
being named global brand
president for Starcom, and
Mediavest USA chief Brian
Terkelsen will become global
brand president for Mediav-
est|Spark. Vittorio Bonori, cur-
rently CEO of ZenithOptimedia
Italy, is being named global
brand president for Zenith.
Those executives will report to
Mr. King.
In the U.S., there will be
four agency CEOs.
ZOOTROPOLIS © DISNEY
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
Crédit Agricole Turns
Focus to Retail Activity
BANKING | B8
© 2016 Dow Jones & Company. All Rights Reserved.
As of 4 p.m. ET EUR/GBP 0.7748 À 0.03%
Metals Recovery in Doubt
Jump looks robust
but skeptics remain;
‘supply overhang will
keep a cap on prices’
BY BIMAN MUKHERJI
Metals prices have been on
a roll, but some wonder how
long it can last.
Since mid-January, the price
of copper is up 13.5%, while
zinc has jumped about 25%
and iron ore has soared 57%.
Analysts cite a number of
reasons for the rise, from an
U.S. Stocks Ride the Third-Longest Bull Market in History
Performance since March 9, 2009
300% KBW BANK INDEX
200
100
0 list for the European Central
22
 
–100
’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16
Sources: FactSet (equity indexes); SIX Financial (oil); Ryan ALM (Treasury)
In March 2009, few were
predicting an end to the finan-
cial crisis. Months earlier, Bear
Stearns, Lehman Brothers and
Merrill Lynch either disap-
peared or were forced to sell
for pennies, while the U.S.
housing market continued to
crumble.
Government intervention
spread in the coming year,
from bank bailouts to help for
Saudis Seek Loan of Up to $8 Billion
BY NICOLAS PARASIE
DUBAI—Saudi Arabia wants
to borrow as much as $8 bil-
lion from international banks,
people familiar with the mat-
ter said Wednesday, as the
kingdom seeks funds to plug a
widening fiscal deficit caused
by cheap oil.
Dollar General Seems a Bargain Barclays Braces for Tough Sell
BY STEVEN RUSSOLILLO
Don’t underestimate the
power of a buck.
For years, dollar stores
have thrived under this man-
tra, in both good economic
times and bad.
AHEAD OF Even as brick-
THE TAPE and-mortar re-
tailers have
struggled while
online behemoth Ama-
zon.com Inc. has prospered,
the dollar chains keep chug-
ging along.
Dollar General Corp., in
particular, has been among
the steadiest of the bunch.
And as it gets set to report
fiscal fourth-quarter results
Thursday, that stability and a
relatively attractive share
price presents investors with
a compelling opportunity.
Analysts polled by FactSet
expect Dollar General to re-
port earnings of $1.26 a share
for the period ending in Janu-
ary, up 8% from the same pe-
riod a year ago. Revenue is
estimated to be up 7% to $5.3
billion.
Perhaps most impressive is
Dollar General’s consistency.
MARKETS DIGEST B6 | WEDNESDAY’S MARKETS B7 | FINANCE WATCH B8
YEN/DLR ¥113.06 À 0.38% GOLD 1256.60 g 0.44%
improving Chinese property
market to a sense that metals
were oversold in 2015.
But even if metals have seen
the worst of this latest down-
turn, they aren’t likely to get
back to their heyday, some an-
alysts say.
“A supply overhang will
keep a cap on prices, so we are
not going to see the highs that
we have seen in previous cy-
cles,” said Daniel Hynes, an an-
alyst with ANZ Bank. “The
gains are well below cyclical
highs in the past five to six
years.”
Che Weitao, manager of Tai-
DOW INDUSTRIALS
9
�22
’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16
auto makers and even to con-
sumers, with the “cash for
clunkers” program and mort-
gage relief.
At the same time, investors
including Bill Gross to Warren
Buffett were warning that
worse could still come.
But that moment in March
marks the beginning of a bull
market in U.S. stocks that now
ranks as the third-longest in
Saudi Arabia’s Ministry of
Finance in recent days asked
foreign banks to submit pro-
posals for the loan, which
would be between $6 billion
and $8 billion, two bankers
who have seen the request
told The Wall Street Journal.
It would be Saudi Arabia’s
first such borrowing from in-
Makes Cents
Gains since Dollar General's
initial public offering
250 %
200
Dollar General
150
100
50
S&P 500
0 vember 2009 after being
–50
2010 ’11 ’12 ’13 ’14 ’15 ’16
Source: FactSet
THE WALL STREET JOURNAL.
Analysts anticipate same-
store sales rose 1.9% for the
quarter. That would put Dol-
lar General on pace for a 26th
consecutive year of same-
stores sales growth, accord-
ing to Edward Jones analyst
Brian Yarbrough.
Dollar stores have thrived
in recent years by offering
less-expensive, everyday
products. They also have em-
braced the smaller-store
model that typically generates
positive cash flow at a faster
rate than the retail industry
THE WALL STREET JOURNAL.
zhou Huangyan Junda Mold-
ing, a steel-products dealer
based in Taizhou, Zhejiang
province, said he doesn’t ex-
pect the increase in the price
of steel to last more than six
months.
“The housing market in
[China] is unlikely to soar for-
ever, and the government must
take measures to cool down
the market, which will hurt
steel prices when that hap-
pens,” he said.
The last cyclical boom in
metals prices five years ago
was driven by China’s then-in-
satiable appetite.
10-YR TREASURY INDEX SHANGHAI COMPOSITE
(Prices move
inversely to yields)

But some investors are placing
’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16
history. The Dow Jones Indus-
trial Average has risen 159%,
logging more than 2,000 days
without posting a decline of
20% that marks a retreat into
bear territory.
Shares of banks, at the cen-
ter of the last crisis, have done
even better.
For many investors today,
the duration of this rally is a
main worry, along with the
ternational markets in more
than a decade, underscoring
the growing strains on the
Arab world’s largest economy,
which, until recently, primarily
relied on oil revenue to grow.
“They want to select the
who’s who of international
banks for this,” said one of the
two bankers, noting that lend-
average, Mr. Yarbrough says.
Commonly found in lower-
income neighborhoods, these
locations often make it easy
for shoppers to run errands
quickly. That means Dollar
General doesn’t necessarily
face as much of a threat from
Amazon, or even Wal-Mart
Stores Inc., as other retailers.
Meanwhile, since returning
to the public markets in No-
taken private two years ear-
lier, Dollar General’s shares
have gained almost three
times as much as the S&P
500. And that even includes
the stock’s 26% decline from
July through November.
It is up roughly 5% in the
year to date, once again out-
pacing the S&P 500. And it
appears to have more room to
run. Shares fetch about 16
times earnings projected over
the next 12 months. That is
lower than its average multi-
ple over the past year,
cheaper than rival Dollar
Tree Inc. and neck and neck
with Wal-Mart.
This dollar fits the bill.
Email: tape@wsj.com
Big Dividend Signals
Caution at Prudential
HEARD ON THE STREET | B8
OIL 38.29 À 4.90%
But for metals prices to
make a sustained recovery
now, Goldman Sachs said in a
report, two things would need
to happen in China: The gov-
ernment would need to expand
credit and property sales
would need to pick up.
Goldman Sachs said it
doesn’t expect the Chinese
government to adopt a long-
term policy of lending at cheap
rates to stimulate the econ-
omy. The ratio of debt to gross
domestic product is high and
rising, while new construction
starts and completions “are
Please see METALS page B7
CRUDE-OIL PRICES
by €10 billion Thursday or
’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16
THE WALL STREET JOURNAL.
health of the global economy.
Highlighting some of the
pressure, oil prices are down
by nearly a quarter since that
low for stocks, while yields on
benchmark U.S. Treasurys have
fallen below 2%.
Even so, the reality of
March 2009 remains a good re-
minder that no one rings a bell
when the market bottoms.
—Geoffrey Rogow
ers will be selected within a
couple of weeks.
The Saudi Ministry of Fi-
nance wasn’t immediately
available for comment.
Saudi Arabia, among the
world’s biggest oil producers,
has benefited from high crude
prices in the past decade to
Please see SAUDI page B7
Halfway through the Bar-
clays PLC presentation last
week that detailed the selloff of
its Africa assets, a footnote
By Matina Stevis
in Nairobi, Kenya
and Max Colchester
in London
warned: “Implementation of
these plans is subject to signifi-
cant execution risks.”
It was more than a dis-
claimer.
As the London-based lender
seeks a serious suitor to take up
a roughly $3 billion stake in
Barclays Africa Group Ltd., it
is bracing for a tough sell in a
difficult environment. Africa’s
biggest economies are reeling
from low commodity prices and
China’s slowdown, while many
global financial institutions are
facing regulatory pressure to
cut their exposure to risk and
build bigger capital buffers.
At stake is the future of one
of Africa’s largest banks. Bar-
clays Africa owns 12 banks
across the continent, the big-
gest of which by far is South Af-
rican lender Absa.
Barclays PLC, separately, di-
Thursday, March 10, 2016 | B5
3-MONTH LIBOR 0.63460%
Building Hopes
Mounting expectations of more ECB stimulus, along with a global
rally in riskier assets, have helped narrow the gap between yields on
eurozone corporate bonds and safe government debt* in recent weeks.
2.0 percentage points
1.5
1.0
0.5
0
2015
*As measured by option-adjusted spreads on the Barclays Euro-Aggregate: Corporates index.
Note: As of March 8 Source: Barclays
A Bet on the ECB:
Buy Corporate Debt
BY CHRISTOPHER WHITTALL
Corporate debt doesn’t offi-
cially figure on the shopping
Bank’s bond-buying program.
small bets that could change
soon.
A shortage of bonds eligible
to be bought under the pro-
gram, known as quantitative
easing, or QE, could mean the
ECB may one day have to ven-
ture into a wider range of as-
sets, such as corporate bonds,
to continue it.
The ECB is “running out of
things to do in front of such
weak inflation numbers,” said
Tanguy Le Saout, head of Eu-
ropean fixed income at Pio-
neer Investments.
Mr. Le Saout said he has
bought some senior European
corporate debt recently, re-
moving a position that was
short of an underlying bench-
mark in that sector.
“It’s a risk we need to take
into consideration,” he said,
referring to the possibility of
the ECB surprising investors
with a large shift into corpo-
rate bonds. “Five billion [euros
of monthly purchases] may be
enough of a signal,” he added.
Economists expect the ECB
to cut a key interest rate and
expand the QE program at its
meeting Thursday to boost
sagging eurozone inflation. A
move to buy corporate debt
would be a surprise. Expecta-
tions of further ECB action
have mounted following a
rocky start to the year for
global markets.
In the eurozone, consumer
prices in February fell year
over year for the first time
since September.
Maria Ramos, CEO of Barclays
Africa, disavows a split-up.
rectly owns a bank in Zimba-
bwe and one in Egypt.
Barclays’s decision to sell a
big chunk of its 62.3% stake in
Barclays Africa sparked con-
sternation from investors and
panic from some clients, forcing
one Barclays manager to take to
YouTube to reassure customers
the bank wasn’t shutting down.
Barclays will likely need to
bring down its stake in Barclays
Africa to less than 20%, mean-
ing it will have to sell some $3
billion worth of Barclays Africa
shares.
JASON ALDEN/BLOOMBERG NEWS
10-YR TREAS g 17/32 yield 1.892%
’16
THE WALL STREET JOURNAL.
The ECB is already set to
buy €60 billion ($66 billion) a
month of mostly government
bonds until March 2017. Most
economists expect the bank to
increase its monthly purchases
postpone the end date of QE.
Under such a scenario,
strategists at Goldman Sachs
Group Inc. estimate the ECB
would run out of German gov-
ernment debt, which accounts
for a large chunk of the pur-
chases, to buy in 10 to 12
months. This means the ECB
would likely have to adjust the
rules governing the QE pro-
gram if it wants to keep it
running.
Some think the ECB
could add corporate
debt to its bond-
buying program.
Adding corporate debt
could prove controversial.
Companies are perceived as
more likely than governments
to default on debt. Buying
bank debt could be particu-
larly thorny given new regula-
tions enforcing losses on
bondholders when a lender’s
capital levels dip too low.
A recent rally in corporate-
bond markets could signal that
Mr. Le Saout isn’t alone in
hedging his bets on an an-
nouncement on corporate
bonds, strategists said.
The average gap in yields
between high-grade eurozone
corporate debt and govern-
ment bonds has narrowed
from a recent three-year high
of 1.67 percentage points in
Please see ECB page B8
Some investors are hoping to
pluck choice cuts of business
from the pan-African operation
and that has led to public jos-
tling between the bank’s leader-
ship—which wants to sell the
unit as a whole—and potential
REX FEATURES/ASSOCIATED PRESS
suitors who want to buy more-
affordable components of the
group in Kenya, Uganda, Tanza-
nia, the Seychelles and else-
where on the continent.
Barclays Africa Chief Execu-
tive Maria Ramos said in an in-
terview on Wednesday that she
wouldn’t allow the group to be
split up. The 57-year-old Ms.
Ramos has been CEO since
2013.
“We have no intention or in-
terest in divesting our [non-
South African] Africa opera-
tions. We have a fantastic
business across Africa,” Ms. Ra-
mos said. “It’s not a desire, it’s
what’s going to happen.”
That approach may have
strategic advantages for the Af-
rican bank, but could make the
search for the right investor
with deep enough pockets even
harder, analysts said.
“The smaller banks can eas-
ily find buyers, even local guys.
Please see AFRICA page B7
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B6 | Thursday, March 10, 2016 THE WALL STREET JOURNAL.

MARKETS DIGEST
Nikkei 225 Index STOXX 600 Index S&P 500 Index Data as of 4 p.m. New York time
Last Year ago
16642.20 t 140.95, or 0.84% Year-to-date t 12.56% 339.14 s 1.66, or 0.49% Year-to-date t 7.29% 1989.26 s 10.00, or 0.51% Trailing P/E ratio * 23.08 20.50
High, low, open and close for each 52-wk high/low20868.03 14952.61 High, low, open and close for each 52-wk high/low 414.06 303.58 High, low, open and close for each P/E estimate * 16.55 17.65
trading day of the past three months. All-time high 38915.87 12/29/89 trading day of the past three months. All-time high 414.06 4/15/15 trading day of the past three months. Dividend yield 2.27 1.97
All-time high: 2130.82, 05/21/15

20000 400 2100

65-day moving average 65-day moving average

19000 380 2050

65-day moving average

18000 360 2000

Session high 17000 340 1950

DOWN UP
t

Session open Close

16000 320 1900
Close Open
t

Session low 15000 300 1850

Bars measure the point change from session's open

14000 280 1800
Dec. Jan. Feb. Mar. Dec. Jan. Feb. Mar. Dec. Jan. Feb. Mar.

International Stock Indexes Data as of 4 p.m. New York time Global government bonds
Latest 52-Week Range YTD Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year
Region/Country Index Close NetChg % chg Low Close High % chg and 10-year government bonds around the world. Data as of 3 p.m. ET
World The Global Dow 2247.16 1.73 0.08 2033.03 • 2643.78 –3.8 Country/ Spread Over Treasurys, in basis points Yield
MSCI EAFE 1612.29 –4.19 –0.26 1471.88 • 1956.39 –6.1 Coupon Maturity, in years Yield Latest Previous Month Ago Year ago Previous Month ago Year ago
MSCI EM USD 789.33 1.24 0.16 691.21 • 1067.74 –0.6 5.500 Australia 2 1.985 107.9 109.7 106.8 127.9 1.967 1.762 1.971
4.250 10 2.564 67.6 74.1 69.3 55.1 2.566 2.419 2.745
Americas DJ Americas 476.71 2.81 0.59 433.38 • 525.25 –2.2
3.500 Belgium 2 -134.4 -111.9 -84.0 -0.447 -0.425 -0.149
-0.438 -131.7
Brazil Sao Paulo Bovespa 48747.39 –354.74 –0.72 37046.07 • 58574.79 12.5
0.800 10 0.525 -136.3 -134.5 -110.8 -175.4 0.481 0.619 0.439
Canada S&P/TSX Comp 13395.78 84.73 0.64 11531.22 • 15524.75 3.0
4.250 France 2 -0.433 -133.9 -131.2 -112.8 -81.8 -0.442 -0.433 -0.126
Mexico IPC All-Share 44455.55 –48.74 –0.11 39256.58 • 46078.07 3.4
1.000 10 0.544 -134.5 -133.2 -111.0 -159.0 0.493 0.617 0.604
Chile Santiago IPSA 3036.44 –6.29 –0.21 2730.24 • 3361.36 3.1
0.500 Germany 2 -0.533 -143.9 -139.9 -120.9 -90.6 -0.529 -0.515 -0.214
U.S. DJIA 17000.36 36.26 0.21 15370.33 • 18351.36 –2.4
0.500 10 0.243 -164.5 -164.1 -148.9 -192.6 0.185 0.238 0.268
Nasdaq Composite 4674.38 25.55 0.55 4209.76 • 5231.94 –6.7
4.500 Italy 2 -0.050 -95.6 -92.8 -60.8 -52.3 -0.058 0.086 0.169
S&P 500 1989.26 10.00 0.51 1810.10 • 2134.72 –2.7
2.000 10 1.415 -47.3 -40.5 -4.2 -91.3 1.420 1.685 1.281
CBOE Volatility 18.62 –0.05 –0.27 10.88 • 53.29 2.3
0.100 Japan 2 -0.179 -108.5 -109.4 -93.5 -67.2 -0.224 -0.240 0.020
EMEA Stoxx Europe 600 339.14 1.66 0.49 303.58 • 414.06 –7.3 0.100 10 -0.016 -190.4 -191.9 -175.0 -176.2 -0.094 -0.023 0.431
Stoxx Europe 50 2845.08 12.73 0.45 2556.96 • 3602.76 –8.2 0.500 Netherlands 2 -0.510 -141.6 -137.1 -117.5 -84.6 -0.501 -0.481 -0.154
Austria ATX 2247.91 10.94 0.49 1929.73 • 2695.57 –6.2 0.250 10 0.353 -153.5 -152.0 -132.2 -184.1 0.305 0.405 0.352
Belgium Bel-20 3384.61 13.42 0.40 3117.61 • 3910.33 –8.5 4.350 Portugal 2 0.285 -62.1 -59.5 -37.7 -57.5 0.275 0.317 0.117
France CAC 40 4425.65 21.63 0.49 3892.46 • 5283.71 –4.6 2.875 10 2.977 108.9 114.3 174.2 -44.4 2.968 3.468 1.750
Germany DAX 9723.09 30.27 0.31 8699.29 • 12390.75 –9.5 4.500 Spain 2 -0.002 -90.8 -91.9 -64.8 -56.5 -0.049 0.046 0.127
Greece ATG 552.59 –11.08 –1.97 420.82 • 857.92 –12.5 2.150 10 1.564 -32.4 -26.6 5.9 -90.5 1.560 1.785 1.288
Hungary BUX 25345.77 90.37 0.36 18354.87 • 25456.76 6.0 3.750 Sweden 2 -0.618 -152.4 -148.9 -127.7 -86.0 -0.619 -0.583 -0.168
Israel Tel Aviv 1466.47 5.99 0.41 1383.34 • 1728.89 –4.1 2.500 10 0.533 -135.5 -133.7 -126.8 -140.9 0.488 0.458 0.784
Italy FTSE MIB 18208.92 191.36 1.06 15773.00 • 24157.39 –15.0 1.250 U.K. 2 0.468 -43.8 -48.7 -36.8 -28.7 0.383 0.326 0.405
Netherlands AEX 435.56 2.67 0.62 378.53 • 510.55 –1.4 2.000 10 1.471 -41.8 -44.0 -31.2 -23.1 1.385 1.415 1.962
Poland WIG 46482.03 –52.96 –0.11 41747.01 • 57460.44 0.03 0.750 U.S. 2 0.906 ... ... ... ... 0.870 0.694 0.692
Russia RTS Index 835.64 –3.59 –0.43 607.14 • 1092.52 10.4 1.625 10 1.888 ... ... ... ... 1.825 1.727 2.193
Spain IBEX 35 8761.10 20.80 0.24 7746.30 • 11884.60 –8.2
Sweden SX All Share 484.22 2.34 0.49 432.78 • 564.90 –4.1 Commodities Prices of futures contracts with the most open interest 3:30 p.m. New York time
Switzerland Swiss Market 7975.81 4.66 0.06 7425.05 • 9537.90 –9.6 EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.; MDEX: Bursa Malaysia
South Africa Johannesburg All Share 51484.46 –763.38 –1.46 45975.78 • 55355.12 1.6 Derivatives Berhad; TCE: Tokyo Commodity Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange;
NYMEX: New York Mercantile Exchange; ICE-EU: ICE Futures Europe. *Data as of 3/8/2016
Turkey BIST 100 78738.19 1055.31 1.36 68230.47 • 88651.88 9.8
One-Day Change Year Year
U.K. FTSE 100 6146.32 20.88 0.34 5499.51 • 7122.74 –1.5 Commodity Exchange Last price Net Percentage high low
359.00 -1.50 -0.42% 378.25 354.25
Asia-Pacific DJ Asia-Pacific TSM 1312.81 –8.57 –0.65 1188.42 • 1621.10 –5.5 Corn (cents/bu.) CBOT
Soybeans (cents/bu.) 885.75 1.25 0.14% 890.50 856.00
Australia S&P/ASX 200 5157.20 49.20 0.96 4765.30 • 5982.70 –2.6
Wheat (cents/bu.)
CBOT
CBOT 467.00 1.75 0.38 493.50 442.25
China Shanghai Composite 2862.56 –38.83 –1.34 2655.66 • 5166.35 –19.1
Live cattle (cents/lb.) CME 137.000 -0.125 -0.09 138.550 127.150
Hong Kong Hang Seng 19996.26 –15.32 –0.08 18319.58 • 28442.75 –8.8
Cocoa ($/ton) ICE-US 3,017 47 1.58 3,215 2,738
India S&P BSE Sensex 24793.96 134.73 0.55 22951.83 • 29044.44 –5.1
Coffee (cents/lb.) ICE-US 122.50 0.80 0.66 128.25 113.35
Japan Nikkei Stock Avg 16642.20 –140.95 –0.84 14952.61 • 20868.03 –12.6
Sugar (cents/lb.) ICE-US 14.64 -0.22 -1.48 14.94 12.61
Singapore Straits Times 2810.43 31.66 1.14 2532.70 • 3539.95 –2.5
Cotton (cents/lb.) ICE-US 56.63 -0.23 -0.40 64.30 54.53
South Korea Kospi 1952.95 6.83 0.35 1829.81 • 2173.41 –0.4 Robusta coffee ($/ton) ICE-EU 1417.00 9.00 0.64 1,568.00 1,342.00
Taiwan Weighted 8634.11 –30.20 –0.35 7410.34 • 9973.12 3.6
Copper ($/lb.) COMEX 2.2365 0.0145 0.65 2.3040 1.9440
Source: SIX Financial Information;WSJ Market Data Group Gold ($/troy oz.) COMEX 1250.80 -12.10 -0.96 1,280.70 1,061.90
Silver ($/troy oz.) COMEX 15.280 -0.110 -0.71 16.005 13.760
Currencies London close on March 9 Aluminum ($/mt)* LME 1,588.50 2.00 0.13 1,588.50 1,451.50
Tin ($/mt)* LME 16,975.00 -250.00 -1.45 17,225.00 13,225.00
Yen, euro vs. dollar; dollar vs. major U.S. trading partners US$vs,
Wed YTDchg Copper ($/mt)* LME 4,975.00 -14.50 -0.29 4,989.50 4,320.50
10% Country/currency in US$ per US$ (%) Lead ($/mt)* LME 1,861.00 -27.00 -1.43 1,888.00 1,598.00
8
Europe Zinc ($/mt)* LME 1,812.00 -27.00 -1.47 1,843.00 1,467.00
6
WSJ Dollar index Bulgaria lev 0.5631 1.7759 –1.3 Nickel ($/mt)* LME 9,090.00 -310.00 -3.30 9,400.00 7,750.00
4
s
Croatia kuna 0.1457 6.865 –2.1 Rubber (Y.01/ton) TCE 171.10 -1.70 -0.98 180.00 154.10
2
Euro zone euro 1.1023 0.9072 –1.5
0 Palm oil (MYR/mt) MDEX 2558.00 30.00 1.19 2,653.00 2,425.00
Czech Rep. koruna-b 0.0407 24.544 –1.4
–2 Denmark krone 0.1477 6.7690 –1.5 Crude oil ($/bbl.) NYMEX 39.96 1.54 4.01 41.35 29.85
–4 s Euro
s Yen Hungary forint 0.003567 280.32 –3.5 NY Harbor ULSD ($/gal.) NYMEX 1.2293 0.0293 2.44 1.2425 0.8750
–6 Iceland krona 0.007750 129.03 –0.9
–8 RBOB gasoline ($/gal.) NYMEX 1.4684 0.0806 5.81 1.5695 1.1253
Norway krone 0.1175 8.5098 –3.8
0.2554 3.9159 –0.2
Natural gas ($/mmBtu) NYMEX 1.751 0.039 2.28 2.5120 1.6110
2015 2016 Poland zloty
Russia ruble-d 0.01406 71.113 –1.1 Brent crude ($/bbl.) ICE-EU 40.86 1.21 3.05 41.48 28.58
US$vs, US$vs,
YTDchg YTDchg Sweden krona 0.1187 8.4266 –0.2 Gas oil ($/ton) ICE-EU 368.25 4.25 1.17 374.00 260.25
Wed Wed
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Switzerland franc 1.0047 0.9953 –0.7
Turkey lira 0.3464 2.8871 –1.0 Sources: SIX Financial Information; WSJ Market Data Group
Americas Hong Kong dollar 0.1288 7.7655 0.2
Ukraine hryvnia 0.0381 26.2645 9.5
Argentina peso-a 0.0651 15.3660 18.7
India rupee
Indonesia rupiah
0.0149
0.0000763
67.0832
13100
1.3
–5.3
U.K. pound 1.4227 0.7029 3.6 Cross rates London close on Mar 9
Brazil real 0.2702 3.7007 –6.6 Middle East/Africa
Japan yen 0.008845 113.06 –6.0
Canada dollar 0.7553 1.3241 –4.3 USD GBP CHF JPY HKD EUR CDN AUD
Kazakhstan tenge 0.002890 346.06 2.2 Bahrain dinar 2.6522 0.3771 –0.01
Chile peso 0.001478 676.70 –4.5 Australia 1.3294 1.8914 1.3355 0.0118 0.1712 1.4654 1.0042 ...
Macau pataca 0.1250 7.9984 –0.1 Egypt pound-a 0.1277 7.8322 0.03
Colombia peso 0.0003159 3165.28 –0.3 Canada 1.3241 1.8836 1.3301 0.0117 0.1705 1.4593 ... 0.9958
Malaysia ringgit-c 0.2440 4.0980 –4.8 Israel shekel 0.2570 3.8915 –0.03
Ecuador US dollar-f 1 1 unch
New Zealand dollar 0.6810 1.4684 0.3 Kuwait dinar 3.3250 0.3007 –0.9 Euro 0.9072 1.2908 0.9115 0.0080 0.1168 ... 0.6851 0.6825
Mexico peso-a 0.0564 17.7234 3.0
Pakistan rupee 0.0095 104.750 –0.1 Oman sul rial 2.5970 0.3851 0.03 Hong Kong 7.7655 11.0479 7.8021 0.0687 ... 8.5600 5.8648 5.8419
Peru sol 0.2905 3.4429 0.8
Philippines peso 0.0214 46.799 –0.1 Qatar rial 0.2746 3.642 –0.03 Japan 113.0580 160.8400 113.5900 ... 14.5580 124.6200 85.3978 85.0500
Uruguay peso-e 0.0311 32.190 7.6
Singapore dollar 0.7254 1.3785 –2.8 Saudi Arabia riyal 0.2667 3.7500 –0.1 0.9953 1.4159 ... 0.0088 0.1282 1.0971 0.7518 0.7486
Venezuela bolivar 0.158595 6.31 0.005 Switzerland
South Korea won 0.0008279 1207.85 2.7 South Africa rand 0.0660 15.1478 –2.1
U.K. 0.7029 ... 0.7063 0.0062 0.0905 0.7748 0.5309 0.5287
Asia-Pacific Sri Lanka rupee 0.0068975 144.98 0.5 Close Net Chg % Chg YTD % Chg
0.7522 1.3294 –3.1 Taiwan dollar 0.03053 32.754 –0.5 U.S. ... 1.4227 1.0047 0.0088 0.1288 1.1023 0.7553 0.7522
Australia dollar WSJ Dollar Index 88.45 –0.28 –0.32 –1.91
China yuan 0.1535 6.5130 0.3 Thailand baht 0.02834 35.280 –2.1 Sources: Tullett Prebon, WSJ Market Data Group Source: Tullett Prebon

Key Rates Top Stock Listings 4 p.m. New York time

Latest 52 wks ago % YTD% % YTD% % YTD%
Libor Cur Stock Sym Close Chg Chg Cur Stock Sym Close Chg Chg Cur Stock Sym Close Chg Chg Asia Titans 50
One month 0.43800% 0.17600% ¥ TakedaPharm 4502 5362.00 -1.56 -11.59 £ RioTinto RIO 2030.50 0.22 2.58 Last: 126.19 t 0.18, or 0.14% YTD t 7.4%
Three month 0.63460 0.26990 Asia Titans HK$ TencentHoldings 0700 145.70 -0.41 -4.58 CHF RocheHldgctf ROG 248.30 -1.00 -10.17
150
Six month 0.89840 0.40140 HK$ AIAGroup 1299 41.60 0.48 -10.73 ¥ TokioMarineHldg 8766 3865.00 -2.28 -17.98 £ RoyDtchShell A RDSA 1689.50 1.84 10.71
One year 1.20900 0.71510 ¥ AstellasPharma 4503 1541.00 -1.75 -11.00 ¥ ToyotaMtr 7203 5976.00 -0.23 -20.19 € SAP SAP 69.77 0.56 -4.92 50–day 140
25.48
moving average
Euro Libor AU$ AustNZBk ANZ 2.00 -8.77 AU$ Wesfarmers WES 41.56 1.71 -0.12 € Sanofi SAN 73.06 0.83 -7.05
130
One month -0.29000% -0.00857% AU$ BHP BHP 17.86 -1.92 ... AU$ WestpacBanking WBC 32.53 2.26 -3.07 € SchneiderElectric SU 55.86 -0.27 6.28 t
Three month -0.24214 0.01929 HK$ BankofChina 3988 3.09 -0.32 -10.69 AU$ Woolworths WOW 23.35 1.52 -4.69 € Siemens SIE 89.55 0.96 -0.37 High 120
Six month -0.13729 0.07571 HK$ CKHutchison 0001 97.30 0.21 -6.80 € Telefonica TEF 9.75 0.10 -4.74 Close 110
One year -0.02329 0.20357 HK$ CNOOC 0883 9.03 -2.48 11.90 Stoxx 50 € Total FP 42.10 0.15 2.04 Low
100
Euribor ¥ Canon 7751 3326.00 0.88 -9.50 CHF ABB ABBN 18.22 0.33 1.45 CHF UBSGroup UBSG 16.33 0.49 -16.34
One month -0.29100% -0.01100% ¥ CentralJapanRwy 9022 19065 -1.75 -11.74 € AXA CS 20.79 0.41 -17.62 € Unilever UNA 39.93 0.41 -0.44 11 18 25 31 8 15 22 29 5 12 19 26 4
Three month -0.22400 0.02900 HK$ ChinaConstructnBk 0939 4.77 -0.83 -10.17 € Allianz ALV 141.80 0.71 -13.30 £ Unilever ULVR 3119.50 0.31 6.59 Jan. Feb. Mar.
Six month -0.13900 0.09900 HK$ ChinaLifeInsurance 2628 17.92 0.67 -28.61 € Anheuser Busch ABI 105.60 1.25 -7.69 £ VodafoneGroup VOD 215.40 -1.03 -2.53
One year -0.02300 0.21700 HK$ ChinaMobile 0941 85.15 0.41 -2.69 £ AstraZeneca AZN 4076.00 0.53 -11.71 CHF ZurichInsurance ZURN 224.50 0.31 -13.12
Yen Libor AU$ CmwlthBkAust CBA 76.31 1.14 -10.78 € BASF BAS 64.35 1.04 -9.01
DJIA Stoxx 50
One month 0.23446% 0.23786% ¥ EastJapanRailway 9020 9659.00 -0.67 -15.64 € BNP Paribas BNP 45.71 0.11 -12.48
17935 -1.43 -14.92 59.04 -0.66 -15.11 Last: 2845.08 s 12.73, or 0.45% YTD t 8.2%
Three month 0.56857 0.38857 ¥ Fanuc 6954 £ BT Group BT.A 459.80 -0.79 -2.52 $ AmericanExpress AXP
Six month 0.90411 0.54143 ¥ Hitachi 6501 504.60 -1.68 -27.03 € BancoBilVizAr BBVA 6.05 -0.71 -10.18 $ Apple AAPL 101.12 0.09 -3.93 3400
One year 1.26679 0.84286 TW$ Hon Hai Precisn 2317 82.80 -0.24 2.48 € BancoSantander SAN 4.11 -0.77 -9.81 $ Boeing BA 122.84 0.40 -15.04
¥ HondaMotor 7267 3110.00 -0.96 -20.46 £ Barclays BARC 168.20 -2.21 -23.16 $ Caterpillar CAT 71.85 0.17 5.72 3200
Offer
KRW HyundaiMtr 005380 149500 1.01 0.34 € Bayer BAYN 98.40 0.82 -15.03 $ Chevron CVX 92.82 4.60 3.18 3000
Eurodollars
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16800
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Overnight repurchase rates ¥ Seven&I Hldgs 3382 CHF Nestle NESN 71.50 0.35 -4.09 15000
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93.45 -0.27 -0.32 $ VISAClA V 70.67 0.07 -8.87 Jan. Feb. Mar.
HK$ SunHngKaiPrp 0016 £ Prudential PRU 1365.00 2.90 -10.84
Sources: WSJ Market Data Group, SIX 153.00 0.66 6.99
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For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Aspect
Buys Rival
In Unusual
Fund Deal
BY LAURENCE FLETCHER
Aspect Capital Ltd., one of
Europe’s biggest computer-
driven hedge-fund firms, has
bought smaller rival Auriel
Capital Management, in a
rare deal between hedge funds
that will help Aspect diversify
into currency trading.
London-based Aspect, which
uses complex algorithms to
latch onto and profit from
market trends, said the deal
adds about $1.4 billion of in-
vestor assets to its portfolio,
taking the total to $6.6 billion.
It declined to say how much it
paid for Auriel.
As part of the deal, Auriel
founders Asif Noor and Anoosh
Lachin, who previously worked
in quantitative research at
Deutsche Asset Management,
have joined Aspect. They will
continue to run a currency
fund at Aspect and also will
start a global macro fund trad-
ing bonds and currencies.
The deal allows Aspect to
branch out from its specialty
of following price trends in
markets. The new funds will
use computer models to hunt
for trends and to analyze yield
curves and other metrics to try
to determine at what level cur-
rencies should be trading.
Computer-driven hedge
funds lost money for three
years in a row between 2011
and 2013, but have been one of
the standout performers in a
bad start to 2016 for hedge
funds. Such trend-following
funds are up 4% this year
through Friday, according to
Hedge Fund Research, while
hedge funds overall are down
2.3% on average.
Aspect’s purchase is a rare
acquisition in the $2.9 trillion
hedge-fund sector, where deals
are often hard to get done be-
cause of managers’ egos and
the risk that investors will pull
out. More common are deals in
which investment funds or pri-
vate-equity firms take a minor-
ity stake in a hedge-fund busi-
ness.
Aspect Chief Executive An-
thony Todd said the deal had
taken almost a year to com-
plete, following a large amount
of due diligence on Auriel. He
said it had been flagged to As-
pect by a consultant the firm
had known for years who knew
Auriel was interested in such a
transaction.
Aspect’s main fund is up
4.1% this year to March 1, hav-
ing gained 7.9% last year and
32% in 2014.
The firm was set up in 1997
by Martin Lueck, Michael
Adam, Anthony Todd and Eu-
gene Lambert.
Mr. Adam and Mr. Lueck
were co-founders of AHL, the
$16.9 billion computer-driven
fund unit now owned by Man
Group.
SAUDI
Continued from page B5
build large foreign reserves
and expand its economy by
spending lavishly at home. It
also substantially reduced its
external debt burden.
Last year, Saudi Arabia ran
a record deficit of nearly $100
billion as crude prices tumbled
by more than half since the
middle of 2014.
The country announced
austerity measures for this
year, including spending and
subsidy cuts, and said it would
consider privatizing state as-
sets.
Last year, Saudi
Arabia ran a record
deficit of nearly
$100 billion.
With this loan, Saudi Arabia
will follow in the footsteps of
Oman and Qatar, two other
Persian Gulf states that have
recently secured international
loans.
The oil exporters of the
Gulf are increasingly looking
to tap international markets to
make up for the loss in oil rev-
enues.
Ratings firm Standard &
Poor’s last month cut Saudi
Arabia’s sovereign credit rat-
ing, citing the impact of low
oil prices on the country’s fi-
Jump in Oil Gives Stocks a Lift
Energy sector leads
gains in U.S., Europe;
investors await ECB
policy decision
BY CARLA MOZEE
AND RIVA GOLD
European and U.S. stocks
gained Wednesday, getting a
boost from a surge in crude-oil
prices and energy shares, as
investors looked toward the
European Central Bank’s pol-
icy decision Thursday.
The Stoxx Europe 600 rose
0.5% to 339.14.
In the U.S., the Dow Jones In-
dustrial Average climbed 36.26
points, or 0.2%, to 17000.36. The
S&P 500 gained 0.5%, while the
N a s d a q
WEDNESDAY’S Composite
MARKETS added 0.55%.
Crude
prices ral-
lied after U.S. government
data showed inventories of
gasoline and other fuels fell,
reflecting strong demand.
However, crude-oil inventories
grew more than expected.
Brent crude for May delivery
jumped $1.42 a barrel, or 3.6%,
to $41.07, its highest settle
since Dec. 4. U.S. crude for
April delivery rose $1.79 a bar-
rel, or 4.9%, to $38.29.
In the oil sector, OMV AG
climbed 2.6% in Vienna, Neste
Corp. tacked on 1.9% in Hel-
sinki, and Tullow Oil PLC
added 3.5% in London.
Shares of Mediaset SpA
jumped 6.8% as the Italian
broadcaster is talking to
French media group Vivendi
SA about selling its pay-TV
unit, according to a Reuters
report.
Restaurant Group PLC tum-
bled 23% after the operator of
the Frankie & Benny’s and
Chiquito chains warned of a
slowdown in same-store sales
METALS
Continued from page B5
highly likely to remain weak
over the coming year.”
China’s property sector has
been one of the biggest con-
sumers of metals such as cop-
per, aluminum and steel, and
the slowdown there has been
one of the biggest causes of
the slump in demand for met-
als.
The fragile nature of the re-
cent rise in metals prices was
seen Tuesday, when prices for
such base metals as copper,
zinc and nickel dropped
sharply after data showed that
China’s exports fell 25.4% in
dollar terms year over year in
February, while imports de-
clined 13.8% last month.
The trade data spooked
market sentiment.
Some analysts say that
China’s demand for metals is,
in fact, holding up well.
Although imports of copper
and iron ore fell from a month
nances and economy. It fore-
casts average growth of 2%
between 2016 and 2019, down
from 3%. Moody’s also re-
cently put Saudi Arabia’s rat-
ing on review for a possible
downgrade while it assesses
the impact of the low oil
prices.
Despite the growing pres-
sure on Saudi Arabia’s fi-
nances, bankers say the king-
dom still has plenty of room to
borrow.
“The amount of borrowing
that is on Saudi Arabia’s bal-
ance sheet is effectively ex-
tremely low relative to its re-
serves and relative to its
economy,” said Karim Awad,
chief executive of EFG Hermes,
one of the Middle East’s larg-
est local investment banks, in
a recent interview. “There’s a
lot of room to borrow and it
will help the economy as a
whole for sure.”
Saudi Arabia has issued do-
mestic bonds worth more than
$5 billion in recent months
and tapped into its foreign re-
serves held by the central
bank to bolster its finances.
The country could also con-
sider tapping the international
bond markets after securing
the loan, the bankers said.
Verus Partners, a small ad-
visory firm set up by former
Citigroup bankers, is advising
the Saudi ministry, the bank-
ers said.
The London-based firm de-
clined to comment.
—Ahmed Al Omran in Riyadh
contributed to this article.
MONEY & INVESTING
Shares of Italy’s Mediaset rose 6.8% on news that the broadcaster is in talks about selling its pay-TV unit to Vivendi.
Investors awaited Thurs-
day's ECB monetary-policy de-
cision, with many expecting
the bank to cut its deposit rate
further into negative territory
and introduce additional quan-
titative easing. The moves
would come as the central
bank continues to fight stub-
bornly low inflation rates in
the eurozone economy.
“Markets are really looking
for more stimulus from Eu-
rope,” said Michelle McGrade,
chief investment officer at
brokerage TD Direct Investing.
“If they don’t do whatever it
takes, markets will be a little
disappointed.”
While ultraloose monetary
policy measures have lifted
Copper ore is trucked from a mine in Eritrea in western Africa. The price stabilized on Wednesday.
earlier, year-to-date imports
were up 23.6% and 6.3%, re-
spectively, noted Mr. Hynes of
ANZ.
Metals prices stabilized
Wednesday on the London
AFRICA
Continued from page B5
Who’s really able and willing to
buy the whole stake in the
group?” said Kato Mukuru,
head of equities at consultancy
Exotix and a veteran Africa-fo-
cused investment banker with
Citigroup and other major insti-
tutions.
The most talked about pro-
spective buyer is former Bar-
clays Chief Executive Bob Dia-
mond and his Africa-focused
Atlas Mara fund, which owns
eight banks in seven African
countries.
Mr. Diamond, who has been
seen at the Barclays central
London offices recently, has
been in contact both with Bar-
clays and with potential inves-
tors who could boost his fund’s
bid, people familiar with the
discussions said.
Mr. Diamond is unlikely to
bid for the whole group, people
with knowledge of the situation
said.
His fund’s listed shares are
valued at about $320 million—a
fraction of what would be
needed to buy the chunk Bar-
clays is seeking to sell.
Beyond the price, the South
African component is outside
the interest of a fund focusing
on the continent’s less-devel-
oped but higher-growth mar-
kets.
Ms. Ramos said she hadn’t
spoken with Mr. Diamond about
the sale. Barclays in London
and a spokesman for Atlas Mara
stocks in the past, uncertainty
remains over what the ECB
might do and what impact
that could have on the region’s
banks.
“Traders need to be wary of
the possibility that the ECB
may disappoint again, like it
did back in December,” said
Fawad Razaqzada, technical
analyst at Forex.com, in a
note. With “oil prices coming
back strongly and the euro re-
maining weak, the ECB may
once again hold off fire. This
potential scenario would likely
disappoint the markets and
lead to a sharp sell-off,” he
wrote.
Stocks around the world
have rebounded sharply in the
Metals Exchange and the New
York Mercantile Exchange.
Copper for March delivery
rose $1.15, or 0.5%, to $2.23 on
the Comex division of Nymex.
“The better-than-expected
declined to comment.
Barclays is playing a long
game, giving itself up to three
years to sell down most of its
shares in Barclays Africa.
Ms. Ramos said she was
looking for a “serious investor
who’d make a long-term com-
mitment” to the group’s future,
and she dismissed concerns
about the perilous state of the
economy in South Africa and
other parts of the continent,
which are being buffeted by low
commodity prices and a Chi-
nese slowdown.
In the absence of a credible
buyer, Barclays wants to sell its
stake in Barclays Africa in
chunks to asset managers or
sovereign-wealth funds, execu-
tives have said.
Despite a heavy bias toward
South Africa that amounted to
almost 80% of revenue in the
first half of 2015, executives at
Barclays are eager to pitch the
unit as a pan-African invest-
ment. Barclays executives have
already held discussions with a
number of asset managers, peo-
Advertisement
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Thursday, March 10, 2016 | B7
past three weeks, spurred by
encouraging U.S. economic
data and gains in oil prices.
But investors have also
been buying assets often asso-
ciated with safety, such as
gold, underscoring their cau-
tion.
“The negative case people
have been very eloquent in ar-
ticulating,” said Bill Nichols,
head of U.S. equities at Cantor
Fitzgerald. “The bullish case is
tougher to make.”
After years of sluggish
growth and inflation in Eu-
rope, “investors are concerned
about how successful [the
ECB’s] efforts are going to be
at generating economic recov-
ery,” said John Conlon, chief
THOMAS MUKOYA/REUTERS
underlying data suggests we
have turned the corner in
[metal] commodities and prob-
ably won’t see the cyclical
lows that we saw earlier this
year,” Mr. Hynes said.
ple familiar with the matter
said.
Analysts expect the South
African Public Investment
Corp., a state-owned invest-
ment vehicle, which holds
around 5% of Barclays Africa, to
boost its stake. Still, it is un-
likely that the PIC will be able
to buy the whole chunk Bar-
clays is looking to sell.
The bank could also face reg-
ulatory hurdles. The sale would
have to be approved both by
U.K. and South African regula-
tors, while the corporate struc-
ture of the bank and its share-
holders add more layers of
complexity.
Another financial institution
analysts see as a possible inves-
tor in Barclays Africa is Qatar
National Bank. Backed by its
wealthy owner, the state of Qa-
tar, QNB has been on an aggres-
sive buying spree in recent
years, snapping up assets in
Egypt and, most recently, in
Turkey in a bid to become the
largest bank in the Middle East
and Africa by 2017.
INTERNATIONAL INVESTMENT FUNDS
FUND NAME
n Chartered Asset Management Pte Ltd - Tel No: 65-6835-8866
Fax No: 65-6835 8865, Website: www.cam.com.sg, Email: cam@cam.com.sg
CAM-GTF Limited
For information about listing your funds,
please contact: Freda Fung tel: +852 2831
2504; email: freda.fung@wsj.com
ITALY PHOTO PRESS/ZUMA PRESS
equity strategist at People’s
United Wealth Management.
Mr. Conlon will be watching
Thursday’s decision closely
and following its impact on
currency markets, as aggres-
sive measures could weaken
the euro against the dollar
ahead of the Federal Reserve’s
meeting next week.
The euro held firm ahead of
the ECB meeting, trading at
$1.1007 late in New York com-
pared with $1.1012 late Tues-
day.
Fed officials are likely to
keep short-term interest rates
unchanged at their March
meeting, but leave open the
possibility of rate rises in
April and June.
Tuesday’s price slide con-
trasted with sharp gains in
prices of iron ore and steel just
a day earlier, after Chinese au-
thorities who met over the
weekend at the National Peo-
ple’s Congress pledged to
wring out excess capacity in
industries such as steel. Such a
step should push up prices by
lowering supply.
But there are skeptics that
such policy pledges will lead to
a sustained rise in prices.
“Nothing has changed much
in the fundamentals. It is just a
change in expectations,” said a
Shanghai-based trader for a
large international commodi-
ties trading firm dealing in
coal, steel and iron ore.
He pointed out that first-
quarter demand for metals was
only slightly better than in the
2015 year-end quarter. “It is
pretty much like the case of a
patient whom you try to heal
by giving drugs. All that you
really are doing is trying to
buy more time.”
—Yifan Xie
contributed to this article.
Barclays is also selling its
Egyptian business separately, a
target that may attract Middle
Eastern buyers.
But the rapid succession of
these acquisitions makes it un-
likely the bank has any appetite
to make another complex take-
over soon, according to a
banker who has advised QNB on
previous transactions. The bank
wasn’t immediately available to
comment.
QNB already has a sizable
presence in Africa. In 2014, it
became the largest shareholder
of pan-African lender Ecobank.
Ms. Ramos is confident the
right suitor will be found and
Barclays Africa will be well-
placed to capitalize on the eco-
nomic ascent of the African
continent.
“Those who will be investing
in our business will be looking
at our long-term prospects,”
she said. “And I’ve been very
pleased with the interest al-
ready.”
—Nicolas Parasie in Dubai
contributed to this article.
NAV —%RETURN—
GF AT LB DATE CR NAV YTD 12-MO 2-YR
OT OT MUS 03/04 USD 287158.88 2.5 -14.4 -7.7
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B8 | Thursday, March 10, 2016
Email: heard@wsj.com
Casino Must
Get Rebound
In France
Under pressure from U.S.
short seller Carson Block,
French supermarket group
Casino released details of its
real-estate operation
in Wednesday’s annual re-
sults. But these raise as
many questions as they an-
swer.
Gains on property dispos-
als contributed €167 million
($184 million) to the com-
pany’s earnings before inter-
est, taxes, depreciation and
amortization in France in
2015, 23% of the total. This
confirms what Mr. Block and
equity analysts had sus-
pected: Casino’s French prof-
its have become highly de-
pendent on selling excess
space in its hypermarkets to
Mercialys, the real-estate in-
vestment trust in which Ca-
sino owns a 40% stake.
But the more interesting
disclosure was that the com-
pany is kicking the habit:
Management expects a prop-
erty contribution of just €66
million this year, down
three-fifths. This somewhat
undermines Casino’s claim,
in response to Mr. Block’s
initial attack in December,
that the property business
generates a “sustained
Ebitda contribution.” More
important, it means the core
grocery business will have to
run very fast just for French
profits to stand still.
Management is guiding in-
vestors to expect Ebitda of
€900 million this year from
Casino’s home market, up
from €726 million. Adjusting
for reduced property profits,
the grocery business will
have to increase profits by
almost half to hit this target.
Everything needs to go
right for Casino to hit its
targets. Management may
have diffused the property
controversy. But it still is
asking investors to take a lot
on trust. —Stephen Wilmot
Crédit Agricole to Focus on Retail Activity ECB
BY NOEMIE BISSERBE
PARIS—Crédit Agricole SA
said Wednesday it aimed to
focus on its retail, asset-man-
agement and insurance busi-
nesses to boost earnings over
the next three years, following
the planned sale of its 25%
stake in the group’s regional
cooperative banks.
The Paris-based lender,
France’s second-largest listed
bank by assets, said it ex-
pected to achieve a net profit
upward of €4.2 billion ($4.6
billion) in 2019, compared
with €3.52 billion in 2015. The
bank is aiming for a return on
tangible equity—a measure of
profitability—of more than
10% by 2019.
Crédit Agricole, which dis-
closed its strategic plan on
Wednesday, is under pressure
to show that it can provide sta-
ble returns to investors, given
its new revenue mix, and de-
spite persistently low interest
rates and choppy markets.
Finance
Watch
NORWAY
Returns Decline
At Sovereign Fund
Norway’s $877 billion sovereign-
wealth fund, the world’s largest, re-
ported a return of 2.7% in 2015,
down from 7.6% in 2014.
It was the weakest performance
since 2011, when full-year returns
were negative. The fund blamed
the weaker returns partly on slow-
ing growth in emerging markets.
Norges Bank Investment Man-
agement, which manages the fund,
also said it held fewer large equity
stakes at the end of 2015 than a
year earlier, due to a gradual shift
away from Europe and a transfer
of equity assets into its real-estate
portfolio.
The Norwegian fund held 1.3%
of all global listed equities at the
end of 2015.
—Kjetil Malkenes Hovland
HEARD ON THE STREET
China Could Redraw the Markets’ Map
Sometimes markets take
mere seconds to change di-
rection, their path swinging
around events like this
week’s hotly anticipated Eu-
ropean Central Bank meet-
ing. But the most powerful
forces in capital markets can
be much slower to take ef-
fect—and have much bigger
consequences.
The tectonic forces of de-
mographics, regulation and
the plumbing behind finan-
cial markets aren’t as
changeable as monetary pol-
icy, and so tend to have deep
and persistent effects. U.S.
tax legislation helped create
the Eurobond market. Sub-
prime mortgage securitiza-
tions were spread around the
globe partly due to wrinkles
in bank capital regulation.
New regulations designed to
make banks safer may be
making markets more vola-
tile.
The latest example of this
kind of shift may be China
and its efforts to open up its
This Big Dividend Signals Caution
Prudential PLC has man-
aged an odd feat: It handed
investors a payout that ap-
pears generous and conser-
vative at the same time.
The U.K.-based life insurer
declared the smallest in-
crease in its regular dividend
since 2009 at its results on
Wednesday, but at the same
time announced its first spe-
cial payout since the 1970s.
The 5% rise in the regular
dividend after three consecu-
tive double-digit percentage
increases could provoke con-
cerns that Prudential’s lead-
ership sees threats to its fu-
ture earnings growth. The
truth appears more that vol-
atile capital is encouraging
Mike Wells, chief executive,
to be careful with regular
payouts, while paying out
one-time gains as a special.
The good news is contin-
The bank said last month it
would sell the stake it holds in
the group’s regional lenders
back to those banks.
Crédit Agricole is 56%-
owned by the group’s regional
cooperative lenders and in
turn controls 25% of those
banks.
While the move will help
simplify its structure and ad-
dress investors’ concerns on
its capital strength, it also will
cut Crédit Agricole’s earnings
by about €470 million.
To make up for the lost in-
come, the bank said it would
increase cross-selling between
the group’s retail cooperative
lenders and its insurance, as-
set-management and con-
sumer-credit businesses, gener-
ating additional annual revenue
of €400 million by 2019.
Crédit Agricole expects total
revenue to grow annually by
2.5% between 2016 and 2019. It
targets a 3% annual growth in
revenue for its insurance and
asset-management division be-
ITALY
Bad Loans Pile Up
Bad loans at Italian banks grew
by 9.4% to €202.05 billion ($222.5
billion) in January, the Bank of Italy
said, as local lenders keep strug-
gling with nonperforming assets.
The rise in bad debts has cut
into banks’ profitability already
hampered by years of recessions or
sluggish growth.
The Bank of Italy said loans to
the private sector declined on an
annual basis by 0.1% in January,
compared with a 0.3% drop in the
previous month.
Loans to households grew by
0.8% in January. Those to nonfinan-
cial companies declined by 0.9%.
—Giovanni Legorano
SEC
No Quick Overhaul
For U.S. Markets
The U.S. stock market won’t be
getting an imminent makeover af-
ter all—not while Mary Jo White is
leading the Securities and Exchange
Commission.
Ms. White said Tuesday the
agency won’t advance any major
changes this year to the frag-
FINANCIAL ANALYSIS & COMMENTARY
Bonding With China
China’s 10-year
government-bond yield
4.0%
3.5
3.0
2.5
2015 ’16
Sources: FactSet; Reuters (photo)
THE WALL STREET JOURNAL.
financial markets. In late
February, China’s central
bank said it would make it
easier for foreign institu-
tional investors to buy bonds
issued in the country. The
immediate consequences of
this have been invisible.
Global investors probably
took more notice when
Moody’s last week slapped a
ued growth in sales and cash
flows at its U.S. and Asian
arms. Prudential is showing
resilience as emerging mar-
kets slow and markets are
volatile. But look at Pruden-
tial’s capital and the picture
is less clear. The group got
a better outcome than it
feared from converting to
new European capital rules
known as Solvency II. But at
the same time, the size of its
capital surplus has taken a
big lurch down over the first
two months of 2016, sug-
gesting it will continue to be
highly sensitive to markets.
The U.K. arm had one-
time gains of £339 million
($482 million) from actions
the group took to prepare
for Solvency II. These were
partly from unloading some
risk connected with retirees
living longer and partly from
MONEY & INVESTING
The bank is simplifying its structure to allay investor concerns.
tween 2016 and 2019, and a
2.5% annual revenue increase
for its financial-services busi-
ness—including leasing and
consumer credit—during the
same period.
LCL, its French retail-bank-
ing arm, and Cariparma, its
Italian lender, are expected to
mented system of trading U.S.
stocks across more than 10 na-
tional exchanges and more than 40
private venues. The SEC had under-
taken what Ms. White called a ho-
listic review of stock-market rules,
including a study of whether stock
exchanges should retain the power
to regulate their members.
The SEC has made progress on
the review, Ms. White said, but ap-
parently has run out of time to pro-
pose fundamental changes this
year. Ms. White, an appointee of
President Barack Obama, is likely to
leave her post by the time the
Obama administration ends early
next year.
“The worst thing you can do is
to look at something that superfi-
cially seems to make sense, but
you don’t have really the data to
justify going forward on it and you
may do more harm than good,” she
told Bloomberg TV in an interview
broadcast Tuesday.
Ms. White outlined a blueprint
in June 2014 for examining market
practices that create conflicts of in-
terest for stockbrokers, shortly af-
ter Michael Lewis’s book “Flash
Boys” alleged the stock market was
rigged in favor of high-frequency
traders. —Dave Michaels
U.S. Federal Reserve was
forced to recognize turbu-
lence emanating from China
as a factor in its interest-rate
decisions; this year started
with Chinese stocks in free
fall, unnerving investors. But
many investors aren’t di-
rectly exposed to China still.
One important channel
that would change this
would be market plumbing in
the form of bond indexes. In-
clusion in such indexes can
provide a steady source of
buyers. China has been ex-
cluded from key indexes be-
The Pudong financial district in cause of the hurdles inves-
Shanghai tors have faced in the past.
February’s decision is a step
negative outlook on the on the road to inclusion,
country’s Aa3 rating. which would be a big deal
But if China succeeds—a for investors. For instance,
big if, given recent mishan- Ashmore, an emerging-mar-
dling of market policies such ket investment manager,
as communication around thinks Chinese government
the exchange rate—the con- bonds could ultimately ac-
sequences could be profound. count for 10% of J.P. Mor-
True, the spillovers from gan’s benchmark GBI-EM
China to global markets have Global Diversified index.
been growing. Last year, the It might not only be
Prudent Values
One-year forward price/earnings
switching some bond invest- multiples
ments. These gains pay for AIA Prudential
£257 million of special divi-
22
dends.
They also helped Pruden- 20
tial finish 2015 with capital 18
worth 193% of its minimum 16
requirements. However, trou-
14
bled equity and bond mar-
kets in January and February 12
cut that capital ratio to 180% 10
by March 1, Prudential said.
8
The costs of the dividends
just declared trimmed that 2014 ’15
further to about 174%. Sources: FactSet; Reuters (photo)
The Solvency II regime is THE WALL STREET JOURNAL.
making life vastly more com-
plicated for insurers it was lifted only 5% when
and capital more volatile. that earnings figure grew
This warrants caution, which 30%. The shares have lost
helps to explain why Pruden- 16% since Mr. Wells took
tial’s regular 2015 dividend over the top job last June
is the smallest as a propor- and the forward price/earn-
tion of operating earnings ings ratio dropped to 11
per share that it has been in times from almost 14 times.
at least five years. And why That valuation can im-
The lender said it would cut
risk-weighted assets at its in-
vestment bank by €10 billion
and reduce annual costs by
€230 million by 2019. Still, it
expects corporate- and invest-
ment-banking revenue to grow
annually by 2% over the next
three years.
Crédit Agricole plans €900
million in cost savings by 2019
through job cuts, the revamp
CHARLES PLATIAU/REUTERS
of its information-technology
system, and the simplification
of its legal structure. At the
same time, it will invest €4.4
billion to, among other things,
develop its digital banking ser-
vices and meet new banking
regulation.
Its core tier-one ratio,
generate annual revenue which measures the amount of
growth of 0.5% and 3%, re- top quality capital such as eq-
spectively, between 2016 and uity and retained earnings
2019. against risk-weighted assets,
Crédit Agricole also said it will stand above 11% in 2019.
planned to trim its investment From next year on, the bank
bank to focus on more-profit- said it would redistribute 50%
able clients and meet stricter of its profit in cash dividends
financial regulation in Europe. to its shareholders.
Moody’s Will Pay Up
Over Crisis-Era Suit
BY TIMOTHY W. MARTIN around $1.5 billion to resolve
crisis-era lawsuits with the Jus-
Moody’s Investors Service tice Department and more than
has agreed to pay $130 million a dozen states. The Justice De-
to end a prominent lawsuit al- partment and several states
leging crisis-era misconduct, a have scrutinized Moody’s be-
record settlement for the rat- havior before the crisis, accord-
ings firm. ing to people familiar with the
The California Public Em- matter, but it isn’t known if a
ployees’ Retirement System, case will be pursued.
the U.S.’s largest public pension Calpers’s case against
fund, alleged in a 2009 lawsuit Moody’s was slated to go to
that Moody’s and two other trial in May. As part of the set-
ratings firms made “negligent tlement, Moody’s didn’t admit
misrepresentations” when they to any wrongdoing, according
awarded rosy grades to resi- to a person familiar with the
dential mortgage bonds that matter.
later soured. The pension fund, The settlement “should
commonly known as Calpers, serve as a cautionary reminder
relied on ratings from these to all investors who rely on rat-
firms to purchase bonds. ings agencies to guide their in-
The pact with Moody’s an- vestments,” said Matthew Ja-
nounced Wednesday follows a cobs, general counsel for
$125 million settlement Calpers Calpers.
reached with Standard & Poor’s A Moody’s spokesman said
Ratings Services in 2015. S&P is the resolution “is in the best in-
the world’s largest ratings firm. terest of our company and its
S&P has also agreed to pay shareholders.”
THE WALL STREET JOURNAL.
WSJ.com/Heard
emerging-market investors
who need to think about this.
Citigroup says if China en-
tered its World Government
Bond Index, dominated by
U.S. Treasurys and eurozone
government bonds, it would
have a weight of 4.6%, re-
sulting in sizable flows to
Chinese markets.
Bond indexes may sound
like a dry and dusty way of
considering this issue. But
they matter. In the eurozone
crisis, fear that countries
would be excluded from in-
dexes amplified the wedge
that was driven between
Southern and Northern Eu-
rope.
Index inclusion is a
drawn-out process and far
from guaranteed. Chinese
markets will remain some-
thing most global investors
watch from afar for some
time. But the start of an im-
portant change in the finan-
cial map of the world ap-
pears to be under way.
—Richard Barley
Aviva
’16
Prudential building in London
prove, as investors get used
to Solvency II, because earn-
ings growth still looks reli-
able. But a less predictable
path for dividends means
Prudential will struggle for
some time to hit the much
higher levels of the past.
—Paul J. Davies
Continued from page B5
February to 1.50 percentage
points Tuesday, according to
Barclays PLC. Eurozone junk-
bond prices have climbed, too.
“We believe the recent rally
in euro credit, at least in part,
reflects a growing perceived
probability of outright corpo-
rate-bond buying from the
ECB,” said Hans Lorenzen,
head of European credit strat-
egy at Citigroup Inc.
Mr. Lorenzen said a broad
rebound in riskier assets over
the past several weeks, follow-
ing a bounce in commodity
prices and firmer U.S. eco-
nomic data, has also boosted
corporate-bond prices.
In one sense, the ECB has
already crept into the corpo-
rate-debt market. The bank
started to buy debt belonging
to a handful of state-backed
firms last year that it said it
considers as government
agencies, but many investors
treat as corporate entities.
That includes energy company
Enel SpA, in which the Italian
government holds a 25.5%
stake.
Strategists at Barclays have
identified 31 other companies
part or fully owned by euro-
zone governments with debt
that could be targeted by the
ECB. They include plane maker
Airbus Group SE, auto maker
Renault SA and utility Elec-
tricité de France SA.
In total, Mr. Lorenzen said
there is about €550 billion in
corporate debt the ECB could
buy, but he remains skeptical
about such purchases for now.
Strategists at J.P. Morgan
Chase & Co. estimate the ECB
could buy €12 billion of corpo-
rate bonds a month without
becoming too dominant and
distorting primary and sec-
ondary markets.
Edward Farley, head of Eu-
ropean corporate bonds at
PGIM Fixed Income, said the
rally in eurozone bonds is at
least partly due to “markets
pinning hopes” on the ECB
buying corporate bonds. But
he added, “That’s a dangerous
game to play.
“People have to be brave to
bet on what the ECB will or
will not do,” he said.