The Wall Street Journal Europe March 07 2016

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Simon Nixon
Draghi Tries
Again on Euro
Corporate Divide
Chinas state-owned industries are stagnating,

while private companies race ahead
REVIEW | A9
EUROPE FILE | A2
MONDAY, MARCH 7, 2016 ~ VOL. XXXIV NO. 26
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Business & Finance

he ECB is likely to push
a key rate even further
into negative territory, a
move investors expect but
still view with trepidation. A1
The BIS warned that
stimulus may have less effect than it once had and
raised concerns about negative interest rates. B5
Some U.S. officials and

tech-industry executives
want to form a panel to address encryption issues. B1
Grace Kundas husband killed himself after losing his mining job, part of a rash of suicides in Zambia amid the commodity bust.
MININGS COLLAPSE CRIPPLES

AFRICAS DREAMS
Adidas plans to open

3,000 stores in China over
the next five years, shrugging
off economic concerns. B4
Facebook plans to boost
its U.K. tax payments, the
latest tech giant to do so
under political pressure. B3
Commerzbank said the
head of its retail unit will
become its new CEO. B5
BPs chief received a 20%
pay raise last year despite
the firms $5.2 billion loss. B4
World-Wide
Cruz won big victories
over Trump in Republican
races in Kansas and Maine
and finished a close second in
Louisiana and Kentucky. A1
Clinton won a crushing
victory in the Louisiana
Democratic contest while
rival Sanders took races in
Kansas and Nebraska. A2
NATO reached a pact
with Turkey and Greece to
let the alliances migrantmonitoring ships operate in
their territorial waters. A3
A truck bombing killed
33 people at a checkpoint in
a Shiite area of Iraq. Islamic
State took responsibility. A3
Slovakias ruling party
will be forced to form a coalition after losing its majority
in parliamentary votes. A3
Spanish firms are holding back on investment
plans as a result of the countrys political impasse. A4
Plunging commodity prices are fueling an economic and social crisis

BY PATRICK MCGROARTY
JOE PARKINSON
aged Congo into a beacon for Africas rising middle class.

Now the global forces that propelled
Kitwes rise have reversed, fomenting an
economic and social crisis that has interrupted dreams of greater prosperity
across Zambias copper belt and exposed
the fragility of Africas commodity-fueled
growth model.
Slowing Chinese demand has nearly
halved the price of copper in two years,
upending an economy reliant on the metal
AND
KITWE, ZambiaA decadelong commodity boom brought sleek shopping

malls, tidy brick homes and dozens of private schools to this palm-pocked mining
town in the heart of Africa.
The population doubled and incomes
soared as record copper prices and a
flood of Chinese investment and workers
transformed a region bordering war-rav-
for 70% of its exports. Chinese contractors

and restaurateurs that followed state construction companies into the landlocked
country are starting to head home.
Zambias kwacha currency is one of the
worlds worst performers, losing half its
value last year. In desperation, President
Edgar Lungu has asked for divine intervention, decreeing nationwide days of
prayer to resurrect the stricken economy.
Kitwe is a prime victim of the comPlease see ZAMBIA page A8
BY MARK MAGNIER
AND LINGLING WEI
BEIJINGChinas leaders
made clear they are emphasizing growth over restructuring
this year, but suggested they
are trying to avoid inflating
debt or asset bubbles as they
send massive amounts of
money coursing through the
economy.
The governments announcement of a 6.5% to 7%
growth target for 2016 at the
start of the National Peoples
In the Spotlight
Military spending is still a

priority for Beijing............ A6
Government plans to cap
energy consumption........ A6
Revamped rules on IPOs in
China face delays............... B7
Congress over the weekend
came with subtle acknowledgment that some of its efforts
to jump-start a persistently
decelerating economy have
misfired, failing to steer stim-
ulus to the most productive

sectors.
In his report to the annual
legislative session, which
opened Saturday, Premier Li
Keqiang promised tax cuts
that could leave companies
with more money to invest.
And for the first time, the Chinese government specified total social financinga broad
measure of credit that includes both bank loans and
nonbank lendingas a metric
for helping determine monePlease see CHINA page A6
Espresso Shot: Italians Warm to U.S.-Style Coffee
The Philippines seized a

North Korean cargo ship,
moving quickly to put new
U.N. sanctions into effect. A6
Trouble brews over caramel macchiatos in land of stand-up bars
Died: Nancy Reagan, 94,

ex-actress and first lady. A7
CONTENTS
Business & Tech. B1-4
Crossword.............. A14
Europe File............... A2
Heard on Street.... B8
Markets Digest..... B6
Money & Inv....... B5-8
Numbers.................. A14
Opinion.............. A12-13
Review.................. A9-11
Technology.................B3
U.S. News.................. A7
Weather................... A14
World News....... A2-6
3.20; CHF5.50; 2.00;

U.S. Military (Eur.) $2.20
s Copyright 2016 Dow Jones &

Company. All Rights Reserved
BIS raises questions about

negative rates............................ B5
Nancy Reagan, 1921-2016

Chinas Leaders Place
Economy on Bubble Watch
Londons mayor stepped

up his rhetoric in favor of the
U.K. leaving the EU, likening
it to an escape from jail. A4
Cairo accused members

of the Muslim Brotherhood
and Hamas for the killing of
Egypts top prosecutor. A4
For investors, one question

dwarfs all the others this
week: How low can you go?
The European Central Bank
is expected on Thursday to
push a key interest rate even
further into negABREAST ative territory, a
OF THE
move that is at
MARKET
once widely anticipated by markets and viewed with trepidation.
Analysts and investors say
the ECBs action likely will
drive down government-bond
yields, further reducing borrowing costs that are already
near record lows in many nations. Stocks and many commodities may extend a rebound
from a selloff early this year
that was driven by worries
over the global economic outlook. The Dow Jones Industrial
Average on Friday climbed
above 17000 for the first time
in two months.
Yet many investors warn
that trading will likely be volatile and that markets could be
roiled if the ECB provides less
stimulus than expected.
Moreover, analysts and
portfolio managers said they
remain skeptical about the efficacy of negative interest rates
in stimulating growth and inflation. Many say they are concerned about unintended consequences, pointing to the
global bank-stock selloff that
followed the Bank of Japans
Please see ABREAST page A2
BY MANUELA MESCO
MILANGiuseppe
Disponetti has hewed to the
same business model since
opening his cafe here in 1989.
Using a tried-and-true coffee
blend, he sells mostly espresso
and cappuccino to regulars
who toss back their drinks
while standing at the bar. He
hasnt refurbished in 20 years
and offers no trendy blended
coffee beverages or comfy
chairs.
Now theres a new coffee
shop nearby. It sells a filtered
coffee long derided in Italy as
black water.
I dont see the point of
that, says Mr. Disponetti, 58
years old, when asked if he has
considered modernizing his
cafes coffee menu. We need
to defend Italian tradition. The
only real coffee is espresso.
That might be true, but
some Italians are jolting its on family time. Fast-food outcoffee

tradition
anyway. lets such as kebab shops are
Across the country, more cafes challenging trattorias. Factory
now offer flavored coffee, and workers anxious to keep their
coffee maker Luigi Lavazza jobs are agreeing to work
SpA is selling them a new through summer holidays.
blend made espeThe challenge to
cially to brew AmerItalys coffee culican-style
coffee.
ture feels especially
Nestl SAs homebitter. The smell of
coffee machines that
coffee permeates Itcan make chocolate
alys city centers,
cappuccino are selland most Italians
ing well in Italy. The
have a favorite
use of coffee pods in
espresso bar, where
home machines has
the drinks are made
soared 70% since
by injecting hot wa2012.
ter at high pressure
Coffee lovers in Arnolds paper cup through a puck of
Italy
say
the
tightly
packed
changes show that some of the grounds. Customers drink a
countrys deep-rooted habits shot at a time from a tiny porare being slowly eroded under celain cup. The ritual lasts no
pressure from a relentless eco- more than a few minutes and
nomic downturn.
has changed little for generaMore shops in Italy are tions.
Please see COFFEE page A8
open on Sundays, an intrusion
www.ebook3000.com
ASSOCIATED PRESS
Russias AvtoVAZ is set

to oust its CEO, who took
charge of the auto maker
just before a recession. B1
BY CHRISTOPHER WHITTALL
AND MIN ZENG
CHARLIE SHOEMAKER FOR THE WALL STREET JOURNAL
Emerging markets have

rallied recently amid a rebound in commodity prices
and confidence the Fed
wont raise rates soon. B5
DLR 113.96 0.23%
Investors
Anxious
Ahead of
ECB Call
Whats
News
Chinas leaders set a

growth target of 6.5% to 7%
for 2016 but suggested they
are trying to avoid inflating
debt or asset bubbles. A1
EUROPE EDITION
FORMER FIRST LADY: Nancy Reagan, wife of Ronald Reagan,

known for her activism on behalf of Alzheimers research, died at
her home in California. Above, at the White House in 1981. A7
Cruz Wins Challenge

Trump in GOP Race
BY REID J. EPSTEIN
Sen. Ted Cruz bolstered his
case for being the strongest
Republican alternative to Donald Trump, winning lopsided
victories over the partys presidential front-runner in caucuses in Kansas and Maine and
finishing a close second to him
in Louisiana and Kentucky.
The results Saturday dealt a
blow to Sen. Marco Rubio,
who placed a distant third in
Kansas, Kentucky and Louisiana while finishing fourth in
Maine, behind the leaders and
Ohio Gov. John Kasich.
Mr. Cruz, of Texas, said his
victories should persuade
other rivals trying to become
the GOPs Trump alternative
to end their campaigns. What
needs to happen is that the
field needs to continue to narrow, Mr. Cruz told reporters
in Idaho, where he was cam-
paigning before the states

Tuesday primary. As long as
the field remains divided, it
gives Donald an advantage.
A Wall Street Journal/NBC
News/Marist poll released
Sunday found Mr. Trump is
the pick of 41% of likely GOP
primary voters in Tuesdays
Michigan primary, followed by
Mr. Cruz at 22%, Mr. Rubio at
17% and Mr. Kasich at 13%.
The poll results suggest
that a significant challenge remains for Republican leaders
who are trying to slow Mr.
Trumps momentum after his
dominant performance on Super Tuesday, on which he won
seven states and opened up a
big lead in delegates.
In his victories Saturday in
Louisiana and Kentucky, Mr.
Please see CRUZ page A2
Clinton widens her lead in
delegates...................................... A2
THE WALL STREET JOURNAL.
A2 | Monday, March 7, 2016
WORLD NEWS
Draghi Tries to Save Eurozone a Third Time

of tools and was prepared to
use them. Now the market
expects him to prove it.
Mario Draghi has already

saved the eurozone twice.
Now the European Central
Bank president must do so a
third time.
If that sounds melodramatic, there are those in the
markets who believe that the
survival of Europes single
currency is as much at stake
at this weeks meeting of the
ECBs Governing Council as it
was when Mr. Draghi promised in 2012
to do whatever it takes
to save the
euro, and
when the
ECB in January 2015 launched a major
government bond-buying
program.
Only two weeks ago, Mr.
Draghi helped quell a market
panic fanned by fears that
central banks had run out of
ammunition to tackle deflationary forces. He insisted
that the ECB retained plenty
DANIEL ROLAND/AGENCE FRANCE-PRESSE/GETTY IMAGES
EUROPE FILE
SIMON NIXON
r. Draghi has ramped

up the pressure on
himself and the ECB.
He has argued that since inflation is always and everywhere a monetary phenomenon, there is no excuse for
the ECB not hitting its inflation target of just under 2%
in the medium term.
He has also spelled out
the consequences of failure:
the longer inflation is below
target, the greater the risk
the market loses confidence
in the ECBs ability to deliver
on its target. Lower inflation
expectations means higher
real interest rates, weaker
borrowing and investment
and slower growth.
On this analysis, the ECB
has little choice but to deliver a substantial further
stimulus next week, given
the weakness of recent economic data. Headline inflation fell well below target to
minus 0.2% in February,
while core inflation also unexpectedly fell to 0.7%. That
suggests that falling energy
prices alone werent to
blame. At the same time,
growth forecasts are also being revised lower, reflecting
the weaker global picture.
The ECB offices in Frankfurt, where officials will meet this week.
Recent surveys show falls in
new orders and business
confidence. This data suggests there is little prospect
of slack in the eurozone
economy being eroded
quickly enough to bring inflation back to its target
within two years.
Not everyone is happy
with the rhetorical trap that
Mr. Draghi has set. No one
disputes that falling inflation
expectations are a concern
and that the credibility of
the ECBs target is important. The debate instead centers over the definition of
the medium term, the urgency of responding to the
latest fall in inflation and the
effectiveness of possible policy tools.
here is little evidence

that disinflation is giving way to full-blown
deflation. Growth expectations have been only modestly trimmed, domestic demand and consumer
spending continue to drive
the recovery, and eurozone
unemployment fell in January to 10.3%, its lowest level
since August 2011.
Nonetheless, Mr. Draghi is
likely to get his way. Although ECB policy makers
have tried to avoid the mistake they made in December,
when additional stimulus fell
short of expectations, no one

will want to risk further undermining fragile market
confidence.
Their challenge will be to
work out how best to deliver
the extra stimulus. Given
growing concerns that negative interest rates risk doing
more harm than good, the
best bet is to buy more government bonds.
But to do that, the ECB
must find a way to boost the
pool of bonds that it can buy.
It could do that either by lifting its 33% cap on the proportion of a single issue it is
allowed to own or by changing its rules so that it can
buy a bond even when it is
certain to make a loss. Another option is to ignore its
national bond-buying quotas
to allow larger purchases of
riskier bonds such as those
of Italy and Spain. Each of
these options risks accusations that the ECB is illegally
financing governments.
Meanwhile, Mr. Draghi
faces a second challenge:
having bet the ranch on the
ECBs ability to bring inflation swiftly back to target,
can he deliver even with an
expanded quantitative easing
program?
History is hardly encouraging: Japan has failed despite two decades of extraor-
ABREAST
Continued from Page One

Trump won the two states
with the most delegates at
stake. Still, the results were
likely to narrow his delegate
lead. Mr. Cruz won at least 64
delegates from the days balloting, compared with 49 for
Mr. Trump, 13 for Mr. Rubio
and nine for Mr. Kasich, Associated Press tallies showed.
Heading into Saturday, Mr.
Trump led the field with 329
delegates. Mr. Cruz was second with 231, while Mr. Rubio
had 110 and Mr. Kasich had 25.
Ben Carson suspended his
campaign on Friday.
The next big test for Republicans comes Tuesday, when
Mississippi and Idaho join
Michigan in holding primaries
and Hawaii has a caucus.
But the day likely to shape
the remaining presidential
field the most is March 15,
when Florida and Ohio hold
winner-take-all primaries. Mr.
Rubio is betting the fate of the
rest of his campaign on Florida, while Mr. Kasich is doing
the same in Ohio.
If Mr. Trump loses both
states, he would find it far
tougher to amass the 1,237
delegates required to clinch
the GOP nomination.
Speaking to supporters and
reporters at one of his golf
clubs in West Palm Beach, Fla.,
Mr. Trump called for Mr. Rubio to end his struggling campaign and warned that any
breakaway, third-party challenge from conservatives
would hand both the White
House and the Supreme Court
to Democrats.
The next president, Mr.
Trump said, could appoint as
many as three, four, or five
Supreme Court judges.
Anybody that does a third
party, thats what its going to
mean, Mr. Trump said. Its
very simple, it guarantees,
100% guarantees, the election
of a Democrat.That is a total
wipeout for conservatives and
for Republicans. So start
thinking about that.
Mr. Trump said its probably time for Mr. Rubio to
drop out and that he was relishing a contest against Mr.
Cruz. I would love to take on
Ted one-on-one, he said.
Saturday brought evidence
that Republicans who oppose
Mr. Trump are beginning to
coalesce behind Mr. Cruz.

decision at the end of January
to adopt negative rates. Others
say the Swiss National Bank
and others could over time be
forced to respond in kind, creating further unpredictable
ripple effects.
The anxiety underscores the
perceived limits of centralbank stimulus at a time of
nearly universal economic
weakness.
The key difference this
time is that the market is
much less receptive to the idea
of the ECB generating inflation
than they were a year ago,
said Jack Kelly, head of global
government-bond funds at
Standard Life Investments.
Many economists expect the
ECB to increase its bond-buying program by 10 billion ($11
billion) a month or to extend
the length of its program beyond its current end date of
March 2017. The bank currently buys 60 billion of
mostly government bonds every month.
Adding to this, markets anticipate that the bank will
lower the interest rate it pays
on overnight commercial bank
deposits by 0.1 percentage
point in March, to minus 0.4%,
investors say.
Yields on government bonds
have tumbled this year, reflecting rising prices as investors
have shifted into haven assets
amid generally soft global economic data. During 2016, 10year government-bond yields
have dropped 0.31 percentage
point in Japan, 0.39 point in
the U.S., and 0.4 point in Germany.
The U.S. 10-year Treasury
yield was at 1.883% late Friday,
though that was up from less
than 1.6% in early February as
recent data have pointed to resilience in the U.S. economy.
While such slim yields may
be unappealing to U.S. investors, many foreign buyers see
them as a steal. On Friday, the
10-year benchmark government bond yielded 0.234% in
Germany, 0.58% in France,
1.48% in the U.K. and negative
0.04% in Japan.
European demand for U.S.
debt could help keep Treasury
yields down at a time when
China and some other large
holders are selling and U.S.
economic growth remains
solid, two factors that would
JOE JASZEWSKI/ASSOCIATED PRESS
CRUZ
Sen. Ted Cruz met supporters after a rally at Boise State University in Boise, Idaho, on Saturday.
Mr. Trumps victory in Louisiana was called minutes after
polls closed, based on the New
Yorkers 24-point lead in votes
cast before Election Day. But
as primary day votes were
counted, Mr. Trumps lead
over Mr. Cruz continued to
shrink, with the difference
eventually narrowing to 3.6
percentage points with all precincts reporting.
In Kentucky, Mr. Trump led
Mr. Cruz by 20 percentage
points in the most recent polling, but he defeated Mr. Cruz
by just 4.3 percentage points.
Mr. Cruz won a commanding victory in Kansas, taking
48% of the vote to 23% for Mr.
Trump. Mr. Rubio had 17%,
and Mr. Kasich drew 11%.
In Maine, Mr. Cruz had
46%, while Mr. Trump had
33%. Mr. Kasich was in third
place with 12%.
Mr. Rubio finished far behind the top two leaders in every state. He drew only 11%
support in Louisiana and 8% in
Maine.
With the Kansas and Maine
victories, Mr. Cruz has won six
states, the second-most after
Mr. Trumps 12. Mr. Rubio has
won just one state, Minnesota.
Mr. Cruzs Kansas blowout
also served to diminish Mr.
Rubio, who failed to carry
even the wealthy Kansas City
suburbs in Kansas, the type of
area that Mr. Rubio has targeted and where he has done
well in other states. Mr. Rubio
carried just 13.7% of the third
congressional districts vote.
Mr. Rubio had canceled Friday events in Kentucky and
Louisiana to instead make

three stops in Kansas, where
he had support from the
states leading political figures, including Gov. Sam
Brownback, Sen. Pat Roberts
and former Senate Majority
Leader Bob Dole.
At a campaign stop in
Puerto Rico, which holds a
Sunday primary, Mr. Rubio
played down Saturdays results and said he was focused
on the March 15 Florida contest. There will be more delegates awarded in Florida than
basically every state that
voted today combined, Mr.
Rubio said at a San Juan news
conference.
Florida awards 99 delegates. There were 155 delegates at stake Saturday.
Mr. Rubios spokesman,
Alex Conant, dismissed Mr.
Cruzs strong showing as a result of strength in small, rural caucuses.
We feel really good about
the map, moving forward, Mr.
Conant said during a Fox News
appearance Saturday night.
After we win the Florida primary, the map, the momentum
and the money is going to be
on our side.
Mr. Trump had also
mounted an effort in Kansas.
He had canceled a planned appearance Saturday at the Conservative Political Action Conference
in
suburban
Washington to instead hold a
campaign rally in Wichita and
appear at a caucus site.
In addition to his Kansas
and Maine victories, Mr. Cruz
won a straw poll at the con-
servative groups gathering,

with 40% support. Mr. Rubio
placed second, with 30%. Mr.
Trump was third, at 15%.
Tim Miller, a spokesman for
Our Principles PAC, the super
PAC devoted to stopping Mr.
Trumps political rise, said the
results in Kansas and Maine
were evidence that the groups
efforts are working.
The anti-Trump momentum is building, as he is now
even further away from garnering the majority of delegates necessary to win the
nomination, Mr. Miller said.
Historically, the partys nominee has built support and coalesced with other factions as
the process goes on. Donald is
going the other direction.
The Cruz victory comes two
days after 2012 GOP nominee
Mitt Romney urged Republicans to band together to stop
Mr. Trump from winning the
partys nomination. His prescription called for strategic
voting, backing Mr. Rubio in
his home state of Florida, Mr.
Kasich in his native Ohio and
Mr. Cruz in states where he is
strong.
Messrs. Kasich and Rubio
appear to be following Mr.
Romneys advice. Mr. Kasich
said Thursday in Detroit that
he would focus his campaign
on Ohio, and Mr. Rubio is set
to do the same in Florida.
Mr. Cruz has shown no sign
of ceding states to his rivals.
His campaign announced late
Friday that he would open 10
field offices in Florida. The
Texan said Saturday he is
playing to win there.
Sanders Picks Up Two States, but Clinton Widens Her Delegate Lead
Hillary Clinton maintained
her formidable advantage in
the Democratic presidential
race with a crushing victory in
Louisiana while rival Bernie
Sanders rebounded from a recent string of losses with victories in Kansas and Nebraska.
As in previous contests, Mr.
Sanders, a senator from Vermont, prevailed on Saturday in
states that are predominantly
white, while Mrs. Clinton dominated in a Southern state
where African-Americans account for a substantial share
of Democratic voters.
Mr. Sanders won Nebraska,

57% to 43%, and Kansas by
68% to 32%. In Louisiana, Mrs.
Clintons 71% swamped Mr.
Sanderss 23%.
We have a path toward victory, Mr. Sanders said after
the Kansas Democratic Party
announced he had won. Our
campaign is just getting
started and we are going all
the way to the Democratic National Convention.
What he doesnt have are
the delegatesor at least
enough of them. Heading into
Saturdays contests, Mrs. Clin-
ton held a lead of 604 to 408

in pledged delegates. She also
has the support of 458 superdelegatesparty leaders and
officials free to back the candidate of their choosingversus
22 delegates backing Mr. Sanders. According to a preliminary
tally by the Associated Press,
Mrs. Clinton won at least 55
more delegates on Saturday,
while Mr. Sanders captured 47
delegates. A candidate needs
2,383 delegates to clinch the
Democratic nomination.
Because delegates are
awarded proportionally, it is
difficult for a trailing candidate

to leapfrog ahead. The trio of
states holding contests Saturday underscored how difficult it is for Mr. Sanders, a
self-described democratic socialist, to mount a comeback.
His campaign targeted Kansas
and Nebraska, airing TV ads in
both states. Together, those
states offer a total of 58 delegatesjust seven more than
Louisiana, where in the 2008
Democratic primary, about half
of Democratic voters were African-American.
Peter Nicholas
www.ebook3000.com
CORRECTIONS
AMPLIFICATIONS
A Morgan Stanley Investment Management fund owns
a stake in Flipkart Ltd. A
Technology article Thursday
about some investors lowering
their valuations of the Indian
e-commerce company didnt
provide the full name of Morgan Stanleys asset-management division.
Readers can alert The Wall Street
Journal to any errors in news articles
by emailing wsjcontact@wsj.com.
dinary stimulus. The ECBs

efforts to date have hardly
been any more successful.
The kind of growth levels
needed to bring down slack
in the eurozone requires
businesses to boost their investment.
ut monetary policy
alone cant deliver
that: It requires determined structural reform at
both national and eurozone
level to boost business confidence. Yet the political conditions for deeper reforms
across the European Union
appears to be deteriorating,
following a series of inconclusive elections, most recently in Slovakia and Ireland, and the challenge of
the migration crisis.
Does that mean Mr.
Draghis efforts to save the
eurozone are doomed to failure? Not necessarily. If the
ECB commits to buying
enough bonds, it can at least
remove doubts over the debt
sustainability of some of the
eurozones most indebted
governments, including his
native Italy.
That addresses one of the
biggest risks to confidence in
the single currencyand it
ensure that if the eurozone
does collapse, no one can
blame him.
tend to push yields higher.

Low yields are going to
stay with us for quite some
time, said Craig Bishop, lead
strategist for the U.S. fixed-income group at RBC Wealth
Management, which had $264
billion in total client assets at
the end of January. I dont
think we will see a spike in
yields until Asia and Europe
can join the U.S. on a solid and
stable footing. We are far away
from that.
The flight to haven assets is
a symptom of continued uncertainty over the economic outlook and how much further
central banks may slash rates
to stimulate growth.
Despite the ECBs efforts to
bolster inflation, eurozone consumer prices fell in February
from a year earlier, the first
fall in prices since last September, data showed last week.
ECB President Mario Draghi
has said several times that the
central bank stands ready to
act further if needed to bolster
inflation.
Demand for German government debt is so high that more
than two-thirds of those securities eligible for the ECBs
bond-buying program had a
negative yield at the end of
February, according to Pictet
Wealth Management.
That isnt the case only in
Germany. At the end of February, 23% of the debt in the
Merrill Lynch Global Fixed Income Markets Index had a negative yield, up from just over
13% at the start of the year. In
August 2014, it was less than
1%.
John Bredemus, vice president at Allianz Investment
Management, which oversees
$700 billion globally, expects
further volatility. The bond
market has become a hot place
for hedge funds and money
managers to bet on centralbank stimulus, say investors
and analysts. A scramble to unwind crowded wagers could
spark sharp yield moves in a
short span, they say.

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Monday, March 7, 2016 | A3
WORLD NEWS
BY AYLA ALBAYRAK
CESME, TurkeyOn a mild
winter day last week, Capt.
Murat Yilmazarslan and his
crew bore down on a dinghy
packed with people making a
dash across the Aegean Seaa
cheerless victory in the Turkish coast guards uphill battle
to stop smugglers ferrying migrants to Europes door.
Soon, their shipthe Umut,
or Hopeand two patrol boats
had intercepted the dinghy,
filled with dozens of Afghans
and others in neon orange life
jackets, as a helicopter hovered overhead. The migrants,
some who wept as they were
ordered to board the Hope,
gave up without a fight.
It isnt always so. Caught
within sight of their goal, refugees have held babies above
the water and threatened to
drop them into the sea if they
arent allowed to proceed to
Greece, coast guard officials
say. On occasion, intercepted
migrants have held knives to
their throats and threatened
to kill themselves. In those
cases, the officials say they
alert the Greek coast guard
and let the people continue
their voyage.
We have such a big weight
on our shoulders, Capt. Yilmazarslan said the next day in
the Turkish port of Cesme.
Turkey is like a sponge that
has been fully soaked, and we
shouldnt be left alone to deal
with this refugee flow.
The Turkish captain and his
crew are at the front line of an

international effort to stop the
people smuggling and defuse
the pressure on countries in
Europe that say they are
reaching, or have exceeded,
their ability to take in more
migrants from the east. A
NATO fleet of five ships has
been deployed to help overwhelmed coast guard officials
like Capt. Yilmazarslan track
and deter the smuggling boats,
but the mission has been
slowed by disagreement between Greece and Turkey over
the specifics for the operation.
On Sunday, the North Atlantic Treaty Organization said
its military commanders had
reached an agreement with
the two countries, allowing
the mission to not just operate
in international waters but
also go into Greek and Turkish
territorial waters. NATO officials had said expanding into
the countries territorial waters was essential to monitoring the most common routes
used by migrants.
With Turkish and European
Union leaders convening for
an emergency summit in Brussels on Monday to discuss
what to do about the expected
new torrent of migrants and
refugees this summer, the
number of those daring to
make the perilous trek to Europe is soaring.
More than 122,000 people,
most of them Syrians and Afghans, traveled the turbulent
strait between Turkey and
Greek islands such as Lesbos
in the first two months of this
year, up from 4,500 during the
same period last year, according to the United Nations refugee agency. Those numbers
make the Aegean Sea route,
less than 10 miles long in
Slovakia Ruling Party

Loses Majority in Vote
BY MARTIN M. SOBCZYK
Slovakias left-leaning antiimmigrant governing party
won elections Saturday but
will lose its outright majority
in parliament and have to
form a broad coalition to govern in a fragmented legislature, according to results released Sunday.
The Smer-Social Democracy
party of Prime Minister Robert
Fico won 28.3% of the vote
and 49 seats in Slovakias 150seat parliament, according to
the countrys statistics office,
which published results based
on 99.9% of voting precincts
reporting.
During the campaign, Mr.
Fico criticized Germany for
opening its doors to refugees
from the Middle East, and argued the policy had helped
fuel Europes migration crisis.
Support for the party has
eroded significantly since four
years ago when it won 44.4%
of the vote and an outright
majority of seats in parliament. Before Saturdays elections it was expected to build
a coalition government with
the center-right Slovak Na-
tional Party, but with that

party receiving just 8.6% of
the vote, the total is too little
for a majority in the legislature.
Amid Europes migrant crisis, the neo-Nazi Nase Slovensko partywhich translates as
Our Slovakiawill enter parliament for the first time, having secured 8% of the vote and
12 seats. The party is against
the euro, which Slovakia uses
as its currency, and is strongly
anti-American.
The Freedom and Solidarity
party, abbreviated as SaS,
came second in the vote with
12.1% and 21 seats. A total of
eight parties will have seats in
the legislature.
Mr. Fico said Smers performance in the vote was lower
than anticipated but still a
decent result. Forming a government will take longer than
expected and wont be easy,
because of the fragmentation
of the legislature, he said.
Mr. Fico, a former member
of the Communist Party who
has criticized Western sanctions on Russia, has said he
wants a bigger role for the
state in the economy.
Migrants whose boat was intercepted by Turkish authorities were taken aboard the Hope last week.
some parts, the busiest corridor for migrant landfalls in
Europe.
I spent my savings from
over 14 years on this trip,
said Ali Malek, one of Afghans
intercepted by Capt. Yilmazarslans crew and brought
on board the Hope. A 31-yearold cafe worker from the western Afghan city of Herat, he
said he paid $2,000 for the
boat ride from Turkey to the
port of Chios in Lesbosby
normal circumstances a 45minute ferry ride that costs
about $30. I cant go back to
Afghanistan anymore. There is
war. There is no safety or
work.
Mr. Malek and other passengers of the rubber dinghy
were brought to the Turkish
port of Cesme and freed the
same night. While disappointed, he said he didnt despair: He immediately began

calculating how to cobble together enough money for another try at crossing the strait
to Greece.
I will try this trip again,
he vowed.
Warming temperatures in
the northeastern Mediterranean, plus a civil war continuing in Syria, only herald a
fresh torrent of Europe-bound
migrants soon.
The numbers continue to
be worryingly high, said Abby
Dwommoh, a spokesperson for
the intergovernmental International Organization for Migration.
The EU statistics agency
said on Friday that the number of people seeking asylum
in the 28-nation bloc reached

1,255,600 in 2015, more than
double that of the previous
year. Syrians, Iraqis and Afghans topped the list of applicants, with more than a third
going to Germany, the agency
said.
Turkish officials say their
own countrys efforts to stem
the human tide have yielded
some progress.
Although the overall number of migrants reaching
Greece from Turkey so far this
year is up from last year, there
was a decrease to 55,000 in
February from 67,000 the previous month.
Meanwhile, they say, the
number of migrants intercepted by the Turkish coast
guard rose from 5,500 to
8,200 over the same period.
In a gruesome measure of
progress, the number of bodies washing up on Turkish
shores also fell by about twothirds between January and
February, from 100 to 37, the
Turkish officials said.
But on the shore in Cesme,
Turkish residents said smuggling had largely gone underground. On the seaside hills of
Cesme, where the Greek island
of Chios was clearly visible in
the horizon, hundreds of refugees would camp openly waiting for the smugglers to cross
them in November and December. But today, only rubbish
and abandoned makeshift
tents remained.
Now they hide until they
are to be smuggled, then
quickly get on the boats and
leave, said one local security
official.
We certainly hope this
lasts and is not just some temporary lull, he said.
The task facing Turkeys
coast guard is enormous. Four
of the newest and largest
ships in its fleet are trying to
patrol more than 2,200 miles
of coastline.
European critics say Turkey
can and should do more. They
also point to President Recep
Tayyip Erdogans threats to let
refugees travel freely into the
EU as evidence that the government in Ankara is playing
politics with the migrant issue.
As the 262-foot Hope lifted
anchor last week and set out
from Cesme, Capt. Yilmazarslan said he and his
crew were simply doing the
best they can.
We cant build a wall on
the waters.
Julian E. Barnes
contributed to this article.
Islamic State Steps Up Attacks in Iraq

BY TAMER EL-GHOBASHY
AND GHASSAN ADNAN
BAGHDADA truck bomb
killed 33 people at a crowded
checkpoint south of Iraqs capital on Sunday, the latest in a
recent spate of attacks on Shiite majority areas by Islamic
State, officials said.
The bombing targeted a security checkpoint in the town
of Hilla, about 60 miles south
of Baghdad in Babylon province, said Falah Abdel Karim,
the head of the provincial security committee. The checkpoint was crowded with civilian vehicles and security
officers, and 81 people were
injured, he said.
Mr. Abdel Karim said the
truck driver detonated the
bomb after being approached
by officers who had detected
the explosives using a device
installed in a security vehicle
at the checkpoint.
In a statement, the Iraqi
militarys joint operations
command in Baghdad said the
truck driver was likely attempting to enter the center of
Hilla in order to set off the explosion there.
It was a real surprise to
Babylon province to have such
ALAA AL-MARJANI/REUTERS
Coast guard crews face

uphill battle to deter
smugglers who ferry
people to Greece
UMIT BEKTAS/REUTERS
Turkey Struggles to Stop Migrant Boats
A truck bomb killed 33 people at a checkpoint south of Baghdad.

a huge attack after being safe
for a long time, Mr. Abdel Karim said.
Islamic State claimed the
attack on social-media accounts linked to the extremist
group, according to the SITE
Intelligence Group, which monitors extremist activity online.
Islamic State has stepped
up terrorist attacks against civilians in recent weeks, killing
more than 100 people in two
days last week, as it faces de-
feats by Iraqi forces backed by

U.S. airstrikes in its stronghold
cities. The recent attacks have
exposed vulnerabilities in
Iraqs security apparatus in areas previously declared safe
and free of insurgents.
Iraqi and American officials
say the uptick in terrorism,
particularly around Baghdad,
is a bid by the militants to revive feelings of insecurity as
the nation seizes the upper
hand against Islamic State for
the first time in two years.

Brett McGurk, the U.S. envoy for the international coalition against Islamic State, said
on Saturday the militant group
is resorting to old tactics to
stir up sectarian tensions as
Iraqi civilians increasingly
rally around the governments
effort to eradicate the group.
The attack on Sunday was
the largest since a car bomb
killed dozens near the same
checkpoint two years ago. It
was the first such attack since
Shiite militias, along with Iraqi
police, stepped up security in
areas surrounding Baghdad after Islamic State took over
about a third of the country in
2014.
Since then, Iraqi forces have
regrouped and, with the help
of U.S. airstrikes, taken back
several key cities and dozens
of towns from the insurgents.
Iraqs
prime
minister,
Haider al-Abadi, has urged
calm in the face of the recent
spasm of violence targeting
Shiite neighborhoods, saying
they are designed to provoke
reprisals against Sunnis and
destabilize Iraqi security
forces.
Safa Majeed contributed to
this article.
Norway Seeks EU Assurances on Gas Purchases

Europes only petrostate is considering spending billions of dollars on Arctic installation to replace aging fields
SLEIPNER, The North

SeaFor three hours on a recent Thursday, Norways
state-owned oil-and-gas company Statoil ASA transformed
offshore rigs into a marketing
platform for a special guest:
the European Unions energy
czar, Maros Sefcovic.
Natural-gas fields like
Sleipner have helped cook
meals and heat homes in Europe for several decades, but
their output will gradually
fade away. To replace those
aging North Sea fields, Norway is considering plowing
billions of dollars into similar
installations 1,000 miles to
the north, in the Barents Sea.
Before going ahead with
this Arctic bet, however, the
country, which isnt part of
the EU, would like to receive
assurances that the bloc will
continue to take its gas.
Hopping off a helicopter
and touring the Sleipner platform in yellow overalls and a
hard hat, Mr. Sefcovic expressed awe at what he called
a huge factory in the middle

of the sea. But the EU Commission vice president, who
leads the EUs effort to reduce
dependence on energy imports, stopped short of committing to buying more Norwegian gas in the future.
What we want is to have
enough gas at a good price,
he said.
Norways marketing
pushand its limited resultsillustrate the challenges
facing Europes only petrostate at a time when moribund energy prices are threatening the underpinnings of a
welfare society largely built
on sharing hefty oil windfall.
Bargaining between Norway and its dithering European customers also highlights a new dynamic at play
on international gas markets.
Since the 1970s, the Nordic
nation has built a gigantic
gas infrastructure, with
nearly 5,000 miles of pipelines, largely aimed at feeding European households
and industries. Diplomatic
tensions between the EU and
Russia, also a big exporter of

gas to Europe via pipeline,
have reinforced Norways
status as a core, reliable energy partner.
But the EU has also been
tapping remote sources of
liquefied natural gas, which
can be shipped in from
around the globe. Although
LNG is traditionally more expensive than piped gas, the
technology has brought addi-
tional flexibility and security,

EU officials say.
The EUs diversification
effort has left Norwegian authorities wondering whether
the country might be better
off building up its own LNG
export capabilities rather
than another steel umbilical
that would connect the frontier Barents Sea to Europe.
Gas supply requires
large upfront investments,
NERIJUS ADOMAITIS/REUTERS
BY KJETIL MALKENES HOVLAND
EU energy czar Maros Sefcovic, center, at the Sleipner platform.
www.ebook3000.com
Tord Lien, Norways minister

of petroleum and energy,
told a European Commission
event in Brussels last month.
The likelihood that Norwegian gas producers invest in
transport infrastructure to
expand gas exports to the
European market is increased if they believe there
is a demand to be met.
Norways sprawling network of gas pipelines was
built largely by Statoil. From
2002, the infrastructure was
transferred to a state-owned
company, Gassco AS, which
began working on long-term
plans to maintain Norways
gas supply into the 2020s.
In 2014, Gassco presented
plans for a nearly $3 billion
pipeline to connect its existing export network to future
gas fields in the Barents Sea.
But Statoil and other energy
companies have showed little interest. In fact, Gassco
has stopped working on the
project, a spokesman said.
Statoil said a possible alternative to the pipeline plan
would be to increase the size
of its existing gas liquefying

unit in Hammerfest, a coastal
town on the Barents Sea.
The problem, however, is
that Statoil and other energy
companies have yet to make
a big discovery that would
justify building large-scale
gas export infrastructure, be
it a pipeline or LNG facilities, says Kjell Giaever, director of PetroArctic, which
provides services to oil companies in the far north.
Projections by the Norwegian Petroleum Directorate
show that Norways gas output will drop off in the
2020s unless new discoveries are made.
Preparing to board the
helicopter back to the mainland after showing off the
Sleipner platform to his EU
visitor, Mr. Lien, the Norwegian minister, said he had
been assured of Europes
continued interest in buying
gas from Norway. As for
building a pipeline, he was
more evasive.
I cant guarantee anything, he said.
HK JP
KO ML
SI
IN UK
FR
MN PR
WORLD NEWS
Spain Impasse Hits Growth Quitting the EU

Spanish
Slowdown
4%
Estimate: 2.7%
3
2
A political stalemate
1
is expected to be a
0
further drag on an
already-anticipated
1
BY JEANNETTE NEUMANN
slowdown in GDP
2
MADRIDAn 11-week-old growth.
3
political impasse in Spain has GDP, change from
4
hurt the countrys rebounding a year earlier
2011
12
13
14
15
16
economy, as some businesses
say they are holding back on Sources: Spain's statistics agency; BBVA (estimate)
investment plans as they wait
for a new government to take a fragmented parliament, mak- At the end of the day, we
ing Prime Minister Mariano cant wait a lifetime to see
shape.
what happens with the current
Hours before the Spanish Rajoy a weak caretaker.
Fruitless multiparty efforts government.
parliament shot down a proAfter hesitating, Mr. Moraposed center-left government to form a new government
on Friday, Pablo del Villar and since have produced a barrage cho said he would move fornine other wine producers met of conflicting proposals about ward with a 1.5 million ($1.65
for lunch in the city of Valla- tax rates and public spend- million) investment in indusdolid and talked shop. Four ingand have left Spanish trial equipment, an upgrade he
of them had been developing businesses frustrated as they undertakes most years, and
plans to expand their wineries, try to guess which direction spend around 3 million to
build a logistics center.
but the projects are all on hold economic policy will take.
Flix Moracho, whose comCoalition building is old hat
for now.
The winemakers dont know pany, Huercasa SA, based in in European countries such as
which party or coalition will the small town of Sanchonuo, Italy and Germany. Not so in
eventually govern Spain, employs 200 people to pro- Spain. For 33 years until Dewhether their corporate tax duce pre-cooked and packaged cember, conservatives and Sobills will rise, or how the regu- vegetables. He said that he cialists took turns governing
lation and cost of exporting mulled over the results of De- pretty much alone. Now they
wine might shift. Were on cembers inconclusive elec- must contend with two uptions for weeks: Would a new starts that gained strong repstandby, Mr. del Villar said.
Spains economy, the euro- government raise his taxes? resentation in parliamentthe
centrist
zones fourth largest and one Would it roll back labor mar- business-friendly
of its fastest growing, is re- ket changes that had allowed party Ciudadanos and the farcovering from a punishing re- him to negotiate contracts left Podemos.
his
employees
Were a young democracy,
cession. But in December, vot- with
ers weary of austerity and rather than accept an indus- Mr. del Villar said. Were not
used to this.
entrenched
unemployment try-wide agreement?
Little by little, I digested
After parliaments rejecended four years of conservative majority rule and elected the news, Mr. Moracho said. tion of a Socialist-Ciudadanos
World
Watch
EGYPT
Killing of Prosecutor
Sparks Accusations
The government accused

members of the outlawed Muslim Brotherhood and Gaza-based
militant group Hamas for the assassination of the countrys top
prosecutor last year, detaining
dozens of people for the attack.
The number of those involved in the assassination were
14, out of a total terrorist cell of
48 members, Magdy Abdul
Ghaffar, Egypts interior minister,
said on state TV. All those arrested confessed to be Muslim
Brotherhood members and received training by Hamas.
Prosecutor Hisham Barakat
died of his wounds from a car
bombing in a Cairo suburb in
June 2015, one of the most-senior officials to be killed in the
country in more than two decades. No group has claimed responsibility for the attack.
The Muslim Brotherhoods
spokesman, Mohamed Montasser, denied the accusations,
as did Hamas.
Dahlia Kholaif
AFGHANISTAN
Government, Taliban
Had Talks in Qatar
An Afghan government delegation recently met with Taliban

members in Qatar to discuss efforts to end the countrys longrunning war, officials said, after
peace talks collapsed last year.
The high-level meeting at the
end of February was held discreetly in the capital Doha to
discuss a possible announcement about restarting official
peace talks, one of the officials
briefed on the meeting told The
Wall Street Journal.
That was the deal, that they
wouldnt simply reject that
theyre going to meet [us] face
to face for official talks, a senior Afghan government official
said.
I heard from both sides that
it was a positive meeting, said
a person close to the Taliban,
commenting on the outcome of
the discussions.
Despite efforts by Afghan
delegates, the militant group
said it hadnt agreed to enter
into an official peace process.
Jessica Donati
CHINA
Investigation Targets
Communist Official
The Communist Party said

the former top official in a heavily industrialized northeastern
province is under investigation, a
political twist that comes just
ahead of an annual legislative
session set to explore how to fix
overcapacity in the economy.
The partys corruption watchdog said Wang Min, a legislator
and former Liaoning province

party secretary, is suspected of
serious discipline violations. Such
statements from the partys
Central Commission for Discipline Inspection often indicate
the official launch of a corruption probe. Mr. Wang, who turns
66 years old this month, wasnt
reachable for comment.
Troubles for a politician who
helped set policy in Chinas industrial rust belt for more than
a decade come as legislators arrive in Beijing for a parliament
session where a central priority
will be how to tackle economic
ills that plague places like Liaoning.
James T. Areddy
PEACEKEEPING
U.N. Outlines Plans

To Counter Abuse
United Nations SecretaryGeneral Ban Ki-moon outlined

long-awaited action to counter
the problem of sexual abuse and
exploitation by international
peacekeeping forces that has
threatened to undermine the
U.N.s credibility.
Mr. Bans plan, detailed in a
report, called for improved investigations and accountability
along with steps to prioritize the
welfare of victims, including a
trust fund to pay for medical
bills and legal fees. He also
called for field court-martial proceedings by countries contributing the culpable troops so punitive measures would appear
more tangible to victims.
U.S. Ambassador Samantha
Power said it was outrageous
that 70% of the sexual-abuse
cases are pending.
The U.S. also said it would introduce a resolution before the
Security Council calling for
greater transparency and accountability by countries whose
troops are accused of sexual
misconduct under the U.N. flag.
Farnaz Fassihi
WORLD TRADE ORGANIZATION
India Complains
About U.S. Visas
India has filed a complaint

with the World Trade Organization challenging the U.S. system
for handing out temporary work
visas to foreigners, a program
that has become a lightning rod
for criticism in the U.S. presidential campaign.
The complaint challenges increased fees charged by the U.S.
for certain types of visas for
highly skilled workers, the WTO
said. Indias information-technology companies with operations
in the U.S. have been among the
most frequent users of these visas, bringing tens of thousands
of Indian workers to the U.S.
The U.S. passed a law last
year that doubles the fees to
$4,000 and $4,500, depending
on the kind of visa. Republicans
and Democrats had both criticized the program for allowing
companies to replace U.S. workers with cheaper labor from developing nations, such as India.
Despite the changes, presidential candidates from both
parties have continued to attack
the visas. Matthew Dalton
coalition on Friday, the parties

have until May 2 to produce a
new government acceptable to
a majority of lawmakers. Many
businesspeople believe they
will fail, triggering a new election on June 26.
Economists say the impasse
has already slowed Spains
economic expansion and will
continue to chip away at
growth until a government
emerges.
Yields on Spanish government bonds have traded above
Italian debt since the run-up
to the election, pushed up by
uncertainty over its outcome
and concern about the Catalonia regions separatist movement.
The gap has held since the
December vote, meaning investors consider Spanish
bonds slightly riskier.
Spains economic expansion, a robust 3.2% in 2015,
was already expected to slow
to about 2.7% this year, in part
because of political uncertainty, according to Banco Bilbao Vizcaya Argentaria SA.
If Spain goes to new elections in June and ends up with
a similar deadlock, said BBVA
chief economist Jorge Sicilia,
growth could slow to as little
as 2.4% this year and 1.7% next
year as wary individuals and
businesses pare back purchases and delay or cancel
planned investments.
Carlos Lpez Perea
and Emese Bartha
Is Like Escaping
Jail, Says Mayor
BY JENNY GROSS
Londons popular Mayor
Boris Johnson on Sunday
stepped up his rhetoric in the
debate over whether the U.K.
should leave the European
Union or remain a member,
likening an exit from the bloc
to an escape from prison.
This is like the jailer has
accidentally left the door of
the jail open and people can
see the sunlit land beyond,
Mr. Johnson told the British
Broadcasting Corp. in an interview Sunday. He added that a
departure from the bloc would
be wonderful and that a
huge weight would be lifted
from British businesses. Advocates for leaving the bloc say
costly EU regulations have
damaged British businesses.
Mr. Johnsons comments
come amid increasing friction
between politicians who are
pushing for Britain to remain
part of the bloc, like British
Prime Minister David Cameron, and those, like Mr. Johnson, who are campaigning for
an exit. Mr. Cameron, hoping
to settle decades of squabbling
over Britains relationship
with the bloc, has called an inor-out referendum on the issue for June 23.
Britains exit from the bloc

would have huge economic
and political ramifications for
the EU and the U.K., Europes
second-largest economy.
Justice Secretary Michael
Gove, who wants Britain to
leave the bloc, told the Sunday
Times newspaper in an interview that the desire to impose
a unified bureaucratic model
on Europe has inflicted pain
across the Continent. He said
the far right is stronger across
the Continent now than it has
been at any time since the
1930s.
But those who advocate
Britains continued membership say that Britain is more
secure in the EU and that Britains access to the EUs single
trading market pays off hugely
for the country.
Leaving would usher in a
decade of uncertainty that
would hit financial markets,
investment and the value of
the pound, the U.K. government said in a recent report.
See the story develop.

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GibraltarPutsAirDealinHardPlace
BY ROBERT WALL
LONDONA push to revamp Europes aviation sector is hitting headwinds due
to a dispute between Spain
and the U.K. that can be
traced back long before the
era of commercial flights.
The European Union last
year promised to boost the
competitiveness of its aviation industry, rolling out
plans to rewrite passengerrights rules, improve operational efficiencies and broker
new traffic agreements with
foreign governments. EU
Transport Commissioner Violeta Bulc in January promised
progress on aviation policy
this year.
Standing in her way is a
three-centuries-old dispute
between Britain and Spain
over Gibraltar, a small, rocky
outpost on the Iberian peninsula. It is a British territory,
but Spain has long disputed
that and wants it back. It has
been the source of frequent
spats between the two.
Aviation is a flashpoint because of the location of Gibraltars airport, which was
built in 1938. It serves airlines such as British Airways
and budget carrier EasyJet
PLC, handling 4,100 flights
and 444,336 passengers
mostly touristslast year.
Spain claims the 1713
Treaty of Utrecht, which
ceded sovereignty over Gi-
ASSOCIATED PRESS
Businesses hold back

on investments as
they wait for new
government to form
A British Airways jet at the airport, which sits adjacent to the Rock of Gibraltar in the U.K. territory.
braltar to the U.K., doesnt
cover the territory now occupied by the airport. The sides
in 2006 struck a deal to resolve a series of Gibraltar-related disputes, including the
airport. But a new terminal
that will serve only passengers going to or from Spain
has opened a new battle line.
And that has slowed down
broader EU talks over a set of
aviation reforms.
Spain has blocked progress, saying any new aviation
rules shouldnt apply to Gibraltar airport as long as it is
under British control. Instead, Spain wants a bilateral

deal first between it and the
U.K. over use of the airport.
The U.K. has rejected that.
For airlines, the stakes
may be high. As part of the
measures, the EU proposes
moving to a pan-European
air-traffic system from one
that is largely tied to national
borders. Cost savings for airlines could be $9 billion a
year, carriers have projected.
I dont see the Gibraltar
question solved any time
soon, said James Sibley, an
analyst at political monitoring group DeHavilland EU.

Uncertainty over who will
lead Spains next government
makes a near-term agreement
on the Gibraltar issue even
more unlikely, he said.
The EU is trying to stay
out of the issue. The two
sides will need to work together to agree on a formulation to resolve this matter
that is obstructing the adoption of EU aviation legislation
and international agreements, a European Commission official said.
Cypruss Bailout Is Almost Near End

BY NEKTARIA STAMOULI
NICOSIA, CyprusCyprus
is about to finish its financial
bailout, leaving Greece as the
only country in the eurozone
that still needs rescue loans.
Eurozone finance ministers
are expected to announce
Monday that Cyprus will exit
its 10 billion ($11 billion)
program on March 23, according to Cypriot officials. European Commission Vice President Valdis Dombrovskis
confirmed the program would
end this month and praised
the governments progress.
This is not the end of the
road, Mr. Dombrovskis said.
It is, in fact, very important
to stay the course, to continue
the structural reform effort, to
continue with responsible fiscal policies.
Cyprus wont get the final
175 million of its earmarked
European funds, after it failed
to carry out one last measureprivatizing the national
telecoms company CYTAfor
lack of support in parliament.
Also, Cypruss credit rating
is still so low that, once the
bailout ends, Cypriot government bonds will no longer
qualify for the European Central Banks asset-purchase
program. That could make it

costlier for Cyprus to raise
money from bond markets
although it doesnt need to do
so soon.
The Cypriot government,
which faces elections in May,
wanted to exit the bailout restrictions fully and so rejected
the option of a postbailout
credit line from Europe, which
would have allowed ECB bond
purchases.
We will eventually get the
investment rating, said Finance Minister Harris Georgiades in an interview.

Whether the ECBs rules that
exclude a country which concludes its program successfully are correct is another issue, which I wouldnt like to
comment on.
The bailout was launched
three years ago, when Cypriot
banks collapsed and the country had to impose capital controls to prevent complete fi-
Turbulent
Cypruss economy has been a roller coaster since it joined the
European Union in 2004 and adopted the euro in 2008.
GDP change, ination-adjusted
6%
Unemployment rate
16%
14
Projections
12
2
10
8
6
4
4
Projections
0
2004
10
15
2004
Sources: Eurostat; Cypriot Finance Ministry (projections)
www.ebook3000.com
10
15
nancial
meltdown.
The
dominant lenders, Germany
and the International Monetary Fund, forced Cyprus to inflict losses on bank depositors
to help pay for the rescue.
Mr. Georgiades said Cyprus
refocused its economy on sectors with healthy prospects,
such as tourism, shipping,
construction and business services, while radically restructuring the swollen and riskladen banking sector. Only
the names of the banks remain
the same, he said.
Cyprus slashed its budget
deficit from 5.5% of gross domestic product in 2013 to 0.2%
a year later. The economy
slumped by 5.9% in 2013 and
shrank by another 2.5% in
2014. Data for last year arent
yet available, but the finance
ministry projects that GDP
rose by 1.4%, and will grow by
1.5% this year.
The contrast with neighboring Greece is still painful.
Greece hasnt been able to escape its tough bailout regimen
since it lost investors trust in
early 2010.
Mr. Georgiades said Cyprus
earned the trust of the IMF,
the commission and European
Central Bank by quickly implementing its side of the deal.
How do we pass
on our values?
Will our money make our childrens lives easier?
Or too easy?
Being wealthy can have its benefits, and its

challenges too.
Youd like your children to have the best
opportunities. And inherit your determination
and drive. How do you get the balance right?
We can help you pass on something even more
precious. Your values. (Weve been helping
families for more than 150 years.)
For some of lifes questions, youre not alone.
Together we can find an answer.
The price and value of investments and income derived from them can go
down as well as up. You may not get back the amount you originally invested.
Past performance is not a reliable indicator of future results. In the UK, UBS AG
is authorized by the Prudential Regulation Authority and subject to regulation
by the Financial Conduct Authority and limited regulation by the Prudential
Regulation Authority. UBS 2016. All rights reserved.
ubs.com/pass-on-values
www.ebook3000.com
WORLD NEWS
BY JAMES HOOKWAY
Over the course of a year,
Blaine Gibson traveled across
Asia and Africa with the nagging hunch that the investigation into the disappearance of
Malaysia Airlines Flight 370
nearly two years ago was
somehow missing something.
In Myanmar, he swam to
sandbars in the Andaman Sea
to sift through lumps of polystyrene, old rubber flip-flops
and lumps of plastic for signs
of the plane. In the Maldives,
he met a witness who had reported to police that he had
seen a plane with similar
markings as the missing Malaysia Airlines jet pass low
over his island on an unusual
flight path.
Then, on Feb. 27, on a barren island in Mozambique, Mr.
Gibson and the captain of his
hired boat found a meter-long,
triangular shaped piece of ma-
Beijing
Includes
Green Cap
In Plan
BY BRIAN SPEGELE
BEIJINGChina will cap
annual energy consumption at
5 billion metric tons of coal
equivalent by 2020, as Beijing
pushes to control the use of
resources and curb greenhouse-gas emissions.
The cap, detailed Saturday
in a draft of the governments
13th Five Year Plan economic
blueprint, comes as Chinese
leaders seek to tackle wasteful
resource usage and industrial
overcapacity in the worlds
second-largest economy.
It marks the first time a
hard energy-consumption cap
has been enshrined in a fiveyear plan, underscoring the increasing importance Beijing
places on the efficient use of
resources. The government
has previously given energyconsumption targets in other,
less official, forms.
In 2015, total energy consumption hit 4.3 billion metric
tons of standard coal equivalent, up 0.9% from a year earlier. The new consumption cap
will increase slightly each
year, rising to a maximum of 5
billion metric tons by 2020.
Limiting overall energy
consumption is key to Beijing
meeting its pledge to stop increases in carbon-dioxide
emissions by 2030 or earlier
as part of a global climatechange pact.
In part, the Chinese government hopes a liberalization of
pricing over more natural resources will encourage efficient consumption. A separate
report from the National Development and Reform CommissionChinas top economic-planning
agency
released Saturday identified
reforms to resource pricing as
a priority for 2016.
We will work to lift pricing
controls over competitive areas in the power, petroleum,
natural gas, and transportation
industries, the NDRC report
said, without providing details.
The energy-consumption
cap also reflects Chinas slowing growth. Chinese resource
consumption once seemed insatiable, as the economy grew
at double digits. Today, however, global energy markets
are grappling with weakerthan-expected Chinese demand for key commodities
such as coal.
CHINA
tary policy.
In the past, leaders have
just said total social financing
should be kept at an appropriate level, while they have set
clear targets for M2 money
supply, which covers all cash
in circulation and most bank
deposits.
Both measures have increased sharply in recent
months. But the money-supply
terial with a honeycomb core.

The words No Step were
clearly printed on one side,
triggering a wave of speculation that it was part of the
horizontal stabilizer from the
tail of the aircraft.
The 58-year-old Seattle
lawyer said in an interview his
goal was to find something,
anything, that would provide
some physical evidence for investigators trying to find out
what happened to Flight 370
and its 239 passengers and
crew. Until now, they have
largely relied on data transmission from the plane to a
satellite operated by Inmarsat
PLC that place it somewhere
in the southern Indian Ocean.
Experts from Australia, Malaysia, the U.S. and the missing planes manufacturer Boeing Co. deemed images of the
debris sent by Mr. Gibson
compelling enough to arrange
for laboratory testing in Canberra, the Australian capital.
Malaysias transport minister
said there was a high probability that it was from a Boeing 777. If confirmed to be
from Flight 370, it would be
the second piece of debris re-
American lawyer Blaine Gibson in Kuala Lumpur on Saturday.

covered after part of a wing
was found on the Indian Ocean
island of Runion last year.
If people there didnt know
to look for debris before, they
know now, said Mr. Gibson,
speaking by telephone from
Kuala Lumpur, where he was
attending a commemoration of
the second anniversary of the
planes disappearance.
This isnt necessarily a
breakthrough. Investigators
note that the recovery of debris in Runion and, if confirmed, Mozambique, is consistent with the 85,000
square-kilometer search area
(about 33,000 square miles) in
the Indian Ocean where they
believe Flight 370 ran out of
fuel after veering off course
on a flight from Kuala Lumpur
to Beijing on March 8, 2014.
Ocean currents would catch

debris from that part of the
sea and propel them toward
Africa, they said.
But Mr. Gibson said he felt
the investigation had depended too much on electronic
transmissions in which the
aircraft systems attempted to
connect with Inmarsat satellites, and not enough on human intelligence. He predicts
more people will join the
search for alternative clues to
what happened to Flight 370.
I think the investigators in
Australia and the people at Inmarsat have been doing their
very best, he said. But I believe that it is possible that a
lot of evidence was considered
and dismissed or not considered at all because of the reliance on the Inmarsat data. So
I thought someone needed to
be out there looking to see
what else might be there in
case the data was misinterpreted or there was some
other problem, and I took it
upon myself to do that.
Investigation officials and
representatives at Inmarsat
couldnt be reached for comment.
It isnt unusual for small,

private teams or amateurs to
get involved in searches for
missing aircraft. Air France
Flight 477 was found in the
Atlantic in 2011 by a group of
scientists in Massachusetts.
The search for Flight 370, the
biggest mystery in modern
aviation history, has attracted
an array of other search efforts, some of which have been
criticized for diverting attention from the core area of the
search in the Indian Ocean.
Mr. Gibson said he was first
drawn by the Flight 370 drama
while watching news coverage
of the disappearance at his old
family home in California.
Soon after, Mr. Gibson began joining Facebook discussion pages that laid out theories about what happened to
the plane. He said he will continue looking for debris or
other evidence that could shed
some light on the fate of
Flight 370. Im not sure
where I will go next. Madagascar could possibly be a good
place to look, he said.
Celine Fernandez
in Kuala Lumpur
Philippines Seizes North Korean Cargo Ship

BY ALISTAIR GALE
AND CRIS LARANO
The Philippines has moved
quickly to put into effect new
United Nations sanctions on
North Korea by seizing a cargo
ship owned by Pyongyang.
The ship, the Jin Teng, arrived on Friday at Subic Bay, a
port northwest of Manila.
Philippine
Coast
Guard
spokesman Armand Balilo said
on Sunday the ship had been
impounded and its 21 North
Korean crew members would
be deported.
Tighter restrictions on
North Koreas cargo operations are a key part of the U.N.
sanctions approved last week
that aim to block the nations
development of nuclear weapons. The sanctions resolution
requires all cargo going to or
coming from North Koreaby
air, land or seato be inspected for arms or other prohibited items.
Previous U.N. resolutions
only required member states
to inspect cargo if they suspected that illicit goods were
contained in the shipment.
In another step to crack
down on North Koreas arms
trade, the new U.N. sanctions
ban 31 vessels owned by
Pyongyang-based Ocean Mari-
EUROPEAN PRESSPHOTO AGENCY
Lawyer has traveled

across Asia and Africa
in quest for physical
evidence of missing jet
JOSHUA PAUL/ASSOCIATED PRESS
Amateurs Flight 370 Quest Brings a Find
North Korean cargo ship Jin Teng anchored at Subic Bay, near Manila, in the Philippines on Friday.
time Management Co., including the Jin Teng, from international ports.
OMM was blacklisted by the
U.N. in 2014 after one of its
ships was found during an inspection in Panama to be carrying jet fighters and other
Soviet-era weapons from Cuba
hidden under bags of sugar. At
that time, the U.N.s sanctions

committee said OMM played
a key role in arranging the
shipment of the concealed
cargo of arms.
Initial inspections of the Jin
Teng, which was carrying a
cargo of palm-kernel expeller,
an animal feed, didnt find any
suspicious materials, Mr. Bal-
ilo said. Coast guard personnel

found only minor problems
with the ship, such as broken
lights, he said.
Philippine Department of
Foreign Affairs spokesman
Charles Jose said the government had reported the actions
it had taken to the U.N. and
that further actions would be
undertaken in consultation
with the world body.
The ship is likely to be inspected by a U.N. panel of experts responsible for monitoring the implementation of
sanctions on North Korea. The
panel has been looking into
another North Korean cargo
ship held in Mexico after it ran
aground there in July 2014.
The Jin Teng is registered
as belonging to Sierra Leone,
according to commercial ship
registries, but North Korea
commonly uses so-called flags
of convenience from other nations to conceal the identity of
its ships.
Pyongyang didnt have any
immediate response through
its state media to the seizure,
although on Friday it said it
categorically rejects the new
U.N. sanctions and defended
its decision to breach longstanding U.N. bans on its testing of nuclear weapons and
ballistic missiles.
North Korea carried out its
fourth detonation of a nuclear
bomb on Jan. 6 and then
launched a long-range rocket
on Feb. 7, widely viewed as a
test of a ballistic missile. The
rocket launch accelerated talks
at the U.N. Security Council to
put together the new package
of sanctions, diplomats said.
Economy Slows Chinese Military Spending

BY JEREMY PAGE
BEIJINGChina is increasing its armed forces budget at
the slowest rate in six years,
an early indication that the
nations economic slowdown is
starting to hamper President
Xi Jinpings military ambitions.
Still, the 7.6% increase is
higher than Chinas economic
growth target of between 6.5%
and 7%, suggesting Beijing
continues to prioritize military
spending as it advances island-building in the South
China Sea and huge restructuring of the armed forces.
The military expenditure
would be 954.4 billion yuan
($146.3 billion), according to a
budget report released Saturday at the opening of an annual meeting of the National
Peoples Congress, Chinas parliament. The report said the
governments overall spending
would grow by 7%. Last year,
Chinas military budget grew
10% to 886.9 billion yuan, or
$142 billion at the time.
Maj. Gen. Chen Zhou, a researcher at Chinas Academy
of Military Sciences, told a

small group of reporters on
Friday that the military budget
was keeping step with overall
economic growth and that the
government was trying to
spend it more efficiently.
Much of this years budget
would go toward the plan Mr.
Xi unveiled last year to cut the
Peoples Liberation Army by
300,000 troops and overhaul
its Soviet-style command
structures, Gen. Chen said.
Craig Caffrey, an expert on
military spending at IHS
Janes, said this years figure
still represents a significant
increase in absolute terms. But
he predicted that Chinas military spending would rise by an
average of less than 10% a year
between 2016 and 2020.
Going forward, I think
were likely to see this slower
rate of growth maintained.
The reduction in personnel
will help that, he said. The
size of the PLA in terms of
manpower, coupled with increases in the average wage in
China, had increasingly become a major driver behind
defense-budget growth, rather
than actual military requirements, and this is a move to

check that trend.
China has notched doubledigit percentage growth in military spending every year for
the past decade, except for
2010 when it fell to 7.3%, a
drop many analysts attributed
to the global financial crisis.
Those increases, combined
Note: 2005 and 2006 gures are estimates; 2015 and 2016 gures are forecasts. 1,000 billion
yuan=$153.1 billion.
Source: Ministry of Finance
believe Chinas actual spending

is significantly higher because
the publicly declared figure excludes arms imports and other
big-ticket items.
Chinese officials deny that
and say much of the military
budget goes toward items such
as salaries, housing and training. A foreign-ministry spokesman told a regular news briefing on Friday that Chinas
military policy was designed to
protect its own territory and
that Beijing was becoming
more transparent about its military spending.
Andrew Erickson, a professor at the U.S. Naval War College, said that whatever the
exact figure was for Chinas
military budget, it was still
the worlds second-largest behind the U.S.
Beijings latest defensespending figure shows that it
is determined to avoid Sovietstyle military overextension,
yet remains focused on enhancing capabilities to further
its outstanding island and
maritime claims in the East
and South China seas, he
said.
measure fails to capture how

banks and financial institutions use the funds. For instance, M2 jumped 13.3% last
year while total social financing grew 12.4%, according to
official data. The discrepancy
indicates not all deposits were
used by banks to make loans
to companies; instead, some of
the funds were tapped for
such purposes as margin loans
for stock-market speculation.
This year, the two targets
are paired, with both set to increase 13%. The government
seeks to more accurately show
where the money is going, and

whether credit is being used
to support the real economy,
said Sheng Songcheng, head of
the central banks survey and
statistics department, in an interview.
Chinas past efforts to direct credit to entrepreneurs
and other desired sectors of
the economy have fallen short.
And its loose monetary policy
risks giving inefficient companies more room to avoid shutting down or retooling.
Much of Chinas growth in
the past two decades has been
fueled by state-led investment

and debt. Concerns about a
credit buildup have grown as
the economy has slowed.
The recent sharp rise in
money supplywhich rose 14%
in January from a year earlierenlivens capital markets but bears careful monitoring, said Fu Yuning,
chairman of China Resources
Holdings Ltd., a diversified
conglomerate. We are closely
watching the financial risks
that come from the increase in
monetary supply, he said.
Companies financial liabili-
Xu Shaoshi, head of Chinas

planning agency, played down
both Moodys concern about
rising debt and fears of mass
layoffs, saying that some companies have cut worker hours
and salaries but have kept
them on the payroll, and that
new jobs are being created in
the service sector and by private enterprises. All predictions of a hard landing will
definitely fail, he told reporters on the sidelines of the legislative meeting Sunday.
Chuin-Wei Yap
with Chinas recent efforts to

enforce its territorial claims in
the South China Sea and East
China Sea, have stoked concern
among its neighbors, and in the
U.S., about Beijings expanding
firepower.
Although Chinas military
budget is dwarfed by that of
the U.S., which is $573 billion
for 2016, many military experts
Army Reserves
China plans to increase its military spending at the slowest pace in
six years because of a slowing economy.
Total spending, in yuan
Annual increase
Budget
1,000 billion
20%
800
16
600
12
400
200
0
2005
www.ebook3000.com
10
15 16
2005
10
15 16
ties now amount to 160% of

gross domestic product, up
from 98% in 2008, according
to estimates by Standard &
Poors. That compares with
around 70% for U.S. firms.
Bad loans reached 1.67% of
bank portfolios at the end of
2015, the highest since June
2009. Analysts believe the figure widely understates the
problem. Last week, Moodys
Investors Service downgraded
its outlook for Chinas sovereign debt, along with that of
25 financial institutions and
38 state-owned companies.
U.S. NEWS
Hurdles to Getting Workers Off the Sidelines

T
he share of Americans
participating in the
U.S. job market has
nudged up lately after years
of decline. Dont look for the
trend to last.
The labor-force participation rate, which stood at 66%
on the eve of
THE
the recession,
OUTLOOK
is a closely
BEN
watched meaLEUBSDORF sure of the
economys vitality. Its
slump to a 38-year low of
62.4% last fall became a potent symbol of the incomplete recovery and a sign
that actual joblessness may
be worse than the official
unemployment rate suggests.
Now the strongest run of
hiring since the end of the
1990s is drawing would-be

job seekers off the sidelines,
pushing the rate steadily up
since September. It hit 62.9%
in February.
But forces independent of
the business cycle are exerting a strong downward pressure, with the wave of babyboomer retirements topping
the list. The rate may keep
climbing in the short term,
but many economists believe
it will resume its decline
soon enough.
Its not that the cyclical
component isnt there. Its
that the aging component is
there and growing, said
University of Michigan economist Betsey Stevenson.
The economys robust
growth in the second half of
the 20th century owed much
to an expanding U.S. workforce as women entered

workplaces in large numbers.
The participation rate, which
measures the share of the civilian population 16 and
older either working or looking for a job, rose from 58.1%
at the end of 1954 to 67.3%
in early 2000. Then it began
to fallslowly at first, leveling off, and then dropping
rapidly during and after the
2007-09 recession, a trend
not matched in other advanced economies.
conomists have debated how much of the

decline reflects postrecession weakness in the
economy versus other explanations, such as shifting demographics or structural
changes in the job market. It

has been and remains a critical question for Federal Reserve officials, who will hold
a policy meeting next week.
If the jobless rate undercounts unemployment, keeping interest rates low should
help more people get back to
work. But if slack in the labor market has largely dried
up, policy makers fear holding rates low could drive inflation uncomfortably high.
Some Fed officials say the
economy is now effectively
at full employment, while
others argue at least some
slack remains in the labor
market.
The ripple effects will be
felt a long time. Lower participation and slower growth
in the labor force will con-
strain the U.S. economys capacity to expand, barring a

pickup in productivity
growth. That could limit
gains in living standards, the
governments ability to pay
its bills and the economys
staying power in the face of
unexpected shocks.
here are ways this

could change. Nearly 1
in 5 Americans in their
prime working years arent
employed or looking for a
job, and the right mix of tax
and benefit policies might
draw many of them into the
labor force. But Republicans
and Democrats disagree on
the merits of specific ideas
like mandated paid family
leave or tighter eligibility for
the Social Security Disability
Insurance program. One potential source of new workers, immigration, has

emerged as one of the presidential campaigns most divisive issues.
Even in the heat of an
election year, though, some
common ground may exist.
Past expansion of the
earned-income tax credit
boosted workforce participation by low-income Americans, and both President Barack Obama and House
Speaker Paul Ryan support
expanding it again.
Economics can be useful
when we all agree on something, said Glenn Hubbard,
a Republican economist and
dean of Columbia Business
School. Its harder for politicians to ignore.
JASON REED/REUTERS
Equity investment totals have

reached $66 trillion worldwide.
Nancy Reagan attending a Washington event in 2007.
First Lady of 80s,

Actress, Activist
BY GORDON LUBOLD
Nancy Reagan, the former
actress who brought grace and
style to her role as first lady
in the Ronald Reagan White
House, has died in her home in
Los Angeles. She was 94.
The cause was congestive
heart failure, acOBITUARY cording to a
spokeswoman.
NANCY
Mrs. Reagan
REAGAN
1921-2016
had been widowed since Mr.
Reagan, the 40th U.S. president who served two terms in
the 1980s, died in 2004 after a
long battle with Alzheimers
disease. In recent years she
rarely appeared in public but
had remained active in Republican politics. After her husband was diagnosed, she became a vocal activist on behalf
of stem-cell research.
Her Just Say No campaign
against drug use, from her
time as first lady, also was a
prominent cause of the many
she took up.
Mrs. Reagan was known for
her fierce loyalty and love for
her husband, and it was the
role she took on as caregiver
to her husband of 52 years
that struck many of those who
remembered her after her
death was announced Sunday.
President Barack Obama
and his wife, Michelle, said in
a statement Mrs. Reagan redefined the role of first lady.
Mrs. Reagan had appeared
with Mr. Obama after he lifted
the ban on stem-cell research
U.S.
Watch
in 2009. She became a voice

on behalf of millions of families going through the depleting, aching reality of Alzheimers, they said.
The couple met after Mrs.
Reagan, then Nancy Davis, was
misidentified as a communist
and Mr. Reagan, an actorturned-politician, cleared her
name. The two starred in Bmovies, including in Hellcats
of the Navy in 1957. They had
two children, Patti and Ronald,
and also helped raise Michael
and Maureen, children from
Mr. Reagans first marriage to
actress Jane Wyman.
Charlton Heston once called
their marriage probably the
greatest love affair in the history of the American presidency.
Their relationship saw triumphs and travails through
Mr. Reagans political career
as California governor and on
to his two terms in the White
House, punctuated by the assassination attempt against
him in 1981, the end of the
Cold War and the collapse of
the Berlin Wall in 1989.
Sen. John McCain (R.,
Ariz.), a former prisoner of
war, remembers the Reagans
commitment to the POW
cause, particularly the lavish
Hollywood parties the couple
would throw for former prisoners of war upon their return, with the likes of John
Wayne and Clint Eastwood.
They went all out, Mr.
McCain said in an interview.
It was dazzling.
wearing it.
Sundays rally in Ohio was Mr.
Kasichs first in his home state
this year. He is pinning everything on a win in Ohios March
15 primary, when 66 convention
delegates are at stake.
Associated Press
ELECTION 2016
COLORADO
Schwarzenegger
Backs John Kasich
New Approach to
Head Off Shootings
Arnold Schwarzenegger threw

his support behind John Kasich
in the Republican presidential
contest on Sunday, saying the
Ohio governor is an action hero
in his own right.
The actor and former governor of California said Mr. Kasich
kicked some serious butt during his 18 years in Washington,
when he worked on balancing
the federal budget. Mr.
Schwarzenegger wore an official
Kasich campaign jacket to a Kasich campaign rally, while Mr.
Kasich donned a coat given to
him by the Terminator star,
with Governator II embroidered
on it. Mr. Kasich joked that he
has dreams of grandeur when
In the U.S. alone, equity markets have grown more than 180%
since 2009. With that much at stake for individuals as well as
institutions mutual funds, retirement funds and endowment
funds need a way to manage the risks of stock market fluctuations.
CME Group gives investment professionals the tools they need to
address market exposure. This is how the financial industry can
offer investors the right balance between risk and reward. This is
how the world advances. Learn more at cmegroup.com/finance.
Colorado lawmakers are trying a new, focused approach to

stopping bloodshed in schools. A
proposed bill would broaden the
circumstances under which mental-health professionals can report a student they believe
poses a threat.
Colorado law requires mentalhealth workers to alert authorities if a patient expresses a specific, imminent threat, and
mandates that they warn those
being threatened.
The proposal would permit
therapists to alert school administrators about a potentially dangerous student even if that danger isnt immediate.
Dan Frosch
CME Group is a trademark of CME Group Inc. The Globe logo is a trademark of Chicago Mercantile Exchange Inc. All other trademarks are the property of their respective owners.
Copyright 2016 CME Group. All rights reserved.
www.ebook3000.com
FROM PAGE ONE

modity busts outsize impact
on Africa. Several mines have
closed and some 15,000 workers have been laid off, with
thousands more expected. Officials say each miners salary
supports 15 dependents, exposing the entire town to the ravages of the global rout.
Violent crime is rising and
blackouts have become commonplace. Hundreds of miners
have withdrawn their children
from private schools that
sprang up to cater to new aspirations. Mining industry subsidies for HIV and malaria medications have been reduced.
Double-digit inflation has frozen sales of the refrigerators,
televisions and cars coveted
here as hallmarks of success.
Its like being back to
square one. We never expected
such a situation, said Reagan
Musonda, one of about 4,000
workers who lost their jobs at
Glencore PLCs local Mopani
unit in November. Saddled with
tuition bills for three siblings
and two children, Mr. Musondawhose
grandfather
named him after the 40th U.S.
presidentis turning the forest
on a patch of land he owns into
charcoal to make ends meet.
Kitwes trauma is reverberating across Zambia and other
resource-reliant African economies from South Africa to the
Sahara. After years of blistering expansion, Nigeria, Angola
and South Africawhose oil,
gold and platinum industries
have long driven the regions
growthare mired in crises
that are freezing development
and testing increasingly cashstrapped governments.
Turmoil is also raising the
prospect of political change.
Angolas entrenched regime is
facing unprecedented public
criticism. Local elections in
South Africa this year could
see the ruling African National
Congress lose control of key
cities like Johannesburg and
Pretoria for the first time.
Election fight
Zambias president faces a
tough challenge in August elections from Hakainde Hichilema,
whom he defeated by less than
30,000 votes in a special election last year after the death of
his predecessor.
We are seeking public office to inject some sanity into
the economy, Mr. Hichilema
said, overlooking the manicured lawns and helipad of his
sprawling compound on the
edge of Lusaka. There is economic war here and people are
dying.
The dramatic shift has revealed how reliant many African economies remain on commodity riches, prompting some
investors to reassess an Africa
Rising narrative that exaggerated gains in manufacturing,
Devalued
Change in African currencies vs.
the U.S. dollar
20%
Nigerian naira
South African rand
Angolan kwanza
Zambian kwacha
20
40
60
2015
16
Source: FactSet
CHARLIE SHOEMAKER FOR THE WALL STREET JOURNAL (PHOTOS)
ZAMBIA
unprecedented security and

disposable income to the workforce. Dirt roads became paved
and traffic-clogged. The sleepy
regional airport opened direct
routes to Johannesburg and
Abu Dhabi.
Children were looking
healthier and happier. People
just didnt realize it was a
boom. They thought this was
now normal, Mr. Mutati said
in an interview on the lawn of
a Kitwe hotel.
Chinese workers arrived in
Zambia in higher numbers than
almost anywhere else on the
continent, drawn by the dealings of their state-backed mining and construction firms and
what they saw as the untapped
potential for businesses as varied as printing shops and private schools. On the three-lane
highway between Kitwe and
the airport, the Chinese built a
50,000-seat stadium that is
rarely filled.
No doubt Africa has some
of the greatest potential in the
coach who noticed while traveling abroad that Italians were

willing to hang out in coffee
bars.
Getting the idea off the
ground in Milan was tough at
first. Mr. Bardolla had to import hot-beverage cups from
the U.K. and look hard for machines that make filtered coffee. A local coffee maker had
to create a special blend suitable for flavored coffee drinks.
In 2009, Mr. Bardolla
opened Arnold Coffee, which
sells caramel macchiato, filtered coffee and cinnamon
caffe latte. Customers were
scarce at first, even from the
nearby university.
But he kept his shop open
in August, when traditional
coffee bars usually close, to
steal their regulars and for
longer hours the rest of the
year. Mr. Bardolla put pretty
girls offering free coffee outside the university.
This is what I call an ad-
dictive business, says Mr.

Bardolla, who claims the quality of his coffee is higher than
at old-fashioned espresso bars.
After some time, people start
to see paper cups around and
they decide to give it a try.
He now has three Arnold Coffee shops in Milan and one in
Florence, with plans to open
three more.
Last year, David Nathaniel
opened a coffee shop called 12
Oz. in Milan that sells caramelflavored cappuccino and
sweetened hazelnut latte. We
Italians exported the consumption of espresso, he says.
Now were importing a new
way of drinking coffee.
Starbucks announced last
Monday it will open its first
store in Italy early next year.
In a bow to tradition, Starbucks will serve a special
espresso blend made to meet
Italian tastes and install a traditional bar where customers
can drink their brew while
standing. At the same time,

the Milan shop will stick with
the Seattle companys Italian
menu descriptions and sweet
coffee drinks.
Antonio Carpenito, 61,
shudders at the thought of a
Starbucks invasion. His coffee
routine has been constant for
decades, and he brews his first
espresso of the day with a
beaten-up, stovetop coffee percolator known throughout Italy as a Moka pot.
He and his wife bought a
coffee-pod Nespresso machine
last year, but its espresso
gave me heartburn, he says.
They went back to the Moka.
At midmorning, Mr. Carpenito goes to his favorite
espresso bar in Naples for another brew. The owner and
other patrons greet him by
name.
That is not coffee, he says
about all the new coffee
drinks. Its something else entirely.
TA N Z A N I A
Kitwe
MOZ.
ANGOLA ZAM B I A
Lusaka
ZIMB.
BOTS.
500 miles
500 km
infrastructure and education.

In 2011 the African Development Bank crowed that the
continents nascent consumer
class was already 350 million
strong. Multinational banks,
brewers and car makers clamored to make customers of
them.
As it turns out, the banks
tally included Africans who
make hardly more than $2 a
day, an income too low to put
many families in the market for
world-class goods and services.
Credit Suisse concluded in October there are actually just 20
million middle-class Africans,
defined as having the equivalent of at least $50,000 in assets, adjusted for local prices.
That is a mere 3% of the continents exploding population.
The emerging middle class
has come under enormous
scrutiny, said David Cowan,
Citigroup Inc.s chief Africa
economist. Africa got oversold
as an idea.
Some companies that spent
years evangelizing Africas economic potential are in retreat.
Barclays PLC wants to sell a
majority of its sprawling business on the continent. Nestl
SA in June cut 15% of its workforce in 21 African countries.
The International Monetary
Fund has cut its forecast for
the regions growth this year to
4% from 4.3% previously and
chided officials for failing to
use the commodity boom to
create factories and commercial farms that could employ
the 18 million Africans entering
the workforce each year.
The number of unemployed
youths is frightening, said Antoinette Sayeh, director of the
IMFs Africa program.
Africa remains the worlds
second-fastest-growing region
behind developing Asia. Construction cranes that pepper
the skylines of Lagos, Johannesburg and Nairobi testify to
the buoyant ambitions of the
continents wealthiest people
and businesses.
Zambian officials remain
upbeat, arguing that more than
$8 billion in foreign-direct in-
vestment during the boom will

protect them from what investors have labeled the superbust.
The panic of people now is
because they lost their jobs,
but they need to wait, said
Chanda Kabwe, district commissioner for Kitwe, the mining hub. In six months we will
see a new cycle and new jobs
germinating.
Business leaders agree that
Zambias decade of stable government and high copper
prices transformed the country. Now they are forecasting a
profound slump.
The prospect of protracted
economic pain caught many
Zambians off guard after years
of plenty.
Many of Zambias 16 million
people traverse their boomerang-shaped nation on thousands of miles of road paved
by Chinese contractors. Miners
and telecom technicians unwind at Pizza Hut restaurants
and mirror-walled dance clubs.
In recent years many took their
first vacations to Johannesburg, southern Africas retail
and cultural mecca.
Falling Fortunes
Plunging commodity prices have curtailed Africas
once-robust growth.
20%
20
40
Previous
forecast
0
16
2007 09
Sources: FactSet (copper); WSJ Market Data Group

(crude); International Monetary Fund (rate)
Those relative luxuries convinced many here and elsewhere in Africa that their ascent into prosperity was
irreversible. Now, Zambians
are reckoning with huge
threats to their expanding ambitions.
In ramshackle markets and
gleaming new malls, prices
skyrocketed as Zambias kwacha shed 47% of its value last
year, more than any currency
except Belarus ruble. Londonbased Fathom Consultancy, an
economic research firm, ranks
Zambia the African economy
most exposed to the commodi-
romonitor International Inc.

Coffee purists say the quality
of espresso in many cafes has
slipped. Few owners have been
able to spruce up because of
the economic squeeze.
That is creating more opportunity for entrepreneurs
like Alfio Bardolla, a financial
8%
2015
GIORGIO COSULICH/GETTY IMAGES
a can about 15 years ago but

soon gave up. On the go is
just not in the culture of this
country, says Carlo Oldani,
Nescafs marketing manager
in Italy.
Since 2009, though, sales in
Italys espresso bars have
fallen 18%, according to Eu-
Copper
Nymex crude
60
Huge threats
A customer drinks an espresso at the Fratelli Nurzia cafe in

LAquila, Italy. Other shops are selling American-style coffee.
Sub-Saharan GDP growth rate,

change from a year earlier
Change in futures prices
COFFEE
Italians have long scoffed at
U.S. coffee trends, especially
Starbucks Corp.s faux-Italian
words (grande), paper cups
and sugary-sweet brews with
ingredients such as pumpkin
that have precious little to do
with the real stuff.
Walking down the street
with a coffee cup in hand is
widely considered unhealthy
and ill-mannered. Theyre not
those kinds of kids, Annamaria Conte, a 44-year-old hairdresser from Naples, says
proudly of her two children,
whom she has always admonished not to eat or drink on
the run.
McDonalds Corp. has just
one-fifth as many drivethroughs in Italy as it does in
France. Nestl tried to sell
Italians Nescaf iced coffee in
ties bust and Chinas slowdown.

Less than a year after the
government sold $1.25 billion
in debt to international investors, officials say they may
need an International Monetary Fund bailout that would
carry strict directives to freeze
public wages and cut subsidies
for gasoline and electricity.
We really overshot our
budget. We cant continue like
this, Finance Minister Alexander Chikwanda said during an
interview at the treasury in Lusaka. The more the world gets
integrated the more shocks we
face. African economies are at
a lower end of development so
the shocks are much more
damaging.
Emmanuel Mutati, an executive at Glencores Mopani unit
for 14 years until 2014, had a
ringside seat for Kitwes transformation. Mopanis workforce
doubled to more than 20,000
during his tenure. Company
clinics and pensions brought
D.R.C.
SOUTH
AFRICA
No middle class
Many entrepreneurial Zambians have borrowed to take
advantage of their countrys
leap forward.
Bruce Ngambi, a butcher
whose father worked in Kitwes
copper mines, started making
two trips a month to South Africa to buy used sedans to sell
in Kitwe for around $2,500.
Now the price has doubled and
demand has imploded; Mr.
Ngambi hasnt brought a car
north since October.
As a result, his two children
went back to school last month
without new lunchboxes or
shoes. Mr. Ngambi, 38, has
stopped inviting his friends for
barbecue and beers.
Over a dinner of Indian
curry and naan on the patio of
a mall completed just six
months ago, Mr. Ngambi and
two friends debated where
their city was headed. Around
them young Zambians in dropcrotch sweatpants and designer sneakers enjoyed the
end of the weekend.
These days there is no middle class, Mr. Ngambi said.
People are going back down
to the lower classand thats
not easy.
A mile away at the warren
of vegetable stands and mobile-phone kiosks in Chisokone
market, vendors said business
has plummeted. Raphael
Alumu reported braiding the
hair of just one or two women
a day, down from 10 a year
ago. A hardware stall said demand for padlocks has spiked
along with robberies.
The pain for many runs far
deeper than skipped shopping
trips and restaurant meals.
Alec Nkhowani, formerly a 40year-old laboratory technician
at the Mopani mine, recently
borrowed $6,000 to build turkey pens and fish ponds on his
farm outside of town.
After he was laid off in November, the bank seized his
pension savings to pay off the
loan. Mr. Nkhowani delayed
plans to get married this year
and has moved into his sisters
house.
Ive depleted all my resources, Mr. Nkhowani said.
Before turning to family, he
consoled himself with a tub of
ice cream and a bottle of
vodka: After I realized they
were going to take everything,
it really depressed me.
For some the despair proved
insurmountable. Ben Chinyimba, who worked the mines
for 30 years to support his
wife, four children and two
grandchildren, drank a lethal
dose of the pesticide Doom after being laid off in November.
Now his wife, Grace, must support the family on her hospital
attendants salary of $200 a
month.
I dont know how to cope
with this life now, she said,
curled up on a mattress in the
living room of her small concrete home, illuminated on a
starless evening recently by
the light of just one candle
stuck in a beer bottle.
The commodity booms reversal has created economic and social crisis in Zambias copper belt. Above, two sisters, aged 3 and 10,
had to move in with their uncle when their parents killed themselves after their father was laid off from his mining job. Below, a
laid-off miner drinks at a local bar in front of Glencore PLCs Mopani mine, which cut 4,000 workers in November.
NAMIBIA
world, said Mo Xing, vice

president of the Zambia Chinese Association and an entrepreneur who says he has invested millions of dollars in a
transportation company and
other businesses since arriving
in 1971.
Now, he said, the outlook
for such projects has become
far more uncertain. Do you
think I could come to Africa
now and build what I built?
No, Mr. Mo said from the private dining room of a restaurant where dozens of Chinese
expatriates sat making paper
lanterns in preparation for the
Lunar New Year. Investing
here takes commitment.
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BY ANDREW BROWNE
A TALE OF
TWO CHINAS
FROM TOP: MARK LEONG FOR THE WALL STREET JOURNAL; MAO SIQIAN/XINHUA/ZUMA PRESSS
In the countrys divided economy, state-owned industries stagnate in the heartland while
private companies on the coast race ahead in the service of growing consumer demand.
USHUN, a city built on

coal in Chinas industrial
northeast, is in fullblown recession. Liu Junfen, a scrap-metal merchant who gathers discarded
bicycles, hubcaps and gas cylinders
to feed to local steel furnaces, says
that prices have plunged by twothirds since Chinas overbuilt realestate market took a dive in 2014if
she can find buyers for her junk at
all.
As for this years prospects
Gou qiang, she sighs, an expression that means something like unbearable.
Meanwhile, at the other end of
China, the coastal city of Shenzhen
clocked sizzling growth of 8.9% last
year. Shenzhen is the home of Tencent, a social-media company whose
QQ network boasts more than 800
million users, along with the telecommunications giant Huawei. Vincent Hu, the chief executive of Cloud
Frame, a company that builds data
centers, is assembling a monstersized facility for Amazon, and he
sees no end to expansion as consumers embrace e-commerce, online
banking and video-sharing. You
only have to use your imagination,
he says.
To say that the worlds secondlargest economy is decelerating
last years 6.9% growth was the
slowest in a quarter centuryis to
miss this contrast in regional fortunes. The divergence is the most
striking feature of todays China,
where despair and hope exist in
equal measure. The question of how
to manage this gulf, which threatens
to bring social conflict, looms over
the annual session of the National
Peoples Congress, the countrys parliament, which opened in Beijing
over the weekend.
Chinas economic slow lane is
choked with state-owned industrial
firms in sectors linked to real estatesteel, cement, coal and construction equipmentall suffering
from massive overcapacity. Many
get by on bank loans, endlessly
rolled over, and orders for boondoggle civil-works projects. They are
zombies in a phantom economy. In a
report to lawmakers gathered in the
Great Hall of the People on Saturday,
Premier Li Keqiang spoke of the
need to cut industrial capacity but
didnt put a figure on projected job
losses. China must proceed proactively yet prudently, he said, suggesting a timid approach to a problem of staggering proportions.
Zipping along in the economic
fast lane are private companies producing goods and services for a burgeoning consumer market that has
taken over from manufacturing as
the engine of Chinas growth. These
corporate leaders are mainly clustered in megacities along Chinas
eastern
seaboardShenzhen,
Guangzhou, Shanghai, Beijing
linked to global networks of knowledge, finance and talent.
Lopsided growth in a nominally
socialist country is an especially
thorny problem. Deng Xiaoping resolved the issue by turning Marxism
on its head: Let some people get
rich first, he famously declared. But
todays Internet-empowered industrial workers wont be treated as
Please turn to the next page
Top: Scrap-metal merchant Liu

Junxia in a yard in Fushun, a steel
town in northeastern China hit hard
by recession, March 3.
Bottom: A worker on top of the
Ping An International Finance Center,
Shenzhen, China, July 2, 2015.
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REVIEW
Chinas Two-Speed Economy

Continued from the prior page
Chinas economy toward disaster.
second-class citizens. Some hanker for a return to socialism. Others
A good place to understand Mr. Xis mind-set is the memorial hall
find solace in religions and cults that challenge Communist Party
to Fushuns most famous resident, Lei Feng, a Mao-era model
control. Widespread anger at wealth disparities could further sap the
worker lauded for carrying manure and washing the socks of his
resolve of Chinas leaders to press ahead with economic reformsand
comrades. He died on duty, killed by a falling telegraph pole. The hall
might even encourage them to launch military adventures to deflect
is a shrine to the values that Mr. Xi says will spur the great rejuvepopular frustrations.
nation of the Chinese nation: patriotism, thrift, selflessness, obediFushunin Liaoning province, part of a vast resource-rich wilderence to the party. Mr. Xi has declared that the spirit of Lei Feng is
ness formerly known as Manchuriahad its chance to catch up. For
eternal, and he is apparently determined that it will live on in state
a decade, the city boomed as China embarked upon the greatest
enterprises.
building spree in history. A voracious nationwide demand for steel
Two years ago, Mr. Xi announced an ambitious 60-point economic
offered dreams of riches, even to workers picking for scraps like Ms.
reform program to give markets a decisive role in allocating reLiu. She and her husband managed to save enough to buy an apartsources. Many expected that he would shutter state loss-makers and
ment and even one for their son.
open protected state industries like telecommunications and banking
Once a national laggard, Liaoning province saw its growth peak in
to entrepreneurs, even as he attacked the patronage networks that
2007 at 15% and continued to outstrip the national average until
weave through local industry and governments.
2014. Then the property market started to crumble. The region paid
But Mr. Xi seems to have gotten cold feet. Instead of closing down
the price for the colossal overbuilding spurred by a credit stimulus
state enterprises, he is bulking them up. He seems afraid that allowthat Beijing unleashed when export markets collapsed after the 2008
ing market forces to prevail will entrench geographically based
global financial crisis. Liaonings growth last year was just 3%. The
wealth disparities and that an aggrieved underclass could erode the
city of Fushun is shrinking.
Communist Partys legitimacy. As Mr. Xi has made clear during his
A sense of betrayal adds to the distress of a protracted recession.
three years in office, his first priority is to save the party. The econA wide avenue that connects Fushun to the nearby provincial capital
omy can wait. Against this political backdrop, Beijings usually deciof Shenyang suggests what might have been. Civil engineers installed
sive economic decision-making process has started to look rudderless.
an electrified light-rail system on the middle of the thoroughfare.
The Communist devotion of a figure like Lei Feng doesnt get
Real-estate developers threw up luxury condominiums on either side.
much attention in the coastal city of Shenzhen, where the economy
But the anticipated influx of buyers never materialized. These days,
is now roughly the same size as Hong Kongsalthough it is streakpeople are fleeing the area, not arriving. Gleaming trams, mostly
ing ahead far faster. Property prices jumped almost 50% last year as
empty, glide past ghostly developments with names like Green Sunhigh-paid creative talent flooded in. The city is conjuring forth huge
shine City and Thai Garden Bay.
personal fortunes and inventive companies, even as industrial giants
Much of the regions growth came from building infrastructure,
in the north wilt.
not from economic activity it generated. Trickle-down economics was
Frank Wang, a model-helicopter enthusiast, hit the jackpot three
an illusion. So was the theory that inland areas were set for a new
years ago when he launched a lightweight, inexpensive drone fitted
golden era as high land and labor costs drove investment away from
with cameras. His firm, SZ DJI Technology Co., is valued at around
the coast. Everyone said the baton of growth would pass to the inte$8 billion. ABCs Good Morning America flew one of his drones into
rior, says Andrew Batson, the China research director of Gavekal
an Icelandic volcano last year and live-streamed the footage.
Dragonomics. It totally has not happened.
There is a strange irony in money escaping China to the U.S. and
Ms. Liu has done the math behind Fushuns property glut. I own
other havens when some of the worlds biggest commercial opportuan apartment with my husband, she says. My parents own an
nities remain in China. Take the movie industry. Over the recent Luapartment, and so do his parents. Weve bought an apartment for our
nar New Year holiday, Chinese cinemas took in more money than U.S.
son. Three generations have homes to live in. Whos buying? In fact,
ones over Christmas and New Yeareven as American revenues were
their son has abandoned Fushun; hes found a job in Beijing in a combloated by the new Star Wars blockbuster, which didnt do as well
puter-games company.
in China. Some U.S. movies now gross more in China than at home.
Down a muddy track, a truck-repair outfit called the Prosperous
China is changing the paradigm of Hollywood, says Jack Gao, the
Goose Heavy Transport Co. is idle. The owner, Jia Junxia, says that
group vice president of Wanda Cultural Industry Group, part of the
she has applied for a passport and is getting ready to leave China
business empire of billionaire real-estate developer Wang Jianlin,
with her children. Snapping closed an expensive leather purse, she
who owns the AMC cinema chain.
reveals her fanciful business plan: a guesthouse in America, someBut Beijing has delayed addressing its industrial problems for too
where in the sun. The economy here wont collapse, she says, but
long: Economic imbalances have grown monumental and could take
it wont get much better either.
the economy down. A recent report by the European Union Chamber
For international investors, Chinas two-speed economyone dyof Commerce in China says that Chinas steel capacity is more than
ing, the other acceleratingis utterly confusing, and it has produced
double the worlds next four biggest producers combinedJapan, Inwildly contrasting strategies. If
dia, the U.S. and Russiaand has
China keeps subsidizing wasteful inbecome completely untethered
vestment to keep industrial cities
from reality. It is a similar story in
alive, its financial system will eventhe cement industry. From 2011 to
tually blow up: At 260% of gross do2012, China produced as much cemestic product, the countrys overment as the U.S. did during the enall debt is approaching danger
tire 20th century, the report notes.
levels. Some Wall Street hedge
China is still urbanizing. Its capifunds are taking huge speculative
tal stock per capitafactories, locobets against the Chinese currency.
motives, bridges and so onis only
Global markets are bracing for a
a fraction of Americas, which means
hard landing by the Chinese econthat demand for basic industrial
omy and years of subpar growth.
goods wont dry up. But the country
The financier George Soros says
may have reached peak demand;
China is already crashing.
coal production is already declining.
At the same time, however, some
Fushuns coal mines are exhausted.
AN EMPLOYEE MONITORS machinery used in producing
of the worlds smartest investors
Mr. Xi dreams about using
smartphone circuit boards, Shenzhen, China, Aug. 7, 2014.
are making the opposite wager:
Chinas vast industrial surpluses to
They are piling in. Last year, China
construct new overland and mariattracted up to $37 billion in venture capital, much of it for technoltime trade routes to Europe. The so-called One Belt, One Road projogy hubs along the coast. That is more than the U.S. typically draws
ect, though, is an improbable visiona string of industrial parks,
in a year and multiples of what Europe usually pulls in.
linked by road, rail and energy pipelines running through remote
Gary Rieschel, the founder and managing director of Qiming Venparts of Central Asia and the Middle East that are infested by terrorture Partners, has just raised $648 million from a group of investors
ism and banditry.
that includes Harvard, Princeton, Duke and the Massachusetts InstiStill, Mr. Hu, the chief executive of Cloud Frame, the Shenzhen
tute of Technology. He ranks Chinese entrepreneurs as highly as any
data-center manufacturer, remains an optimist. If Western observers
in Silicon Valley, and he says that China will lead the world in techoften fixate on Chinas vulnerabilities, he and other Chinese entreprenologies like electric vehicles. Its hard to deal with the rate at which
neurs focus on its resilience. In a crisis, Beijing has many more lethings change, he says.
vers it can pull, he says. For millennia, he notes, Chinese emperors
Whos right? Politics will largely determine the outcome. And right
planned for invasions from nomad tribes to the north, and he thinks
now, things are finely balanced. Much hinges on the choices that the
their successors are no less prepared.
Chinese government makes in the northeasthistoric Manchuria
But history holds other lessons. The Manchu dynasty collapsed in
which has played an outsize role in shaping modern China. In the
large part because it clung to old ways of thinking that were incom17th century, Manchu tribes swept south across the Great Wall to
patible with the industrial trends of the day. The Empress Dowager
capture Beijing and set up the last imperial dynasty, the Qing. As the
Cixi, who presided over the final decay, opposed railways on the
Qing declined, czarist Russia drove a railroad through the region to
grounds that clanking steam engines would disturb souls interred in
the Pacific. In the 1930s, Japanese militarists turned the area into a
tombs along the tracks.
puppet kingdom and built car plants, aircraft factories and chemical
If China fails, it will not be for lack of investment funds, talent or
works. Later, Mao Zedong made Manchuria the industrial heartland
ambition; it will be largely because Mr. Xi failed to open up the heartof his command economy.
land to harsh market forces and risk social turmoil. It will be because
President Xi Jinping is sometimes described as the most powerful
he decided to surrender his economyand the rest of the worldto
Chinese leader since Mao, and his political vision harks back to that
the icy winds that howl through Fushun this time of year. It will be
time; he is loath to dismantle the decaying socialist industries leading
a Manchurian winter.
MIND & MATTER:

ROBERT M. SAPOLSKY
A Carnivore With
Leavesand
Nerves of a Sort
HUMANS ARENT all that
special. Plants, too, have a
great capacity for social intelligence. Just consider the 1982
musical Little Shop of Horrors, which features Audrey IIthe enormous, carnivorous, talking/singing plant who
eventually eats most of the cast, having
adeptly manipulated the hapless Seymour
into providing victims. No human sociopath
could have done it better.
Hit musicals may not meet the highest
scientific standards, but more rigorous research shows that plants do indeed possess
something resembling the defensive physiological response of humans. Many plants
produce what biologists call secondary
compounds, toxins that discourage animals
and insects from eating them. The challenge
is that some herbivores appear only intermittently. With its limited metabolic resources, a plant cant afford to produce the
toxin continuously, so it waits for that oncea-decade caterpillar infestation. A chemical
in the saliva of the first caterpillar to chomp
on a leaf sets off inflammatory alarmsand
within hours, the plant is making toxin.
Now we have discovered that, in pursuit of
their aims, plants also can count.
Venus flytraps are bizarre carnivorous
plants that do unplantlike things: They move
fast to enclose an insect, make a chemical
brew that dissolves it and then absorb its remains. This process is metabolically costly
for flytraps, so they have evolved a detection
system to prevent airborne debris from accidentally triggering it. Hinged hair cells stick
out of the inner surface of the trap. If something bumps into a single hair cell, nothing
happensit could be debris. But if something, presumably a moving insect, deflects a
second hair cell within about 20 seconds of
the first, the trap springs.
But wait. What if its just wind blowing debris into two hair cells? An international team
of scientists, publishing recently in the journal
Current Biology, shows that there are two additional safeguards to guard against wasting
energy on false alarms.
If the trap happens to close in response to
debris, it should be still after that. A struggling insect, by contrast, should continue to
deflect hair cells. So flytraps have rules: Three
or more hair deflections activate the genes
that make the dissolving enzymes; five or
more activate nutrient uptake. As a nursery
rhyme would have it:
One, twoI will trap
you. Get to five, Ill
absorb you alive.
Of course, flytraps
cant really tell that 2
+ 2 = 4. Theres a
critical-mass mechanism. Deflection of a
hair cell triggers an
influx of ions into
cells along the trapping leaf; the ions are
pumped back out after about 20 seconds
(thanks to a cascade
of molecular events that take about that long
to complete). The accumulation of two hairs
worth of ion influx springs the trap; the accumulation of more brings about the next two
steps.
Still, flytraps have taken the first baby
steps toward brains. When deflected, flytrap
hair cells work like human neurons. Suppose
that something brushes against a hair on
your arm. The mechanoreceptor neuron
attached to the hair has an action potentiala burst of electrical excitation, thereby
triggering a neighboring neuron that projects to your spine, triggering a neuron that
projects to your brainand you sense the
touch. The flytrap hair cells also generate
action potentials.
The last shared common ancestor of animals and flytraps was some single-cell organism. Thus, incredibly, flytraps have independently evolved rudimentary nervous systems.
Fittingly, the German biophysicist Erwin Neher, who won a Nobel Prize for his studies of
electrical excitation in animal neurons, headed
the team that did the flytrap research.
The big messages here? Nature is so cool
and be thankful that evolution hasnt produced a real Audrey II. Yet.
WORKERS IN A SALVAGE YARD find

few buyers for their piles of recycled
metal, Fushun, China, March 3.
FROM TOP: BRENT LEWIN/BLOOMBERG NEWS; MARK LEONG FOR THE WALL STREET JOURNAL
TIM LAHAN
A flytraps
rules:
One, two
I will trap
you. Get
to five,
Ill absorb
you alive.
www.ebook3000.com
REVIEW
SUE OGROCKI/ASSOCIATED PRESS
AUBREY MCCLENDON,
then CEO of Chesapeake
Energy Corp., in 2012.
The Apostle
Of Fracking
The late Aubrey McClendon
led todays energy revolution
BY RUSSELL GOLD
TEN YEARS AGO, I first interviewed a brash
up-and-comer in the energy business named
Aubrey McClendon. The chief executive of
Chesapeake Energy Corp., he was smart and
personable. His bold vision of the future of energy struck meand made me a little skeptical.
McClendon said that there were lots of new
places to drill; you just needed to lease vast
tracts of land and begin fracking, a then-obscure method of cracking open rock to get at
natural gas. This was about as far from the
conventional wisdom as you could then get,
but much of it turned out to be true.
McClendon wasnt the inventor of fracking,
but he was its chief apostle. He led the energy
revolution that has swept North America for
the past decade. He convinced Wall Street to
fund his company and others chasing gas deposits in shale rocks, and he sped up the metabolism of the sleepy domestic energy industry until it produced an abundance of natural
gas and oil.
This week, McClendon was indicted on a serious charge: conspiring to rig the price of oil
and gas leases. It was the latest in a series of
public setbacks and humiliations that led many
to see him as a scoundrel. But there is no de-
nying the significance of Aubrey McClendon:

He didnt just see the energy boom coming. He
helped to create it. And he helped to change
the global energy industry in ways that are
still being felt from Tulsa to Tehran.
The day after the indictment was handed
up, McClendon was to appear in federal court.
He never made it. That morning, he sped down
a two-lane road in the outskirts of Oklahoma
City and slammed into a bridge embankment.
He was alone in the car. Police say that he took
no evasive action. He was declared dead at the
scene. He was 56.
The U.S. oil and gas industry was very different before McClendons arrival. There was
no boom and no bust. It was just a long period
of declining production and rising imports.
When I interviewed him in August 2006, the
U.S. was producing about 64 billion cubic feet
of natural gas a day. Today, it is more than 90
billion cubic feet, and last month, an unprecedented U.S. export of gas left Texas for Brazil.
Oil soon joined the party. The U.S. went
from producing 5 million barrels a day in August 2006 to 9.2 million barrels a day, a steep
rise that swamped the global market.
Along the way, McClendon became a multibillionaire and then lost his fortune. He was
stripped of his titles at the company he cofoundeda very public rebuke. To the extent
that he was known publicly, he was caricatured
and castigated as a cheerleader for fracking.
The truth is more complex. McClendon was
an energy visionary who lived his life betting
WALKING
BILLBOARDS
FOR
UNHEARD
PATIENTS
WHILE GIVING a lecture at a medical conference
in 2014, Karen Hein wore an unusual outfit. From
the front, it looked like a simple business jacket.
But at the end of the speech, Dr. Hein turned
around and let the audience view the back.
There they saw a painting of Dr. Hein,
dressed in a white medical coat and cast as a
shepherdess, leading a herd of goats ridden by
children. Holding her hand in the picture was
her husband, dressed in a hospital gown, a symbol of his life with Alzheimers disease.
Dr. Hein explained to the audience that the
painting carried her message: Physicians are
partners on a journey with all those around
them. To her friends, she admitted that when
she first put on the jacket, I cried.
Dr. Heins jacket was created by Regina Holliday, a patient advocate and artist who paints
peoples medical narratives on the backs of their
business jackets. She doesnt charge a fee for
her art, and people hear about her work largely
by word-of-mouth.
Those who get the jacketspatients, advocates, researchers, government officials, scientistsagree to wear them at meetings and conferences, generating discussion and attention.
REGINA HOLLIDAY
BY AMY DOCKSER MARCUS
on natural gas. But gas is a terribly volatile

commodity. Chesapeakes initial success led
other companies to follow, first in the pursuit
of natural gas and then of oilcreating a giant, persistent glut that made prices fall. For
an executive with a debt-fueled business plan,
a long period of low prices is disastrous. McClendon created the ingredients of his own
downfall.
Did the pressure of low prices lead him to
conspire to rig bids for land leases, as a federal grand jury has charged? McClendon denied it, and the Justice Department took steps
Thursday to dismiss the indictment, so the evidence that led to the charges might never be
known.
Having interviewed McClendon several times and
written about him extensively, I saw that land
deals were his lifeblood.
They are how he got his
start in the business in
1982. Again and again, McClendon borrowed money,
leased land, drilled wells
and sold gas and oil. He
wanted to be first and fastestto pay the least
and take the biggest gamble. Sometimes this
mix of ambition, risk tolerance and luck
worked out. Sometimes it didnt.
If Chesapeakes competitors didnt move
quickly to lease some prospective land, the
companys small army of landmen would nab
it. So other CEOs sped up their operations and
began to copy Chesapeakes approach. But
none could match McClendons appetite for
growth. By the end of 2006, Chesapeake was
drilling more wells than any other company
world-wide.
This speed also meant that communities
and many companieswere unprepared for
the drilling boom. Inexperienced crews were
tasked with drilling wells, overseen by regula-
tors initially overwhelmed

by the scale of activity.
The industry drilled first,
then slowly began to develop best practices to
make sure that communities and the environment
were protected. Chesapeake and other companies made mistakes, but
the boom meant jobs and
a flurry of investment in
rural areas that for years
had been passed over by
waves of economic expansion.
Eventually, Chesapeake
and its imitators found so
much natural gas that they
swamped the market.
Prices dropped. For decades, coal had generated
the bulk of electricity in
the U.S., but cheap natural
gas chipped away at its
market share until it
grabbed the top spot.
McClendon wasnt content to let the markets invisible hand push coal
aside. In 2007, he quietly
financed a Coal Is Filthy
campaign in Texas to prevent the state from approving 11 new coal plants.
After this success, he took
the campaign national.
The so-called war on coal?
McClendon fired one of the first shots.
A few years ago, the U.S. woke up to its new
status as an energy superpower. But McClendons insatiable appetites and love of leverage
had caught up with him. In 2008, he faced a
margin call amid the stock-market turmoil. He
was forced to sell almost all of his shares as
Chesapeakes share price plunged. In July, his
5% stake in the company was worth more than
$2 billion. By October, his stake was basically
gone. The firms board of directors controversially gave him a $75 million retention bonus.
The worst was yet to come. As a co-founder
of Chesapeake, he had the option to buy a
small stake in every well the company drilled.
By 2011, when it was drilling more wells than anyone
else, his financial exposure
was enormous. He borrowed as much as $1.4 billion from a private-equity
group even as he was negotiating the sale of Chesapeake assets to the group.
Investors were outraged
and forced the board of directors to strip him of his
chairmanship. Within a year, he was out at
Chesapeake.
I suspect, however, that Aubrey McClendon
will be remembered not for these transgressions but for helping to usher in an era of
abundant natural gas, a weakened OPEC and a
grievously wounded American coal industry.
We are all living in the energy world that he
envisioned a decade ago.
He helped usher
in an era of
abundant
natural gas and
a weaker OPEC.
Ms. Holliday considers all the different paintings353 so far, with fellow artists painting another 55a walking gallery. What drives the
project is the idea that patients should sit at the
center of health careand that medical authorities should engage them as equal partners.
Her paintings for patients are especially
evocative. On a jacket for a breast cancer survivor, she painted the woman emerging, larger
than life, from the earth. She holds on to an
electrical cord suspended in the sky, representing the energy she takes and gives back to the
community.
For a patient with a debilitating joint condition, Ms. Holliday painted the woman in a sycamore tree, the kind under which Hippocrates
sat, according to legend, as he taught medicine.
The woman smiles even though she is in pain,
her own limbs pierced by those of the tree. Below her, the trees roots are held by others.
Were at a moment in health care where we
need people to express the humanity of the
changes we are seeing, says Susannah Fox,
chief technology officer at the U.S. Department
of Health and Human Services. Ms. Fox, whose
own jacket shows her giving a speech from behind a screena symbol, she says, of her time
as a health researcher who gathered data but
could not offer opinionssays that Ms. Holliday
is a reflection of that need.
These days Ms. Holliday, 43, cannot keep up
with demand for the jackets. The waiting list is
long, and it can take months to get one.
She got involved in advocacy back in 2009,
while her husband, Fred, was dying of kidney
cancer. At the time, Ms. Holliday, a self-taught
muralist and artist, was working in a toy store
in Washington, D.C. One of her customers was
THE CUPBOARD WAS BARE, above,
a jacket for Shannah Koss; left, Shift,
a jacket for Nick Van Terheyden.
Mr. Gold, the Journals senior energy writer,

is currently an energy journalism fellow at
the University of Texas at Austin. He is the
author of The Boom: How Fracking Ignited
the American Energy Revolution and
Changed the World (Simon & Schuster).
involved in health-care reform. When the customer heard of the difficulties that Ms. Holliday
had faced to get access to her husbands medical
records, she invited Ms. Holliday to tell her
story at a meeting, introducing her to the world
of patient empowerment.
Ms. Holliday started painting jackets later
that year, first at the request of a Twitter follower who knew her story and wanted the artist
to paint about it on the back of the business
jacket she planned to wear at a health conference. Ms. Holliday embraced the idea. A business jacket is a uniform of power, but with a
personal story painted on the back, she hoped
that it would remind the wearer of how it feels
to be a patienta bit of an outsider, with people
staring and wondering. A few years later, Ms.
Holliday decided to create a whole gallery of
business jackets.
The role of patients is starting to change.
President Barack Obama and the head of the National Institutes of Health have publicly called
for greater patient input in health care, and patient-driven scientific collaboration is no longer
unusual. Ms. Holliday and her art have come to
represent these new attitudes. She is regularly
invited to speak and paint at conferences, and
her jackets are now seen less as the mark of outsiders than as coveted statements of principle.
Ms. Holliday understands that social movements must evolve. Earlier this year, with the
help of money from crowdfunding campaigns,
she bought a red-brick, 80-year-old home in
Grantsville, Md., the 860-person town where her
late husband grew up and is buried.
She plans to turn the building into an art
center, where artists and patients can join her in
developing innovative ways to engage healthcare professionals and help her to paint jackets.
She wants more people to share their stories
and the walking gallery to grow. To do that,
she says, I need roots.
OPINION
REVIEW & OUTLOOK
Clintons Email Jeopardy
illary Clintons Super Tuesday victory that the State Department allowed this circumgives her a clear path to the Democratic stance to arise in the first place. Yes it does.
presidential nomination, but Bernie
Discovery could lead to depositions, interrogaSanders has never been her
tories and new documents that
Aides shouldnt take
biggest obstacle to the White
show who approved Mrs. ClinHouse. Her real liability is an
tons unsecure email arrangethe fall for her
email scandal that has put her
ment and who tried to conceal
self-serving actions.
in legal jeopardy.
it. Judge Sullivan said he may
Camp Clinton is arguing
also issue a subpoena requiring
that the U.S. State DepartMrs. Clinton and Ms. Abedin to
ments release last week of a final batch of turn over the entire email system they used.
emails ends the controversy over her private
Many other lawsuits are also proceeding and
server. Yet that release is merely the end of one could provide answers to the many questions
judicially mandated exercise overseen by a bu- that Mrs. Clinton has dodged. Did she turn over
reaucracy friendly to the former Secretary of all her work email? How many did she edit beState. The real action is in the courts, the FBI fore giving them to State? Who had access to
and Justice Department.
the server containing confidential information?
But even the friendly State Department re- Was her email hacked by foreign governments
view has been damaging. Of 30,000 emails Mrs. or criminals?
Clinton turned over to State, we now know that
All of this is presumably also part of the FBIs
2,093 were classified as confidential or se- investigation into Mrs. Clintons mishandling of
cret. Another 22 were classified top secret classified information. Attorney General Loretta
and State withheld their contents from public re- Lynch last month largely dodged Congressional
lease. Mrs. Clinton keeps claiming these were questions about the Clinton probe, though she did
retroactively classified, but thats been vigor- divulge that career attorneys are working with
ously disputed by intelligence community mem- the FBI. The Washington Post reported Wednesbers, who note that at least some of the top- day that Justice has granted immunity to Bryan
secret emails refer to intelligence projects Pagliano, the former State Department employee
classified from the beginning.
who set up the private server at Mrs. Clintons
The latest release provides fresh evidence that New York home in 2009. This suggests that a
Mrs. Clinton knew her server held national secrets. grand jury may be empaneled if it isnt under way.
In one email from April 2012, aide Jake Sullivan
Now that Mrs. Clinton is the odds-on Demoforwarded Mrs. Clinton a blog post from a jihadist cratic nominee, the political stakes of all this
group. Mrs. Clinton replied: If not classified or are enormous. One excuse we are likely to hear
otherwise inappropriate, can you send to the NY- is that Mrs. Clinton shouldnt be held responsiTimes reporters who interviewed me today?
ble for others who sent her classified informaThe fact that Mrs. Clinton had to ask if this one tion, as California Senator Dianne Feinstein rewas classified suggests she knew that people were cently said. In other words, let Mrs. Clintons
sending sensitive information to her unsecure aides take the fall.
server. The new email dump also shows then-Sen.
But those aidesand the countrywouldnt
John Kerry sending Mrs. Clinton intelligence hed be in this mess if Mrs. Clinton hadnt set up an offobtained from top Pakistani generals.
grid account to evade disclosure laws and protect
Theres more to come. Federal judges have her messages from public scrutiny when she ran
spent the past year doing what the State Depart- for President. Her employees can hardly be
ment wouldntthat is, upholding the Freedom blamed for using a system she designed, and Mrs.
of Information Act. Judge Emmet Sullivan re- Clinton was responsible as the senior official for
cently granted Judicial Watch discovery into knowing the classification rules.
whether State and Mrs. Clinton deliberately
With Donald Trump emerging as the probable
thwarted FOIA laws.
GOP nominee, the political and media temptation
Judge Sullivan said from the bench: Here you in Washington will be to protect Mrs. Clinton and
have Mrs. Clinton and [Clinton aide Huma] Abe- legally excuse her behavior. But the law applies
din and their private counsel deciding, after nei- equally to everyone if it means anything. These
ther Mrs. Clinton nor Ms. Abedin were govern- investigations need to follow their honest course
ment employees, what emails are federal records, and hold Mrs. Clinton accountable for her actions.
and what emails are not. It just boggles the mind The country can handle the political fallout.
Erdogans Press Assault
Turkish court on Friday effectively

I believe that free media will continue even
shut down Zaman, the countrys high- if we have to write on the walls, Zaman Editorest-circulation newspaper. Zaman has in-Chief Abdulhamit Bilici said on Friday. Zaman
been one of the last instituwriters who showed up to work
Turkeys elected
tions standing between Presiover the weekend complained
dent Recep Tayyip Erdogan
of having to work under the
autocrat silences his
and his dream of ruling a
watchful eyes of special-operamain media critic.
Turkish sultanate.
tions forces, and they said they
The court provided no explacouldnt access their email acnation for granting prosecutors
counts or the newspapers pagrequest to place the privately owned Zaman and ination system to file stories.
its parent company under trusteeship. Prosecutors
Turkish Prime Minister and Erdogan protg
accused Zaman of serving as an organ for Fethul- Ahmet Davutoglu on Friday said he wouldnt inlah Gulen, a Pennsylvania-based Islamic cleric and terfere with this process, which is legal, not
former Erdogan ally who has emerged as one of political. That explanation wouldnt be plausithe Turkish Presidents most ardent critics.
ble even if Mr. Erdogan hadnt already hollowed
The decision will mean that the state will ap- out other institutions of Turkish democracy, nopoint new management and editorial staff. Large tably the judiciary. In the past two years he has
protests broke out at the newspapers headquar- fired or reassigned thousands of judges, proseters in Istanbul over the weekend, with readers cutors and police officers.
and columnists joining the barricades to face
Mr. Erdogan now rules Turkey much as his
down tear gas. Zaman published a defiant final geopolitical rival, Vladimir Putin, rules Russia.
edition on Saturday, and its English-language One lesson, for established democracies as much
sister newspaper, Todays Zaman, continues to as new ones, is to beware of popular authoritaripost updates online.
ans who promise to punish the press.
The New Cash Hoarders
re Japan and Switzerland havens for ter- tion need lower taxes, liberalized labor laws,
rorists and drug lords? High-denomina- freer competition and other reforms to promote
tion bills are in high demand in both faster growth. But Keynesian economists and
places, a trend that some policentral bankers prefer pumpNegative interest rates priming, so they rail instead
ticians claim is a sign of nefarious behavior. Yet the two
against cash.
have the law abiding
countries boast some of the
Which is where the fearscrambling for bills.
lowest crime rates in the
mongering about terrorists and
world. The cash hoarders are
gunslingers comes in. In cerordinary citizens responding
tain circles the 500 euro note is
rationally to monetary policy.
known as the Bin Laden, former U.S. Treasury
The Swiss National Bank introduced negative Secretary Larry Summers wrote last month in
interest rates in December 2014. The aim was to calling for a global ban on notes worth more than
drive money out of banks and into the economy, $50 or $100. He noted interest from European
but that only works to the extent that savers find Central Bank President Mario Draghi and said
attractive places to spend or invest their money. that if Europe moved, pressure could likely be
With economic growth an anemic 1%, many brought on others, notably Switzerland.
Swiss withdrew cash from the bank and stashed
Fellow Harvard economist Kenneth Rogoff
it at home or in safe-deposit boxes. High-denom- wants to retire cash altogether, primarily beination notes are naturally preferred for this cause a significant fraction, particularly of
purpose, so circulation of 1,000-franc notes large-denomination notes, appears to be used to
(worth about $1,008) rose 17% last year. They facilitate tax evasion and illegal activity. But he
now account for 60% of all bills in circulation and doesnt hide the additional monetary-policy moare worth almost as much as Serbias GDP.
tive: Getting rid of physical currency and reJapan, where banks pay infinitesimally low placing it with electronic money, he wrote in
interest on deposits, is a similar story. Demand 2014, would allow central bankers to set negafor the highest-denomination 10,000-yen notes tive interest rates without people bailing out
rose 6.2% last year, the largest jump since 2002. into cash.
But 10,000-yen notes are worth only about $88,
The current hoarding in Switzerland and Japan
so hiding places fill up fast. That explains why underscores one of many ways in which cash is a
Japanese went on a safe-buying spree last basic tool of economic liberty: It lets people shield
month after the Bank of Japan announced nega- themselves from monetary policies that would
tive interest rates on some reserves. Stores re- force their savings into weak economies that cant
ported that sales of safes rose as much as 250%, attract sufficient spending or investment on their
and shares of safe maker Secom spiked 5.3% in own. These economies need reforms that boost
one week.
incentives to work and invest, not negative interCash hoarding is another lesson in the limits est rates and cash limits that raid the bank acof monetary stimulus. Economies stuck in defla- counts of law-abiding citizens.
Trump Is No Unifier
The Donald Trump that
showed up at his Super
Tuesday news conference last week was a different Donald Trump
than weve seen before.
POTOMAC Weve witnessed angry
Trump, flustered Trump,
WATCH
(at least once) gracious
By Kimberley
Trump, and exuberant
A. Strassel
Trump. This was presidential Trump. Kind of.
The presidential bit was Mr. Trumps
pivot toward the general election, and his
promise that he is a unifier who is creating a much bigger party that cant be
beat. He then reverted to true Trump
style to warn that if Republican power
players succeeded in taking him out,
theyd also take out his new loyalists,
meaning the party would lose everything in November.
Both claims are worthy of some analysis. GOP turnout, no question, is epic.
More than 8.5 million people turned out
for Republican races on Super Tuesday, a
stunning 81% higher than the 4.7 million
in 2012. (The other side, by contrast, saw
turnout fall 32% from 2008, the last contested Democratic primary.) Vermont
aside, every single Republican primary
and caucus has drawn record numbers.
Lets stipulate that Mr. Trump is behind some of this. Both surveys and anecdotal evidence show that he is pulling
new people to the polls. Yet lets also
stipulate that so, too, are the other
Republican candidates. The reality is
that a lot of Americans are rebelling
against the Obama presidency. Ted Cruz,
Marco Rubio and John Kasich are inspiring their own droves.
The best evidence for this is Texas,
where 2.8 million souls voted in the
GOP race on Tuesdaynearly double
2012, and a 108% increase over 2008.
Along with Nevada, thats the biggest
jump in state turnout numbers so far.
Yet the masses were coming out to give
Mr. Cruz 44% of the vote. Mr. Trump
limped in a distant second, with 27%.
His 757,000 voters equaled far less than
Mitt Romney claimed (more than one
million) in 2012.
Texas aside, five other Super Tuesday
states posted GOP turnout of 50% more
than ever before. Four were states Mr.
Trump either lost or nearly lost: Alaska,
Arkansas, Minnesota and Virginia. (The
fifth was Tennessee, where Mr. Trump
had a clear victory). Oklahoma also had a
record turnout, adding 20,000 new voters
to the rolls since Jan. 15 alone. Mr. Cruz
won that state, while Mr. Rubio tied Mr.
Trump in state delegates.
This raises the interesting question of
whether Mr. Trump isnt driving two
kinds of turnouthis own, and the #NeverTrump crowd. Back in the Iowa contest,
USA Today reported on Latino activists
who went to caucus in Republican prima-
ries solely to cast a vote against Mr.

Trump. (He lost that first contest.)
Would both pro-Trump and antiTrump voters stay home if he werent the
nominee? Possibly. The bigger concern
for Mr. Trump is how many stay home if
he is the nominee. The real-estate mogul
loves to claim that people love him, but
what he surely knows is that most of that
love is emanating from a very small section of the electorate. Approximately 3.37
million Americans have cast a Trump
vote. Yet an average 60 million people
vote Republican in general elections, and
overall 126 million people cast a presidential vote in 2012.
Hes certainly not unifying the broader
country. According to a recent Gallup
poll, nearly 60% of Americans view him
unfavorably. Mr. Trumps overall unfavorable rating would be the highest Gallup
has clocked, for any nominee, in any
party, since it started tracking the question 25 years ago.
Mr. Trump likes to claim he beats Hillary Clinton in polls. In fact, in the Real
Clear Politics database of 45 such polls,
he loses in 38 of them, and ties in two
others. Mr. Rubio, by contrast, has
steadily gained ground on her, winning 15
of the last 20.
His favorable rating even

within the Republican
Party keeps dropping.
This is why Mr. Trump is promising
unity; hed need extraordinary amounts
of it to overcome general electorate hostility. And yet the party is not, in fact,
unifying. He came nowhere near claiming a majority of delegates on Super
Tuesday. A CBS poll conducted last week
found that 74% of non-Trump voters
wouldnt be satisfied were he the nominee. His favorable rating even within the
GOP keeps dropping. Gallups tracking
had his net favorable rating among Republicans and Republican-leaning independents was down to 15 points at the
end of February, the lowest since tracking began in August.
In 2008 Roberta McCain famously admitted that many Republicans would
vote for her son only while holding
their nose. Yet polls suggest party loyalty will not sway anti-Trumpkins. A
Bloomberg survey of Southern Super
Tuesday voters found that in a hypothetical between Mr. Trump and Hillary Clinton, 27% of GOP voters wouldnt go with
their own nominee.
Republicans roared into this race with
a strong crop of conservatives, and a base
eager to reclaim the White House. Mr.
Trump is trying to claim he alone can inspire the unity and enthusiasm to win the
GOP the White House. Dont believe it.
Death of a Fracker
Aubrey
McClendon
came along at the right
time for America, and
for many Americans
who happened to be
property owners in the
rust-belt Northeast.
BUSINESS
In a note to clients
WORLD
several years ago, Wall
By Holman W.
Street economist Ed
Jenkins, Jr.
Yardeni
mentioned
getting off the train in
Philadelphia and chatting with a porter
who owned hunting land upstate. The
porter held on to his luggage-hauling job
for the time being but was looking forward to retiring on his six-figure lease
payment and 20% gas royalties.
Quite possibly, this porter owed his
transformed circumstances to Chesapeake Energy, the company founded by
McClendon, which at one point was estimated to be contracting with one million
property owners.
The U.S. certainly owes what modest
prosperity it has enjoyed in recent years
in large measure to McClendon and
fracking. President Obama may well owe
his re-election in Ohio, home of the Utica
shale, and Pennsylvania, home of the
Marcellus, to the energy boom. Vladimir
Putin surely would be even more rampant today if Americas resurgent industry hadnt disarmed him of much of his
energy revenue. A red-letter moment
came just last month, with the first shipment to Europe of liquefied natural gas
from the Lower 48, prompting Gazprom
threats of a price war.
All this is due in considerable measure to McClendon, whose company at
its peak was Americas second-biggest
gas producer, behind Exxon Mobil.
McClendon died Wednesday when his
Chevy Tahoe crashed into an overpass
abutment at high speed in his native
Oklahoma City. His death came a day after, in the latest in a series of legal hassles, a grand jury indicted him for alleged
antitrust offensesthough this may have
been the least of his troubles.
The man whom Forbes once called
Americas most reckless billionaire
likely wouldnt have had his impressive
impact otherwise. He was on the lunatic
fringe in his appetite for risk. To the disapproval of investigative reporters, he
was found to have run up huge personal
debts while running Chesapeake, under
a contract in which he personally shared
drilling costs for the companys wells
and received a share of the profits.
It was a clever incentive, but thanks
to Chesapeakes rapid growth, his debts
to cover his share of the drilling costs
also grew rapidly, and margin calls had

previously cost him his ownership in the
company he founded. With admirable
frankness, his board cut him a new contract and tried to put him back on his
feet, it said, because of the other opportunities that exist in the industry and
Mr. McClendons reduced Company
stockholdings.
But then came the prolonged gasprice depression thanks to the fracking
abundance McClendon made possible.
Activist shareholder Carl Icahn helped
Chesapeakes board to the conclusion
that McClendon had become a liability.
McClendon left and founded a new company to renew his hunt for shale opportunities, but landed in a fresh hole when
prices failed to rebound.
His bad luck, in not unfamiliar fashion, has been good luck for much of industrial America, enjoying a resurgence
and influx of foreign investment thanks
to cheap energy supplies.
Oklahoma City by then had also been
transformed, not least by McClendons
effort to bring an NBA franchise to town.
The encomiums in his hometown paper
these past days, and from colleagues in
the energy business, have been almost
embarrassing.
The bid-rigging allegations first surfaced in relation to land deals in Michigan, a case Chesapeake quietly settled.
Energy companies frequently partner
with each other instead of bidding
against each other. Chesapeake itself was
born when two entrepreneurs competing
for leases decided to join forces.
In a statement one day before his
death, McClendon complained of being
singled out as the only person in the oil
and gas industry in over 110 years since
the Sherman Act became law to have
been accused of this crime in relation to
joint bidding on leasehold.
He may well have had a point. Let us
note with sadness that so many young
people spill out of U.S. law schools with
nothing more inspiring on their minds
than rushing to the nations capital to tie
up business in red tape and gotcha laws.
Thirty years ago the New Republic put
the parasite culture of Washington on
its cover. Plus a change . . .
It would be useless to deny the speculation that McClendons death was a suicide, though he was also notorious for
talking into his cellphone while driving.
Who knows? But ask the many countries
that cant seem to produce an Aubrey
McClendon whether, in return for their
occasional foibles, such people arent a
precious resource worth the chaos they
sometimes cause.
OPINION
By Lawrence B. Lindsey
illary Clinton and Bernie

Sanders promise all types
of programs to make
America a more equal
country. Thats no surprise. But when you look at
performance and not rhetoric, the administrations of political progressives
have made income distribution more
unequal than their adversaries, who
supposedly favor the wealthy.
The U.S. Census Bureau releases
annual updates on income distribution
in America, publishing three technical
statistical measuresthe Gini index,
the mean logarithmic deviation of income (mean log deviation for short),
and the Theil indexeach of which
represents inequality levels on a scale
of 0 to 1 (zero signifies perfect equality and 1 indicates perfect inequality).
Transfer payments reduce

incentives to work and
lower incomes. Yet Clinton
and Sanders are eager
to go that route.
By all three measures, inequality rose
more under Bill Clinton than under
Ronald Reagan. And it wasnt even
close. While the inequality increase as
measured by the Gini index was only
slightly more during Clintons two
terms, the Theil index and mean log
deviation increased two and three
times as much, respectively.
Barack Obamas administration follows this pattern, despite the complaints he and his supporters have
made about his predecessor. The mean
log deviation increased 37% more under Mr. Obama than under President
George W. Bush, although when this
statistic was released, Mr. Obama had
only six years as president compared
with Mr. Bushs eight. The Gini index
rose more than three times as much
under Mr. Obama than under Mr. Bush.
The Theil index increased sharply dur-
ing the Obama administration, while it

fell slightly under Bush 43.
No president intends to raise inequality. And the spin doctors for
Messrs. Clinton and Obama may insist
that it wasnt their fault. But consider
their policies. Both Democratic presidents presided over bubble economies
fueled by easy money. There is no better way to make the rich richer than
to run policies that push up the price
of financial assets. Cheap money is a
boon to those who have access to it.
Interest rates were also too low under
Bush 43, but that bubble was in housing, and the effects were therefore
more evenly distributed than under
Mr. Clintons stock-market bubble or
Mr. Obamas credit bubble.
Money matters, but so do other
policies, such as the long, historic
sweep of the expanding welfare state.
In 1968, government transfer payments totaled $53 billion, or roughly
7% of personal income. By 2014, these
had climbed to $2.5 trillionabout
17% of personal income. Despite the
redistribution of a sixth of all income,
inequality measured by all three of the
Census Bureaus indexes is far higher
today than in 1968.
Transfer payments under Mr.
Obama increased by $560 billion. By
contrast, private-sector wages and
salaries grew by $1.1 trillion. So for
every $2 in extra wages, about $1 was
paid out in extra transfer payments
lowering the relative reward to work.
Forty-five million Americans received
food stamps in mid-2015, an increase
of 46% since the end of 2008. Similarly, 71.6 million individuals were enrolled in Medicaid and the Childrens
Health Insurance Program, an increase
of 13.3 million since October 2013.
In 2008, during the deepest
recession in 75 years, 13.2% of Americans lived below the governments official poverty line. The Great Recession officially ended in June 2009, but
in 2014, after five years of economic
expansion, 14.8% of Americans were
still in poverty. The economy was better, and there were a lot more handouts, but still poverty rose.
The structure of American house-
GETTY IMAGES
How Progressives Drive Income Inequality
holds shows how this happened. From

2008 through 2014, the number of
two-earner households declined.
These two-earner households have become the backbone of the American
middle class.
Research by the Hamilton Project
and the Urban Institute show that
when families with children making
between $20,000 and $50,000 attempt to have a second earner go back
to work, the effective tax rate on the
extra earningsincluding lost government benefits such as food stamps,
the earned-income tax credit and
medical
support
paymentsis
between 50% and 80%. This phaseout
of the ever-increasing array of benefits has created a working-class trap
instead of a poverty trap that is increasing inequality and keeping the
income of these households lower
than they might otherwise be.
While the number of two-earner
households declined during the first
six years of the Obama presidency, the
number of single-earner households
rose by 2.6 million and the number of
households with no earners rose by
almost five million. In other words,
two thirds of the increase in the number of families under Mr. Obama was
accounted for by households with no
one working. This is the reason the
middle class has shrunk, and the reason inequality has increased. And unless the number of people wanting to
work and the number of jobs through
economic growth is increased, inequality will only increase.
The flip side of the progressive

agenda to redistribute income to
those with less is to raise taxes on the
rich. The data show that that, too, is
also an ineffective way to reduce
inequality.
President Clinton increased the top
tax rate on higher earnersyet inequality rose during his administration, and faster than under the tax-cutting Ronald Reagan. The same
happened under President Obama. Tax
rates went up on upper-income earners. Inequality rose too, and more than
under his tax-cutting predecessor.
A recent Brookings Institution
studywhose authors include Peter
Orszag, President Obamas director of
the Office of Management and Budgetfound that boosting the top tax
rates even more, as Sen. Sanders suggests, would have little or no effect on
inequality. The paper explored the effects of raising the highest marginal
income-tax rate to 50% from 39.6%.
Assuming no behavioral effects, the
expected revenue was then distributed directly (and in theory costlessly)
to the bottom 20% of income earners.
The $95 billion in extra taxes and
transfers reduced the Gini Coefficient
by only 0.003. To put that in perspective, that reversed only one fifth of
the increase in inequality during the
Obama presidency.
There was a catch. When the
authors assumed that there might be
a behavioral response by higher income taxpayers, inequality fellbut
for the wrong reasons. Less work, sav-
ing, investing and more tax sheltering

reduced the taxable income of higher
earners and therefore meant less revenue to redistribute. So the rich got
poorer, by their own choice, but the
poor got less in benefits. A true loselose situation.
None of this should really be
surprising. If the socialist ideal of
from each according to his ability, to
each according to his need worked in
practice, the Berlin Wall might still be
standing. Of course, one of the reasons it came down is that a new ruling
class emerged to take from the productive and give to those in need, siphoning off a cut of the swag along
the way. Ruling classes always have
sticky fingers.
Redistribution through the political
process is not costlesseven in a perfect world there would be a large bureaucracy to feed. Special-interest
elites also emerge when so much
money is being moved around. They
take their cut, introducing even more
inefficiency into the system.
Presidential contenders who boast
of their plans to reduce inequality
might ponder the fact that providing
more free things isnt the answer.
Even free college and free health care
are paid with taxes that discourage
people from increasing their work,
savings and entrepreneurship.
Attacking the rich and running
against inequality may be a sensible
political strategy. But in the end the
programs to implement this strategy
make the problem worse.
The repeated failure of political
promises has another downsideincreasing voter alienation and cynicism. The appeal of redistribution is
understandable, but voters who think
the progressives running today are
going to reduce inequality are falling
into the same trap as people entering
fifth or sixth marriagesthe triumph
of hope over experience.
Mr. Lindsey, a former Federal
Reserve governor and assistant to
President George W. Bush for economic policy, is president and CEO of
the Lindsey Group.
President Obama Created Donald Trump

By Bobby Jindal
resident Obama doesnt get

enough credit for his accomplishments and often tells us so.
I happen to agree that he doesnt
get enough credit. Not for slowing the
rise of the oceans or healing the
planet, as he immodestly claimed he
would, even before taking office. He
has succeeded handsomely, though, in
living up to his vow to be a transformative president, like Ronald Reagan,
and not an incremental one in the Bill
Clinton mold. Mr. Obama has accomplished many changesthey just
arent the ones we were waiting for.
Mr. Obama has alienated allies like
Israel while encouraging adversaries
like Iran and Cuba. He has fostered
Americans record-breaking dependence on government programs and
record-low participation in the workforce. He has expanded the power, size
and expense of the federal
government in unprecedented ways,
all at the expense of Americans
freedom, standard of living and economic well-being.
But the president truly doesnt get
enough credit for creating one of the

most polarizing forces in American
politics today. No, not Hillarythats
more Bills doing. Lets be honest:
There would be no Donald Trump
dominating the political scene today if
it werent for President Obama.
I believe that voters tend to act in
open-seat presidential elections to
correct for the perceived deficiencies
of the incumbent. In 1980, after four
years of President Carter telling us to
turn up the thermostat and wear a
cardigan while the Soviets invaded Afghanistan and the Iranians invaded
the U.S. Embassy, the fed-up American
people elected a cowboy to the White
House who made it clear that the evil
empires days were numbered.
After eight years of President Reagans supply-side economics and
broadsides against welfare queens, we
got a kinder, gentler President H.W.
Bush. After four years of international
diplomacy without the vision thing,
we got a loquacious Arkansas governor promising to invent a third way
forward focused on the economy at
home. After eight years of Clintonian
empathy and skirt-chasing, we got a
plain-spoken President George W.

Bush, who promised to restore integrity to the Oval Office. After Hurricane
Katrina and post-Saddam Iraq, we got
the professorial President Barack
Obama, who seemed to many to promise competence.
After the cool, weak and

endlessly nuanced Obama,
no wonder voters are going
for a strong, blunt leader.
After seven years of the cool, weak
and endlessly nuanced no drama
Obama, voters are looking for a
strong leader who speaks in short, declarative sentences. Middle-class incomes are stagnant, and radical Islam
is on the march across the Middle
East. No wonder voters are responding to someone who promises to make
America great again. You can draw a
straight line between a president who
dismisses domestic terrorist attacks
as incidents of workplace violence and
a candidate who wants to ban Muslims from entering the country.

Mr. Obama likes to bemoan the increasing partisan divides across the
country, as if he were merely a passive
observer at best and a victim at worst.
Uncharacteristically, the president is
being too modest. He has created the
very rancor he now rails against.
Imagine how different things would
be if Mr. Obama had pursued a stimulus bill that included targeted tax cuts
and infrastructure spending balanced
with gradual entitlement reformsinstead of a stimulus that merely dusted
off congressional Democrats wish list
of pork-barrel projects and ideological
experiments.
Imagine if Mr. Obama had actually
worked with Republicans in an open
process to bring down health-care
costsinstead of pushing through, on
a partisan vote, the largest expansion
of government-welfare programs in a
generation. Or if he had listened to
the message that voters sent in the
first midterm election by putting
Republicans in charge of Congress
instead of petulantly relying on executive orders, and using an eraser and
whiteout on the Constitution, to

shove the Environmental Protection
Agency and other federal agencies
deeper into Americans lives.
Over the past seven years America
could have been transformed in an
inspiring way if its education system
had been opened up, if its energy
policy had been liberated, if the entire approach to governing had been
overhauled. President Obama chose
the opposite approach, favoring a
closed education system that fails
millions of children and an energy
policy that chains the economy to his
green agenda.
President Obama loves to construct
straw men so he can contrast his heroic self against them. But Donald
Trump needs no characterization; he
is capable of being absurd on his own,
no outside help required. Without
President Obama, there is no Donald
Trump. Mr. Trump often diagnoses
the ills Mr. Obama has caused, but his
prescriptions are just as often wrong.
America deserves better.
Mr. Jindal is the former governor
of Louisiana.
Russias Democratic Opposition Needs the Wests Support

By Mikhail Kasyanov
ast month I was in the city of

Nizhny Novgorod campaigning
for election into the Duma, Russias lower house of Parliament. It
was a short-lived trip. When we arrived, we were met with physical
threats. Provocateurs violently disrupted our event as police stood idly
by. All of this happened shortly after
I had already been assaulted in a
Moscow restaurant and received a
death threat from Chechen leader
Ramzan Kadyrov. There seems to be
an effort to force me out of Russia.
I take these threats seriously. Any
reasonable person in my position

would fear for his life and for the
lives of his colleagues. But Russia desperately needs to change, and this
change must come from inside. I cant
lead that effort from outside my
country. I will not leave.
My good friend Boris Nemtsov
understood this. Together, Boris and
I led the democratic opposition to
Vladimir Putin. Then, last year, Boris was assassinated, gunned down
on a bridge beside the Kremlin. A
few weeks ago, along with tens of
thousands of my fellow Russians in
Moscow, St. Petersburg and other
cities, I paid tribute to Boris in a
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march to mark the first anniversary

of this death.
I have no illusions. Mr. Putin has
already started to warn against enemies abroad who are preparing to
interfere in Russias elections in a
direct threat to our sovereignty.
He is attempting to mobilize public
opinion against the opposition,
much as he has against imagined external foes, ahead of the Duma elections in September and the presidential election in 2018.
Mr. Putin understands his own
vulnerability. There is still great bitterness in the country toward the
fraud committed in the 2011 Duma
election and toward his 2012 return
to the presidency without the consent of the people. Protests erupted
then, and Mr. Putin responded
harshly. He put political scapegoats
on trial. He exerted pressure on civil
society, democratic politicians and a
shrinking independent media. The
Duma, staffed by Kremlin loyalists,
passed a law on foreign agents to deter and criminalize human-rights
work funded by respected international organizations.
My goal, and the goal of my colleagues participating in the September election, is to become a parliamentary opposition. Even a small
presence in the Duma would be a victory, a sign that real change is possible. It would also allow us to voice
our democratic vision for Russia amid
all the distorted, xenophobic, statesponsored propaganda.
Not so long ago, the outlook for
Russia was very different. From 2000
to 2004, I served under Mr. Putin as
Russias prime minister. Initially I was

able to pursue reforms that began to
modernize the economy, alleviate the
distress of ordinary people and attract foreign investment.
None of us leading Russia at the
time, including Mr. Putin, saw NATO
as a threat. I still dont. I reject this
and any other pretext for the annexation of Crimea and the aggression in
Ukraine. I also reject the bombing of
innocent people in Syria to prop up
the Assad regime.
Some of us would risk

our lives to bring
change to Russia. But
even that isnt enough.
But the outlook isnt as bleak as it
might appear. Despite intense propaganda, 60% of Russians still favor
better relations with the U.S. and Europe, according to a recent poll conducted by Russian Research Week
(FOM), an organization aligned with
the Kremlin. Another poll that found
that the percentage of Russians who
believe in stronger ties with the
West rose to 54% from 40% last year.
Russians see themselves as part of
European civilization.
This society is now under intense
pressure. Facing dissatisfaction over
disastrous economic policies and mistakes in foreign policy, Mr. Putin may
again decide to manipulate elections.
This could provoke clashes that would
end badly for the Russian people.
The next two years will be crucial.

Achieving democracy is our responsibility. The West, however, shouldnt
make our work more difficult by lowering its standards or giving in to Mr.
Putins vision for Russia. That includes helping Ukraine succeed as a
democratic sovereign nation. It was
the prospect of Ukraines successful
democratic transition, not some historic right to Crimean territory, that
motivated Mr. Putin to interfere.
Sanctions against the regime must
be maintained. Mr. Putin didnt expect
to face a united West. Do not compromise with him. Do not trade Ukraine
sanctions for cooperation in Syria.
We need the West to stand with us
in solidarity for the cause of Russian
democracy. Hold Russia to its commitment to democracy and human
rights. Expand the reach of the Magnitsky Act. Visa and financial sanctions that target Russians for humanrights abuses are principled, and they
work. New targets should include the
state-sponsored propagandists who
hounded and smeared Boris as a traitor. This continues to this day against
me and others in the opposition.
The worlds problem is not with
Russia, but with Mr. Putin. My values
and principles remain fixed on a vision of a free and democratic Russia.
We Russians see ourselves as part of
Europe and look forward to an improved relationship with the West. I
believe this can be achieved, and will
continue to work for that, in spite of
everything.
Mr. Kasyanov is the leader of the
Russian democratic coalition Parnas.
WEATHER & CROSSWORD
What the U.S. Jobless Rate Really Shows

New York. Even though unemployment is down, a whole
group has vanished from the
figures.
To help account for some
of the differences, the BLS
produces five alternative
measurements of unemployment in addition to the official rate. Some are more restrictive, and some are more
expansive.
The official rate, known as
U-3, falls somewhere in the
middle. It classifies people as
unemployed if they do not
have a job, have actively
looked for work in the prior
four weeks and are currently
available for work.
In contrast, the most restrictive measurement,
known as U-1, counts people
as unemployed only if they
have been out of work for 15
weeks or longer based on the
argument that unemployment benefits may have been
exhausted, causing serious financial hardship as a direct
consequence of unemployment. By this measure, overall unemployment in February was 2.1%.
At the opposite extreme is
U-6, which adds discouraged
workers, part-time workers
who want full-time jobs, and
marginally attached workers
to the official U-3 figure.
People with impediments
such as transportation problems or child-care requirements that keep them from
searching for work are considered to be marginally attached workers. By this measure, unemployment in
February was 9.7%.
During the Great Recession, the official rate topped
out at 10%. U-6 peaked at
17.1%, and U-1 at 5.9%.
As a point of reference,
the worst conditions the
country has ever experienced
occurred during the Great
Depression, when unemployment peaked around 25%.
The remaining BLS measurements of unemployment
are U-2, enumerating job losers and people who com-
How Bad Is It?

The jobless rate is near the level many economists consider functionally full employment, but
alternative measures differ. The most restrictive counts only those who have been out of work for
15 weeks or more. The broadest adds discouraged, involuntary part-time and marginally attached
workers to the ofcial count.
16%
14
U6: U-3 plus

discouraged,marginally
attached and
involuntary part-time
workers
12
U5: U-3 plus

discouraged and
marginally attached
workers
10
8
U-4: U-3 plus

discouraged workers
6
4
U-3 Ofcial
unemployment
rate 4.9%
U2: Job losers and

people who completed
temporary jobs
1994
96
98
00
02
04
06
08
10
12
14
Note: Seasonally adjusted Source: Labor Department
Some Americans are nervous about the economy despite low unemployment. Above, a Washington street.
pleted temporary jobs; U-4,
adding discouraged workers
to the official U-3 figure; and
U-5, adding discouraged and
marginally attached workers
to the official figure.
Some encouraging news
in the current report is that
the broadest measure of un-
Weather
said. Obviously, not everybody 16 and over wants a job.

So, how do you decide
whether you have a fully employed economy?
Its a difficult question to
answer because there are different kinds of unemployment, and not all are signs of
employment is down, and the

official rate is about as good
as it gets.
Although it may seem
counterintuitive, economists
say zero unemployment is
undesirable. It gets back to
the question, What is full
employment? Dr. DeFreitas
a distressed economy.
Cyclical unemployment
occurs when there are too
few jobs to employ everyone
who wants to work. This is
what happens during a recession, and its the worst.
Structural unemployment
is caused by changes that affect the labor market, such
as improved technology or
shifting consumer preferences. New opportunities are
created, but the changes
cause some people to lose
jobs.
Frictional unemployment
occurs as part of normal
turnover in the labor market;
someone who is unemployed
takes time to find a desirable
job or an employer waits for
the best applicants.
Full employment is tied
to having no inflation or deflation pressure occurring because of the state of the
economy, said John Vahaly,
an economics professor at
the University of Louisville in
Kentucky. With approximately 5% unemployment, we
think we avoid both problems.
Traditionally, the worry
has been that if the unemployment rate falls much lower, it
could trigger price inflation
because, among other pressures, a tight labor market
leads to demands for higher
wages. Prices will increase to
keep up with rising costs.
But for now, the labor
market is far from overheating.
You can see that if you
look at our Employment Cost
Index, which tracks wage and
salary changes, said Mr. Bergman, the BLS economist, said.
The rate of wage change is
not that different from what it
was in 2012, and, brace yourself, its around 2%.
That may mean the economy is operating under a
new paradigm. So, while 4%
or 5% unemployment is traditionally considered a safe
level, today, the question
seems to be: How low can
you go?
The WSJ Daily Crossword | Edited by Mike Shenk

Shown are todays noon positions of weather systems and precipitation. Temperature bands are highs for the day.
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16 t
-2 r
7 pc
21 c
1 r
-1 pc
-2 sf
67
68
69
70
71
Tomorrow
Hi Lo W
8
1 pc
3 -4 sn
19 11 s
22 12 pc
24 10 s
21 7 pc
36 27 pc
6 -5 pc
7 -1 pc
21 10 r
11 4 c
11 6 pc
7
1 pc
28 16 pc
29 20 c
7 -3 c
29 22 pc
23 10 pc
19 14 t
23 15 r
10 -3 pc
19 12 c
30 22 pc
9 2 sh
9
1 sh
7 -2 pc
City
Geneva
Hanoi
Havana
Hong Kong
Honolulu
Houston
Istanbul
Jakarta
Johannesburg
Kansas City
Las Vegas
Lima
London
Los Angeles
Madrid
Manila
Melbourne
Mexico City
Miami
Milan
Minneapolis
Monterrey
Montreal
Moscow
Mumbai
Nashville
New Delhi
New Orleans
New York City
Omaha
Orlando
Today
Hi Lo W
5 -2 sh
29 21 pc
29 16 s
22 18 c
29 21 s
24 19 c
16 10 pc
30 24 t
30 18 s
23 14 c
16 8 c
30 23 pc
7 -1 pc
14 8 r
11 0 sh
34 25 s
27 19 t
24 9 pc
25 20 pc
10
1 pc
16 12 c
32 12 pc
5 -1 sn
3 0 c
32 25 pc
19 11 pc
29 17 pc
25 18 pc
14 7 s
21 14 t
26 13 s
Tomorrow
Hi Lo W
5 -4 sh
31 21 pc
30 17 s
22 18 pc
28 19 sh
25 19 r
17 10 pc
30 25 t
24 15 c
21 7 t
21 9 pc
29 22 pc
8 5 sh
20 8 s
11 0 s
33 25 s
35 22 pc
22 11 pc
26 22 pc
10
1 pc
18 3 sh
32 14 pc
5 2 pc
4 0 pc
33 25 pc
22 15 c
30 17 pc
27 20 t
18 10 pc
17 5 c
27 17 s
Today
City
Hi Lo W
Ottawa
6 -2 sn
Paris
6 0 pc
Philadelphia
15 6 s
Phoenix
22 11 pc
Pittsburgh
17 7 pc
Port-au-Prince
31 20 t
Portland, Ore.
12 4 sh
Rio de Janeiro
33 24 pc
Riyadh
27 16 t
Rome
13 5 sh
Salt Lake City
12 0 c
San Diego
16 11 r
San Francisco
15 9 sh
San Juan
28 23 t
Santiago
26 10 pc
Santo Domingo 30 20 t
Sao Paulo
27 21 t
Seattle
11 4 sh
Seoul
14 0 pc
Shanghai
22 10 pc
Singapore
31 25 c
Stockholm
4 -1 sn
Sydney
29 22 s
Taipei
27 18 pc
Tehran
18 4 s
Tel Aviv
25 14 s
Tokyo
16 12 r
Toronto
10 4 pc
Vancouver
10 3 sh
Washington, D.C. 17 8 s
Zurich
5 -2 sh
Ice
Tomorrow
Hi Lo W
6 2 c
8 2 pc
21 9 pc
25 12 pc
21 9 pc
31 19 pc
10 6 r
32 24 t
27 16 s
13 5 sh
10 2 pc
18 12 pc
16 11 s
28 22 sh
29 12 s
30 20 pc
27 20 t
10 5 c
8 -3 c
13 6 r
31 26 pc
4 -2 pc
29 23 s
26 17 pc
17 5 s
24 17 pc
18 12 pc
15 9 c
9 4 r
21 9 pc
4 -4 sh
FIRST EDITION | By Zhouqin Burnikel &

Don Gagliardo
Across
1 No-no for a
vegan
5 Lose it
altogether
10 The Green
Hornets partner
14 Waterloo band
15 Suppose...
16 Notion
17 Landing site of
July 1969
18 Carrier of
Thursday
Night Football
20 Tree limb
22 Gallivant
23 Fall blast
27 Decimal system
base
28 Flew alone
29 Historic stretch
31 Container for
a gallon of milk
34 Taylor Swifts
___ Song
35 Secret spot?
38 Folksinger
Guthrie
40 Danger
42 Hauler on the
interstate
43 Subject of many
a stereotype joke
45 Hubbub
46 Bar spigot
47 Kittens cry
48 Mopes
51 Pro-___ (some
tourneys)
53 Outlook
organizing aid
58 Cloners field
60 Avant-___
61 Local check
point?
65 Criminals break
them
66 Movie director
Preminger
67 Too rich for my
blood
68 You dont know
the half ___!
69 Arty New Mexico
community
70 Motel in Psycho
71 Alps or
Appalachians:
Abbr.
Down
1 Ballroom dance
from Cuba
2 Kindle download
3 In the
neighborhood
Solve this puzzle online and discuss it at WSJ.com/Puzzles.
Hi
7
2
19
20
23
16
35
11
6
21
11
10
5
26
26
10
30
19
15
23
11
14
28
7
6
5
66
Flurries
Rabat
b
City
Amsterdam
Anchorage
Athens
Atlanta
Baghdad
Baltimore
Bangkok
Beijing
Berlin
Bogota
Boise
Boston
Brussels
Buenos Aires
Cairo
Calgary
Caracas
Charlotte
Chicago
Dallas
Denver
Detroit
Dubai
Dublin
Edinburgh
Frankfurt
U1: People
unemployed 15 weeks
16 or longer
ANDREW CABALLERO-REYNOLDS/AGENCE FRANCE-PRESSE/GETTY IMAGES
ach month, the U.S. Labor Departments Bureau of Labor Statistics

boils the state of the job
market down to a single
number: the official unemployment rate.
Its a quick way to assess
how many Americans might
be experiencing financial
hardship, but its impossible
to capture the
experiences of
everyone in the
country with a
single data
point. Some
THE
groups will
NUMBERS
fare better
JO CRAVEN than the headMCGINTY
line numbers,
while others
will do worse.
That difference may help
explain why some Americans
feel nervous about the economy even though theyve
been told repeatedly the
Great Recession is over, and
the official rate of unemployment is 4.9%. According to
the latest local area figures,
for example, unemployment
in the Salt Lake City metropolitan area was 2.8% in December, while in the Bakersfield, Calif., metro area it was
10.2%. Most economists consider a rate of 4% or 5% to be
functionally full employment.
We do have a top-side
number that appears to be
historically low, said Bruce
Bergman, an economist with
the BLS. But as policy makers have said, there are pockets within our economy, and
various groups are not sharing the same experience.
Critics also say the headline number doesnt account
for underemployed workers
or discouraged workers who
were laid off during the recession, failed to find new
jobs and eventually stopped
looking.
Once youre jobless for a
year or more, you are far
more likely to drop out of the
labor force, said Gregory DeFreitas, an economics professor at Hofstra University in
4 Ballroom dances
from Argentina
5 Liquor flavored
with juniper
berries
6 Awry or away
7 Skill for speaking
with the deaf:
Abbr.
8 Showed signs of
exertion
9 They give you
the once-over
10 Fuzzy fruit
11 Humane society
program
12 To the point
13 Like some sturdy
furniture
19 Spud
21 Showtime rival
24 Skip a fancy
ceremony
25 Rakish fellow
26 Luxury car with
a prancing
stallion logo
30 Apt. units
31 Quick poke
32 Website address
33 Acquires, slangily
35 Remote
36 ___ little
teapot...
37 Bit of useful
advice
39 Number thats
its own square
41 Fans fave
44 Nerdy sort
48 Grand ___ (island
near Florida)
49 Pointer or pug
50 Downhill run
51 Monks head
52 Mazda roadster
54 Seasonal fast
food sandwich
55 What dodgers
dodged, or
what you might
find in the
starred answers
56 Hurdler Moses
57 Takes a breather
59 Some boxing
wins: Abbr.
62 ___ funny
63 Stage signal
64 Elevations: Abbr.
Previous Puzzles Solution

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The contest answer is J. CREW. Each theme

answer suggests a famous person who uses a
first initial: the FBI BUILDING is named after J.
Edgar Hoover; the SURGEONS GENERAL named
preceded and succeeded C. Everett Koop;
GEODESIC DOMES were popularized by R.
Buckminster Fuller; THE SHIPPING NEWS was
written by E. Annie Proulx; CAKES AND ALE was
written by W. Somerset Maugham. The five
initials spell the contest answer.
BUSINESS & TECH.
Facebook U.K. Taxes to Rise

Company changes its payments structure
By James Marson,
Paul Sonne
and Jason Chow
Bo Andersson, a former
General Motors and Saab Automobile executive and the
first non-Russian to run AvtoVAZ, will be relieved as
chief executive at a board
meeting later this month,
said Sergei Chemezov, CEO of
state-owned conglomerate
Rostec, which owns a 25%
stake in AvtoVAZ.
Mr. Chemezov said that the
controlling shareholder, a Renault SA and Nissan Motor
Co. alliance that owns just
over half of AvtoVAZ, has
agreed to the move. The alliance partners invested more
than $2.3 billion in the company since 2008.
Mr. Chemezov said Rostec
and Renault are preparing a
bailout, but the final details
were still being worked out.
Rostec could convert debt to
equity while Renault would
have to inject funds, he said.
Rostec has said it doesnt
plan to increase its stake.
Now, we need to change
the person, said Mr. Chemezov, a friend of Russian President Vladimir Putin since the
1980s. Thats all.
Spokesmen for Renault and
AvtoVAZ declined to comment. Mr. Andersson couldnt
be reached to comment.
Mr. Andersson has been
totally caught off guard, by
the decision, said a person familiar with his thinking.
Renault and Nissan placed
a bet on Russias auto market
when they took a controlling
stake in AvtoVAZ in 2014.
Russia is the French companys
only
significant
growth prospect outside
Western Europe. But Western
sanctions over the Ukraine
conflict and tumbling oil
prices drove Russia into recession last year.
Total car sales in the country slumped 36% to 1.6 million vehicles last year, acPlease see AUTO page B2
European Banks
Dumping Ground
FINANCE | B5
Monday, March 7, 2016 | B1
Drone Makers to Expand in Asia

As competition
intensifies, companies
are in a race to gain
new customers
BY JURO OSAWA
In the Chinese city of Xian,
Han Luyi runs a small store inside a shopping mall that sells
drones made by the worlds
biggest
consumer
drone
maker.
Shoppers stop by and ask
questions: Why is this toy so
expensive? Can a drone lift me
up and make me fly? Most
Chinese people dont know
anything about drones, said
the 22-year-old Ms. Han, who
opened the shop in August.
Her store is one of the distribution partners of Chinese
drone maker SZ DJI Technology Co., which controls
roughly two-thirds of the
worlds consumer drone market, according to analysts.
From splashy flagship store
openings to flying lessons and
rental services, some drone
companies are vying for new
customers in Asia as competition intensifies in the U.S., the
worlds biggest market.
Its fair to say Asia is a
new frontier, said Derrick
Xiong, co-founder of Guangzhou-based drone maker
Ehang which makes the
Ghost line of drones. Ehang
is starting to expand its business in China by offering
drone-flying lessons at universities and renting drones to
tourists through local travel
DJI shows off its Phantom 4 drone in China on Saturday. Drone makers are racing to increase staff in Asia to build sales channels.
agencies, he said.
Ehang was among companies unveiling new products at
the Consumer Electronics
Show in Las Vegas in January,
along with Frances Parrot SA,
where Intel Corp. showed a
new drone that uses its 3-D
camera technology.
As competition increases,
companies such as DJI are racing to increase staff in Asia to
build sales channels and edu-
cate consumers who arent so

familiar with drone capabilities. DJI is opening a flagship
store in Seoul this month with
an event featuring breakdancers, local bands and photography sessions for the public.
The launch comes hot on
the heels of its first-ever flagship store in the southern Chinese city of Shenzhen, where
the company is based. Visitors
to the futuristic spacecraft-
like building in the citys waterfront shopping area can

watch DJI drones flying inside
a giant cage-like flight area in
the middle of the shop floor,
while drone-shot videos play
in-store. DJI and its local dealers also hold weekend droneflying lessons to train pilots.
The U.S. is our largest
market, and we are really just
starting to increase our exposure in China, said DJI
founder and Chief Executive

Frank Wang in December,
when the company opened the
Shenzhen store. Because of
income levels, drones are not
an impulse buy in China, he
said. Data on the drone market
is relatively scarce, but Chinas
market for camera-equipped
drones is still small with
roughly 40,000 units shipped
in the third quarter, according
Please see DRONES page B3
U.S. Officials Back Encryption Commission

BY CAT ZAKRZEWSKI
As Apple Inc. and the Justice Department spar over access to the phone of a San Bernardino shooter, some U.S.
officials and private-sector executives want to create a commission to address the issues
posed by encryption.
Rep. Michael McCaul, chairman of the House Homeland
Security Committee, on Thursday pitched a plan for a bipartisan encryption commission
at a computer-security trade
show in San Francisco.
The Texas Republican proposed the commission in a bill
he introduced to Congress last
week with Sen. Mark Warner
(D., Va.) Last week, a group of
industry executives and former
government officials revealed
a separate initiative to address
the tensions between privacy
U.S. Rep. Michael McCaul is proposing an encryption commission.

Agency Director Mike McConnell joined with privacy groups
to form The Digital Equilibrium project.
While neither effort proposed specific solutions, they
and national security.

Former RSA Security Executive Chairman Art Coviello,
former Secretary of Homeland
Security Michael Chertoff and
former National Security
Teen Retailers Push for a Turnaround
DAN DENNISON/GETTY IMAGES
BY KHADEEJA SAFDAR
When Urban Outfitters

Inc. and Aropostale Inc. report holiday-season earnings, investors will be looking for signs of a turnaround
in the struggling teen-retail
sector.
Store chains catering to
teens have been hard hit in
the past few
years by declinTHE
ing mall traffic,
WEEK
changing tastes
AHEAD
that eschew
logo-laden clothing and
fierce competition from fastfashion players such as Forever 21 Inc. and Hennes &
Mauritz AB. To cope, some
retailers have closed U.S.
stores, cut costs and pushed
deeper into international
markets. But there are some
signs of a pickup.
Last week, Abercrombie
& Fitch Co. registered its
first same-store sales gain in
more than three years during the quarter ended Jan.
30, and American Eagle
Outfitters Inc. posted higher
sales amid progress on improving merchandise and
controlling inventory levels.
Many analysts arent con-
MONEY &
INVESTING
MAO SIQIAN/XINHA/ZUMA PRESS
MOSCOWRussias largest
auto maker, OAO AvtoVAZ, is
poised to remove the Swedish
auto executive who took
charge just before the country fell into a recession that
led to sharply lower car sales.
Urban Outfitters continues to expand its store base, unlike rivals.

vinced yet that a turnaround
will hold. Pacific Sunwear
of California Inc., a retailer
with surf-inspired clothing
on Friday hired financial advisers to consider its options
including a debt reorganization under chapter 11 protection, according to people familiar with the situation.
Some of these teen players are recovering from the
dramatic erosion of productivity, said Credit Suisse analyst Christian Buss. But
their business remains challengedjust slightly less
challenged than the year before.
Zumiez Inc., which sells
action-sports clothing, is expected to report earnings on
Thursday and teen retailer
Buckle Inc. is scheduled to
release results on Friday.

Analysts forecast Aropostale sales of $521 million
for the quarter, down 12%
from $594 million in the
same quarter a year earlier,
but its return to profitability
is still in question. In January, it said it planned to eliminate about 100 jobs as part
of an effort to lower expenses
by up to $40 million a year.
The retailer has reported
two consecutive years of
losses. Its cash position fell
each quarter for the past
year and ended October at
$42 million. The company
said it would report fourthquarter results on March 17
after pushing it back a week.
For Urban Outfitters, analysts forecast fourth-quarter
sales of $1 billion, flat from a
year earlier, and earnings of
56 cents a share, down from
60 cents a share in the same
period last year.
The retailer, which has
more varied product offerings
than many of its peers and
continues to expand its store
base unlike its rivals, reported
sales figures last month,
showing a 2% sales decline at
existing stores in the three
Please see RETAIL page B2
ALEX WONG/GETTY IMAGES
Russian
Car Giant
To Seek
The Ouster
Of Its CEO
BUSINESS NEWS | B3
INSIDE:
both hope that simply putting

adversaries together would encourage discussions that might
help bridge the divides of the
use of encryption technology.
Rep. McCaul in presenting
his bill said the time had come
to lower the temperature on
the encryption debate ahead of
any congressional debate.
He said proposals to weaken
encryption could undermine
security and American business interests abroad.
Most members dont understand what encryption is,
Rep. McCaul said. They dont
understand the threat. They
dont understand the value of
encryption. He criticized proposals to create a back door
that would give the government access to encrypted devices. But he said encrypted
devices and communication
apps are inhibiting both do-
mestic law enforcement and

global intelligence at a time
when ISIS poses a growing
threat. Rep. McCaul compared
his efforts to the bipartisan
commission that investigated
the Sept. 11, 2001 attacks.
The other group, which was
formed before the San Bernardino attacks in December, suggested a summit of representatives
from
government,
companies and civil-liberty
groups.
Mr. Coviello said the initiative is totally in sync with
the efforts of Rep. McCaul and
Sen. Warner. Mr. Coviello said
he understands that people
may be cynical about such
commissions. My response to
that is what alternative do we
have? he said. Apple Chief Executive Tim Cook earlier endorsed a call for a congressional commission.
PaidMusicServiceAims
To Attract Young Fans
BY HANNAH KARP
As music-streaming services vie for paying subscribers, teens and college students
have proven difficult to attract, since they generally have
little disposable income and
are content to listen free on
Alphabet Inc.s YouTube, despite the ads.
CR Media Inc. is hoping to
change that with a new service
that it plans to launch in coming months, targeting younger
listeners with a $1.99 monthly
price tag that includes eight
on-demand songs a day. CRs
so-called Octo plan also features the kind of custom radio
that Pandora Media Inc. offers
free with advertising to its
roughly 80 million active
monthly listeners, though CR
subscribers can see the next
eight songs slated to play on
any station.
A social networking component lets users attach photos
and eight-second personal videos to songs to send to friends.
CRs CEO, Tom Brophy, said
the low monthly price was the
centerpiece of his pitch when
he started licensing negotia-
tions with record companies

several years ago.
After starting the company
in 2014, he has obtained licenses from all three major record companies, giving them a
collective $8 million in advance money as part of the
deal and issuing them a 5%
stake in the company, which is
traded on the over-the-counter
CR Media aims to
launch its musicstreaming service in
coming months.
bulletin board. CR still needs
to raise more money to launch
the service, Mr. Brophy said.
Some record-label executives said they licensed the
service in hopes that the low
price could hook more young
consumers on subscription
streaming, leading to higherpriced plans down the road.
Another executive said that
his company had agreed to license its music to CR primarily because it didnt want to
turn down the advance money.
B2 | Monday, March 7, 2016
INDEX TO BUSINESSES
BUSINESS NEWS
These indexes cite notable references to most parent companies and businesspeople
in todays edition. Articles on regional page inserts arent cited in these indexes.
B
Banco Bilbao Vizcaya
Argentaria.................B7
Banco Santander ........ B5
BlackRock....................B7
BNP Paribas................B7
Boeing.........................A6
BP................................B4
British Broadcasting .. A4
British Land................B8
Buckle..........................B1
EuroHypo.....................B5
Euromonitor
International.............A8
Exxon Mobil................B4
F
Facebook......................B3
Flipkart........................A2
Forever 21...................B1
G
Gamesa Corporacion
Tecnologica ............... B4
Gassco.........................A3
H
Hershey.......................B4
H&M Hennes & Mauritz
.....................................B1
J
J.P. Morgan Chase......B7
C
Chevron ....................... B4
Coach...........................B8
Commerzbank ............. B5
CR Media..................B1
D
Deutsche Bank............B5
Deutsche Brse...........B8
L
Land Securities GroupB8
London Stock Exchange
Group.........................B8
Luigi Lavazza..............A1
Morgan Stanley.....A2,B7
Nestle....................A1,A8
Nissan Motor..............B1
P
Pacific Sunwear of
California .................. B1
Pandora Media............B1
R
Renault........................B1
S
Samsonite...................B8
Siemens.......................B4
Socit Gnrale.........B7
Space Exploration
Technologies.............B2
Starbucks....................A8
Statoil.........................A3
T
The British Broadcasting
.....................................B3
Tiffany.........................B8
U
UniCredit.....................B5
Urban Outfitters.........B1
Y
Yum! Brands ............... B4
M-N
McDonald's ................. A8
Zumiez.........................B1
INDEX TO PEOPLE
A
Alloatti, Filippo...........B5
Fico, Robert ................ A3
Oldani, Carlo...............A8
Andersson, Bo.............B1
Orlopp, Bettina...........B5
Gamez, Sergio.............B7
Bardolla, Alfio.............A8
Ghosn, Carlos..............B4
Subbarao, Duvvuri......B8
Blessing, Martin.........B5
Goldberg, Pablo...........B7
Gove, Michael.............A4
T
Talese, Nan.................B2
Carpenito, Antonio.....A8
Chemezov, Sergei.......B1
Hasenstab, Michael....B5
Tillerson, Rex..............B4
Chen, Oliver ................ B2
Tungesvik, Geir...........B4
Conte, Annamaria.......A8
Johnson, Boris............A4
Cook, Tim....................B1
Juckes, Kit .................. B7
Wang, Frank................B1
Coviello, Art................B1
Warner, Mark..............B1
Currie, Colin ................ B4
D
Daz, Santiago Lpez..B7
Tenengauzer, Daniel...B7
Mandel, Michael.........B5
Watson, John..............B4
McCaul, Michael ......... B1
Mller, Klaus-Peter .... B5
Xiong, Derrick.............B1
Dudley, Bob.................B4
Nathaniel, David.........A8
Zhou Xiaochuan..........B8
Elon Musk...................B2
Nystedt, Jens..............B7
Zielke, Martin.............B5
Prince of Tides
Best-Selling Author
Pat Conroy Dies at 70
BY JEFFREY A. TRACHTENBERG
you a novel and I intend to deliver it.

Mr. Conroys ambitious,
sometimes painful exploration
of the American psyche made
him one of the countrys most
popular writers.
His father was a military officer, and his works reflected a
peripatetic life flavored by a
military upbringing.
Mr. Conroys books have
sold more than 20 million copies world-wide, according to
his publisher, with The Great
Santini, The Lords of Disci-
He will be cherished
as one of Americas
favoritewriters,
editor Nan Talese.
pline and The Prince of
Tides all successfully translated into movie adaptations.
He also wrote the cookbook
memoir, The Pat Conroy
Cookbook: Recipes and Stories
of My Life. This book is the
story of my life as it relates to
the subject of food, he wrote
in promotional copy for the
book.
Let me take you to a restaurant on the Left Bank of
Paris that I found when writing The Lords of Discipline.
Mr. Conroy was married to
the novelist Cassandra King
Conroy. In a statement issued
by his publisher, she said,
The water is wide and he has
now passed over.
GREG CEO FOR THE WALL STREET JOURNAL
Pat Conroy, the much-admired author of such novels as

South of Broad and The
Prince of Tides,
OBITUARY died Friday at
the age of 70 in
PAT
Beaufort, S.C.,
CONROY
1945-2016
according to his
publisher.
Pat has been
my beloved friend and author
for 35 years, spanning his career from The Prince of Tides
to today, said Nan Talese, his
longtime editor and publisher
at Doubleday, in a statement.
He will be cherished as one of
Americas favorite and bestselling writers.
Mr. Conroy, in a Feb. 15
post on Facebook, disclosed
that he was suffering from
pancreatic cancer.
I celebrated my 70th birthday in October and realized
that Ive spent my whole writing life trying to find out who
I am and I dont believe Ive
even come close, wrote Mr.
Conroy.
It was in Beaufort in sight
of a rivers sinuous turn, and
the movements of its dolphinproud tides that I began to
discover myself and where my
life began at fifteen.
I have recently been diagnosed with pancreatic cancer.
With the help of the wonderful
people at M.D. Anderson I intend to fight it hard. I am
grateful to all my beloved
readers, my friends and my
family for their prayers. I owe
CRAIG RUBADOUX/ASSOCIATED PRESS
Dresdner Bank............B5
Pat Conroy, shown in 2013, also wrote The Great Santini.
SpaceX notched another successful Falcon 9 rocket launch, above, Friday. However, the booster slammed into its intended landing site.
SpaceXRocketsLandingFails
BY ANDY PASZTOR
Elon Musks Space Exploration Technologies Corp. came
up short once again trying
to land the lower portion of a
spent booster on a floating
platform, even as it notched
another successful Falcon 9
rocket launch.
Fridays nighttime liftoff
of an upgraded version
of the Falcon 9 from Floridas
Cape Canaveral Air Force
Base was uneventful, after
four aborted tries stretching
over the past week.
But returning the lower
portion of the used rocket to
Earth didnt unfold as officials
of SpaceX, as the company is
called, had hoped.
Less than three minutes after a flawless blastoff, the
lower stage and its nine Mer-
lin engines separated as

planned while flying faster
than 5,000 miles an hour and
subsequently started a series
of carefully programmed maneuvers to head back toward
the Earth.
But the engines may have
run out of fuel prematurely or
were unable to slow down the
rocket enoughproblems the
company previously had indicated were likelyand the
booster slammed into its intended landing site.
Transmission of video images from the specially outfitted barge, some 400 miles off
the Florida coast, stopped before the return sequence had
ended, leaving reporters and
others unsure of what transpired.
Roughly one hour later, Mr.
Musk posted an update on
Twitter confirming the landing

attempt didnt succeed.
Rocket landed hard on the
drone ship, he posted. Didnt
expect this one to work, he
added, due to the high speed
re-entering the atmosphere.
From the beginning, SpaceX
officials and Mr. Musk, the billionaire entrepreneur who
founded and controls the company, stressed that chances of
a successful landing were remote due to the type of satellite launch, and the likelihood
that the returning part of the
rocket would be traveling too
fast or wouldnt have adequate
fuel to position itself for a
proper vertical touchdown.
SpaceX successfully landed
a spent booster on land last
December but that followed a
mission to a lower orbit,
which meant there was more
fuel left in the tanks to slow

down and position the returning first stage. The returning
booster also was traveling at a
slower velocity.
Despite the stumble in demonstrating rocket reusability
even under such difficult conditions, Fridays flight was
good news for the Southern
California company, which
projects launching a total of a
dozen other government and
commercial payloads in 2016.
The roughly 12,000-pound satellite boosted into high-earth
orbit for international satellite
operator SES SA was the largest payload SpaceX has ever
taken to such an altitude.
The souped-up version of
the Falcon 9, including larger
fuel tanks and greater thrust,
appeared to operate exactly as
designed.
AUTO
Continued from page B1
cording to industry data, and
are forecast to fall to 1.3 million in 2016. Sales of AvtoVAZs mainstay Lada cars
were down 31% last year to
269,000 vehicles compared
with 2014.
Last month, AvtoVAZ said
it needed a bailout, its second
since 2009, after its net loss
for 2015 nearly tripled from
the prior year, to 74 billion
rubles ($1.2 billion). The
company also shifted its staff
to a four-day workweek last
month, slashing pay by 20%.
Mr. Chemezov said in an
interview that he disapproved
of how Mr. Andersson steered
the company as the economy
crumbled, but said the main
reason for calling for Mr. Anderssons removal was last
years steep loss. He said he
expected Mr. Andersson
would leave AvtoVAZ soon after the board makes its decision. Renault plans to send
one of its executives to take
over operations, he said.
Mr. Andersson would be
the most high-profile foreign
CEO to be ousted from a Russian company since Bob Dudley, now the head of BP PLC,
left a joint venture between
the British oil company and a
group of Russian tycoons in
2008 after his work visa
wasnt renewed and he said
he faced harassment.
The 12-year veteran of the
Swedish army was appointed
to lead AvtoVAZ in 2014, and
tasked with turning a sprawling, Soviet-era auto plant into
a modern enterprise. Mr. Andersson earlier had taken
charge of GAZ Group, a Russian truck and bus maker,
leading it to a $120 million
profit in his first year from a
$1 billion loss a year earlier.
In 2014, he moved to improve efficiency at AvtoVAZ,
whose Lada sedans were once
the pride of the Soviet auto
RETAIL
months ended Jan. 31. Its earnings call with management is
scheduled for Monday.
Urban Outfitters is looking
for ways to increase its relevance to customers, and customers are looking to go into
stores that have experiences,
DMITRY BELIAKOV FOR THE WALL STREET JOURNAL
A
Abercrombie & Fitch...B1
Adidas ......................... B4
Aeropostale.................B1
Alphabet......................B1
American Eagle
Outfitters..................B1
Apple...........................B1
Areva...........................B4
AvtoVAZ......................B1
Two top shareholders are pushing to replace CEO Bo Andersson, shown above at a factory in 2015.
industry. He laid off tens of
thousands of workers and renegotiated contracts with
suppliers, stoking resentment
after some local suppliers
couldnt pay their workers.
AvtoVAZ, established in
the 1960s and based in Togliatti some 800 kilometers
east of Moscow, struggled for
a chaotic decade-and-a-half
after the collapse of the Soviet Union, a period that included shootouts at the factory gates as criminal gangs
vied for control.
The company was taken
over by the state arms-trading agency Rosoboronexport,
now a subsidiary of Rostec, in
the
mid-2000s.
Renault
bought a one-quarter stake in
2008 and took a controlling
interest along with Nissan in
2012. Some of the most recent models introduced by
AvtoVAZ were based on Renault and Nissan platforms.
So far Renault hasnt been
severely wounded by its investment. The French auto
maker reported earnings rose
49% on a 10% revenue gain
last year as the European

auto market gained steam. Its
share of AvtoVazs loss was
$700 million for 2015.
The Rostec chief praised
Mr. Andersson for cutting
some costs and launching
production of two new cars.
But, he said, Mr. Andersson
had too often turned to for-
eign suppliers instead of local

suppliers. And his job cuts
stoked tensions in the town,
leading to several protests
late last year.
The tension was building
up [in Togliatti], Mr. Chemezov said. I told him several
times to be careful, but he
doesnt understand.
said Oliver Chen, an analyst at

Cowen & Co.
Urban Outfitters, which also
owns the Anthropologie and
Free People brands, made the
unusual move of buying a restaurant group. In November, it
announced plans to acquire
Philadelphias Vetri Family
group of restaurants as a way
to capture increasing consumer spending on casual dining.
The issue for the sectors

retailers is they might not be
adapting fast enough to satisfy
the fickle tastes of teenage
shoppers.
Outside
Aropostales store in New Yorks
Times Square, Pauline Caspar,
18 years old, said brand names
splashed across tops and
sweatshirts immediately catch
her attention and put her off.
It always says Aropostale as
if you are advertising for
them, she said.

Mariana Rose, 18, shopping
at an American Eagle store
nearby, said she prefers having
different options for every
season. Abercrombie and
American Eagle have their
own styleit never changes,
she said. I only go there for
basics, and thats it.
Reversal of Fortunes
Russias new-car sales tumbled last year as high ination and
currency weakness forced consumers to cut back on purchases.
Light vehicles sales by country, and change from a year earlier
VEHICLES SOLD
IN 2015
CHANGE FROM 2014
Spain
1.0 million
20.9%
Italy
1.7
France
1.9
COUNTRY
15.5%
6.8%
U.K.
2.6
U.S.
17.4
5.8%
3.2
5.6%
Germany
China
12.1
Russia
1.6
6.3%
2.5%
35.7%
Source: WardsAuto
The Week Ahead looks at

coming corporate events.
TECHNOLOGY
DAVID PAUL MORRIS/BLOOMBERG NEWS

to research firm IDC. By comparison, the Consumer Electronics Association last year
estimated that 700,000 drones
would be sold in the U.S. in
2015. But Chinas annual drone
shipments are expected to rise
sharply to 3.1 million units by
2019, as distribution channels
expand and drones find industrial applications such as mineral exploration, law enforcement and agriculture, IDC
said. DJI built its business primarily in the U.S. several years
ago because there were few
other markets in the world
where demand and applications for drones existed.
When the Chinese company
developed its first Phantom
four-propeller drone in 2012,
it immediately took the new
product to California and
showed it to Hollywood producers and Silicon Valley executives. Since then, its drones
from the roughly $1,000
Phantom models to professional devices that cost more
than $4,000have won over
U.S. filmmakers, celebrities
and consumers.
This month it unveiled the
new Phantom 4, the first consumer drone that can automatically avoid obstacles like
trees, buildings and people.
By making its drones easier
to fly and aerial photography
far more accessible, DJI has
helped to open up a new mar-
Ehang Ghost Drone 2.0 at this years Consumer Electronics Show.
Facebooks U.K. Taxes to Rise

Companychanges
paymentsstructureas
Europeangovernments
boostpolitical pressure
BY SAM SCHECHNER
LONDONFacebook Inc.
plans to boost its tax payments in the U.K., the latest
tech giant to change its tax
structure under mounting political pressure from European
governments.
The social-networking firm
said Friday that as of April it
will direct big U.K. clients to
start cutting their checks to a
Facebook affiliate in the country, rather than funneling that
revenue through low-tax Ireland and then on to the Cayman Islands. The change will
boost the revenueand likely
the tax liabilityof Facebooks
U.K. entity, though a spokesman for the company declined
to provide estimates.
The new structure is easier to understand and clearly
recognizes the value our
U.K. organization adds to our
sales through our highly
skilled and growing U.K. sales
team, the company said in a
memo to U.K. employees seen
by The Wall Street Journal.
The move is the latest sign
that multinational corporations, particularly in the tech
sector, are changing their tax
practices amid a global shakeup in tax rules. Driving the
changes have been efforts by
countries to reshape tax treatment at the international
level, but national rules are
also changing, like the U.K.s
new diverted-profits tax that
passed last year.
Amazon.com Inc. last summer made a change to its European structure to begin collecting revenue from units in
individual European countries,
rather than through Luxembourg. Alphabet Inc.s Google
also said in January that it
would start attributing some
revenue from Google clients in
CHRIS RATCLIFFE/BLOOMBERG NEWS
DRONES
ket in the U.S. beyond the military and a small group of

hobbyists,
said
Philip
Finnegan, director of corporate analysis at U.S. aerospace
market researcher Teal Group.
In doing so, it has become
one of the worlds most valuable tech startups, valued at
roughly $8 billion in its latest
$75 million fundraising last
May from Silicon Valley venture-capital firm Accel Partners. With 1,500 engineers
working on hardware and software technologies for its
drones, it has recruited former
engineers from Apple Inc. and
Tesla Motors and built a new
research and development office in Palo Alto, which the
company says will eventually
employ several dozen people.Last year, DJIs revenue
stood at roughly $1 billion, according to a person familiar
with the matter.
The U.S. accounted for
more than 40% of its sales,
while Asia took up roughly
20%, according to the person.
But it is now facing new
challenges from competitors
backed by prominent investors, often offering cheaper
devices. Intel in January acquired German drone startup
Ascending Technologies, after investing more than $60
million last year in Hong
Kong-based drone maker
Yuneec Holding Ltd. A
spokesman for Yuneec said the
company plans to soon open a
new office in Japan, in addition to existing ones in China
and Hong Kong.
@wsjd | wsjd.com
Facebooks revisions are likely to raise the revenueand likely the tax liabilityof its U.K. entity.
the U.K. to its local unit,
boosting taxes.
Googles change has come
under intense criticism in
the U.K. because it was coupled with a settlement in
which Google agreed to pay
130 million ($185 million) in back taxes over a decade, an amount critics said
was too small.
Facebook, which is based
in Menlo Park, Calif., said Friday that it didnt strike any
deal with HM Revenue & Customs, the U.K. governments
tax authority, but had informed it of its planned
changes in how it handles
revenue from U.K. clients.
A spokesman for HMRC
said it didnt comment on individual taxpayers but added,
We will closely examine any
businesss structure on behalf
of the British public to make
absolutely sure they pay all
the tax due to the U.K.
The British Broadcasting

Corp. first reported Facebooks tax change.
Under Facebooks new
structure, clients that work
with U.K.-based salespeople
to craft their advertising
plans will pay for ads in the
U.K., while smaller clients
Revenue from big

U.K. clients wont be
funneled through
low-tax Ireland.
that use automated ad-buying
systems will continue to buy
their ads from Facebooks
Irish entity. It isnt yet clear
how Facebook will attribute
the costs for selling those ads
to the U.K. unit.
Currently, Facebooks Irish
unit pays a large royalty fee
for the use of Facebooks in-
tellectual property, reducing

its taxable income in Ireland.
The U.K. unit likely will also
have to pay for the use of the
technology developed outside
the U.K., which could reduce
the profit and tax it would
have to pay in the U.K.
In 2014, Facebooks U.K.
unit reported a 28 million
loss on 105 million in revenue, according to U.K. corporate filings. But the units
only client was Facebook itself, providing what the company described as sales support, marketing services and
engineering support, rather
than taking in revenue from
clients.
While Facebook doesnt
break out its revenue from
U.K. clients, market-research
firm eMarketer estimates
Facebook brought in 632 million from the U.K. last year.
Nicholas Winning
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BUSINESS NEWS
AdidasPlansMoreStoresinChina
Sportswear company
shrugs off economic
worries, will add 3,000
more retail outlets
BP Chiefs
Total Pay
Rose 20%
Last Year
BEIJINGAdidas AG is
planning to open 3,000 stores
in China over the next five
years, shrugging off concerns
that a slowdown in the Chinese economy will further
damp consumer demand.
The German sportswear giant is expanding to 12,000
stores in China from its current 9,000 and aspires to more
than double the cities where it
sells its running gear and tennis shoes to at least 2,200,
said Adidas China head Colin
Currie in a briefing on Friday.
Mr. Currie said Adidas is
keying on positives for its
business in China, such as new
government policies to foster
the soccer industry and population growth.
The company will focus on
Chinas smallest cities, expecting continued urbanization
even in the face of economic
challenges, Mr. Currie said.
We are cautiously optimistic, but were far more on the
optimistic side, he said. Adidas executives plan to keep a
close eye on the companys
sales data to monitor for potential fallout across China,
now its fastest-growing global
market, Mr. Currie said.
Adidas has continued to
grow operations in China even
as sales sag for some foreign
food-and-beverage companies,
such as Yum Brands Inc.,
owner of the Pizza Hut and
KFC franchises, and chocolate
maker Hershey Co.
Adidas reported on Thursday that its sales last year in
the China region, including
Hong Kong and Taiwan, increased 18% excluding foreignexchange effects.
LONDONBP PLC Chief Executive Bob Dudley received a

20% bump in his total compensation package last year, bringing it to $19.6 million despite a
continuing slump in oil prices
that has battered the energy
companys earnings.
Mr. Dudley got a boost in
2015 from a $1.4 million cash
bonusup from about $1 million in 2014and a doubling of
his retirement savings from
2014 to $6.5 million, the company said in its annual report
released on Friday.
Overall, the company continued a freeze on its executives
salaries and said they would remain static in 2016 given the
low oil prices. Mr. Dudleys actual salary of about $1.9 million
was little changed from 2014.
BP is the first of the socalled oil majors to release details of executive pay in 2015
a year defined by a nearly 50%
drop in oil prices that hammered the entire sector.
Mr. Dudleys compensation
increase reflects a year in
which BP incurred a loss of $5.2
billion. The company said this
year it would cut 7,000 jobs by
the end of 2017 and has slashed
spending to help manage the
slump. Mr. Dudley should be accustomed to operating under
such pressure.
The 60-year-old executives
time at the head of the company
has been defined by crises: BPs
2010 blowout in the Gulf of Mexico followed by one of the biggest oil slumps in the markets
history.
Though sizable, Mr. Dudleys
pay package is still much smaller
when compared with the heads
of the largest U.S. oil companies.
In 2014, Exxon Mobil Corp. CEO
Rex Tillerson received compensation valued at $33 million and
Chevron Corp. head John Watson got a $26 million package.
Such massive payouts have
in the past led to tensions with
investors. For instance, last
year, shareholder advisory
group Glass Lewis recommended investors vote down
Mr. Dudleys proposed pay for
2014, though ultimately the
package received approval at
the companys annual meeting.
BP said its compensation
committee focused on Mr. Dudleys success in bringing down
costs and spending, a strong
safety record for the year and
operating cash flow and underlying profit that beat internal
targets.
The companys decision in
late 2014 to plan for a lower
for longer oil price meant that
the leadership acted early and
decisively to respond to the
low oil price environment, BP
said in the annual report.
Overall, management delivered very well in terms of
what they could control.
BP said Mr. Dudleys pay
package isnt as large as it
looks because U.K. reporting
requirements have inflated the
increase in Mr. Dudleys pension. The company said their
top executives pension savings
increased by $309,000 last
year. That number has been
multiplied by 20 in the report
to comply with U.K. regulations, but the company said a
U.S. plan like Mr. Dudleys
would more typically have an
annuity factor of around 14.
Excluding pension and retirement savings the executives pay fell to $13.1 million
in 2015, compared with $13.4
million a year earlier. He received $9.7 million from a deferred bonus and performancelinked shares, down from $10.4
million in 2014. Along with his
salary and cash bonus, he received $119,000 for a car, security and other benefits.
German sportswear giant Adidas is expanding its retail presence in China. The company wants to focus on the countrys small cities.
In the fourth quarter, sales
were up 16% on the same basis. Much of the companys
growth has come from aggressive expansion across China.
China is a key growth market for sportswear makers, as
more middle-class Chinese hit
the gym, take up sports or
travel for outdoor adventures.
The sportswear market in
China, including everything
from swimsuits to soccer
shorts, grew to 165 billion
yuan, or $25.3 billion, last
year, up 11% from a year earlier, according to market research firm Euromonitor International. As part of
diversifying the economy,
Chinas leaders are championing the development of sports,
building up athletic events as
well as arenas and television
stations to support them.

A big priority is soccer. Chinese president Xi Jinping, a
huge soccer fan, has said his
dream is that China will qualify for, host and win a future
World Cup. Chinese companies
have invested in overseas soccer teams and Chinese teams
have paid large transfer fees
to bring in star players from
Europe. Conglomerate Dalian
Wanda Group bought a 20%
stake in Spanish soccer club
Atltico Madrid last year.
Adidas is attempting to piggyback on a government mandate making soccer compulsory in schools. Last year, it
signed a three-year deal to
create soccer programs in
20,000 elementary and middle
schools across China, training
50,000 teachers and running a
national summer camp.

Adidas is hoping to repeat in
soccer the success that Nike
Inc. has had in building up basketball in China, now one of the
countrys most popular sports.
Nike is now the No. 1 sports
brand in China by market
share, leading with 17.5% share
of sales, while Adidas is right
behind with 16%, according to
Euromonitor International.
Mr. Currie said he believes
that Chinas soccer agenda will
boost the participation rate
and benefit the company.
Many Chinese wear Adidas
as athleisure wear, but the
demand for athletics gear is
likely to grow over the next
five to 10 years, he said, adding, I think were at the
crossroads of a cultural
change.
To be sure, many sportswear companies expected a

sporting boom in 2008, when
China hosted the Summer
Olympic Games in Beijing. Yet
companies, including Adidas,
overestimated the demand and
suffered from a glut of inventory for years as a result.
Mr. Currie said the trends
are different now as more people participate in sports and
as women and girls have become a key segment of the
athletic market.
The company plans to open
stores that focus on individual
sports and population groups,
selling soccer gear and more
apparel to children. Mr. Currie
also sees a boost from the end
of Chinas one-child policy,
which he expects to result in
more children playing sports.
Siemens, Gamesa Hit Snag With Tie-Up

BY EYK HENNING
AND CHRISTOPHER ALESSI
FRANKFURTA
billioneuro tie-up of Siemens AGs
wind-power activities with
Gamesa Corporacion Tecnologica SA has hit a snag because the Spanish wind-turbine maker needs more time
to renegotiate the future of an
offshore wind joint venture
with French nuclear-engineering firm Areva SA, people familiar with the matter
said Friday.
Siemens
and
Gamesa
reached an agreement in principle weeks ago by which Siemens would transfer its wind
activities to the Spanish company in exchange for a 60%

stake in a future combined entity, the people said.
The deal would create the
worlds largest wind-turbine
maker by capacity, with a market value of roughly 10 billion, or about $11 billion.
However, that transaction
hasnt been signed yet because
the ownership structure of
Gamesas 50-50 offshore joint
venture with Areva, known as
Adwen, must be rearranged
because the Spanish company
will get a new controlling
shareholder with Siemens, according to the people.
One potential route under
discussion could see Gamesa

buy Arevas stake in Adwen,
one of the people said.
Areva is closely watching
developments in the offshore
wind sector but remains focused on the execution of our
projects through our JV Adwen, a representative for the
company said in a written
statement on Friday. Those
projects include a 600-megawatt offshore wind farm in the
German North Sea.
Gamesa and Siemens declined to comment on Friday.
Siemens and Areva also
arent strangers. The companies had a joint venture of
their own, Areva NP, which
Siemens exited in early 2011.

At the time, Areva alleged
that Siemens had violated the
agreement by holding talks
over a separate tie-up with
Russias Rosatom. Areva ultimately bought Siemenss stake
in their joint venture for 1.62
billion, but an arbitration
court later forced Siemens to
pay back 648 million.
Now, the potential deal between Siemens and Gamesa
would propel the German industrial conglomerate ahead
of wind-turbine market leader
Vestas AS, while allowing it to
increase its onshore wind
business capabilities.
The deal would be the latest
in the global wind-turbine industrys process of consolidation. In October, German turbine maker Nordex SE said it
would purchase the wind operations of Spains Acciona SA
for cash and shares valued at
785 million.
The industry has been preparing for slower growth and
more intense competition, according to analysts at J.P. Morgan, as it tries to reduce the
cost of turbines and the cost
of energy for wind.
Siemens led wind-turbine orders during the second half of
2015, followed by Vestas, General Electric Co. and Gamesa, according to Navigant Research.
unit to recall 2,425 Passat 2.0
TDI sedans for a possible oilpump failure that could lead to a
sudden engine stop.
In-Soo Nam
Business
Watch
XIAOMI
India Remains Focus

Of Chinese Tech Firm
RENAULT
Sharing functions to save

costs will produce an estimated
5.5 billion ($6 billion) in synergies by 2018, Renault SA and
Nissan Motor Co. said, as the
two car makers vowed to
deepen ties.
Last year, the two companies, which work together under the Renault-Nissan Alliance,
netted a total of 4 billion in
internal savings as they shared
engineering, purchasing, human
resources and supply-chain
management functions.
Now, the alliance hopes to
partly converge the two companies quality and costing departments, according to a
statement issued Friday from
the Renault-Nissan Alliance. It
also will look to increase synergies in several other departments, including sales and marketing, product planning and
after sales services.
As global car makers fight for
market share and expand globally to wring growth from all
corners of the world, Renault
and Nissan, which have been in
an alliance since 1999, have followed the more unusual path of
increasing collaboration but still
maintain separate corporate and
brand identities without completely merging the companies.
Renault owns 43.4% in Nissan, while the Japanese com-
JASON ALDEN/BLOOMBERG NEWS
Closer Nissan Ties

To Yield More Savings
Renault and Nissan vowed to deepen ties. Above, Renault cars on display at the Geneva auto show.
pany owns 15% of Renault.
The auto industry is rapidly
evolving, requiring Renault and
Nissan to leverage the Alliance
as a pragmatic business tool,
said Carlos Ghosn, chief executive of both car makers. The
road ahead is one of more convergence, working more closely
together.
Jason Chow
STATOIL
Contract Terminated
With Rig Operator
Norways Statoil ASA said on

Sunday it had decided to end its
contract with a drilling rig operated by China Oilfield Services
Ltd., or COSL, three months after a worker died when the rig
was hit by a wave during a
storm in the North Sea.
The conditions for terminating the contract signed with
COSL Offshore Management AS

have, in our opinion, been met,
said Geir Tungesvik, Statoils senior vice president for drilling
and well, in a statement.
One rig worker died and two
others were injured at the COSL
Innovator rig on Dec. 30, when a
wave surge shattered several of
the rigs windows during a
storm, the first fatality on the
Norwegian continental shelf
since 2009. The accident is being investigated by the countrys
Petroleum Safety Authority.
A Statoil spokesman said the
contract hadnt been ended due
to the fatality, but because the
COSL Innovator didnt satisfy
conditions stipulated in the contract. The spokesman declined to
specify which conditions, saying
that was confidential.
COSL wasnt immediately
available for comment.
Kjetil Malkenes Hovland
HONDA
More Than 7,000 Cars

Recalled in Korea
South Koreas Transport Ministry on Friday ordered Honda

Motor Co. to recall thousands of
cars with problematic air bags
that were imported into Korea.
A total of 7,659 Civic FD1 and
Legend KB1 sedans equipped
with rupture-prone Takata Corp.
air bags are subject to the recall,
the ministry said. In the event of
a crash, the air bags installed in
these vehicles could send metal
fragments flying and injure passengers, the ministry said.
The recall in Korea is part of
the Japanese auto makers plan
to bring back millions of its cars
that have been found to have
the defective air bags since
2014.
Separately, the ministry ordered Volkswagen AGs Korean
Xiaomi Corp. Chairman and

Chief Executive Lei Jun said that
India continued to be a major target market this year and that he
aimed to further expand in businesses other than smartphones.
The Chinese technology company still has no immediate plans
for an initial public offering of
stock, he said.
Our focus has been sharpened on the Indian market, Mr.
Lei said. We are currently in
about sixth or seventh place
there, so theres an improvement,
but I hope to move into the top
three as soon as possible.
Mr. Lei made the comments
Saturday on the sidelines of the
annual meeting of the National
Peoples Congress, Chinas largely
rubber-stamp parliament, of
which he is a delegate.
At last years NPC, Mr. Lei unveiled sales targets, but he was
more restrained Saturday after
Xiaomi missed its smartphone
sales target for 2015.
He declined to discuss smartphone sales or how the company
planned to battle its chief domestic rival, Huawei Technologies Co.
Xiaomi shot to the top of
Chinas smartphone market in
2014 with its online sales of
bargain smartphones. Chinas
smartphone market since then
has had an influx of competitors
and Xiaomis sales growth
slowed last year.
Chun Han Wong
and Eva Dou
CHRISTOPHE MORIN/BLOOMBERG NEWS
BY SARAH KENT
ZHANG PENG/LIGHTROCKET VIA GETTY IMAGES
BY LAURIE BURKITT
BP Chief Executive Bob Dudley
Samsonite Pays Up
To Go Upmarket
Stability, Not IPOs,

Takes Priority in China
HEARD ON THE STREET | B8
REGULATION | B7
As of 4 p.m. ET Friday EUR/GBP 0.7734 0.06%
MAX ROSSI/REUTERS
NG HAN GUAN/ASSOCIATED PRESS
MARKETS DIGEST B6 | FINANCE WATCH B8
YEN/DLR 113.96 0.23% GOLD 1269.90 0.99%
OIL 35.92 3.91%
3-MONTH LIBOR 0.63350%
10-YR TREAS g 15/32 yield 1.883%
A Dumping
Ground for
Bank Losses
Stocks in many developing countries are rallying in 2016,
though some big markets are still in a rut
Performance since end of 2012

2.1%
2.0%
20%
BRAZIL
27%
26%
INDONESIA
TURKEY
13%
11%
7.4%
MALAYSIA
RUSSIA
3.9%
3.7%
Percentage change this year
Percentage change this year

0.1%
1.0%
2.9%
PHILIPPINES
Performance since end of 2012
23%
12%
1.8%
0.0%
26%
7.3%
20%
INDIA
CHINA
A Lunar New Year
celebration in
Indonesia, above,
and a market in
Manila, left.
Photos: Edi Ismail/LightRocket/Getty Images (top); Aaron Favila/Associated Press
Note: Through Thursday
Sources: FactSet (stock indexes); Thomson Reuters (Nifty India); RBC Capital Markets (2016 percentage change)
Emerging Markets Don Rally Cap

BY IRA IOSEBASHVILI
AND CAROLYN CUI
Emerging markets, which
last year slumped, have rallied in recent weeks, amid a
rebound in commodity prices
and increasing confidence the
U.S. central bank wont soon
raise interest rates.
The turnabout is fueling a
number of assets. As of late
last week, stocks in emerging
markets were up 12% since
late January, according to the
MSCI Emerging Markets In-
dex, erasing most of the declines they sustained during a

selloff at the start of the year.
Currencies such as the Mexican peso and Russian ruble
also have roared back from
recent lows, up 7% and 13%,
respectively, against the U.S.
dollar.
During the first two
months of the year, emerging
countries had bond inflows of
$5 billion, according to the Institute of International Finance.
We feel weve reached a
point of maximum pessimism

on emerging markets, and
those types of extreme sentiments usually indicate an opportunity, Franklin Templeton portfolio manager Michael
Hasenstab wrote in February
as the markets began to turn.
The weekslong rally, one of
the biggest for emerging markets during a period of punishing declines in various assets, comes despite slowing
economic growth across most
of these markets and heavy
debt burdens.
Banco Bust
Quarterly losses booked in
Santanders corporate center
0.5 billion
BY JEANNETTE NEUMANN
POLAND
SOUTH
KOREA
Santander, other
lenders book some of
problems in vague
corporate center
Investors willingness to
bet on emerging markets illustrates how money managers are searching for yield at
a time when central banks in
Europe and Japan have
pushed some interest rates
into negative territory, and
U.S. bond yields remain near
record lows.
It also shows how some investors fear that sitting out
what may be a fleeting rally
can leave them badly lagging
behind peers and benchmark
Please see RALLY page B7
MADRIDEuropean lenders face all sorts of pressure on

their profitsfrom weak investment banking to energy
loans to souring returns
in emerging markets.
But to judge by some of
their books, the banks biggest
problems are elsewhere, in
something called the corporate center.
The vaguely defined area,
set up as a catch-all category
for shared costs like headquarters staff, is becoming a dumping ground for losses related to
everything from bad acquisitions to penalties for wayward
business practices.
Banco Santander SA, the
eurozones largest bank by
market value, booked 1.6 billion ($1.76 billion) of corporatecenter losses for the fourth
quarter of 2015, wiping out all
but 25 million of the gains reported by its other divisions,
all but one of which were profitable.
Italys
UniCredit
SpA
booked 1.1 billion of losses in
its corporate center in the first
half of 2015, offsetting
the profit before tax in its corporate- and investment-banking division.
Other banks in the U.K.,
France and Spain have piled up
corporate-center losses as
0.5
1.0
1.5
2.0
2010 11
12
13
14
15
Note: 1 billion=$1.1 billion

Source: the bank
well. Investors and analysts

complain the practice masks
the true performance of business lines like investment
banking or operations in specific countries such as Brazil.
They also worry it hurts accountability: Typically, there
are no corporate-center executives to take the blame.
It makes the job more difficultyou have to reclassify everything, said Filippo Alloatti,
a Hermes Credit senior analyst
in London, protesting how hard
it can be to figure out a specific divisions profit. It takes
two hours or more to dig out
the real number.
Santander and UniCredit
each said they are working to
make charges in their corpoPlease see BANKS page B7
BIS Sounds an Alarm About Effects of Negative Rates

BY BRIAN BLACKSTONE
ZURICHThe Bank for International
Settlements
warned Sunday that centralbank stimulus may have less
traction in financial markets
than it once had, and raised
questions about the consequences of a tool that has
gained favor of late: negative
interest rates.
Underlying some of the
turbulence of the past few
months was a growing perception in financial markets
that central banks might be
running out of effective policy
options, said the Basel, Switzerland-based BIS, a consortium of central banks, in its
quarterly report on financial
markets.
And while central banks
have shown they can cut rates
below zero, there is great uncertainty about the behavior

of individuals and institutions
if rates were to decline further into negative territory or
remain negative for a prolonged period, the BIS said.
Meanwhile, the groups
chief economist, Claudio Borio, said that emerging markets face risks from tighter financing conditions abroad
and changing financial cycles
at home at a time when debt
issuance from emerging-market borrowers has fallen back.
It is as if two waves with different frequencies came together to form a bigger and
more destructive one, Mr.
Borio said.
The global economy ended
last year on a somewhat positive footing. The U.S. Federal
Reserve lifted interest rates in
December for the first time in

nearly a decade without major
immediate fallout in financial
markets. But that calm quickly
faded at the start of 2016,
driven by concerns over
Chinas growth prospects and
plunging oil prices that drove
already low inflation rates
around the world even lower.
The ECB is expected

to beef up stimulus
measures when it
meets on Thursday.
The Fed hasnt raised rates
again since December and
isnt expected to do so when
it meets later this month. The
European Central Bank is expected to beef up its stimulus
measureswhich include asset purchases and a negative

deposit ratewhen it meets
on Thursday.
The BIS has repeatedly
warned in recent years about
the long-term effects of super-easy monetary policies
and the burden that has been
placed on central bankers to
restore economic growth
around the world.
Despite exceptionally easy
monetary conditions, in key
jurisdictions growth has been
disappointing and inflation
has remained stubbornly low,
Mr. Borio said. Market participants have taken notice.
And their confidence in central banks healing powers
hasprobably for the first
timebeen faltering.
But despite these types of
warnings, many central bank-
ers have continued to press

forward with stimulus in an
environment of very low inflation or outright declines in
consumer prices, known as
deflation.
Entering 2016, central
banks in four European economiesthe eurozone, Switzerland, Sweden and Denmark
had negative interest rates.
Japan joined that club in January, cutting the rate on excess reserves parked at the
central bank to minus 0.1%.
The ECB is expected by analysts to reduce its deposit
rate, currently minus 0.3%,
when it meets Thursday. That
could put pressure on central
banks in neighboring countries, such as Switzerland, to
follow suit. Mr. Borio noted
that $6.5 trillion of global
sovereign debt traded at neg-
ative yields in the wake of the

Bank of Japan decision.
But the BIS cautioned that
as the BoJ and ECB signaled
their willingness to extend accommodation,
markets
showed greater concerns
about the unintended consequences of negative policy
rates.
More recently, the debilitating impact of persistently
negative interest rates on the
profitability of the banking
sector has emerged as an important consideration, according to the BIS report.
Even more directly, such
rates can weaken the profitability and/or soundness of institutions with long-duration
liabilities, such as insurance
companies and pension funds,
seriously challenging their
business models, it said.
BY JON SINDREU
As officials at the European Central Bank gear up
to reassure markets of their
power this week, they are
still to face the elephant in
the room: German and
French banks wont lend to
Italian and Spanish ones.
The fact
MONEYBEAT that many
Northern European lenders would rather pay to park
money at the central bank
than lend to their Southern
European counterparts
shows just how much work
the ECB still has to do to
free up the flow of credit
around the eurozone.
After the financial crisis

hit in 2008, eurozone banks
stopped extending loans to
one another across borders,
but continued lending to financial institutions inside
their own countries. When
the ECB started flooding the
banking system with liquidity in 2012, interbank lending
declined, domestic or otherwise. The reason is that a
great share of the European
banks had so much of this
central-bank moneycalled
reservesthey didnt need to
borrow anymore in order to
settle their transactions.
Please see LENDING page B7
Federal Reserve scales back
plan on bank limits................ B8
BERLINCommerzbank AG
on Sunday said the head of its
retail unit will become its new
chief executive, succeeding one
of the last acting leaders of a
European bank that tapped taxpayers in the financial crisis.
By Andrea Thomas,
Ulrike Dauer
and Eyk Henning
The supervisory board of

Germanys
second-largest
lender appointed Martin Zielke
as the new CEO effective May 1,
to succeed Martin Blessing,
who said last year that he
wouldnt extend his contract,
which ends this year.
"He enjoys the trust of the
entire supervisory board, said
the banks supervisory board
chairman, Klaus-Peter Mller,
in a statement following an extraordinary board meeting on
Sunday. Mr. Zielke has a long

and extensive experience in the
private and corporate customer
businesses, and in the finance
function. He managed the turnaround of the banks private
customers business in an impressive manner."
The supervisory board also
said Michael Mandel will replace Mr. Zielke as retail unit
head, and said it will appoint Bettina Orlopp to the
management board, in charge
of compliance, human resources and legal.
Both Mr. Mandels and Ms.
Orlopps appointments to the
management board are effective May 1, but are subject to
approval by the German banking supervisor BaFin.
Mr. Zielke, 53 years old, currently heads the banks retail
customer business. He has been
a member of Commerzbanks
IMAGO/ZUMA PRESS
Europes North Still Commerzbank Retail Chief to Be CEO

Wont Lend to South
Martin Zielke, incoming CEO

management board responsible
for the retail operations since
November 2010.
He started his professional
career at a branch of crosstown
rival Deutsche Bank AG, followed by stints at former rival
Dresdner Bank AG and Commerzbanks real-estate and

public financing unit, EuroHypo AG.
Under Mr. Zielkes watch, retail outperformed Commerzbanks other operations. Operating profit in the retail area
increased to 751 million ($827
million) last year, from 455
million and 221 million in the
previous years.
Mr. Blessing, oversaw Commerzbanks acquisition of rival
Dresdner Bank and the winddown of EuroHypo. Both operations incurred billions of euros
in losses in the financial crisis,
taking Commerzbank to the
brink of insolvency. As a result,
Mr. Blessing turned to the government, which injected 18
billion of capital into the lender
in late 2008 and early 2009.
The government still holds a
stake of around 15%.
MARKETS DIGEST
Nikkei 225 Index
STOXX 600 Index
Year-to-date
17014.78 s 54.62, or 0.32%
t 10.61%
52-wk high/low20868.03 14952.61
High, low, open and close for each
trading day of the past three months. All-time high 38915.87 12/29/89
341.80 s 2.38, or 0.70%

trading day of the past three months.
Data as of Friday, March 4, 2016
S&P 500 Index
400
19000
380
Last
1999.99 s 6.59, or 0.33%

trading day of the past three months.
Year-to-date
t 6.56%
52-wk high/low 414.06 303.58
All-time high
414.06 4/15/15
20000
4 p.m. New York time

Year ago
Trailing P/E ratio * 23.08 20.50

P/E estimate *
16.55 17.65
Dividend yield
2.27
1.97
All-time high: 2130.82, 05/21/15
2100
65-day moving average

2050
Session high
360
2000
17000
340
1950
16000
320
1900
15000
300
1850
UP
Close
DOWN
Session open
18000
Open
Close
Session low
Bars measure the point change from session's open
14000
Dec.
Jan.
280
Feb.
Dec.
International Stock Indexes

Region/Country Index
World
The Global Dow

MSCI EAFE
MSCI EM USD
Data as of 4 p.m. New York time
Close
Latest
NetChg
2260.08
1628.83
790.97
20.55
17.13
10.78
% chg
Low
2047.44
1491.52
688.52
0.92
1.06
1.38
Americas
Brazil
Canada
Mexico
Chile
DJ Americas
Sao Paulo Bovespa
S&P/TSX Comp
IPC All-Share
Santiago IPSA
478.85
2.19
49084.87 1891.48
13212.50 88.85
44849.02 106.80
3061.63 16.69
433.35
4.01 37497.48
11843.11
0.68
40265.37
0.24
2759.77
0.55
U.S.
DJIA
Nasdaq Composite
S&P 500
CBOE Volatility
17006.77
4717.02
1999.99
16.86
62.87
9.60
6.59
0.16
0.37
0.20
0.33
0.96
Stoxx Europe 600

Stoxx Europe 50
Austria
ATX
Belgium
Bel-20
France
CAC 40
Germany
DAX
Greece
ATG
Hungary
BUX
Israel
Tel Aviv
Italy
FTSE MIB
Netherlands AEX
Poland
WIG
Russia
RTS Index
Spain
IBEX 35
Sweden
SX All Share
Switzerland Swiss Market
South Africa Johannesburg All Share
Turkey
BIST 100
U.K.
FTSE 100
341.80
2860.26
2230.50
3418.58
4456.62
9824.17
552.84
24735.23
1449.75
18278.98
437.99
46400.67
818.25
8811.60
487.00
7982.57
52200.71
77191.14
6199.43
2.38
18.94
18.91
2.01
40.54
72.25
1.48
375.18
69.52
4.04
47.60
19.67
44.60
4.94
31.73
413.70
362.82
68.97
Asia-Pacific
Australia
China
Hong Kong
India
Japan
Singapore
South Korea
Taiwan
1328.40
9.37
5090.00
8.90
2874.15 14.39
20176.70 234.94
24646.48 39.49
17014.78 54.62
2837.00 49.38
1955.63 2.54
8643.55 31.76
EMEA
DJ Asia-Pacific TSM
S&P/ASX 200
Shanghai Composite
Hang Seng
S&P BSE Sensex
Nikkei Stock Avg
Straits Times
Kospi
Weighted
Jan.
0.46
15660.18
4266.84
1829.08
11.95
0.70
0.67
0.86
0.06
0.92
0.74
0.27
1.54
Closed
0.38
0.93
0.10
2.46
0.51
1.02
0.40
0.80
0.47
1.13
303.58
2566.26
1957.05
3130.76
3896.71
8752.87
440.88
18283.40
1383.34
15773.00
382.61
42152.70
628.41
7746.30
435.21
7496.62
46282.02
68567.89
5536.97
1190.45
4765.30
2655.66
18319.58
22951.83
14952.61
2532.70
1829.81
7410.34
0.71
0.18
0.50
1.18
0.16
0.32
1.77
0.13
0.37
52-Week Range
Close
High
18312.39
5218.86
2130.82
40.74
Coupon
Commodities
8%
6
4
2
0
2
4
6
8
10
US$vs,
YTDchg
Fri
in US$ per US$ (%)
Country/currency
Europe
WSJ Dollar index

s
Yen
s Euro
2015
2016
US$vs,
YTDchg
Fri
in US$ per US$ (%)
Country/currency
Americas
Argentina peso-a
0.0659 15.1645 17.2
Brazil real
0.2686 3.7226 6.0
Canada dollar
0.7497 1.3339 3.6
Chile peso
0.001469 680.80 3.9
Colombia peso
0.0003156 3168.87 0.2
Ecuador US dollar-f
1
1 unch
Mexico peso-a
0.0563 17.7676 3.3
Peru sol
0.2899 3.4500 1.0
Uruguay peso-e
0.0308 32.500 8.7
Venezuela bolivar 0.158603
6.31 unch
Asia-Pacific
0.7425 1.3468 1.9
0.1536 6.5086 0.2
Australia dollar
China yuan
Key Rates
Fri
Country/currency
Hong Kong dollar
India rupee
Indonesia rupiah
Japan yen
Kazakhstan tenge
Macau pataca
Malaysia ringgit-c
New Zealand dollar
Pakistan rupee
Philippines peso
Singapore dollar
South Korea won
Sri Lanka rupee
Taiwan dollar
Thailand baht
Cur Stock
0.43800%
0.63350
0.89205
1.19400
0.17500%
0.26460
0.39760
0.68810
Euro Libor
One month
Three month
Six month
One year
-0.28500%
-0.23014
-0.13229
-0.02514
-0.00714%
0.02500
0.08143
0.20714
Euribor
One month
Three month
Six month
One year
-0.28100%
-0.21500
-0.13600
-0.02800
-0.00800%
0.03600
0.10700
0.22500
0.24036%
0.57554
0.90321
1.27446
Offer
0.23500%
0.38643
0.54071
0.84000
0.4500%
0.6500
0.9000
1.2500
Latest
0.3500%
0.5500
0.8000
1.1500
52 wks ago
3.50%
2.70
1.475
5.00
3.25%
2.85
1.475
5.00
0.05%
0.50
0.50
2.00
1.00
0.25
2.25
0.05%
0.50
0.50
2.25
0.75
0.00
2.00
Overnight repurchase rates

U.S.
0.42%
Euro zone
n.a.
0.14%
n.a.
Prime rates
U.S.
Canada
Japan
Hong Kong
Policy rates
ECB
Britain
Switzerland
Australia
U.S. discount
Fed-funds target
Call money
7.7630
66.8905
13000
113.96
344.67
7.9838
4.0578
1.4697
104.765
46.709
1.3749
1196.72
145.07
32.513
35.340
52 wks ago
Libor
One month
Three month
Six month
One year
Eurodollars
One month
Three month
Six month
One year
0.1288
0.0149
0.0000769
0.008775
0.002901
0.1253
0.2464
0.6804
0.0095
0.0214
0.7273
0.0008356
0.0068932
0.03076
0.02830
0.2
1.0
6.0
5.3
1.7
0.3
5.7
0.4
0.1
0.3
3.1
1.8
0.6
1.2
1.9
2.6518
0.1276
0.2557
3.3280
2.5978
0.2746
0.2666
0.0653
0.3771 unch
7.8353 0.1
3.9105 0.5
0.3005 1.0
0.3849 0.003
3.642 0.02
3.7504 0.1
15.3239 1.0
Close Net Chg % Chg YTD % Chg
WSJ Dollar Index
88.84 0.37 0.42 1.48
106.2
67.8
-128.5
-131.6
-129.8
-129.8
-139.6
-164.0
-91.7
-41.3
-107.0
-191.9
-136.2
-150.6
-74.0
104.9
-90.6
-32.6
-149.2
-134.2
-46.4
-39.5
...
...
CBOT
CBOT
CBOT
CME
ICE-US
ICE-US
ICE-US
ICE-US
ICE-EU
COMEX
COMEX
COMEX
LME
LME
LME
LME
LME
LME
TCE
Palm oil (MYR/mt) MDEX

NYMEX
Crude oil ($/bbl.)
NY Harbor ULSD ($/gal.) NYMEX
RBOB gasoline ($/gal.) NYMEX
Natural gas ($/mmBtu) NYMEX
Brent crude ($/bbl.) ICE-EU
ICE-EU
Gas oil ($/ton)
116.9
74.3
-109.2
-123.8
-110.7
-121.2
-118.4
-153.6
-70.9
-33.0
-87.7
-178.2
-115.8
-140.9
-65.2
98.5
-71.7
-22.3
-126.2
-128.9
-33.3
-27.4
...
...
107.6
73.0
-131.0
-133.6
-129.3
-129.7
-141.4
-166.2
-90.5
-41.3
-105.2
-185.2
-137.6
-151.8
-74.0
98.6
-89.5
-29.1
-146.4
-131.3
-46.4
-40.3
...
...
Yield
Month ago
1.925
2.565
-0.460
0.500
-0.444
0.539
-0.565
0.173
-0.056
1.423
-0.203
-0.017
-0.527
0.317
0.109
2.821
-0.046
1.544
-0.615
0.523
0.385
1.433
0.849
1.835
1.872
2.585
-0.390
0.604
-0.405
0.630
-0.482
0.306
-0.007
1.512
-0.175
0.060
-0.456
0.433
0.051
2.827
-0.014
1.619
-0.560
0.553
0.370
1.568
0.702
1.842
126.5
52.5
-79.1
-161.1
-76.5
-144.2
-85.3
-178.0
-42.1
-72.4
-64.0
-174.0
-79.0
-167.6
-47.7
-23.7
-47.9
-74.8
-78.3
-134.3
-24.4
-21.6
...
...
Sources: WSJ Market Data Group, SIX

Financial Information, Tullett
Sym
Close
AIAGroup
AstellasPharma
AustNZBk
BHP
BankofChina
CKHutchison
CNOOC
Canon
CentralJapanRwy
ChinaConstructnBk
ChinaLifeInsurance
ChinaMobile
CmwlthBkAust
EastJapanRailway
Fanuc
Hitachi
Hon Hai Precisn
HondaMotor
HyundaiMtr
Ind&Comml
JapanTobacco
KDDI
Mitsubishi
MitsuUFJFin
Mitsui
Mizuho Fin
NTTDoCoMo
NatAustBnk
NipponStl&SmtmoMtl
NipponTeleg
NissanMotor
NomuraHldgs
Panasonic
PetroChina
PingAnInsofChina
RelianceIndsGDR
RioTinto
SamsungElectronics
Seven&I Hldgs
SoftBankGroup
Sumitomo Mitsui
SunHngKaiPrp
TaiwanSemiMfg
1299
4503
ANZ
BHP
3988
0001
0883
7751
9022
0939
2628
0941
CBA
9020
6954
6501
2317
7267
005380
1398
2914
9433
8058
8306
8031
8411
9437
NAB
5401
9432
7201
8604
6752
0857
2318
RIGD
RIO
005930
3382
9984
8316
0016
2330
42.05
1591.50
25.02
17.67
3.10
98.85
9.10
3368.00
19965
4.79
18.10
85.70
75.74
10060
17590
519.30
82.90
3188.00
147500
4.09
4700.00
2896.00
2053.50
559.90
1446.00
184.70
2584.50
26.63
2209.00
4755.00
1096.50
535.10
1015.50
5.38
35.80
29.95
44.90
1215000
4647.00
5861.00
3629.00
94.10
152.50
-0.83
-2.06
0.89
2.43
1.31
1.33
3.88
1.60
-0.67
1.27
3.78
0.76
1.11
-0.84
-0.62
2.39
2.98
0.38
...
1.24
-1.96
-4.04
2.04
1.56
2.55
-0.05
-3.62
0.99
0.80
-2.72
0.92
2.14
-0.54
0.56
3.47
...
1.58
-0.41
-0.15
0.03
0.69
2.28
-0.97
1.923
2.644
-0.132
0.508
-0.106
0.677
-0.194
0.339
0.238
1.395
0.019
0.379
-0.132
0.443
0.182
1.882
0.180
1.371
-0.124
0.777
0.414
1.903
0.659
2.119
3:30 p.m. New York time
357.25
876.50
457.00
135.825
2,995
120.85
14.79
56.65
1400.00
0.75
12.75
-2.75
0.375
43
3.00
-0.05
0.24
6.00
2.2725
1270.50
15.700
1,588.00
16,460.00
4,825.00
1,832.00
1,840.00
8,820.00
177.60
0.0640
12.30
0.554
7.50
310.00
57.00
40.00
36.00
20.00
3.00
2.90
0.98
3.66
0.47
1.92
1.20
2.23
2.00
0.23
1.72
2505.00
35.70
1.1589
1.3332
1.666
38.53
346.00
4.00
1.13
0.0387
0.0344
0.027
1.46
10.75
0.16
0.21%
1.48
-0.60%
0.28
1.46
2.55
-0.34
0.43
0.43
3.27
3.45
2.65
1.65
3.94
3.21
Year
low
378.25
890.50
493.50
138.550
3,215
128.25
14.93
64.30
1,568.00
354.25
856.00
442.25
127.150
2,738
113.35
12.61
54.53
1,342.00
2.3040
1,280.70
16.005
1,588.00
16,460.00
4,825.00
1,852.00
1,840.00
8,820.00
179.30
1.9440
1,061.90
13.760
1,451.50
13,225.00
4,320.50
1,598.00
1,467.00
7,750.00
154.10
2,653.00
40.50
1.2182
1.5695
2.5120
40.94
369.50
2,425.00
28.74
0.8750
1.1253
1.6110
28.58
260.25
Cross rates
London close on Mar 4
Australia
USD
1.3468
GBP
1.9159
CHF
1.3554
JPY
0.0118
HKD
0.1735
EUR
1.4814
CDN
1.0096
AUD
...
Canada
1.3339
1.8973
1.3428
0.0117
0.1718
Euro
0.9089
1.2931
0.9150
0.0080
0.1171
1.4672
...
0.9905
...
0.6816
Hong Kong
7.7630
11.0436
7.8137
0.0681
0.6749
...
8.5410
5.8200
5.7640
84.6300
113.9610
162.1200
114.7100
...
14.6800
125.3800
85.4410
Switzerland
0.9936
1.4132
...
0.0087
0.1280
1.0930
0.7447
0.7378
U.K.
0.7029
...
0.7076
0.0062
0.0906
0.7734
0.5271
0.5219
U.S.
...
1.4227
1.0064
0.0088
0.1288
1.1003
0.7497
0.7425
Japan
Source: Tullett Prebon
Sources: Tullett Prebon, WSJ Market Data Group
4 p.m. New York time
% YTD%
Chg Chg
Asia Titans
HK$
AU$
AU$
HK$
HK$
HK$
HK$
HK$
HK$
AU$
TW$
KRW
HK$
AU$
HK$
HK$
$
AU$
KRW
HK$
TW$
Year ago
Sources: SIX Financial Information; WSJ Market Data Group
Middle East/Africa
Bahrain dinar
Egypt pound-a
Israel shekel
Kuwait dinar
Oman sul rial
Qatar rial
Saudi Arabia riyal
South Africa rand
1.940
2.562
-0.408
0.568
-0.420
0.586
-0.518
0.244
-0.040
1.470
-0.192
-0.036
-0.484
0.378
0.137
2.933
-0.029
1.558
-0.614
0.542
0.414
1.489
0.878
1.884
Previous
Top Stock Listings

Latest
Yen Libor
One month
Three month
Six month
One year
in US$
US$vs,
YTDchg
per US$ (%)
Bulgaria lev
0.5629 1.7764 1.3
Croatia kuna
0.1449 6.900 1.6
Euro zone euro
1.1003 0.9089 1.3
Czech Rep. koruna-b 0.0407 24.586 1.2
Denmark krone
0.1474 6.7830 1.3
Hungary forint
0.003575 279.74 3.7
Iceland krona
0.007746 129.10 0.8
Norway krone
0.1176 8.5069 3.8
Poland zloty
0.2545 3.9299 0.2
Russia ruble-d
0.01390 71.954 0.1
Sweden krona
0.1178 8.4856 0.5
Switzerland franc
1.0064 0.9936 0.8
Turkey lira
0.3440 2.9067 0.4
Ukraine hryvnia
0.0381 26.2545 9.4
U.K. pound
1.4227 0.7029 3.6
Latest
Prices of futures contracts with the most open interest
Copper ($/lb.)
Gold ($/troy oz.)
Silver ($/troy oz.)
Aluminum ($/mt)*
Tin ($/mt)*
Copper ($/mt)*
Lead ($/mt)*
Zinc ($/mt)*
Nickel ($/mt)*
Rubber (Y.01/ton)
London close on March 4
Yen, euro vs. dollar; dollar vs. major U.S. trading partners
Spread Over Treasurys, in basis points

Previous
Month Ago
Year ago
Yield
Corn (cents/bu.)
Soybeans (cents/bu.)
Wheat (cents/bu.)
Live cattle (cents/lb.)
Cocoa ($/ton)
Coffee (cents/lb.)
Sugar (cents/lb.)
Cotton (cents/lb.)
Robusta coffee ($/ton)
Source: SIX Financial Information;WSJ Market Data Group
Currencies
Feb.
EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.; MDEX: Bursa Malaysia
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 3/3/2016
Year
One-Day Change
Commodity
Exchange Last price
Net
Percentage
high
1619.39 4.4
5982.70 3.9
5166.35 18.8
28442.75 7.9
29448.95 5.6
20868.03 10.6
3539.95 1.6
2173.41 0.3
9973.12 3.7
Country/
Maturity, in years
5.500
Australia 2
4.250
10
3.500
Belgium 2
0.800
10
4.250
France 2
1.000
10
0.500
Germany 2
0.500
10
4.500
Italy 2
2.000
10
0.100
Japan 2
0.100
10
0.500 Netherlands 2
0.250
10
4.350
Portugal 2
2.875
10
0.500
Spain 2
2.150
10
3.750
Sweden 2
2.500
10
1.000
U.K. 2
2.000
10
0.750
U.S. 2
1.625
10
2.4
5.8
2.2
7.4
414.06 6.6
3591.47 7.7
2681.44 6.9
3905.71 7.6
5268.91 3.9
12374.73 8.6
851.81 12.4
24735.23 3.4
1723.56 5.2
24031.19 14.7
509.24 0.9
57379.45 0.1
1082.21 8.1
11866.40 7.7
564.90 3.6
9526.79 9.5
55188.34 3.0
88651.88 7.6
7103.98 0.7
Jan.
Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year
and 10-year government bonds around the world. Data as of 3 p.m. ET
524.44 1.7
58051.61 13.2
15450.87 1.6
45773.31 4.4
3359.04 4.0
Dec.
Global government bonds
2639.52 3.3
1950.85 5.1
1066.71 0.4
YTD
% chg
1800
Feb.
-9.76
-8.09
-10.42
-1.06
-10.40
-5.32
12.76
-8.35
-7.57
-9.79
-27.89
-2.06
-11.45
-12.14
-16.56
-24.90
2.60
-18.47
-1.01
-12.61
5.12
-8.18
1.26
-26.05
0.03
-24.15
4.05
-11.82
-8.57
-1.67
-14.30
-21.20
-18.14
5.70
-16.55
-2.12
0.42
-3.57
-16.27
-4.53
-21.21
0.37
6.64
Cur Stock
Sym
Close
HK$
AU$
AU$
AU$
4502
0700
8766
7203
WES
WBC
WOW
5520.00
147.20
4148.00
6229.00
40.37
31.71
22.76
TakedaPharm
TencentHoldings
TokioMarineHldg
ToyotaMtr
Wesfarmers
WestpacBanking
Woolworths
Stoxx 50
CHF
CHF
CHF
CHF
CHF
DKK
ABB
AXA
Allianz
Anheuser Busch
AstraZeneca
BASF
BNP Paribas
BT Group
BancoBilVizAr
BancoSantander
Barclays
Bayer
BP
BritishAmTob
FinRichemont
CreditSuisse
Daimler
Deutsche Bank
DeutscheTelekom
Diageo
ENI
GlaxoSmithKline
HSBC Hldgs
INGGroep
ImperialBrands
IntesaSanpaolo
L'AirLiquide
LVMHMoetHennessy
LloydsBankingGroup
LOreal
NationalGrid
Nestle
Novartis
NovoNordiskB
Prudential
ReckittBenckiser
ABBN
CS
ALV
ABI
AZN
BAS
BNP
BT.A
BBVA
SAN
BARC
BAYN
BP.
BATS
CFR
CSGN
DAI
DBK
DTE
DGE
ENI
GSK
HSBA
INGA
IMB
ISP
AI
MC
LLOY
OR
NG.
NESN
NOVN
NOVO-B
PRU
RB.
18.30
21.35
141.15
105.95
4021.00
63.28
46.48
470.00
6.24
4.12
174.30
98.49
367.90
4044.50
65.55
15.45
67.30
18.02
15.46
1874.00
13.54
1370.00
453.55
11.45
3675.50
2.52
97.57
153.35
73.24
155.70
944.50
71.50
71.65
379.60
1346.50
6539.00
% YTD%
Chg Chg Cur Stock
-0.65 -8.99
-0.27 -3.60 CHF
-0.74 -11.97
0.83 -16.81
0.42 -2.98
1.54 -5.51
1.07 -7.10
...
1.89 CHF
-1.09 -15.38
-0.25 -13.70
2.32 -7.39
0.53 -12.90 CHF
0.59 -10.52
1.64 -11.00
-1.10 -0.36 $
0.19 -7.48 $
1.85 -9.57 $
4.81 -20.37 $
0.89 -14.95 $
1.63
3.93 $
$
2.19
7.25
$
0.69 -9.08
$
0.78 -28.77
$
0.98 -13.25
$
2.13 -20.02
$
0.49 -7.40
$
1.13
0.94
$
-0.66 -1.88
$
... -0.22 $
0.68 -15.41 $
0.48 -8.03 $
-0.46
2.48 $
-2.02 -18.26 $
0.63 -5.87 $
-0.23
5.83 $
0.91
0.23 $
1.63
0.26 $
0.64
0.75 $
0.99 -4.09 $
-0.49 -17.45 $
6.51 -5.08 $
0.45 -12.05 $
1.25
4.11 $
RioTinto
RocheHldgctf
RoyDtchShell A
SAP
Sanofi
SchneiderElectric
Siemens
Telefonica
Total
UBSGroup
Unilever
Unilever
VodafoneGroup
ZurichInsurance
Sym
Close
RIO
ROG
RDSA
SAP
SAN
SU
SIE
TEF
FP
UBSG
UNA
ULVR
VOD
ZURN
2130.00
250.70
1677.50
69.89
72.43
56.00
89.84
9.83
42.67
16.47
39.87
3109.00
221.25
225.10
5.86
7.60
-0.32 -9.30
0.75
9.93
0.47 -4.76
0.84 -7.85
0.41
6.54
2.02 -0.04
-0.02 -3.96
1.13
3.42
0.92 -15.63
1.63 -0.60
1.68
6.24
...
0.11
1.40 -12.89
58.29
103.01
121.07
72.84
87.93
26.80
44.11
98.48
63.18
82.29
30.46
156.84
125.56
30.63
137.80
60.05
106.50
117.18
52.08
52.03
61.26
29.71
83.49
160.07
110.40
97.00
121.80
73.90
51.81
66.78
0.34
1.49
1.22
1.52
0.46
-0.26
0.34
-0.34
2.05
-0.13
0.79
0.97
-0.98
0.16
...
0.15
-0.14
0.42
-0.04
-0.61
-0.34
-0.60
0.78
0.43
0.55
0.93
-0.02
-0.01
-0.15
0.97
DJIA
AmericanExpress
Apple
Boeing
Caterpillar
Chevron
CiscoSystems
CocaCola
Disney
DuPont
ExxonMobil
GenElec
GoldmanSachs
HomeDepot
Intel
IBM
JPMorganChase
JohnsJohns
McDonalds
Merck
Microsoft
NikeClB
Pfizer
Procter&Gamble
3M
TravelersCos
UnitedTech
UnitedHealthGroup
VISAClA
Verizon
WalMart
% YTD%
Chg Chg
AXP
AAPL
BA
CAT
CVX
CSCO
KO
DIS
DD
XOM
GE
GS
HD
INTC
IBM
JPM
JNJ
MCD
MRK
MSFT
NKE
PFE
PG
MMM
TRV
UTX
UNH
V
VZ
WMT
www.ebook3000.com
-16.19
-2.14
-16.27
7.18
-2.26
-1.31
2.68
-6.28
-5.14
5.57
-2.22
-12.98
-5.06
-11.09
0.13
-9.06
3.68
-0.81
-1.40
-6.22
-1.98
-7.96
5.14
6.26
-2.18
0.97
3.54
-4.71
12.09
8.94
Asia Titans 50
Last: 127.06 s 0.60, or 0.48%
YTD t 6.8%
150
140
130
120
110
100
50day
moving average
t
High
Close
Low
11
Dec.
18
25 31
Jan.
15
22
29
5
Feb.
12
19
26
Stoxx 50
Last: 2860.26 s 18.94, or 0.67%
YTD t 7.7%
3400
3200
3000
2800
2600
2400
11
Dec.
18 24 31
Jan.
15
22
29
5
Feb.
12
19
26
Dow Jones Industrial Average
P/E: 17
Last: 17006.77 s 62.87, or 0.37%
YTD t 2.4%
18000
17400
16800
16200
15600
15000
Dec.
11
18
24
31
Jan.
15
22
29
5
Feb.
Note: Price-to-earnings ratios are for trailing 12 months

Sources: WSJ Market Data Group; Birinyi Associates
12
19
26
MONEY & INVESTING
China IPOs Lose Priority
RALLY
SHANGHAIChinas leaders
signaled that new rules to free
up company listings will be introduced later than many investors were expecting, in the
latest sign that ensuring stability has become Beijings
policy priority as the countrys
economy weakens.
In a surprise omission, Premier Li Keqiang made no reference to the long-planned introduction of a so-called
registration-based system for
initial public offerings as he
delivered his Work Report at
the opening of Chinas annual
parliament session on Saturday.
The change, which many investors had expected to come
as early as May this year,
would take away some of the
powers of Chinas stock-market regulator to approve listings, giving companies and investors more clout in deciding
whether IPOs proceed.
Chinas cabinet-like State
Council had in December set a
two-year time frame for restructuring the system for
companies to sell shares on
the countrys stock exchanges.
The absence of any reference to the new measures in
Mr. Lis speech is a sign of the
way Beijings attitude toward
market-based economic reform has shifted in the last 12
months, during which time
Chinese stocks first surged
then fell back rapidly. In his
equivalent report a year ago,
Mr. Lithe second-most-powerful official in China after
President Xi Jinpinghad
vowed to implement the new
share issuance registration
system in the coming year.
The IPO reform is definitely being postponed because the emphasis is on market stability, a person with
direct knowledge of the matter
told The Wall Street Journal.
In his speech on Saturday,
Mr. Li instead stressed the
need to increase the level of
rule of law in Chinas stock
and bond markets, indicating
the authorities continuing
preoccupation with clamping
down on market fraud and irregularities.
This time last year, Beijing
was planning to put stock-
BANKS
Chinese Premier Li Keqiang made no reference to changing IPO rules in a speech on Saturday.
market reform at the center of
its economic plans. The hope
was that Chinese companies
would come to rely more on
equity capital rather than piling on more debt, in turn easing the burden on Chinas
banking system. Meanwhile,
more widespread share ownership would, it was hoped, help
hasten Chinas shift to more
consumption-led growth.
When Mr. Li spoke last
March, Chinese stocks were
enjoying a bull run, in part
thanks to official encouragement for investors to borrow
to buy more stocks. Shares in
Shanghai, Chinas main equity
market, eventually rose 58% in
slightly more than three
months, peaking in June last
year.
They started falling back
sharply over the summer,
though, and have continued
their slide this year, falling
19% in 2016 alone.
Beijing made several efforts
to halt the markets slump.
Government-backed investment fundswhich became
known as the national
teambought shares periodically during the autumn.
In January, the market regulator introduced new circuit
breakers that interrupted
trading when markets fell by
7% in one day. The system
only encouraged further heavy
share selling, and was
scrapped just four days after
its launch.
Last months ousting of
Xiao Gang, Chinas former top
securities regulator, who had
been heavily criticized for his
mismanagement of the stockthe lenders U.K. unit, the main
driver of Santanders profits.
For decades, U.K. banks sold
the insurance product to cover
loan payments if a borrower
lost a job or fell ill. But many
borrowers were incorrectly
told they had to have PPI, and
in 2011 regulators demanded
that Santander and other banks
pay back customers.
Analysts said the charge
should have been assigned to
the U.K. unit. Had Santander
done so, the unit would have
registered a net loss for the
fourth quarter instead of the
475 million profit it showed in
the parent companys accounts.
Santander booked the provision as a one-off, an accounting term for unusual losses or
gains unrelated to the banks
typical activities.
This is the second time
Santander has booked one-off
PPI charges, Exane BNP analyst Santiago Lpez Daz wrote
in a Feb. 10 report.
Santanders board calculated
Executive
Chairman
Ana
Botns 2015 bonus expressly
excluding the PPI charge and
other one-offs, according to the
banks annual report on executive pay. A bank spokeswoman
said the board has discretion to
MARCELO DEL POZO/REUTERS

rate centers clearer to investors. European lenders and accounting experts say the way
they book corporate-center
charges complies with International Financial Reporting
Standards.
The use of corporate centers
is a common accounting treatment among big complex
banks such as J.P. Morgan
Chase & Co. and BNP Paribas
SA. They can serve the purpose
of supporting the costs of
bankwide technology, issuance
of shares or the expense of
hedging against changes in currencies.
But their use is growing and
making it harder to distinguish
where losses happen at a time
when investors are hungry for
details about how European
lenders will cope with negative
interest rates and sluggish economic growth.
Santanders 1.6 billion corporate-center loss included a
600 million charge to cover
potential claims related to the
wrongful sale of payment-protection insurance, or PPI, by
QILAI SHEN/BLOOMBERG NEWS
BY SHEN HONG
Banco Santander is working to make charges booked in its

corporate center clearer to investors.
market crisis, also seems to

have played a part in delaying
changes to the IPO system.
The new chairman has just
arrived and he needs time to
review a lot of things, said
the person with direct knowledge of the matter, referring
to Liu Shiyu, who has succeeded Mr. Xiao.
Chinas market regulator,
the China Securities Regulatory Commission, couldnt be
reached for comment.
The looming introduction of
a new IPO system has weighed
on Chinese markets, with investors becoming worried
about a rapid increase in new
share supply. A total of 754
companies are currently in the
queue for regulatory approval
of their IPOs.
754
Number of companies waiting

for regulatory approval for
initial public offerings
In December, a moderate
market recovery prompted the
regulator to end a ban on IPOs
that started in July. However,
the failure of the circuitbreaker experiment in January
shook investors again.
The delay in rolling out
the IPO reform shows the authorities concerns about the
potential supply pressure that
it may have on an already-vulnerable market, said Shen
Meng, director at Chanson &
Co., a boutique investment
bank.
It also suggests that the
exclude one-offs unrelated to
an executives performance.
A majority of the wrongful
PPI sales were made by U.K.
lender Abbey National before
Santander bought the bank in
2004.
The corporate centers
fourth-quarter loss also included a 435 million charge
for goodwill and other
items. Goodwill represents the
difference between the value of
an acquired asset and what a
company paid for it.
The bank explained to some
analysts that the charge mostly
resulted from depreciation in
the goodwill of its Puerto Rico
unit.
Other investors and analysts, left to guess at the cause,
speculated for days that it reflected potential losses at
Abengoa SA, a Spanish renewable-energy and engineering
firm that had filed for preliminary creditor protection, and
additional funds to shore up
Santanders investment in
Spains bad bank.
They turned out to be
wrong. Santanders provision
for Abengoa in Spain and the
bad-bank charges, a spokeswoman said, were accounted
for in the lenders Spanish
banking
and
real-estate
units. But the bank didnt disclose that when it published its
results.
The spokeswoman wouldnt
provide details on what had
triggered the 435 million
charge, which was also booked
as a one-off for the fourth
quarter.
Analysts also want to know
what is in UniCredits corporate
center.
According to the bank, it includes global banking services,
corporate center global function, inter-segment adjustments and consolidation adjustments not attributable to
individual segments.
Investors said UniCredit
isnt clear about what that
means.
A UniCredit spokesman said
authorities have reassessed

previous reforms, such as the
circuit breakers, and are now
considering them too rash and
risky, Mr. Shen added.
Chinas National Peoples
Congress, the countrys equivalent of parliament, in December approved a proposal to authorize Mr. Lis cabinet to
effectively bypass restrictions
in the Securities Act and roll
out the IPO reform.
The current system, under
which the Chinese securities
regulator approves IPOs, has
been criticized for compromising the stock markets role as
a venue for companies to raise
money. The regulator has also
been accused by some of giving politically powerful but inefficient state-run companies
favorable treatment with stock
listings, leaving tens of thousands of ambitious, innovative
private businesses struggling
for funding.
A registration system
should give markets more say
in the IPO process, with flotations going ahead only if they
gain enough support from investors, as is generally the
case in Western stock markets.
Some investors expressed
disappointment with the lack
of progress in financial liberalization.
I think Chinas capital market has regressed, said Chen
Ken, a Shanghai-based retail
investor. If we dont see many
new policies that exceed expectations or merely repetition of old tunes, the market
may well fall more.
Yifan Xie
the bank is reviewing how it
reports corporate-center performance with the aim to
make it easier to assess each
divisions results.
Some lenders eventually reveal details about corporatecenter expenses. Such explanations can leave investors
wondering why lenders didnt
offer them sooner.
On Jan. 13, Spains Banco
Bilbao Vizcaya Argentaria SA
announced that it would reclassify some of its Spain-related
technology expenses from the
corporate center to its Spanish
banking unit.
In doing so, BBVA revised its
earnings in Spain downward by
311 million in 2014 and the
first three quarters of 2015.
Santander executives promised investors during a conference in September to be more
fastidious about assigning
costs to the divisions that incur
them to increase corporate
center transparency and facilitate the analysis of all business units.
The 1.6 billion loss in the
fourth quarter of 2015 was the
highest booked by the corporate center in four years
and nearly triple the total
from the same period of 2014.
Santanders head of investor
relations, Sergio Gamez, said
the bank aims to have corporate-center losses represent no
more than 15% of its annual net
profit by 2018excluding onetime items.
Giovanni Legorano
Advertisement

indexes.
The overall majority of investors in emerging markets
believe the fundamentals are
not positive, said Daniel
Tenengauzer, a managing director at RBC Capital Markets.
However, if youre managing
a portfolio, you cant afford to
turn your back. People are
saying, Even though I dont
love the fundamentals, I have
to go in.
Some said emerging markets remain a minefield of
risk, prone to crushing reversals whenever sentiment
changes.
Emerging-market economic
growth has mostly slowed,
undercut by Chinas weaker
commodity appetite. Brazils
economy had its biggest contraction in 2 decades last
year. Russia has been hit by
low oil prices and international sanctions. South Africa,
a big mineral exporter, has
high unemployment and gaping budget deficits.
Investors also worry that
developing nations are struggling with high levels of dollar-denominated debt, which
has become difficult to service after a two-year-long dollar rally. Standard & Poors
Ratings Services said corporate defaults in emerging
markets rose in 2015 to their
highest levels since 2004.
The Bank for International
Settlements estimates there
was $1.1 trillion in dollar-denominated bonds from nonbank emerging-market companies in the third quarter
last year, more than double
the amount of seven years
ago.
Meanwhile, Beijing could
be forced to devalue its yuan
under pressure from heavy
outflows or in a move to
boost its economy. That could
compel other countries to
lower the value of their currencies to remain competitive.
Political issues cloud markets
from South America to Southeast Asia.
And if the Federal Reserve
moves to raise interest rates
later this year or in 2017, it
could raise the appeal of
Treasurys over high-yielding
but
comparatively
risky
emerging-market assets.
Emerging-market rallies
have been short-lived over the
past few years, often petering
out when commodity prices
tumbled. Its hard to get excited about a strategy like this
when investors are faced with
SANJIT DAS/BLOOMBERG NEWS
Leaders signal delay in

planned new rules for
stock-market listings;
stability more urgent
arrows from multiple angles,

said Kit Juckes, a strategist at
Socit Gnrale SA.
Still, some investors point
to reasons to be bullish. In
aggregate, emerging-market
currencies are at their cheapest level in 20 years, said
Jens Nystedt, emerging-markets fixed-income portfolio
manager with Morgan Stanley Investment Management.
But some of them are cheap
for good reason.
Most notably, the rebound
in oil, metals and other raw
materials has given a boost to
these commodity-exporting
nations and raised hopes that
the worst of the commodity
declines are over. Prices for
Brent crude, for example, are
up by more than one-third
from January lows, including
a 9.3% gain last week. Prices
for copper and sugar are up
by double-digit percentages.
The belief that the Fed
wont raise interest rates soon
could damp any dollar rally,
which could make emergingmarket currencies more attractive.
Stocks in emerging markets
have continued to suffer outflows this year, but that may
be changing. In February, outflows slowed to $1.1 billion
from Januarys $6.9 billion,
according to the Institute of
International Finance.
Mr. Nystedt said he increased his exposure to
emerging markets in the past
few months, buying the debt
of countries such as Poland,
Thailand and Chile. An aggregate portfolio of emergingmarket debt denominated in
local currency would yield
about 7% in 2016 if oil prices
stayed around current levels.
The popular tactic known
as a carry tradeborrowing
money in a low-yielding currency and investing in higheryielding assetshas been
hard to pull off in the past
several years, as falling currencies ate into investor
gains. But this year, Mr. Nystedt said, the emerging-market
currencies he favors look
more stable.
Some investors are focusing on emerging markets
cheap valuations and recent
gains. Pablo Goldberg, a portfolio manager at BlackRock
Inc.s emerging-market debt
team, said some concerns look
overblown. He has been adding local-currency bonds,
which the fund hasnt had for
some time. Its a call that
might start to find more support among investors this
year, said Mr. Goldberg.
Julie Wernau
Stocks in Malaysia have rallied. Above, Kuala Lumpur.
LENDING
They have simply been using
the ECB piggy bank.
This abundance, however,
isnt shared by all. Even now
that the ECB pumps about 60
billion ($66 billion) of liquidity
a month into the financial system, banks in the south of Europe still need to go to the
central bank to get liquidity
every week. Northern European banks still wont lend to
them. The reluctance has nothing to do with profitability, especially since the ECBs negative deposit rate means banks
are charged for letting their
reserves sit idle in the central
banks accounts.
Banks cant lend reserves to
households and businesses
those potential borrowers
dont have access to the central banks payment system

but they can try to shift the
hot potato to other banks. And
since negative rates were introduced in June 2014, they
have done just that, but only
to banks inside their own
countries.
Indeed, Northern banks
would rather watch their reserves gradually lose value
than lend them to Spanish and
Italian banks. Whatever this
tells investors about the health
of Southern European banks, it
is unlikely to reassure them
about the ECBs clout.
MONEYBEAT
Read the
continuously
updated look
.COM
inside the
markets, free
online at wsj.com/moneybeat
WSJ
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HEARD ON THE STREET
Email: heard@wsj.com
FINANCIAL ANALYSIS & COMMENTARY
Bargains in London Real Estate

Shares in London-oriented
real-estate investment trusts
have fallen this year even as
the wider market has stabilized. Land Securities, the
largest U.K. REIT, with a
portfolio of London offices
as well as big shopping malls
outside the capital, is down
10%. Close peer British Land
has fallen 13%.
For the past three years,
U.K. property has been a
popular buy, with most
shares trading close to companies underlying book values. This years reversal,
which has pushed shares in
Land Securities to a 31% discount to expected book, is
reminiscent of two previous
selloffs.
The first, in 2007, proved
to be a warning tremor of
the 2008 banking crisis: The
market correctly anticipated
a property crash. The second, in 2011, was a snap response to the eurozone crisis. Because investors saw
London as a haven and the
citys economy remained
healthy, property values continued to recover. That time,
the market got it wrong.
Not So Hot Property

U.K. real-estate investment trusts,
price to adjusted book value
British Land
Land Securities
40 %
20
0
20
40
60
80
A worker walks past a picture

of the London skyline
in central London
Fast-forward to 2016 and

the market has two big worries. First, the tsunami of
capital that has flooded the
London property market in
recent years is receding. Eurozone investors see more
opportunities at home,
while emerging-market buyers have less cash to splash.
Luxury homes in Londons
most exclusive areas have
succumbed to this shift.
The other concern is Brexit. The London office mar-
ket thrives on competition

for limited corporate space
among international companies. If the U.K. votes to
leave the European Union,
U.S. firms that use London
as a landing station for the
trading bloc could shift staff
to Paris or Frankfurt.
Still, evidence of a reversal so far remains limited.
Agents report that there are
now two or three bidders for
a given block, whereas there
used to be half a dozen.
2005
10
Sources: Peel Hunt Research; Reuters (photo)
OVERHEARD
Above all, it isnt clear

what would prompt a selloff
among property owners. Unlike in 2005-2007, most of
the recent boom has been
driven by equity rather than
debt. For those investors,
central London offices still
yield far more than bonds,
making disposals unattractive. Brexit could be a catalyst, but the scenario of a
mass exodus of foreign owners or tenants still seems
far-fetched.
A correction cannot be
ruled out in what remains a
cyclical market. In 2007 to
2009, U.K. commercial property values fell by 45%.
For now, a slowdown still
looks more likely. Valuers
would have to mark Land Securities portfolio down by
about one-fifth to justify the
current discount, according
to brokerage Peel Hunt.
The economist Paul Samuelson famously said stocks
had predicted nine of the
last five recessionsand the
same applies to property
crashes. The market may be
getting it wrong this time.
Stephen Wilmot
Exchanges: How LSE Strategy Tees Up a Deal

Some days on the stock
markets it is hard to discern
a clear direction. Last years
results from the London
Stock Exchange, which is
discussing a merger with
Deutsche Brse, were a bit
like that.
The figures, which were
reported Friday, were confused by a string of acquisitions, discontinued contracts
and coming disposals. Cutting through the fog, what is
clear is that investing in
technology services and indexes was the right move for
LSE because its traditional
revenues from stock-market
listings, secondary trading,
clearing and settlement, saw
little growth last year.
LSE trumpeted top-line

revenue growth in 2015 of
78%. That sounds great. But
revenues before acquisitions
and currency moves actually
grew a measly 2%.
Moreover, most of the extra revenues came from a
business that LSE has already
agreed to sell: Russell Investment Management, the funds
business that came with the
$2.7 billion takeover of Frank
Russell Company in 2014.
LSE is selling this for $1.15
billion, which makes the price
paid for Russell indexes look
even better than it did at the
time.
The Russell indexes in
combination with LSEs FTSE
indexes were the big positive
for the group. Revenues from

these rose 41%, or 152 million ($216.2 million.) Technology services also added
about 15 million in revenues.
That is very helpful when
traditional capital markets
and post-trade services revenues were down 3%. LSE did
lose a clearing contract with
London Metal Exchange in
2014, so adjusting for that
revenues rose about 2.5%.
Things could be looking up
on this front. Trading in rates
and foreign exchange has
picked up strongly in the first
two months of this year versus 2015, according to analysts at Barclays, while credit
and equities have also improved. Investment banks are
There arent many selfhelp books for central bankers. Who Moved My Interest
Rate?the forthcoming
memoirs of former Reserve
Bank of India Governor Duvvuri Subbaraomay be a
welcome addition.
Mr. Subbarao may secretly
have cried out for help himself when he helmed Indias
central bank. He took over 10
days before Lehman Brothers
collapsed, and stepped down
at the height of the 2013 taper tantrum when India was
hammered by capital flight.
Mr. Subbarao admits he
was sometimes guilty of
miscommunication. At his
last news conference in 2013,
investors went berserk, sending the rupee plunging, after
he said almost the same
thing that was in the banks
official written statement.
The difference was his apologetic tone and body language. In retrospect, he realizes he needed to be more
firm and assertive.
His words could be chicken
soup for Zhou Xiaochuans or
Mario Draghis soul.
Exchanging Places
struggling to capture better

fees from this, but turnover
for exchanges and clearers
tracks such activity more
closely.
Of course, what investors
really want is more details on
the proposed tie-up with
Deutsche Brse, specifically
what the deal will do for
growth and profitability. LSE
gave nothing further on that.
Its stock is up 24% since
the talks were confirmed and
Intercontinental Exchange
said it might also bid. That
puts LSE on a forward price/
earnings ratio of 26.5 times,
far ahead of the 15 to 21
times that rivals trade on.
The good news for LSE investors is that the results
Share-price performance
10%
London Stock Exchange

Deutsche Brse
Intercontinental Exchange
0
10
20
2015
16
Source: WSJ Market Data Group
show some good reasons for

suitors to bid. The bad news
for would-be buyers is that
this risks being a pricey
trade.
Paul J. Davies
WSJ.com/Heard
Samsonite
Puts Tumi
Into Its Case
In buying premium luggage brand Tumi, Samsonite
is making a logical but expensive move. It will have to
pack carefully to make this a
successful trip.
The Hong Kong-listed luggage giant confirmed Friday
it has struck a $1.8 billion
all-cash deal to acquire New
Jersey-based Tumi. Its stylish line should fit well with
Samsonites stable of baggage brands, which lacks a
big, high-end name. And
Tumis shareholders should
welcome the offer. At 27
times forward earnings, the
price is the richest Tumi has
traded since 2013. And it is
substantially higher than
multiples for Coach and Tiffany, which at around 19
times are similar to Samsonites.
Yet Samsonite is paying
up for a somewhat bedraggled business. Tumis operating margins are healthy, but
revenue growth has slowed
five years running, to an anemic 3.9% last year. E-commerce sales actually shrank.
To justify the premium
price, Samsonite will need to
substantially improve Tumis
business. Management
wouldnt quantify synergies,
but said once in Samsonites
fold, Tumi should gain bargaining power over suppliers
and landlords for retail outlets. The more substantial
uplift should come from
Samsonite plugging Tumi
into its broader business.
Samsonite shares rose
slightly Friday, a rare bounce
for an acquirer. Investors
may have been relieved Samsonite, which has net cash, is
borrowing to finance the
deal, rather than issuing
shares. Samsonite coveted
Tumis high-end appeal. The
high-end price, however, will
make execution of this deal
critical.
Alex Frangos
MONEY & INVESTING
Fed Eases Planned Rules

On Credit Among Banks
BY RYAN TRACY
AND DONNA BORAK
WASHINGTONThe Federal
Reserve on Friday eased a plan
to limit big banks credit exposure to one another, taking into
account industry concerns as it
continues to hone rules aimed
at restricting the financial interconnections that exacerbated the 2008 crisis.
The eight U.S. banks considered systemically important
by regulators and foreignowned banks with U.S. assets
of more than $500 billion will
face the toughest limits, with
the Fed capping their exposure
to one another at 15% of highquality capital.
But that isnt as stringent as
the Feds original proposal of
10% in 2011.
All banks with more than
$50 billion in assets will be restricted to a maximum exposure to any one counterparty
equal to 25% of their total capital base, plus certain additions.
For banks with more than
$250 billion in assets, the 25%
limit will be calculated on a
Finance
Watch
NORWAY
Oil Fund Is Tapped

For the First Time
Norways government in January tapped into its sovereignwealth fund to cover its expenses, for the first time since
the fund was established in
1996, in another sign that falling
oil revenues are taking a toll on
crude producers.
In January, the fund transferred 6.7 billion kroner ($790
million) to the government, the
first such transfer since the fund
was set up, according to the
countrys Ministry of Finance.
narrower base of high-quality

Tier 1 capital. Calculating the
exposure based on high-quality
capital makes it more stringent.
Policy makers said the draft
plan was designed to be less
stringent for those institutions
whose failure and distress
would be less likely to pose a
risk to U.S. financial stability,
but would impose stricter limits on firms that pose larger
risks.
The central bank is

trying to limit
lenders exposure to
one another.
We are determined to do as
much as we can to reduce or
eliminate the threat that trouble at one big bank will bring
down other big banks, Fed
Chairwoman Janet Yellen said
at a Friday meeting where the
Feds governing board approved the rule unanimously.
The Fed is required to imUntil now, the government
has pumped nearly 200 billion
kroner a year into the fund on
average. But this year, it may
spend as much as 80 billion kroner from the wealth funds returns, according to Norways
central bank.
Kjetil Malkenes Hovland
FEDERAL RESERVE
Watchdog to Probe
Wall Streets Sway
A congressional watchdog is
launching an investigation into
whether Wall Street has too
much influence over the Federal
Reserves financial oversight.
California Rep. Maxine Waters, the top Democrat on the
House Financial Services Committee, and Texas Rep. Al Green,
the top Democrat on the committees oversight-and-investigations panel, requested the Gov-
Take Your
Investments
Wherever Life
Takes You
pose the limits under the 2010

Dodd-Frank financial-overhaul
lawpart of an effort to avoid
a repeat of the financial crisis,
when instability at a few large
financial firms spread to many
others and threatened the entire economy.
The Fed will take comments
on Fridays proposal before
making it final.
The Fed initially proposed
the rules in 2011 but went back
to the drawing board after
banks said the proposal vastly
overestimated their exposures.
The earlier proposal also would
have limited exposures between the largest banks to 10%
of capitalmore stringent than
the 15% limit proposed Friday.
Fridays draft also gives
banks more leeway in calculating their exposures, a nod to
industry concerns about calculations of exposures in derivatives and other financial contracts. The exposure calculation
also would exclude exposures
to some foreign governments
and to major central clearinghousestwo potentially large
exposures for banks.
ernment Accountability Office
investigation on Oct. 8. They
asked for particular focus on the
New York Fed.
Were still very early in the
process, said Lawrance Evans,
GAO director of financial markets and community investment.
Weve started the process of
putting a team together. We
have to think of the questions
we want to ask and work with
our Hill clients on the scope of
the investigation.
The investigation marks the
first time the GAO has examined the notion of regulatory
capture at the Fedwhen regulated companies co-opt the regulators, giving them great influence over enforcement.
Congressional Democrats
have long argued that lax oversight due to regulatory capture
was a main cause of the 2008
financial crisis.
Gabriel T. Rubin
Clarity. So you can jump straight to it.

With a streamlined dashboard, quick-read
market indexes and a seamless device-to-device
experience, the new MarketWatch gives you easy
access to critical data wherever you are.
Explore now at MarketWatch.com
www.ebook3000.com
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Chinas state-owned industries are stagnating,

DJIA 17006.77 0.37%

S&P 500 1999.99 0.33%

NIKKEI 17014.78 0.32%

STOXX 600 341.80 0.70%

OIL 35.92 3.91% GOLD 1269.90 0.99% EURO 1.1003 0.42%

Business & Finance

Some U.S. officials and

MININGS COLLAPSE CRIPPLES

Adidas plans to open

Plunging commodity prices are fueling an economic and social crisis

aged Congo into a beacon for Africas rising middle class.

KITWE, ZambiaA decadelong commodity boom brought sleek shopping

for 70% of its exports. Chinese contractors

Military spending is still a

ulus to the most productive

Espresso Shot: Italians Warm to U.S.-Style Coffee

The Philippines seized a

Trouble brews over caramel macchiatos in land of stand-up bars

Died: Nancy Reagan, 94,

3.20; CHF5.50; 2.00;

s Copyright 2016 Dow Jones &

BIS raises questions about

Nancy Reagan, 1921-2016

Londons mayor stepped

Cairo accused members

For investors, one question

some Italians are jolting its on family time. Fast-food outcoffee

Russias AvtoVAZ is set

CHARLIE SHOEMAKER FOR THE WALL STREET JOURNAL

Emerging markets have

DLR 113.96 0.23%

Chinas leaders set a

FORMER FIRST LADY: Nancy Reagan, wife of Ronald Reagan,

Cruz Wins Challenge

paigning before the states

THE WALL STREET JOURNAL.

A2 | Monday, March 7, 2016

Draghi Tries to Save Eurozone a Third Time

Mario Draghi has already

DANIEL ROLAND/AGENCE FRANCE-PRESSE/GETTY IMAGES

r. Draghi has ramped

effectiveness of possible policy tools.

here is little evidence

short of expectations, no one

Continued from Page One

Continued from Page One

JOE JASZEWSKI/ASSOCIATED PRESS

Louisiana to instead make

servative groups gathering,

Mr. Sanders won Nebraska,

ton held a lead of 604 to 408

difficult for a trailing candidate

dinary stimulus. The ECBs

tend to push yields higher.

THE WALL STREET JOURNAL.

Thorold Barker, Editor, Europe

NEED ASSISTANCE WITH

THE WALL STREET JOURNAL.

Monday, March 7, 2016 | A3

crew are at the front line of an

Slovakia Ruling Party

tional Party, but with that