U.S. leads 25 strikes against Islamic State

A plume of smoke rises above a building during an air strike in Tikrit March 27, 2015. REUTERS/Thaier Al-Sudani

WASHINGTON(Reuters) – The United States and its allies conducted 25 strikes against Islamic State in Iraq and Syria on Sunday, according to the coalition leading the daily operations against the militant group.

In a statement released on Monday, the Combined Joint Task Force said 16 strikes near nine Iraqi cities were concentrated near Falluja and Mosul, where they hit six units of Islamic State fighters as well as two dozen rockets and a dozen rocket rails, among other weapons.

The strikes also hit a bunker, weapons caches and four tactical units near other cities, including Al Baghdadi, Albu Hayat, Bayji, Habbaniyah, Hit, Kisik and Sultan Abdallah, the task force said.

In Syria, nine strikes near Al Shadaddi, Manbij, Mar’a and Palmyra hit six units of militant fighters as well as six Islamic State fighting positions, four vehicles, an improvised explosive device, and other targets, according to the statement.

(Reporting by Washington newsroom)

U.S. says it, allies to do more to combat Islamic State

A F/A-18E/F Super Hornets of Strike Fighter Attack Squadron 211 (VFA-211) lands on the flight deck of the USS Theodore Roosevelt (CVN-71) aircraft carrier

By Phil Stewart

STUTTGART, Germany (Reuters) – U.S. Defense Secretary Ash Carter said on Wednesday that Washington and its allies had agreed to do more in their campaign to defeat Islamic State, but that more risks lay ahead.

He made the comment following talks in Germany with defense ministers and representatives from 11 other nations participating in the alliance.

He said the United States greatly regretted the death of a Navy SEAL in an attack by the jihadist group in northern Iraq on Tuesday. He named the man as Petty Officer First Class Charles Keating.

“These risks will continue… but allowing ISIL safe haven would carry greater risk for us all,” he added, using an acronym for Islamic State.

“…We also agreed that all of our friends and allies across the counter-ISIL coalition can and must do more as well, both to confront ISIL in Iraq and Syria and its metastases elsewhere.”

The talks included ministers from France, Britain and Germany and were planned well in advance of Tuesday’s attack, in which Islamic State fighters blasted through Kurdish defenses and overran a town.

The elite serviceman was the third American to be killed in direct combat since the U.S.-led coalition launched a campaign in 2014 to “degrade and destroy” Islamic State, and is a measure of its deepening involvement in the conflict.

Offering new details about Keating’s mission, Carter said the SEAL’s job was to operate with Iraqi Kurdish peshmerga forces to train and assist them north of the city of Mosul.

“That part of the peshmerga front came under attack… and they found themselves in a firefight,” Carter said.

In mid-April the United States announced plans to send an additional 200 troops to Iraq and put them closer to the front lines of battle to advise Iraqi forces.

In late April, President Barack Obama announced he would send an additional 250 special operations forces to Syria, greatly expanding the U.S. presence on the ground there to help draw in more Syrian fighters to combat Islamic State.

Carter said the risks extended to pilots flying a U.S.-led campaign of daily air strikes. “Every time a pilot goes up in an airplane above Syria or Iraq they’re at risk,” he said.

The Islamist militants have been broadly retreating since December, when the Iraqi army recaptured Ramadi, the largest city in the western region. Last month, the Iraqi army retook the nearby region of Hit, pushing the militants further north along the Euphrates valley.

But U.S. officials acknowledge that the military gains are not enough.

Iraq is beset by political infighting, corruption, a growing fiscal crisis and the Shi’ite Muslim-led government’s fitful efforts to seek reconciliation with aggrieved minority Sunnis, the bedrock of Islamic State support.

(Reporting by Phil Stewart; editing by Ralph Boulton and John Stonestreet)

Oil Plows through $45 a barrel; U.S. producers rush to lock in prices

Oil pump jacks are seen next to a strawberry field in Oxnard

y Liz Hampton

HOUSTON (Reuters) – U.S. oil producers pounced on this month’s 20 percent rally in crude futures to the highest level since November, locking in better prices for their oil by selling future output and securing an additional lifeline for the years-long downturn.

The flurry of dealing kicked off when prices pierced $45 per barrel earlier in April. It picked up in recent weeks, allowing producers to continue to pump crude even if prices crash anew.

While it was not clear if oil prices will remain at current levels, it may also be a sign producers are preparing to add rigs and ramp up output.

This week, Pioneer Natural Resources Co;, a major producer in the Permian shale basin of West Texas, said it would add rigs with oil prices above $50 per barrel.

Selling into 2017 tightened the structure of the forward curve, with December 2017’s premium to December 2016; known as a contango, narrowing to $1.30, its tightest since June 2015. That spread had been as wide as $2.15 a barrel just four days earlier.

Open interest in the December 2017; WTI contract was at a record high of 122,533 lots on Friday, up about 20,000 lots from the start of April.

“U.S. producers have been quick to lock in price protection as the market rallies given that the vast number of companies remain significantly under hedged relative to historically normal levels,” said Michael Tran, director of energy strategy at RBC Capital Markets in New York.

It was not clear which companies embarked on the forward selling. In the past a handful of producers such as Anadarko Petroleum; have sporadically hedged in large chunks.

But trade sources pointed to increased activity among financial instruments for the balance of 2016, calendar year 2017 and even 2018.

The uptick in producer hedging activity came as benchmark West Texas Intermediate (WTI) futures finished April up 20 percent for the biggest monthly increase in a year. Prices have rebounded by as much as 80 percent on expectations of falling U.S. production after touching a 12-year low in February.

On Friday, Baker Hughes reported oil drillers removed another 11 from operation the week to April 29, bringing the total oil rig count to 332, its lowest since November 2009.

The calendar 2017 strip week climbed to $49.44 on Thursday, its strongest since early December. In January, it had traded as low as $37.38 a barrel.

To outlast the downturn, many producers like Continental Resources;, are deferring completions on already drilled wells, known as DUCs.

“There are some companies that will hedge at $45 and $50, giving them more incentive to bring those DUCs on line,” said Hakan Carapcioglu, an energy market analyst with Ponderosa Advisors, a Denver-based consultancy.

To be sure, many have questioned the fundamentals backing the recent oil rally, particularly as U.S. crude inventories currently stand at a record 540.6 million barrels, according to the latest data from the Energy Information Administration. [EIA/S]

(Reporting by Liz Hampton; Editing by David Gregorio and Alan Crosby)

Fed’s Kaplan says may back June or July rate rise

A guard walks in front of a Federal Reserve image before press conference in Washington

By David Milliken and Marc Jones

LONDON (Reuters) – Dallas Federal Reserve President Robert Kaplan said on Friday that he could back a rise in U.S. interest rates as soon as June or July, if U.S. economic data firms up as he expects.

Kaplan, who does not currently vote this year on the Federal Open Market Committee, said interest rates should rise gradually but that financial markets had underestimated the Fed’s readiness to follow December’s rate rise with another move.

“We’ll see how the second quarter unfolds but I think the market may well be underestimating how soon we might move next,” Kaplan said at an event in London hosted by think-tank OMFIF.

“If the second-quarter data is firming you will see me advocating in the not too distant future that we try to take the next step. We will see what meeting, whether that means June or July or what else. I’d like to see it happen,” he told reporters after.

The Fed kept rates on hold at 0.25-0.5 percent this week and signaled it was in no rush to raise them again soon, citing slowing economic activity despite an improved labor market.

The message pushed the dollar sharply lower and helped drive oil prices to their highest so far this year.

For economists it also added to a feeling that has been growing since the start of the year that U.S. rates may not be set to diverge from those in Europe and Japan as much as many had predicted.

Kaplan’s remarks were the first from a U.S. policymaker after this week’s Fed rate decision, and appeared calculated to drive home a more hawkish message on rates.

If GDP growth rebounds this quarter, as expected, “I personally will be moving toward advocating some removal of accommodation sooner rather than later,” Kaplan said in a Bloomberg TV interview after his speech.

“I will also advocate that we take these steps in a gradual and patient manner,” he said, expressing a cautious view on normalizing rates held widely at the Fed.

LOWER PEAK

Kaplan also said he expected rates to peak at a lower level than seen historically.

In forecasts released last month, all but one of the Fed’s 17 policymakers said they believe it will be appropriate to raise rates at least twice this year. Traders are betting on just one hike.

The Fed raised rates last December for the first time in nearly a decade but has kept them unchanged since then over worries about global growth and low inflation.

Kaplan forecast U.S. gross domestic product growth this year at 2.0 percent, slightly faster than he projected last month.

U.S. employers can continue to add jobs at a “healthy” pace without overheating the economy, largely because of a global labor surplus putting downward pressure on inflation, he said.

But Kaplan also expressed confidence that inflation, which has undershot the Fed’s 2.0 percent target for years, will return to that level over the medium term as the downward pressure from a strong U.S. dollar and cheap oil abates.

He told reporters he would be looking to see whether other economic indicators caught up with measures of a labor market that was rapidly closing in on full employment.

“It’s going to have to get reconciled one way or the other. It’s either going to happen with the PCE (inflation) and other numbers firming, or other numbers weakening,” he said.

“We still believe the consumer in the U.S. is strong and has the capacity to be spending.”

The state of the debate ahead of Britain’s June 23 referendum on whether to stay in the European Union could also affect Kaplan’s view about a Fed hike on June 15.

Sterling could suffer a “sudden depreciation” if Britain left the EU, he said, with ripple effects for the world economy.

(Reporting by Marc Jones, David Milliken and Ann Saphir; Editing by Clive McKeef and James Dalgleish)

U.S. single-family home sales fell in March

A new subdivision project of residential homes in shown in Glenelg, Maryland

By Lucia Mutikani

WASHINGTON (Reuters) – New U.S. single-family home sales unexpectedly fell in March, but the decline was concentrated in the West region, suggesting that the housing market continued to strengthen.

The Commerce Department said on Monday new home sales decreased 1.5 percent to a seasonally adjusted annual rate of 511,000 units. February’s sales pace was revised up to 519,000 units from the previously reported 512,000 units.

Sales rose in the Midwest and South, but tumbled in the West and were unchanged in the Northeast.

Economists polled by Reuters had forecast new home sales, which account for about 8.7 percent of the housing market, rising to a 520,000 unit-rate last month.

U.S. financial markets were little moved by the data.

New home sales are volatile month-to-month. The decline in sales over the past three months likely does not signal a slowdown in the housing market, given a strong labor market and historically low mortgage rates.

A report last week showed a 5.1 percent surge in sales of previously owned homes in March.

The housing market is bucking a broadly weak economy, with data such as trade, industrial production, business spending and retail sales suggesting the economy lost considerable momentum in the first quarter after logging a 1.4 percent annualized growth rate in the fourth quarter.

First-quarter gross domestic product estimates are as low as a 0.3 percent rate. The government will release the advance first-quarter GDP estimate on Thursday.

The demand for housing is being fueled by a robust labor market, characterized by the lowest unemployment benefit claims since 1973, and mortgage rates near record lows. Labor market strength has increased employment opportunities for young adults, boosting household formation.

But a shortage of properties for sale, which is limiting choice for buyers and driving up prices, remains a constraint for the housing market.

Last month, the inventory of new homes on the market rose 2.1 percent to 246,000 units, the highest since September 2009. Despite the increase, new housing stock remains less than half of what it was at the height of housing bubble.

At March’s sales pace it would take 5.8 months to clear the supply of houses on the market. That was the most since last September and was up from 5.6 months in February.

New single-family homes sales surged 18.5 percent in the Midwest and climbed 5.0 percent in the populous South.

Sales plunged 23.6 percent in the West, reversing February’s 21.7 percent jump. The West has seen a sharp increase in home prices amid tight inventories.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

World ‘greatly worried’ on China’s maritime expansion, says Japan

Still image from United States Navy video purportedly shows Chinese dredging vessels in the waters around Mischief Reef in the disputed Spratly

TOKYO (Reuters) – Japanese Foreign Minister Fumio Kishida, speaking ahead of a visit to Beijing, said on Monday China was making the world “worried” with its military buildup and maritime expansion in the East and South China Seas.

Ties between China and Japan, the world’s second- and third-largest economies, have long been plagued by a territorial dispute, regional rivalry and the legacy of Japan’s World War Two aggression.

China and Japan dispute sovereignty over a group of uninhabited East China Sea islets, while in the South China Sea, Beijing is building islands on reefs to bolster its claims.

China has rattled nerves with its military and construction activities on the islands in the South China Sea, including building runways, though Beijing says most of what it is building is for civilian purposes, like lighthouses.

“Candidly speaking, a rapid and opaque increase in (China’s) military spending and unilateral attempts to change the status quo in the East and South China Seas under the aim of building a strong maritime state are having not only people in Japan, but countries in the Asia-Pacific region and the international community worried greatly,” Kishida said in a speech to business leaders.

China claims almost the entire South China Sea, believed to have huge deposits of oil and gas. Brunei, Malaysia, the Philippines, Taiwan and Vietnam also have claims to parts of the waters, through which about $5 trillion in trade is shipped every year.

Kishida plans to visit China as early as Japan’s “Golden Week” extended holiday, which starts on Friday.

“Through candid dialogue with the Chinese side, I want to get the wheel turning to create the Sino-Japanese relations that are suitable for a new age,” he said.

(Reporting by Kiyoshi Takenaka; Editing by Nick Macfie)

U.S. and allies conduct 36 strikes against Islamic State

WASHINGTON (Reuters) – The United States and its allies conducted 36 strikes against Islamic State in Iraq and Syria on Thursday, the coalition leading the operations said.

In a statement released on Friday, the Combined Joint Task Force said six strikes in Syria, five of them near Mar’a, hit five tactical units and destroyed four vehicles, two fighting positions and a bulldozer.

In Iraq, 30 strikes near six cities, 21 of them near Mosul, hit several tactical units, 18 modular oil refineries, two crude oil stills and destroyed 51 boats among other targets, the statement said.

(Reporting by Washington Newsroom)

Secretive North Korea lifts veil on arms program

KCNA file picture shows North Korean leader Kim Jong Un looking at a rocket warhead tip after a simulated test of atmospheric re-entry of a ballistic missile

By Jack Kim and David Brunnstrom

SEOUL/WASHINGTON (Reuters) – Ahead of a rare ruling party Congress next month, secretive North Korea is revealing details of its weapons development program for the first time, showcasing its push to develop long-range nuclear missiles despite international sanctions.

Until recently, information on the North’s weapons program was hard to come by, with foreign governments and experts relying on satellite imagery, tiny samples of atomic particles collected after nuclear tests and mangled parts and materials recovered from long-range rocket launches.

No longer. In just over a month, the North has published articles with technicolor photographic detail on a range of tests and other activities that point to fast-paced efforts to build a nuclear-armed intercontinental ballistic missile (ICBM).

The reason for the revelations, many analysts say, is that Pyongyang believes convincing the world, and its own people, of its nuclear prowess is as important as the prowess itself. Nevertheless, isolated North Korea’s true capabilities and intentions remain unknown.

“Close-up pictures of ground test activities are almost unprecedented from the DPRK,” John Schilling, an aerospace engineer specializing in satellite and launch vehicle propulsion systems, told Reuters.

DPRK stands for Democratic People’s Republic of Korea, the North’s official name. The reclusive state has conducted four nuclear tests in the past 10 years, the last in January.

“The openness suggests that the underlying strategy is as much diplomatic as military: it is important to Pyongyang not only that they have these capabilities, but that we believe they have these capabilities,” Schilling said.

In its latest revelations, North Korean state media reported on Saturday that the country had carried out a successful test of a new ICBM engine. Pictures showed what experts said were the engines of two Soviet-designed R-27 missiles clustered together, ejecting two exhaust plumes.

The claims indicate the North has no intention of slowing down, despite last month’s United Nations sanctions and stern warnings from Washington and elsewhere, said Michael Elleman, a U.S.-based rocket expert with the International Institute for Strategic Studies.

“The revelations, pronouncements and ‘tests’ appear to be part of a campaign to establish the narrative that Pyongyang has, or will soon have, a nuclear-armed, long-range missile that could threaten the U.S. mainland,” he said.

“Each unveiling, if real, would be part of a structured program aimed at developing the capability. The open question is: How real are these tests?”

The activities are likely to be watched closely by U.N. experts assigned to enforce sanctions prohibiting the North from engaging in work that involves ballistic missile technology.

CONVINCING THE DOUBTERS?

There is an increasing feeling among international arms experts that North Korea’s capability may be more advanced than previously thought. It could have a primitive but operable ICBM “later this decade,” said a U.S. government source with intelligence on the North’s weapons program.

Overcoming such scepticism, and fuelling alarm for its neighbors and the United States, may be the intended effect, with significant domestic propaganda value ahead of the May ruling party congress, said Yang Moo-jin of the University of North Korean Studies in Seoul.

“To a normal military, arms development is supposed to be classified,” he said. “But Kim Jong Un had years of the South and the U.S. putting his military down, so now he wants to maximize the perceived threat of what he’s trying to develop.”

The recent ICBM engine test followed the March test of a solid-fuel rocket engine and a simulated test of atmospheric re-entry of a missile warhead.

Kim has vowed another nuclear warhead test soon, which would be the country’s fifth. Some analysts say it could be timed to take place just before the congress, at which Kim is likely to unveil an official policy of twinning economic development with nuclear capability.

Kim also claimed in March that his country has miniaturized a nuclear warhead to be mounted on a ballistic missile. Media reports displayed a spherical object and a jubilant Kim standing before a large rocket-shaped object similar to the KN-08 ICBM.

The choreographed manner in which the weapons tests appear to be taking place also points to political posturing rather than rigorous technical examination, some analysts have said.

Given the North’s secrecy, penchant for bombastic propaganda and history of manipulating photographic and video images, its claims are still met with plenty of scepticism.

“I am still not convinced that everything really is what they want us to believe it is,” said German aerospace engineer Markus Schiller, who has closely followed the North’s missile development program.

(Editing by Tony Munroe and Raju Gopalakrishnan)

Zika spread, impact ‘scarier than we initially thought’: U.S. health official

Dr. Anthony Fauci, director of the National Institute for Allergy and Infectious Disease, speaks about the Zika virus from the White House in Washington

WASHINGTON (Reuters) – The spread and impact of the Zika virus is wider than initially anticipated and the first vaccine candidate for the virus should be available in September, U.S. health officials said on Monday.

Dr. Anne Schuchat, a deputy director of the Centers for Disease Control and Prevention, told reporters the type of mosquito in which the virus is carried is present in more U.S. states than initially thought. She said what authorities are learning about the virus is “scarier than we initially thought.”

Anthony Fauci, director of the U.S. National Institute of Allergy and Infectious Diseases, said at a White House briefing the first Zika vaccine candidate should be available in September.

(Adds dropped word “initially” in quote in headline and second paragraph)

(Reporting by Clarece Polke; Editing by Tim Ahmann)

Wall Street predicting a rotten 2016 for U.S. Banks

Goldman Sachs sign is seen above floor of the New York Stock Exchange shortly after the opening bell in the Manhattan borough of New York

By Olivia Oran

(Reuters) – It is only April, but some on Wall Street are already predicting a rotten 2016 for U.S. banks.

Analysts say it has been the worst start to the year since the financial crisis in 2007-2008 and expect poor first-quarter results when reporting begins this week.

Concerns about economic growth in China, the impact of persistently low oil prices on the energy sector, and near-zero interest rates are weighing on capital markets activity as well as loan growth.

Analysts forecast a 20 percent decline on average in earnings from the six biggest U.S. banks, according to Thomson Reuters I/B/E/S data. Some banks, including Goldman Sachs Group Inc, are expected to report the worst results in over ten years.

This spells trouble for the financial sector more broadly, since banks typically generate at least a third of their annual revenue during the first three months of the year.

“What’s concerning people is they’re saying, ‘Is this going to spill over into other quarters?'” Goldman’s lead banking analyst Richard Ramsden said in an interview. “If you do have a significant decline in revenues, there is a limit to how much you can cut costs to keep things in equilibrium.”

Investors will get some insight on Wednesday, when earnings season kicks off with JPMorgan Chase; Co; JPM, the country’s largest bank. That will be followed by Bank of America Corp; and Wells Fargo; WFC; on Thursday, Citigroup Inc; C.N; on Friday, and Morgan Stanley; MSN; and Goldman Sachs Group Inc; on Monday and Tuesday, respectively, in the following week.

Banks have been struggling to generate more revenue for years, while adapting to a panoply of new regulations that have raised the cost of doing business substantially.

The biggest challenge has been fixed-income trading, where heavy capital requirements, new derivatives rules, and restrictions on proprietary trading have made it less profitable, leading most banks to simply shrink the business.

Bank executives have already warned investors to expect major declines across other areas as well.

Citigroup Inc; C.N; CFO John Gerspach said to expect trading revenue more broadly to drop 15 percent versus the first quarter of last year. JPMorgan Chase & Co’s Daniel Pinto said to expect a 25 percent decline in investment banking. Several bank executives have warned about declining quality of energy sector loans.

Global investment banking fees for completed merger and acquisitions, and stock and bond underwriting, totaled $15.6 billion in the first quarter, a 28 percent decline for the year-ago period, according to Thomson Reuters data.

Volatility in stock prices and plunging commodities prices caused trading volume to dry up during most of the quarter. Trading activity picked up slightly in March but was not strong enough to offset declines during the first two months of the year.

Analysts have been lowering first-quarter estimates over the last month in light of business pressures. They now expect JPMorgan to report adjusted earnings of $1.30 per share, Bank of America to report 24 cents per share, Wells Fargo to report 99 cents per share, Citigroup to report $1.11 per share, and Morgan Stanley to report 63 cents per share. Goldman is expected to report $3.00 per share, the lowest first-quarter earnings since before the financial crisis.

Matt Burnell, a Wells Fargo banking analyst, said in a research note Friday that capital markets weakness may extend at least into the second quarter.

Analysts said there may be some loan growth outside of the energy sector, and a small uptick in net interest margins, a measure of loan profitability, but overall, the tone was less-than-optimistic.

“The first quarter is going to be ugly and we don’t think that necessarily gets recovered in the back half of the year,” said Jerry Braakman, chief investment officer of First American Trust, which owns shares of Citigroup, JPMorgan, Wells Fargo and Goldman. “There are a lot of challenges ahead.”

(Reporting by Olivia Oran in New York; editing by Lauren LaCapra)