Long Live the Fly
Aren’t Safe
Scientists study fruit flies for clues
to extending humans’ healthy lives
PERSONAL JOURNAL | A12
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What’s
News
Business & Finance
T he U.S. is viewed as the
engine of global growth,
but some policy makers
worry about banking on the
strength of its consumer-
driven economy. A1
 EDF’s finance chief has
resigned over how the
French utility plans to fi-
nance a $26 billion U.K.
nuclear-reactor project. B1
 AvtoVAZ’s CEO plans to
step down from the Russian
car maker, which reported a
$1.2 billion loss for 2015. B1
 A file-downloading app
for Apple’s OS X operating
system was infected with
so-called ransomware. B1
 Iron ore prices jumped
almost 20% on a bet China
will stimulate its economy
and buoy demand for the
steelmaking ingredient. B5
 Investors are valuing
Alibaba’s financial-services
unit at over $50 billion, a
sign of demand for China’s
financial-tech sector. B5
 Microsoft said it would
make its SQL Server data-
base program, one of its
most lucrative products,
available to Linux users. B3
 Nickel prices remain near
a 13-year low due to big
stockpiles of the metal and
soft Chinese demand. B8
 ZTE was hit with U.S.
trade curbs, hindering the
Chinese tech firm’s ability to
buy U.S. suppliers’ goods. B2
World-Wide
 The EU was locked in ne-
gotiations with Turkey’s
leader, who presented tough
new demands as the price for
allowing the bloc to send mi-
grants back to Turkey. A1
 The U.S. conducted air-
strikes on what officials said
was an al-Shabaab training
camp in central Somalia. A2
 Political rivalries are de-
laying an offensive to retake
Mosul, Iraq’s second-largest
city, from Islamic State. A3
 Syrian opposition groups
were still undecided over
whether to attend peace
talks, a negotiator said. A3
 Tunisian forces and
Libya-based jihadists
clashed near the border,
leaving at least 51 dead. A3
 South Korea accused
North Korea of trying to hack
into Seoul government web-
sites and smartphones. A4
 China released a dissident
lawyer detained last year and
flew him to the U.S. in a rare
act of leniency by Beijing. A4
 Clinton and Trump hold
large leads in Michigan
ahead of that state’s presi-
dential primary Tuesday. A7
 Greece’s creditors nar-
rowed their differences over
the economic overhauls Ath-
ens should implement. A6
 Beijing plans to take
over some of the debts of
China’s local authorities. A4
CONTENTS
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On the Campaign Trail in North Carolina
NEXT STEPS: Donald Trump campaigned for the Republican U.S. presidential nomination on Monday in Concord, N.C. Four states—
Michigan, Idaho, Mississippi and Hawaii—are holding GOP presidential contests on Tuesday. A2, A7, B5
U.S. Rejects Growth Yoke
Policy makers say
American consumers
can’t be relied upon
to drive global economy
BY DAVID HARRISON
With global growth sputter-
ing, much of the world is hop-
ing to hitch a ride with the
U.S. economy. One big prob-
lem: The U.S. may not have
enough horsepower to act as
the global tow truck.
The collapse of commodity
prices and China’s slowdown
have walloped once-highflying
Al-Shabaab
Training Base
In Somalia
Destroyed
BY GORDON LUBOLD
WASHINGTON—The U.S.
conducted airstrikes on what
officials said was an al-Sha-
baab training camp in central
Somalia, killing more than
150 suspected fighters
thought to be preparing to
stage an attack.
The strikes, conducted by
American manned and un-
manned aircraft on Saturday,
came after intelligence indi-
cated that fighters at the
Raso training camp were in
the final preparations for an
attack, said Capt. Jeff Davis, a
Pentagon spokesman.
“This was a group that was
completing training to do a
large-scale attack, and it
would follow that when they
concluded training, they
would engage in a large-scale
attack,” Capt. Davis said at
the Pentagon on Monday.
“The Somali government
welcomes the precision drone
attack on the al-Shabaab
base,” said Abdisalam Aato, a
Somali government spokes-
man. “The attack was in col-
laboration with ground forces
of the Somali national army.”
Mr. Aato said he didn’t
have details on the army’s in-
volvement, but said it was
helping the U.S. government
with the operation.
The camp, which Mr. Aato
said had been known to have
the capacity to house as
many as 200 fighters at a
time, is located about 120
miles north of Mogadishu in
central Somalia, defense offi-
Please see STRIKE page A2
Overseas Profits
From Trump
OPINION | A11
TUESDAY, MARCH 8, 2016 ~ VOL. XXXIV NO. 27 WSJ.com EUROPE EDITION
STOXX 600 340.93 g 0.25% OIL 37.90 À 5.51% GOLD 1263.20 g 0.53% EURO 1.1015 À 0.08% DLR ¥113.58 g 0.17%
Turkey,
EU Press
Migrant
Accord
BY VALENTINA POP
BRUSSELS—European
Union leaders were locked in
negotiations with Turkish
Prime Minister Ahmet Davuto-
glu, who presented tough new
demands as the price for al-
lowing the bloc to send mi-
grants back to Turkey.
Under a new Turkish pro-
posal, Ankara would step up
its efforts to take back eco-
nomic migrants who have ar-
rived in EU and allow the Eu-
ropean bloc to send back
Syrian refugees who cross the
Aegean Sea to Greece.
In exchange, Turkey is de-
manding a doubling of EU as-
sistance to €6 billion ($6.6 bil-
lion), an acceleration of the
process for it to become an EU
member, and visa-free access
to the bloc for its citizens by
end-June. Turkey is also seek-
ing EU backing for its long-
standing call for a safe zone to
be established in Syria where
civilians can take refuge.
The two sides had reached
an agreement in November
economies, leading many pol- pansion. American strength. The rela- that called for Turkey to re-
icy makers and businesses to “The only engine of growth tive power of the U.S., they ceive an initial €3 billion in
turn their eyes to the rela- is the U.S. economy,” said Sri say, can only go so far to aid to encourage the 2.6 mil-
tively sturdier consumer- Mulyani Indrawati, managing shake the world out of its lion Syrian refugees currently
driven U.S. economy. director and chief operating slump. living in Turkey to stay there.
The World Bank estimates officer at the World Bank in a “The U.S. economy alone But EU leaders are frustrated
that the U.S. accounted for al- speech Monday in Washington, can’t pull the global economy that thousands of migrants
most 23% of global growth D.C. Europe is struggling with along. We simply don’t have continue to arrive every day in
last year, its highest contribu- the U.K.’s possible exit, Japan the torque,” said Timothy Ad- Greece. Turkish leaders mean-
tion since 2003. This year, the continues to see weak growth ams, head of the Institute of while complain that the EU aid
U.S. is expected to contribute and the emerging economies International Finance, a trade has only started trickling in
a still-strong 21% with faster that were “the engines of group representing financial and isn’t nearly enough to off-
growth than many advanced growth during the last de- institutions. set the $10 billion the govern-
nations. The International cade” are underperforming, U.S. policy makers, in set- ment has spent in accommo-
Monetary Fund predicts the she said. tings such as the recent Group dating refugees.
U.S. will grow a respectable While the spotlight reflects of 20 meeting of top finance “They said they would pro-
2.6% this year and next, well on the U.S. economy, officials, have been pushing vide €3 billion of support four
though private-sector econo- some experts and policy mak- other nations to encourage months ago—they have yet to
mists see a slightly slower ex- ers worry about banking on Please see GROWTH page A7 Please see TURKEY page A6
EUROPE’S PENSION PINCH Fewer Kicking In
Pension contributors
per 100 recipients
Too few workers contribute to systems, and nations 200 people
set little cash aside for benefits they promise
175
BY JULIET SAMUEL depend on pensions provided by Poland’s gov- Greece
ernment. 150
Italy
ZARASZOW, Poland—Krystyna Trzcińska, State-funded pensions are at the heart of
Poland
68 years old, has farmed a strip of land in this Europe’s social-welfare model, insulating peo-
125 France
corner of eastern Poland for more than four ple from extreme poverty in old age. Most Eu-
decades. Retired now, she grows clover be- ropean countries have set aside almost noth- Spain
tween neat rows of raspberry bushes to feed ing to pay these benefits, simply funding them Germany
100 projections
her rabbits. The rabbits she eats, the berries each year out of tax revenue. Now, European 2013 ’20 ’30 ’40 ’50
she sells. countries face a demographic tsunami, in the Source: European Commission,
The berries bring in the equivalent of about form of a growing mismatch between low The 2015 Ageing Report
$1,300 a year. To survive, she and her husband Please see PENSION page A8 THE WALL STREET JOURNAL.
Worse Than Getting Shot
By Aaron Burr? Missing ‘Hamilton’
i i i
Government staffers find Broadway hit
is a barometer of professional coolness
BY ERICA ORDEN Broadway hit musical about one
of the nation’s earliest politi-
In conversation after conver- cians, has become an essential
sation at a Manhattan cocktail barometer of professional cool-
party last fall packed with polit- ness.
ical types, Melissa DeRosa found People who figure out she
herself suddenly panicked. hasn’t seen it tend to be ap-
Ms. DeRosa, chief palled, Ms. DeRosa
of staff to New York said. “It’s like the
Gov. Andrew Cuomo, grown-up equivalent
pretended to check of sitting alone in the
her phone for email cafeteria.”
or take a call, any- “Hamilton” has
thing to avoid dis- proven wildly popu-
closing a painful, lar among general
personal secret: She audiences. For peo-
hadn’t seen “Hamil- ple who work in poli-
ton.” Lin-Manuel tics, it holds a partic-
In nearly every Miranda ular appeal that has
exchange, “this was left those who ha-
the topic that came up during ven’t attended the musical—
the first 15 minutes,” Ms. De- box-office tickets are sold out
Rosa said. through January 2017—feeling
In political circles in New like outcasts.
York, Washington and else- Vice President Joe Biden and
where, seeing “Hamilton,” the Please see SHOW page A8
A2 | Tuesday, March 8, 2016
Why Trump Moves Past His Contradictions
CAPITAL JOURNAL
GERALD F. SEIB
D
onald Trump is a man
of huge contradic-
tions.
He regularly decries that
the U.S. has accumulated a
national debt of $19 trillion,
yet has proposed a tax cut
and associated economic
ideas that the nonpartisan
Committee
for a Re-
sponsible
Federal Bud-
get estimates
would add
between
$11.7 trillion and $15.1 tril-
lion to the debt over the
next decade.
He calls journalists—and
this is a direct quote from a
rally in Florida over the
weekend—“the most dishon-
est people on earth…disgust-
ing, dishonest human be-
ings.” Yet he is conducting a
campaign that is built
around the free media cover-
age their organizations pro-
vide.
He promises to smash Is-
lamic State fighters harder
than anyone else, yet evinces
little interest in putting
American troops into Syria
Venezuela Looks for Missing Miners in Lawless East
BY MAYELA ARMAS
AND KEJAL VYAS
CARACAS, Venezuela—The
governor of an eastern Vene-
zuelan state rich in mining on
Monday acknowledged that 28
wildcat miners are missing,
just two days after denying re-
ports they had been slain.
“Every state security organ
has been sent to the area at
once,” said Francisco Rangel, a
retired general who is gover-
nor of Bolívar state and a
member of the ruling United
Socialist Party. “The area is
rough, mountainous, difficult
for search operations.”
On Saturday, Mr. Rangel ac-
cused those who said the min-
ers were killed of spreading
“false and irresponsible infor-
mation,” a statement that
prompted protests Monday in
Tumeremo, some 500 miles
east of Caracas. Relatives of
the miners and townspeople,
saying a gang intent on steal-
ing their gold had targeted the
miners, blocked a highway in
the mineral-rich area and de-
manded that authorities locate
their loved ones.
“We’re not going leave the
streets until our family mem-
bers are returned or until the
government allows us to visit
the mine to see what hap-
pened,” said Yoli Fermin,
whose husband, José Gregorio
Nieves, has been missing since
Friday. She spoke by telephone
STRIKE
Continued from Page One
cials said.
Capt. Davis declined to say
if U.S. officials had identified
the potential target, and he
wouldn’t say if the training
camp was connected to past
operations in which al-Sha-
baab is suspected.
Al-Shabaab has stepped up
the pace and the intensity of
its attacks in recent months.
In January, the insurgent
group overran a Kenyan base
in Somalia, killing at least
180 troops, the Somali gov-
ernment said. Kenyan author-
ities have yet to release offi-
cial numbers.
The group claimed respon-
sibility for a bombing of a
Daalo Airlines commercial jet
in February that blew a hole
in the fuselage. The only per-
son killed in that blast was
the suspected bomber.
There have been previous
attacks on a peacekeeping
force known as the African
Union Mission in Somalia, or
Amisom.
The U.S. contributes about
50 military trainers and ad-
visers to support Amisom and
Somali forces. The U.S. forces
provide technical training and
assistance and other support,
Pentagon officials said.
to do it—the kind of position
that prompted 117 former
Republican national-security
officials to declare in an
open letter opposing his
nomination that he “swings
from isolationism to military
adventurism within the
space of one sentence.”
Yet none of this seems to
matter to his many fervent
supporters. Why?
Two reasons. First, the
Trump army supports him
because of his attitude
rather than his agenda. They
take him at his word on the
big stuff: He’ll stop illegal
immigration, he’ll trash old
trade deals and negotiate
great new ones, he will stop
American companies from
moving overseas by pressur-
ing them. It’s more impor-
tant that he says he will re-
peal Obamacare than have a
detailed plan for replacing it.
In short, goals matter
more than any mechanism to
achieve them. And since it’s
been a decade or so in which
few of those detailed, 10-
point plans that other politi-
cians offer have gotten en-
acted in Washington, voters
probably don’t take policy
papers seriously. Dysfunction
in Washington is Mr.
Trump’s friend; the politi-
cians who now curse his rise
have created the gridlock
that enables him.
The second reason is that
Mr. Trump makes clear that
everything is negotiable any-
way. His policy proposals, to
Miners dig for gold in a makeshift camp near Tumeremo in Venezuela’s eastern Bolivar state.
from Tumeremo.
In a news conference Mon-
day, Mr. Rangel said the
search for the miners has been
fruitless. “We don’t have a sin-
gle piece of evidence that indi-
cated a murdered person,” he
said. “We don’t have a single
cadaver.”
But he said there is evi-
dence pointing to a clash “be-
tween armed gangs of the
area. Such clashes have hap-
pened before.” The Venezuelan
attorney general’s office said
it had assigned two prosecu-
No American ground
troops took part in the U.S.
strike on the training camp,
Capt. Davis said.
It wasn’t clear whether the
strike killed any of al-Sha-
baab’s leaders, but Capt. Da-
vis said that by eliminating
trainers as well as the mili-
In a 2010 photo, al-Shabaab militants parade new recruits after arriving in Mogadishu from their training camp south of the capital.
WORLD NEWS
GOP presidential candidate Donald Trump hasn’t been pressed yet on policy specifics.
the extent they exist, are
opening bids rather than a
set of immovable principles.
“Now, sometimes you ask
for more than you want and
you negotiate down to the
point,” he said in the most
recent Republican debate, in
Detroit last week. Later he
added: “There’s always give
and take. There’s always ne-
gotiation.”
So Mr. Trump gets away
with saying things that sim-
ply can’t be taken at face
value. One example: He
seems to suggest at his ral-
lies that the recently con-
cluded deal with Iran over
its nuclear program would
tors to the case.
News of the missing min-
ers, and the protests that have
ensued in the region by the
border to Guyana, are the lat-
est flashpoints in this politi-
cally polarized nation.
Américo de Grazia, an opposi-
tion lawmaker representing
Bolívar state, and other rivals
of President Nicolás Maduro
say the government initially
tried to cover up the episode.
“The highways are still
closed because the govern-
ment has not spoken to the
tants receiving training, the
strike had reduced the
group’s ability to conduct at-
tacks or train for new ones.
He said the camp was de-
stroyed.
Capt. Davis said the U.S.
had been observing the camp
for weeks before Saturday’s
THE WALL STREET JOURNAL.
have on the budget.
The center says its best
estimate is that Mr. Trump’s
tax plan would reduce fed-
eral revenues by between
$9.5 trillion and $11.9 trillion
over a decade. Add in the
higher cost for veterans’
benefits and higher interest
costs, and the broader plan
would reduce government
receipts by $11.7 trillion to
$15.1 trillion over 10 years.
M
r. Trump says spend-
ing cuts, eliminating
MIKE EHRMANN/GETTY IMAGES
waste and spurring
higher growth would make
up the difference. But he
also says he would protect
Social Security benefits. To
balance the budget on those
terms would require cutting
all other federal spending—
including on Medicare—by
55% to 65%. Add on the cost
somehow require the U.S. to presidential nomination will of Mr. Trump’s pledge to
pay Iran $150 billion. In the be taken at his word, as Mr. strengthen the military, and
Florida rally over the week- Trump found in that Detroit “it becomes literally impossi-
end, he said he would tell debate last week when Fox ble to balance the budget
Iran, “We don’t have $150 News moderators called him with only spending cuts,” the
billion” for you. on the gap between his con- center says.
demnations of federal debt Could Mr. Trump gener-
Y
et that impression is and his economic ideas that ate enough economic growth
simply false. To the seem destined to add to it. to make up the difference?
extent Iran will reap a That problem is worth a The center estimates it
financial windfall from the closer look. The Committee would require annual eco-
deal—and it’s probably less for a Responsible Federal nomic growth of 7.7% to 9%
than $150 billion—it will be Budget attempted to pull just to avoid adding to the
from the return of Iran’s own together the few economic- debt, and 10.4% to 11.4% to
assets and proceeds from oil policy proposals Mr. Trump balance the budget in a de-
sales that have been frozen has laid out—a giant tax cade—twice as high as the
in international accounts cut, immigration enforce- fastest growth period in the
abroad. It isn’t U.S. money. ment and expanding health past six decades.
At some point, though, a care for veterans—to see That would be a huge
candidate moving closer to a what effect they would achievement indeed.
lawless southern and eastern very environmentally con-
states. scious, that preserves human
“The area, located in the values,” Mr. Merentes said
jungle and of difficult access, Thursday.
has been taken over by local But that effort could suffer
gangs that continue profiting a setback. “What stands out is
significantly from illegal min- the marked deterioration in
ing and a weak state pres- security in southern Bolívar
ence,” Diego Moya-Ocampos, and the negative implications
an analyst with the risk con- for mining companies operat-
sultancy IHS, said of the re- ing nearby,” said Mr. Moya-Oc-
gion where the miners have ampos.
gone missing. Ms. Fermin said her hus-
Deadly conflicts involving band, like many other Tumer-
gold miners are common and emo residents, supplemented
have even led to the displace- the meager income he gener-
CARLOS GARCIA RAWLINS/REUTERS
ment of people from indige- ated driving a taxi with peri-
nous tribes, according to Sur- odic mining excursions.
vival International, an
organization that advocates
for native peoples.
Relatives fear the
The independent newspa- miners were victims
per Correo del Caroni in Bolí-
var state says it documented
of a gang intent on
at least 17 violent conflicts at stealing their gold.
mining sites in 2015 that cost
at least 28 lives.
families of the disappeared,” Reports of the missing min- “It’s a risky job, we know.
Mr. de Grazia said. “We have ers come at a delicate time for But you can’t survive here on
to ask ourselves why there are Venezuela, which the Interna- minimum wage so what else
guns in the mines, why there tional Monetary Fund esti- do you expect the people to
are missing.” mates will suffer an 8% eco- do?” said an exasperated Ms.
Venezuela is rich in depos- nomic contraction this year. Fermin. She said her husband
its of gold, copper, diamonds, As part of an effort to diver- set out every day last week on
bauxite and other valuable sify the oil-dependent econ- a motorcycle, driving into the
minerals. But red tape and a omy, Mr. Maduro and the jungle. He was home every day
government drive to national- president of the central bank, by 4 p.m.—except for Friday.
ize the mining sector over the Nelson Merentes, in recent “Now I don’t know if he’s
last decade has left many of weeks have said the govern- alive or dead,” she said.
the country’s mines underde- ment is trying to attract inter- —Anatoly Kurmanaev in
veloped and in the hands of national mining companies. Caracas and Maria Ramirez
informal mining gangs that “What we want is sustain- in Puerto Ordaz
operate freely in the country’s able mining, very professional, contributed to this article.
strike and said there were no
known civilian casualties.
It was unclear where the
drone used in the attack was
the strike two days after it
occurred to allow U.S. and
other officials to conduct an
assessment of the site before
CORRECTIONS 
AMPLIFICATIONS
Readers can alert The Wall Street
based. The U.S. maintains a announcing it publicly, Penta- Journal to any errors in news
number of unmanned aircraft gon officials said. articles by emailing
wsjcontact@wsj.com.
at a sprawling base at Camp —Heidi Vogt
Lemonnier, in Djibouti. in Nairobi, Kenya,
The Pentagon confirmed contributed to this article. THE WALL STREET JOURNAL.
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Rivalries Stall Push to Retake Iraqi City
The jockeying slows
efforts to capitalize on
battlefield victories
against Islamic State
BY TAMER EL-GHOBASHY
BAGHDAD—Political rival-
ries are delaying an offensive to
recapture Iraq’s second-largest
city from Islamic State, slowing
the effort to take advantage of
recent battlefield victories over
the extremist group.
Despite local calls for an
imminent offensive, people in-
volved in the discussions say
differences among the various
forces fighting Islamic State—
a group that includes the U.S.,
Iran-backed militias and Kurd-
ish fighters—have prevented
any meaningful military plan-
ning for an assault on Mosul.
U.S. officials have offered
shifting timetables for an of-
fensive on Mosul since declar-
ing in January 2015 that prep-
arations were under way, with
U.S. officials in Iraq saying re-
cently that an operation could
begin this summer. In a visit
to Baghdad over the weekend,
President Barack Obama’s en-
voy on the fight against Is-
lamic State, Brett McGurk, de-
clined to set a time frame.
Mr. McGurk estimated Is-
Syria Opposition Refugee Flood Strains Turkish Town
Weighs New Talks
BY NOUR MALAS
BEIRUT—Syrian opposition
negotiators deliberated over
whether to attend United Na-
tions-mediated peace talks set
to start this week, a senior ne-
gotiator said, as a rare cease-
fire in Syria mostly held at the
start of its second week.
Many Syrians on opposing
sides, along with international
diplomats, have welcomed
what they describe as a signif-
icant reduction in violence
across the country since the
truce began on Feb. 27. But
Riad Hijab, a coordinator for
the High Negotiations Com-
mittee, which broadly repre-
sents the opposition at peace
talks, on Monday said the Syr-
ian government and its Rus-
sian allies were continuing to
violate the truce. And though
some humanitarian aid had
reached rebel-held areas be-
sieged by the regime, it wasn’t
enough, he said.
“There are lots of difficul-
ties on the humanitarian-as-
sistance front,” Mr. Hijab said
on a conference call with re-
porters.
Long-besieged areas most
in need of aid, such as the Da-
mascus suburb of Daraya, still
haven’t received deliveries, he
said. The opposition will be
watching to see whether con-
voys make it into some of
these towns in the next few
days as it weighs engaging in
peace talks, he added.
Mr. Hijab said he was con-
tinuing to consult with rebel
factions on the ground and
other political associates be-
fore deciding whether condi-
tions are right to attend the
talks, scheduled to begin
Wednesday in Geneva.
After those consultations,
he said, the committee would
Deadly Border Clash Highlights Tunisian Fears Over Libya
Heavy clashes between Tuni-
sian security forces and Libya-
based jihadists killed at least 51
people on Monday near the
border between the two coun-
tries, Tunisia’s interior ministry
said, fueling concerns that
Libya’s political chaos is spilling
into its more stable neighbor.
By Matt Bradley
in Beirut
and Radhouane Addala
in Tunis
Tunisian security forces
killed at least 35 jihadists after
the extremists launched coordi-
nated morning raids on a mili-
tary barracks and a police sta-
tion in the Tunisian town of Ben
Guerdane, the interior ministry
said in a statement. Ben Guer-
dane is a reputed way station
for Tunisian jihadists making
the journey to join Islamic State
affiliates operating in Libya.
lamic State has lost 40% of the
territory it once controlled in
Iraq, as Iraqi forces backed by
U.S. airstrikes have taken back
key cities such as Tikrit and Ra-
madi. Large pockets of Islamic
State resistance in western des-
ert towns have also fallen.
Defense Secretary Ash
Carter said last week that the
Syrian town of Shaddadi had
been cleared of militants, cut-
ting off an important supply
line between Mosul and
Raqqa, Islamic State’s de facto
capital in Syria. Mr. McGurk
described Shaddadi’s libera-
tion and a similar victory in
the Iraqi city of Sinjar as the
beginning of an effort to iso-
late Mosul.
Over the weekend, Iraq’s
military airdropped leaflets
over the occupied city ad-
dressed to “the patient sons of
Mosul.” “Your security forces
settled the fight in Ramadi in
Iraq’s favor,” it read. “Now
they are readying for the big-
gest battle…be ready.”
But Iran, through the Shiite
militias it supports, is insisting
on a role in Mosul after being
sidelined in recently liberated
Ramadi, according to Iraqi and
U.S. officials. Iraq’s Sunni
groups and the U.S. fear militia
participation will fan sectarian
tensions and expand Iran’s al-
ready sizable influence in Iraq.
also decide whether it sup-
ports an extension of the truce
past the two weeks initially
approved by the opposition.
“The level of violence has
been reduced, but it hasn’t
stopped,” Mr. Hijab said. There
have been no recorded truce
violations by rebels except in
“some cases of self-defense,”
he said. “On the other hand,
there are continued offensives
by the forces of the regime,
the Iranians and the Russians.”
Meanwhile, Syria’s govern-
ment on Monday accused ter-
rorists, a term it often uses for
Islamist rebel factions, of fir-
ing rockets into a Kurdish-con-
trolled neighborhood in
Aleppo for a second day. There
were conflicting reports on
the number of people killed in
the separate rocket attacks on
Sunday and Monday. Syria’s
state news agency reported
that at least 18 people died.
The Aleppo neighborhood
of Sheikh Maqsood is the site
of fighting between the Syrian
Kurdish militia that controls
the neighborhood and Islamist
rebels groups vying for control
of the area. It lies in the gov-
ernment-held part of Aleppo.
In rebel-controlled Idlib
province, activists reported
airstrikes on a market in the
town of Abu Dhour on Mon-
day. More than 13 people died,
activists in the province said.
Also on Monday, convoys
carrying food and nutritional
and health supplies for more
than 16,700 people in an east-
ern Damascus suburb were en
route, a United Nations official
said. The deliveries were
heading to three subdistricts
of the suburb, Kafr Batna, the
official said. Aid deliveries for
20,000 people in three other
districts of the same suburb
were completed on Friday.
Police, national guardsmen
and a soldier were also killed in
the clash, along with seven ci-
vilians including a 12-year-old
girl, the ministry said.
Libya is a focus of concern
for Western policy makers in
countries leading the fight
against Islamic State five years
after the ouster of dictator
Moammar Gadhafi created a
political vacuum.
The Sunni Muslim extremist
group occupies stretches of
Libya’s Mediterranean coastline
and the city of Sirte, Gadhafi’s
birthplace, and appears to view
the increasingly unstable coun-
try as an area of expansion af-
ter sustaining defeats in its
self-declared caliphate strad-
dling Syria and Iraq. Islamic
State leaders recently urged
new recruits to head to Libya
instead of to its traditional
strongholds.
U.S. forces are gradually ex-
WORLD NEWS
Holding Pattern
Political rivalries are delaying a battle to take Mosul, Iraq’s second-
largest city, from Islamic State.
Islamic State control
Key Islamic State losses
since last winter
Raqqa
Shaddadi
Deir Ezzour
SYRIA
Source: Institute for the Study of War (areas of control)
Kurdish officials insist their
forces should have a role in the
fight to recapture Mosul, as
well. But Baghdad worries the
Kurds will use the fight to take
territory that helps strengthen
their case for an autonomous
Kurdish homeland.
The jockeying among Iraq’s
splintered groups, and the for-
eign powers that back them,
have repeatedly pushed back
the timetable to retake Mosul.
BY AYLA ALBAYRAK
KILIS, Turkey—Five years
ago, Kilis was a tiny Turk-
ish town best known as a
place for truckers to pick up
pistachio-encrusted pastries
before crossing the nearby
Syrian border.
Today, Kilis has more than
doubled in size, transformed
by refugees from the conflict a
few miles away into one of
Turkey’s newest Syrian-major-
ity communities.
The Turkish government
has nominated Kilis for a No-
bel Peace Prize for its hospi-
tality, hailing it as an example
the world should celebrate.
But the influx of Syrians is
creating fissures in a country
whose demographics have
been fundamentally changed
by the war.
Home to about 100,000
Turks before the Syrian war,
Kilis is straining from the ar-
rival of more than 125,000
Syrians. The town’s water and
sewage systems are struggling
to cope. Schools are filled to
capacity. Although Turkey is
developing plans to build more
classrooms, for now many Syr-
ian children roam the streets,
stay at home, or spend their
days working in shops, cafes
and factories.
Jobless Turks say they re-
sent the success of Syrian ref-
ugees, who have set up 100
shops and restaurants in the
small town. Rents have sky-
rocketed because of the de-
mand.
“We were caught by a shock
wave,” Kilis Vice Mayor Cuma
Ozdemir said, as he showed
video clips of the first refu-
gees arriving in 2011. “Our in-
frastructure is about to col-
lapse. This is not a city built
for this population.”
Success in places like Kilis
is vital to the global effort to
contain the steady migration
heading west. European lead-
panding an aerial bombing
campaign against the group
there. Last month, American jet
fighters bombed a training
Tunisian special forces during the clashes near the Libyan border.
Tuesday, March 8, 2016 | A3
ceptable.”
Mosul is considered pivotal
to controlling the north of
Iraq, and liberating it could
open a new front to challenge
Active conflicts Islamic State operates freely Islamic State in neighboring
Syria. The city is still believed
50 miles
to be home to up to two mil-
50 km lion Iraqis living under austere
IRA Islamic State rule. It is also the
QI
Mosul KU hub of a Sunni region, though
R IRAN
it has long been one of Iraq’s
Erbil
D
Sinjar more diverse cities and it has a
IS
TA
Makhmour wealth of Iraqi cultural sites.
N
Kirkuk
The city abuts territory
IRAQ controlled by the semiautono-
mous Kurdistan Regional Gov-
Tikrit ernment, which has for years
sought full independence and
has called for a referendum to
secede from Iraq. As their
forces have evicted Islamic
Ramadi
Baghdad State from nearby towns and
cities, the KRG has informally
expanded into oil-rich terri-
THE WALL STREET JOURNAL. tory—most notably in Kirkuk.
That political pressure has
As a result, some Iraqi and unnerved Baghdad, but Kurd-
U.S. officials are now predict- ish officials say they have no
ing the offensive won’t even interest in occupying Mosul
begin this year. and would participate in the
“Each side is striving to military campaign to secure its
claim the victory in Mosul to boundaries.
gain more political influence,” Still, the timing and con-
said Ammar Tauma, a Shiite tours of the campaign remain
lawmaker and member of unclear, says Jabbar Yawar,
Iraq’s security and defense the secretary-general of the
committee. “For their political Peshmerga, as the Kurdish
rivalry to play out at the ex- troops are known.
pense of our people is unac- “There are preparations but
Syrian refugees gathered at the Bab al-Salam border gate with Turkey in early February.
ers frantically searching for make money for his family.
solutions are counting on Tur- “I used to be able to read
key to save them. Europe is and write a bit,” he said dur-
giving Turkey more than $3 ing a short break at the res-
billion to build more homes taurant. “Now I’ve forgotten
and schools, to provide more everything. I can only read
jobs, and to offer more medi- and write my own name.”
cal care to the 2.6 million Syr- Sharif recently became the
ian refugees already living in family’s sole breadwinner. In
the country—hoping a better 2014, his family fled
life will make them less willing the town of Azaz, about 5
to leave. miles inside Syria, to Kilis. He
If any place in Turkey is go- now pushes Turkish-style
ing to succeed in absorbing so meat pizzas into an oven with
many Syrians, it is going to be a baking paddle, washes
somewhere like Kilis, where dishes and cleans tables for
generations of family relations less than $70 a month.
span the Turkey-Syria border. Sharif is one of an esti-
“Many of the arrivals were mated 400,000 underpaid Syr-
our kin,” said Mehmet Ca- ians working illegally in Tur-
narslan, a 30-year-old restau- key. To prevent children like
rant owner. “My relatives Sharif from becoming part of
came here, too, and we helped what the United Nations has
them open a corner shop. But warned could be a “lost gener-
now their corner shop has ation,”
grown into a supermarket, and Turkey has put more than
it’s us—Turkish businesses— 300,000 Syrian children into
suffering here.” classrooms. But another
Mr. Canarslan recently 600,000 are still waiting.
hired a Syrian to work in his To encourage refugees to
cafe: a 10-year-old boy named stay, Ankara is now allowing
Sharif, who said he can’t go to millions of Syrians to legally
school because he needs to work in Turkey, ending a pol-
camp near the capital Tripoli, with Libya on high surveillance
killing some 40 Islamic State with support from the U.S.,
fighters. Germany and the U.K. and is
Tunisia has placed its border building a 122-mile fence to
stop cars from crossing into its
territory.
Tunisia was considered a
success story of the 2011 so-
called Arab Spring uprisings,
but high unemployment rates
have since made it a fertile re-
cruiting ground for extremist
groups.
FATHI NASRI/AGENCE FRANCE-PRESSE/GETTY IMAGES
Local residents said several
of the jihadists participating in
Monday’s attacks were Tuni-
sians from Ben Guerdane.
“We ran away [from the
fighting] and later we found
bodies of dead jihadis that we
can recognize,” said a witness
who gave his name only as
Hedi. “They knew their way
around very well, just like lo-
cals we haven’t seen in a long
time.” He said 70 to 80 assail-
ants had used the Islamic call
there is no plan and no zero
hour to start the operation or
a plan for the post-liberation
period,” he said.
Recapturing Mosul would
be a bigger and more compli-
cated battle against Islamic
State than any so far. The city
is more than four times the
size of Ramadi.
“Whomever thinks this bat-
tle will happen in 2016 is ei-
ther a daredevil or believes he
is Rambo,” said Mashaan al-
Jabouri an influential Sunni
parliamentarian whose son
commands a Sunni militia.
“Ramadi was a good victory
but Ramadi is a village that
was masquerading as a city.”
Iraq has moved at least two
infantry units and heavy
equipment to Makhmour, a
base about 60 miles southeast
of Mosul in what defense offi-
cials say is an effort to pres-
sure Islamic State forces in the
city ahead of a full-fledged
ground assault.
Islamic State, in an appar-
ent attempt to show sophisti-
cated weaponry ahead of any
coalition campaign for the city,
released photos through social
media showing what it
claimed to be air defense ca-
pabilities in and around Mosul.
—Ghassan Adnan
and Ali A. Nabhan
contributed to this article.
BUNYAMIN AYGUN/ASSOCIATED PRESS
icy in place since the start of
the war. But the new regula-
tion comes with restrictions.
Syrians who have been in Tur-
key at least six months can
work only in the province
where they registered as refu-
gees. And Syrians can’t make
up more than 10% of any
workplace.
The restrictions, along with
the often-convoluted bureau-
cratic challenges, make it hard
for Syrian families to stay.
While work visas are a corner-
stone of the plan, Turkish and
Western officials acknowledge
that it could take months to
see any real impact from the
program.
For the Turkish govern-
ment, the challenges Kilis is
facing can’t overshadow the
generosity the residents have
offered to Syrian refugees.
“People share their jobs,
houses, trades and social
spaces” with Syrian refugees,
Ayhan Sefer Ustun, deputy
head of Turkey’s ruling Justice
and Development Party, wrote
in his letter nominating Kilis
for a Nobel Peace Prize.
to prayer as a signal to attack.
The ministry didn’t elabo-
rate as to how many jihadists
had participated.
The town has sustained itself
for decades through a black-
market economy of heavily sub-
sidized goods brought in from
Libya. But in recent years, the
town became an important way
station for young people seek-
ing to join Islamic State affili-
ates in Libya, Syria and Iraq.
The same loose controls at
the border that eased the
smuggling of goods became key
to moving people from all over
Tunisia into Libya.
Tunisian authorities began
to clamp down on the porous
crossing last year, when gun-
men who they say had been
trained in Libyan Islamic State
camps carried out two separate
assaults that killed dozens of
tourists. The attacks were
claimed by Islamic State.
A4 | Tuesday, March 8, 2016 HK JP KO ML SI IN UK FR MN PR THE WALL STREET JOURNAL.

WORLD NEWS

Beijing to
Shift Debt
Burden in
Tax Plan
BY LINGLING WEI

BEIJING—China’s central
government will take over
some of local authorities’
debts in a move to help them
regain footing and allow Bei-
jing to cut business taxes.
Key to Chinese leaders’ eco-
nomic agenda this year is to

JEON HEON-KYUN/EUROPEAN PRESSPHOTO AGENCY

slash taxes and debt loads for
companies, leaving firms with
more funds to invest and inno-
vate as Beijing looks to entre-
preneurs to help drive growth.
But lowering taxes has long
been a difficult pill for local
officials to swallow, since they
see spending-induced growth
as crucial to their survival.
This has led to credit-fueled
construction of apartment
blocks, highways and railways
around China, many of which A South Korean soldier stood on a K-55 self-propelled howitzer during exercises Monday. The joint U.S.-South Korean military drills have angered Pyongyang.

Tensions Flare on Korean Peninsula

now sit empty.
Now Beijing must find ways
to address local authorities’
debt buildup without pushing
growth into an abyss. One so-
lution: Let the central govern-
ment help.
“When the entire society is
deleveraging, the [central]
government needs to add le-
verage and increase its defi-
cit,” said Finance Minister Lou
Jiwei at a news confer-
ence Monday on the sidelines
of the National People’s Con-
gress, China’s annual legisla-
tive session.
For years, China has grap-
pled with how to realign re-
sources and responsibilities
for different layers of its gov-
ernment. Under the current
system, Beijing collects reve-
nue from local governments
and sends back some of the
funds. By some estimates, lo-
cal governments receive little
more than half of the fiscal
Some officials have
urged Beijing to
sharply widen the
budget deficit.
revenue, while being responsi-
ble for more than 80% of the
Seoul accuses North
of cyberattacks;
Pyongyang threatens
nuclear strike on U.S.
BY ALASTAIR GALE
SEOUL—South Korea’s in-
telligence agency accused
North Korea of attempting to
hack into government web-
sites and smartphones as ten-
sions on the peninsula in-
creased at the start of military
drills involving U.S. troops in
the South.
Pyongyang threatened to
respond to the military drills
with a nuclear attack on the
U.S. and South Korea, while
Seoul said it would impose
new sanctions on the North.
The exchanges underscored
the deterioration in cross-bor-
der relations since North Ko-
rea’s recent tests of a nuclear
bomb and a new rocket.
While ties between the two
Koreas are rarely smooth,
North Korea’s nuclear detona-
tion in January and rocket
launch in February—viewed by
other nations as a missile
test—have triggered a switch
to a more assertive policy to-
ward Pyongyang by South Ko-
rean President Park Geun-hye.
South Korean officials who
talked a few months ago of
working with North Korea to-
ward eventual reunification
now emphasize pressuring its
regime. At a meeting of senior
aides on Monday, Ms. Park
called for sanctions on North
Korea to be fully enforced “to
make sure it will abandon its
nuclear program and move to-
ward change.”
Seoul has been a strong
supporter of United Nations
sanctions enacted last week
that aim to make it impossible
for North Korea to continue its
nuclear-weapons development.
The first known effect of those
sanctions came when the Phil-
ippines seized a North Korean
cargo ship in recent days.
South Korea said it would
impose its own new sanctions
on North Korea after it closed
a jointly run industrial park
last month that funneled
around $100 million a year to
the North Korean government.
The new sanctions will likely
include freezing any North Ko-
rean assets in the South, ac-
cording to local media reports.
North Korea typically
makes threats of conflict
around the time of military
drills in the South, but inter-
national efforts to impose
harsh economic and other
penalties on the isolated state
for its nuclear pursuit have el-
evated concerns among some
that Pyongyang may lash out.
South Korean officials have
been among those warning of
North Korean provocations. On
Monday, South Korea’s Na-
tional Intelligence Service
published a rare news release
in which it accused Pyongyang
of attempting cyberattacks on
government websites and the
phones of “key figures.”
The agency gave no further
details but said it would work portrays as a rehearsal for in-
to ensure the government is vasion, Pyongyang said it was
adequately prepared to guard prepared to take a “pre-emp-
against attacks. In recent tive and offensive nuclear
years, South Korean govern- strike” against South Korea
ment and private-sector web- and the U.S., including Ameri-
sites have been brought down can bases in Asia. North Korea
by sporadic hacking attacks commonly makes threats dur-
that Seoul has blamed on ing joint exercises—in part,
North Korea. Pyongyang has experts say, to solidify support
denied involvement. among its military for the
On Monday, the U.S. and North Korean leadership.
South Korea began annual The threat followed a call
joint military drills intended by North Korean dictator Kim
to ensure readiness for any Jong Un last week for the na-
North Korean military attack tion’s nuclear weapons to be
through a combination of bat- available for use at any time.
tlefield and computer-simu- A South Korean Defense
lated exercises. This year’s ex- Ministry spokesman said Seoul
ercises run through April and would respond “firmly and se-
involve 17,000 U.S. and around verely” to any North Korean
300,000 South Korean troops. offensive against the South.
The simulations will include China added its concerns
offensive maneuvers against about the U.S.-South Korean
North Korea’s leadership and drills, and suggested they
its nuclear and missile arse- were fueling tensions in a re-
nals, Yonhap News Agency re- gion Beijing sees as strategi-
ported, citing unnamed South cally vital to Chinese security.
Korean military sources. —Kwanwoo Jun in Seoul and
In response to the drills, Charles Hutzler in Beijing
which North Korea routinely contributed to this article.

In Rare Move, China Frees Dissident Lawyer

expenditure. That helps ex-
plain why local officials in
general haven’t welcomed
lower taxes. Compared with
the West, where tax cuts can
help politicians win elections,
local Chinese officials owe
their positions not to voters
but to showing Beijing they
can deliver solid growth.
Mr. Lou said a new tax sys-
tem would save Chinese com-
panies more than 500 billion
yuan ($76.9 billion) in taxes
this year. But the new system,
based on a value-added tax,
means that certain levels of
government will suffer a drop
in their tax revenue, with local
authorities bearing the brunt.
He pledged to increase the
central government’s borrow-
ing and deficit as a way to
ease shortfalls, and said Bei-
BY JOSH CHIN against the lawyers were fab-
ricated in retribution for their
BEIJING—A Chinese lawyer advocacy of Western legal
detained in a sweep of legal concepts and their adoption of
activists last year was re- confrontational tactics inside
leased and flown to the U.S., in and outside the courtroom.
a rare act of leniency that con- Chinese officials have repeat-
trasts with the treatment of a edly said the lawyers’ acts, in-
dozen other lawyers and legal cluding the organization of
assistants still being held. protests outside courts,
Chen Taihe, a law professor crossed a line into illegality.
and advocate for the adoption The spokeswoman for
of a jury system, arrived in China’s legislature, the Na-
San Francisco on March 1 after tional People’s Congress, de-
spending seven months in Chi- fended the government’s ac-
nese police custody and under tions, saying lawyers should
monitored release, Mr. Chen be role models in respecting
and the U.S.-based human- the law and deserved to be
rights group Dui Hua Founda- punished when they broke it.
tion said Monday. Among the welcome party
DUI HUA FOUNDATION

jing is considering transfer-
ring some funds to city halls
and townships.
The central government
represents one of the few cor-
ners of the Chinese economy
where there is still scope for
debt expansion.
According to Macquarie Se-
curities, debt owed by state
companies reached about 59.3
trillion yuan last year, or the
equivalent of 88% of China’s
gross domestic product. Debt
owed by private companies
amounted to 55% of GDP and
that owed by local govern-
ments was 41% of GDP. By
comparison, the central gov-
ernment’s debt is about 10
trillion yuan, or 14% of GDP.
In recent months, some
Chinese economists and offi-
cials, including at the central
bank, have urged Beijing to
sharply widen the budget defi-
cit—a move that would let au-
thorities cut business taxes
even in a time of dwindling
government revenue.
In its economic plan pre-
sented at the National People’s
Congress, Beijing said it would
lift China’s budget deficit to
3% of GDP from 2.3% last year.
Some officials had suggested
an even larger rise, to 4%-4.5%
of GDP. “Raising the deficit is
intended to prevent a sharp
slowdown in the economy,”
Mr. Lou said Monday, adding
that it was “difficult to say”
how much room the central
government has to increase
borrowing.
Neither Mr. Chen nor Dui
Hua, which worked with Chi-
nese officials and U.S. diplo-
mats to gain his release, could
explain why authorities
dropped the charges of picking
quarrels, embezzlement and
inciting subversion leveled
against him after his detention
in mid-July. “I think I’m in-
credibly lucky,” Mr. Chen said
in a phone interview. “Gener-
ally, no matter what you do,
nobody can get out. There is
no negotiation.”
“Of the cases I’ve worked
on—and I’ve worked on a lot—
this in my opinion was the
greatest act of clemency by
World
Watch
GERMANY
Far Right Gains
Support in Local Poll
The far-right Alternative for
Germany emerged as the third-
largest party in municipal elec-
tions in the German state of
Hesse on Sunday, in a likely pre-
view of the success the party
looks set to score in three state
elections later this week.
The outcome of the ballot
highlights the rapid rise of a
party that has been using the
Lawyer Chen Taihe, who arrived in the U.S. this month after being released by Chinese authorities.
the Chinese government in
more than 10 years,” said Dui
Hua Foundation Executive Di-
rector John Kamm.
China’s ministries of foreign
affairs and public security and
the police bureau in the south-
ern city of Guilin, where Mr.
Chen was detained, didn’t re-
spond to requests to comment.
Authorities’ willingness to
release Mr. Chen and let him
migration crisis to boost its pop-
ularity. Founded only in 2013
mostly on an antieuro stance, it
has concentrated increasingly on
opposing migration.
—Ruth Bender
MALAYSIA
Flight 370 Families
Rush to File Claims
The families of the 227 pas-
sengers on board missing Ma-
laysia Airlines Flight 370 rushed
to file lawsuits in several coun-
tries against the airline Monday
ahead of a two-year deadline
under an international treaty.
The cases are rarities in avia-
tion legal history because there
is very little evidence to rely on
other than satellite data indicat-
ing that the plane ended its
flight thousands of miles off
leave for the U.S. is a surpris-
ing turn from a Chinese gov-
ernment that has clamped
down on dissent. More than
300 lawyers, law-firm staff
and legal activists were inter-
rogated or taken into custody
last summer. Some of those
who were criminally detained
have since been released on
bail. Mr. Chen appears to be
the only one to have the case
course in the southern Indian
Ocean. The Boeing 777 disap-
peared on March 8, 2014, during
a flight from Kuala Lumpur to
Beijing. Despite nearly two years
of deep-sea searches no flight
recorders have been found.
—Gaurav Raghuvanshi
PHILIPPINES
Rebel Leader Warns
Of Extremist Threat
Islamic State will gain a foot-
hold in the southern Philippines
unless the country’s next presi-
dent commits to completing a
stalled peace process, the leader
of the country’s main Islamic
rebel group warned.
While vowing to keep violent
extremists at bay, Al Haj Ebra-
him Murad, chairman of the
Moro Islamic Liberation Front,
against him dropped, accord-
ing to lists of detainees kept
by human-rights groups.
Twelve have been formally
arrested on charges of subver-
sion or inciting subversion and
remain in detention, according
to human-rights groups, and a
further three dozen have been
forbidden from leaving China.
Rights groups and support-
ers have said the charges
said in an interview in Malaysia
on Monday that delays to a
peace deal promising far-reach-
ing autonomy for Filipino Mus-
lims are weakening his authority
on the southern island of Minda-
nao.
“They are capitalizing on the
frustration of the people; they
are trying to say that there is
no more hope and we have to
return to violence,” Mr. Murad
said, referring to Islamic State
and its local affiliates. “That is
what we are trying to counter.”
—Yantoultra Ngui
and Trefor Moss
CYPRUS
Bailout Program
To End This Month
Cyprus will successfully exit
from its bailout program this
greeting Mr. Chen at San Fran-
cisco was a 5-week-old son he
was meeting for the first time.
Mr. Kamm said he used the
birth of Mr. Chen’s son in Jan-
uary as an emotional prod in
convincing Chinese officials to
grant the lawyer a passport
and allow him to leave.
Mr. Chen’s wife and son de-
parted on Aug. 3 for San Fran-
cisco holding visas that tech-
nically only permitted them to
enter the U.S. accompanied by
Mr. Chen. They were admitted
after telling border officials
about Mr. Chen’s situation, ac-
cording to people familiar
with the matter.
month despite not completing
one final task required by its
creditors, eurozone finance min-
isters said Monday.
The exit will mark the fourth
conclusion of a eurozone bailout
following Ireland, Spain and Por-
tugal. It leaves Greece as the
only country in the currency bloc
to remain in a financial rescue
program.
Cyprus signed up to a rescue
package of as much as €10 bil-
lion ($11 billion) in March 2013,
when its banks collapsed and
the country had to impose capi-
tal controls to prevent financial
meltdown.
Eurozone finance ministers,
who met in Brussels for their
monthly gathering, praised the
island for its efforts to bring its
economy back on track.
—Viktoria Dendrinou
THE WALL STREET JOURNAL. Tuesday, March 8, 2016 | A5
A6 | Tuesday, March 8, 2016 THE WALL STREET JOURNAL.

WORLD NEWS

France Pushes Labor Reform TURKEY

BY WILLIAM HOROBIN
PARIS—President François
Hollande is winning the
praise of business leaders like
Jean-Marc Rieger for the first
time in years with a recipe to
fix France’s anemic economy:
make it easier to hire and
fire.
“You can’t recruit when
things are going well if you
can’t lay off when things are
going badly,” said Mr. Rieger,
chief executive of Chimirec, an
industrial waste-management
company.
By the end of March, Mr.
Hollande’s government plans
to introduce legislation that
would create clearer, simpler
rules for cutting staff in diffi-
cult times while capping
court-ordered severance pay.
Under the plan, firms would
also have more flexibility to
negotiate lower overtime pay
and other workarounds to
France’s hallowed 35-hour
workweek.
The proposals aim to loosen
the regulatory straitjacket that
many businesses leaders,
economists and officials in
other European capitals blame
for choking growth in the eu-
rozone’s second-biggest econ-
omy.
In recent years, Spain and
Italy have both taken steps to
follow Germany in making
their economies more compet-
itive by loosening labor re-
an EU promise to “cooperate
with Turkey in any joint en-
deavor to establish humanitar-
ian safe areas inside Syria.”
Continued from Page One European diplomats said it
dency. That raises the specter deliver,” Turkish President Re- wasn’t clear what impact such
Stubborn Unemployment of protests similar to those cep Tayyip Erdogan said Mon- a statement could have, given
Once on par with Germany, France’s unemployment rate has slowly that forced the government of day in Ankara. the EU’s reluctance to inter-
climbed. The country is considering labor reforms like those enacted former President Jacques Chi- Turkey’s heightened de- vene militarily in Syria.
in Italy and Spain, whose jobless rates have fallen from recent peaks. rac to back down on labor mands come as Europe has be- Another concession consid-
overhauls in 2006. gun to choke off the main mi- ered by EU leaders is a bigger
Monthly unemployment rate “This labor law is the final grant trail through Europe at resettlement program, moving
25% straw,” said Carole Couvert, Greece’s northern border. At United Nations-vetted refugees
2003–’05 Germany the head of the white-collar the same time, the govern- from Turkey directly to EU
overhauls welfare CFE-CGC union that until now ment in Ankara has found it- countries. Under the deal dis-
20 benefits/labor laws Spain backed Mr. Hollande’s pro- self in an increasingly isolated cussed, EU countries would
2015 Italian business overhauls. position in the region follow- agree to take in one Syrian
law helps ease Mr. Hollande is also facing ing its clash with Russia over refugee from Turkey for each
15 hiring/firing strong resistance from the left Syria. Syrian refugee returned from
wing of his own Socialist Still, EU diplomats said the Greece. EU countries would
Italy Party, which has cast the labor bloc was taking the Turkish also pick up the bill for the re-
10 France overhaul as an existential demands seriously—a sign turn flights.
threat to its political identity. that the bloc wants to help
In an attempt to quell the German Chancellor Angela
5 criticism, Mr. Hollande’s gov- Merkel, who is facing a politi-
Under the proposed
Germany
2012 Spain ernment agreed last week to cal backlash at home over her deal, the EU would
overhauls consult with unions and left- open-door refugee policy.
0 labor laws
wing lawmakers on how to After weeks of discussions
also speed up
2000 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 make the overhaul more palat- between Berlin, Brussels and membership talks.
Source: Eurostat THE WALL STREET JOURNAL. able to the Socialist base. Ankara that aimed to broaden
In its draft form, the bill is the November deal, Mr. Davu-
strictions. But in France, the nomic powerhouse. While the designed to allay the fears of toglu surprised leaders on Only a few thousand people
threat of paralyzing street moves ultimately cost Mr. employers that have left Monday by offering to take have been moved under the
protests has made a revamp of Schröder re-election, Mr. Hol- France’s labor market split in back all migrants, including current resettlement program.
labor rules a taboo for succes- lande is hoping his plan will a two-tier system. Afraid to Syrian refugees, in return for The U.N.’s refugee agency has
sive governments, despite an do the opposite. “I’ve made hire under permanent con- tougher demands on aid, visa vetted people who are likely
unemployment rate that stub- employment my priority,” Mr. tracts loaded with benefits rules and other issues that be accepted for asylum be-
bornly remains above 10%. Hollande said last week. “Ac- and job protections, many several EU leaders were reluc- cause of the dangers they face
With the end of his term tion is the only possible companies have resorted to tant to endorse. at home, and countries in the
approaching in 2017, Mr. Hol- path.” using temporary contracts, Mr. Davutoglu demanded EU have taken them in on a
lande is charting a path simi- The strategy places Mr. creating a constant churn of that the bloc gives Turkish cit- voluntary basis.
lar to Gerhard Schröder, the Hollande on a crash course job seekers. izens the prospect of visa-free It isn’t clear what a larger
center-left former German with his leftist base. Fractious More than 80% of new re- access to the EU by the end of program would entail, but the
chancellor who, about a dozen student organizations have cruits are on temporary con- June. The decision to lift the U.N.’s human-rights agency
years ago, pushed through un- united with labor unions to tracts, making it harder for visa requirement for Turkey’s said last week it could start
popular overhauls that many call for demonstrations, begin- those workers—often young 75 million citizens would have the process for 400,000 refu-
now credit with transforming ning on Wednesday—the first people—to take out loans or to be taken by the bloc’s gov- gees to be moved all over the
Germany into Europe’s eco- time in Mr. Hollande’s presi- rent homes. ernments. Several member world.
states, notably France, have Amid the negotiations,
been traditionally reluctant to some European officials criti-

Greece’sLendersNarrowDifferences
BY VIKTORIA DENDRINOU
BRUSSELS—Greece’s inter-
national creditors narrowed
their differences over the eco-
nomic overhauls that Athens
should implement in exchange
for fresh loans, paving the way
for a new round of negotia-
tions which could lead to a
much-anticipated deal on debt
relief.
The country’s bailout moni-
tors agreed to send their
teams back to Athens as soon
as Tuesday, in a sign they
were moving closer to each
other’s positions on the type
and scale of budget cuts and
economic overhauls Athens
must undertake to meet the
targets set out in its rescue
program.
“There is enough common
ground, enough preparation
has been done for the mission
to continue, hopefully to work
toward a successful comple-
tion,” said Jeroen Dijssel-
bloem, the Dutch finance min-
ister who presides over
meetings with his eurozone
counterparts.
He cautioned, however, that
“more work needs to be done,
more effort needs to be put in
for there to be a good out-
come.”
Without an agreement by
all sides on the reforms that
Athens must adopt, Greece’s
creditors cannot complete a
review of its up-to-€86 billion
($94 billion) bailout program.
The conclusion of this assess-
ment is a prerequisite for the
country to receive more finan-
cial aid and for the start of po-
litically sensitive talks on debt
relief for Greece.
“We look forward to closing
in a timely manner the first
review and having a discussion
on debt,” Greek Finance Minis-
ter Euclid Tsakalotos said.
Still, EU officials cautioned
that while the return of the
creditors’ teams suggested the
two sides have converged on
what they will require from
Athens, they still hadn’t fully
converged on the scale or type
of budget belt-tightening
needed.
expand visa-free access to the
bloc.
Under the proposed deal,
the EU would also speed up
membership talks with Turkey.
But European Parliament Pres-
ident Martin Schulz said the
EU wouldn’t agree to make
Turkey’s membership bid a
“precondition to tackle the
refugee crisis.”
“We have to separate the
access negotiations between
Turkey and the European
Union and all the questions re-
lated to the opening of new
chapters from the short-term
management of the refugee
crisis,” Mr. Schulz said.
The draft deal also includes
cized Turkey’s fresh takeover
of the country’s largest-circu-
lation newspaper, Zaman.
An Istanbul court appointed
trustees on Friday to run the
publication, which allegedly
has ties to a religious network
that prosecutors and Mr. Erdo-
gan accuse of seeking to top-
ple the government.
“It can’t be that just be-
cause of the migration crisis
we throw other values out the
window, like freedom of the
press,” said Luxembourg
Prime Minister Xavier Bettel.
—Matthias Verbergt and
Laurence Norman in Brussels
and Emre Peker in Istanbul
contributed to this article.

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THE WALL STREET JOURNAL.
Front-Runners Look to Pad Leads
Poll shows Trump and
Clinton in strong
positions ahead of
Michigan primary
BY PATRICK O’CONNOR
Donald Trump is well-posi-
tioned to claim another win,
this one in Michigan on Tues-
day, according to a new Wall
Street Journal/NBC News/Mar-
ist poll that finds him with a
double-digit lead.
The Republican front-runner
is the preferred pick of 41% of
likely GOP primary voters, fol-
lowed by Texas Sen. Ted Cruz,
at 22%. Florida Sen. Marco Ru-
bio draws 17% support. John
Kasich, the governor of neigh-
boring Ohio, is last, at 13%.
In the Democratic race, for-
mer Secretary of State Hillary
Clinton leads Vermont Sen.
Bernie Sanders, 57% to 40%,
the poll finds. Mrs. Clinton
also leads Messrs. Trump and
Cruz, the two leading contend-
ers for the Republican presi-
dential nomination, in tests of
potential general-election
matchups.
The poll results suggest
that a significant challenge re-
mains for Republican leaders
who are trying to slow Mr.
GROWTH
Continued from Page One
faster consumption in major
economies such as China and
Germany.
“The world can’t depend on
the United States to be the
consumer of first and last re-
sort,” Treasury Secretary Ja-
cob Lew said in a recent inter-
view with The Wall Street
Journal. “That’s not a power-
ful enough engine to drive the
whole global economy. So
there needs to be more de-
mand in other places where
there’s the capacity to gener-
ate it.”
Still, the buying habits of
American households have be-
come a global preoccupation
as U.S. consumer spending ad-
LUCAS JACKSON/REUTERS
justed for inflation grew 3.1%
last year, the fastest annual in-
crease since 2005.
While export-oriented sec-
tors of the American economy
have been hit by the global
turmoil amid a strong dollar
that makes goods more expen-
sive overseas, the U.S. has per-
formed relatively well thanks
to a recovering job market and
cheap energy prices that have
bolstered consumers’ spending
power. Only about one-eighth
of U.S. output comes from ex-
ports; consumer spending still
accounts for more than two-
thirds of U.S. gross domestic
product.
“The fact that the U.S. has
been able to delink its own
economic prospects from
those of almost the entire rest
of the world is quite remark-
able,” said Cornell University
economist Eswar Prasad.
“Many people, including my-
self, had anticipated at least
some drag from the persistent
strength of the dollar and the
fact that the rest of the world
was so weak.”
Guillaume Deglise, chief ex-
ecutive of Vinexpo, a French
Colleges Spar Over Nursing
BY ANNA LOUIE SUSSMAN
AND MELISSA KORN
When California state Sen.
Marty Block was working on a
bill to allow community col-
leges to offer some bachelor’s
degrees, a B.S. in nursing
seemed like a sure bet.
Most of the four-year Cali-
fornia State University cam-
puses that offer a bachelor’s in
nursing have to turn students
away, at a time when the state’s
hospitals increasingly demand
that new nurses hold such de-
grees. But Mr. Block, a Demo-
crat, soon got the message from
four-year schools and their lob-
byists: Stay off our turf.
So the final bill that passed
in 2014 allowed community col-
leges to offer bachelor’s pro-
grams in such subjects as mor-
tuary sciences and ranch
management but not nursing.
“I didn’t want to forfeit a
very good bill because I wanted
it to be perfect,” Mr. Block said.
The scene in Sacramento is
being replayed across the U.S.
as community colleges and
Trump’s momentum after his
dominant performance on
Super Tuesday, when he won
seven states and opened up a
big lead in delegates. On
Thursday, Mitt Romney, the
party’s 2012 nominee and a
Michigan native, delivered a
full-throated takedown of the
Republican front-runner.
But the survey bolsters at
least one argument Republi-
cans are making against the
New York billionaire: He trails
Mrs. Clinton by 16 percentage
points in one of the states he
predicts he could win in the
fall general election, and he
trails Mr. Sanders by 22
points. Mr. Romney lost Michi-
gan, 44% to 54%, to President
Barack Obama in 2012.
“The GOP’s worries about
the Trump candidacy seem
well-founded in the contest for
Michigan’s 16 electoral votes,”
said Lee Miringoff, director of
the Marist College Institute
for Public Opinion, which con-
ducted the poll. “Trump trails
both Clinton and Sanders by
substantially wider margins
than Romney lost the state to
Obama in 2012.”
The decision by retired neu-
rosurgeon Ben Carson to leave
the presidential race has little
impact in his home state of
Michigan, the poll finds. Con-
The U.S. economy—and by extension the U.S. consumer—is again being called on to help drive
global growth. Here, shoppers in a Wal-Mart store in New Jersey late last year.
company that organizes trade
fairs for the wine and spirits
industry, said his company is
boosting its focus on the U.S.
because “it’s the leading con-
sumer market.”
“Many people have forgot-
ten that in the last few years,”
he said. “The focus was proba-
bly too much on China.”
Amando M. Tetangco, gov-
ernor of the central bank of
the Philippines, recently said
the “vibrant outlook” in the
U.S. could have “positive spill-
over effects” for Filipino ex-
porters.
In Germany, the U.S. con-
sumer has already helped. Ex-
ports to the U.S. rose 19.4% be-
tween January and November
of last year, offsetting a 4.3%
drop in exports to China, ac-
cording to the German statis-
tics office.
four-year schools spar over who
should be responsible for edu-
cating today’s nurses.
Leaders at community col-
leges, which now train nurses to
the associate-degree level, ar-
gue they can help fill a hole in
the nursing labor market at a
low price. Administrators at
four-year colleges counter that
community colleges aren’t
equipped to teach upper-level
nursing courses and say there
aren’t enough qualified faculty
members to go around.
“We have to be responsible
in terms of how many students
realistically can complete these
programs and how many can
get jobs,” said Christine Mallon,
assistant vice chancellor of aca-
demic programs and faculty de-
velopment at the California
State University System.
Bachelor’s degrees in nurs-
ing from community colleges
would consist of the same
number of credits as those at a
four-year university, but they
would likely appeal most to
students who want to attend
part time because they are al-
U.S. NEWS
Michigan Preview
Hillary Clinton and Donald Trump lead their parties' presidential fields
in Michigan, the largest state to hold a nominating contest on Tuesday.
Preference among likely
Michigan primary voters
DEMOCRAT
Clinton
Sanders 40
REPUBLICAN
Trump 41%
Cruz 22
Rubio 17
13
Kasich
Source: WSJ/NBC News/Marist Poll of 546 likely Democrat primary voters and 482
likely GOP primary voters, 1,705 registered voters conducted March 1-3; margin of error:
+/-4.2 pct. pts. (Democrats), +/-4.5 pct. pts. (GOP), +/-2.4 pct. pts. (registered)
ducted before Mr. Carson said
he was leaving the campaign
trail, the poll found him to be
the top pick of 9% of likely
GOP primary voters. When his
support was distributed to
voters’ second-choice candi-
dates, it was spread almost
evenly among the rest of the
field. All four candidates
gained modest ground, and
Mr. Trump’s lead over Mr.
Cruz shrank by two percent-
age points.
Today’s dynamic is similar
to one that prevailed nearly
two decades ago. In 1999, as
Asian countries were gripped
by a financial crisis, an IMF
report noted that the U.S.
economy “has shown no signs
of abating despite the slow-
down of most of the United
States’ overseas markets.”
“The ability of the United
States to act as the main engine
of global growth can be ex-
plained in part by the optimism
of consumers and investors en-
gendered by an exceptionally
encouraging combination of
economic developments,” the
report said.
But that was a different era.
In 1998, the U.S. was the
world’s undisputed economic
behemoth, accounting for al-
most half of global economic
growth.
ready working in the field.
The debate comes amid long-
term predictions of a shortage
in nurses as the U.S. population
ages. Montana State University
nursing economist Peter Buer-
haus estimates a shortage of
about 130,000 nurses nation-
wide by 2025, not as acute as
once feared but still a signifi-
cant staffing challenge.
The Institute of Medicine,
now part of the nonprofit Na-
tional Academy of Sciences, in
2010 recommended that 80%
of nurses hold bachelor’s de-
grees by 2020, up from about
50% at the time.
Spurred by the report, as well
as incentives in the Affordable
Care Act to use more highly cre-
dentialed nurses, hospitals are
scrambling to bring on new staff
with bachelor of science degrees
in nursing, or push nurses with
associate degrees to upgrade to
a BSN. That means additional
coursework emphasizing com-
munity health, critical thinking
and evaluating research, in ad-
dition to liberal-arts or general-
education classes.
Presidential preference in general
matchups among Michigan
registered voters
57% Clinton
Trump 36
Clinton
Cruz
Sanders
Trump 34
Sanders
Cruz 36
THE WALL STREET JOURNAL.
Mr. Trump’s support in
Michigan reflects his strengths
in the 15 states that already
have voted. He performs best
among men, among Republican
primary voters who identify
themselves as moderate, those
who lack a college degree and
voters who make less than
$50,000 a year. He registers his
highest level of support from
those GOP voters who don’t ac-
tively practice a religion.
Mr. Cruz leads Mr. Trump
Today, after the rise of
China and other emerging
markets, the U.S. contribution
is less than half that.
Pinning the world’s hopes
on the U.S. economy poses
risks both to emerging mar-
kets and to the U.S.
For emerging markets, fo-
cusing too much on exporting
to the U.S. could bind them to
American economic cycles,
putting them at the mercy of
not just U.S. monetary policy
but also the whims of Ameri-
can consumers. It could also
lead them to postpone making
the difficult decisions needed
to develop healthy domestic
demand.
And there are reasons to
worry about the health of the
U.S. economy, despite a gener-
ally positive outlook. Wages
have been stubbornly slow to
Kristina Spaete in San Diego would like to get her bachelor of science in nursing at a community college.
For now, getting into any
program is tough. U.S. schools
turned away 68,938 qualified
applicants from bachelor’s and
graduate nursing programs in
2014, according to the Ameri-
can Association of Colleges
of Nursing, citing a dearth of
faculty, clinical sites and class-
room space.
Yet starting upper-level
Tuesday, March 8, 2016 | A7
among a single demographic
group—the 16% of likely GOP pri-
mary voters who describe them-
selves as “very conservative.”
In the Democratic primary,
Mrs. Clinton holds large leads
over Mr. Sanders among Afri-
can-Americans, drawing 76%
52%
to his 21%. Similar leads pro-
pelled Mrs. Clinton to victories
in South Carolina, Georgia and
48%
other states with large shares
of African-American voters.
41
The two more or less split
white Democratic primary vot-
56%
ers in Michigan.
“Michigan is following a fa-
miliar story line in the Clinton-
54%
Sanders matchup,” Mr. Miringoff
said. “The greater the diversity
of the Democratic electorate, the
greater the Clinton lead.”
The former secretary of
state also crushes Mr. Sanders
among registered Democrats,
garnering almost twice as much
support. He shows similar
strength among independents,
but they only account for 22%
of likely Democratic primary
voters, according to the poll.
The survey was taken March
1-3 and included 482 likely Re-
publican primary voters and
546 likely Democratic voters.
The margin of error was plus or
minus 4.5 percentage points for
Republicans and 4.2 points for
Democrats.
Driving Growth
U.S. contribution to global GDP
growth as a share of the overall
25% Estimates
20
15
10
5 abama Supreme Court for invali-
0
2010 ’11 ’12 ’13 ’14 ’15 ’16
Source: World Bank
THE WALL STREET JOURNAL.
rise since the recession ended,
though they have picked up
somewhat in recent months.
Business investment has also
struggled to rebound.
Meanwhile, the stronger
dollar caused exports to
plunge at a seasonally ad-
justed annual rate of 2.7% in
the fourth quarter of last year
after rising just 0.7% in the
third.
That has hurt American
manufacturers and made many
gloomy about the future. De-
mand for long-lasting durable
goods fell 3.3% last year. And
only 27% of American manu-
facturers were optimistic
about the world economy in a
survey conducted by Pricewa-
terhouseCoopers.
A higher share, 46%, ex-
pressed optimism about the
U.S. economy.
“The longer the drag from
global growth remains in
place,” said Gregory Daco,
head of U.S. macroeconomics
at Oxford Economics, “the
more likelihood there is for a
U.S. slowdown that would
have secondary impacts on the
rest of the world.”
nursing classes at community
colleges remains a battle. While
17 states have or soon will allow
bachelor’s degrees at commu-
nity colleges, only nine autho-
rize such programs in nursing.
Lobbyists for Michi-
gan’s 28 community colleges are
drumming up legislative support
for a bill that would allow their
institutions to award BSN de-
U.S.
Watch
ECONOMY
Employment Gauge
Slipped in February
A compilation of U.S. job-mar-
ket indicators edged lower last
month, a sign employers may
hire workers at a slower clip in
the coming months.
The Conference Board said its
employment-trends index slipped
to 129.09 in February from 129.15
a month earlier. From a year ear-
lier, the index was up 2.1%.
The index, which seeks to
show employment trends more
clearly by filtering out the volatil-
ity of monthly data, is an aggre-
gate of eight indicators, including
jobless claims, job-openings data
from the Bureau of Labor Statis-
tics and industrial-production fig-
ures from the Fed.
“The flatness of the Employ-
ment trends index since Sep-
tember suggests that the rapid
job growth in recent months is
likely to slow down,” said Gad
Levanon, director of macroeco-
nomic research at the board.
The Conference Board’s mea-
sure follows the Labor Depart-
ment’s February jobs report, re-
leased on Friday, which showed
businesses hired at a stronger-
than-expected pace last month.
Other indicators, including initial
claims for unemployment com-
pensation, private payrolls and
planned layoffs, have pointed to
a solid job market, though Amer-
icans are still waiting for a sus-
tained pickup in wage growth.
—Lisa Beilfuss
SUPREME COURT
Woman’s Adoption of
Partner’s Kids Allowed
The U.S. Supreme Court on
Monday reinstated a lesbian
woman’s adoption of her partner’s
biological children, rebuking the Al-
dating the woman’s parental rights.
The two women, identified in
court documents by their initials,
are Alabama residents who were
in a relationship from approxi-
mately 1995 through 2011, a pe-
riod during which they couldn’t
legally marry in the state.
One woman had three chil-
dren via artificial insemination,
and the other adopted them in
Fulton County, Ga., which was re-
ceptive to same-sex adoptions,
after establishing residency there.
After the couple split, the biologi-
cal mother sought to nullify the
adoption and wouldn’t permit the
former partner to visit the chil-
dren, legal papers say.
The Alabama Supreme Court
in September said the adoption
was invalid, concluding that a
Georgia court had misapplied its
own state law. The partner ap-
pealed to the U.S. Supreme
Court, which temporarily blocked
the Alabama Supreme Court rul-
ing while considering the case.
The Supreme Court on Mon-
day said Alabama must honor
the Georgia adoption.
The opinion was unsigned
and had no noted dissents. The
case returns to the Alabama
courts to determine the
woman’s custody and visitation
rights.
Kyle Duncan, an attorney for
the biological mother, said his
client had no comment.
—Jess Bravin
SANDY HUFFAKER FOR THE WALL STREET JOURNAL
grees, after nursing. Dan Phelan,
president of Jackson College, a
community college in Michigan,
said hospitals and health systems
around the state back the bill.
Lining up against it are the state’s
four-year universities. “BSN pro-
grams generate significant reve-
nues, with little cost for the uni-
versities, and it’s a turf they want
to protect,” he said.
A8 | Tuesday, March 8, 2016
SHOW
Continued from Page One
Treasury Secretary Jacob Lew
have attended performances,
New York City Mayor Bill de
Blasio took in the show last
summer and New York Attorney
General Eric Schneiderman has
seen it twice.
The show’s home, the Rich-
ard Rodgers Theatre, even
serves as a venue for political
fundraisers. President Barack
Obama raised money there, as
did Mr. Cuomo (“Thank you—
you taught me about politics!”
the governor scrawled on a
cardboard cutout of Hamilton
on display backstage).
All the fuss has created a
sort of stage fright among some
political aides, advisers and
elected officials. Many admit to
bouts of acute professional and
social anxiety about being a
PENSION
Continued from Page One
birthrates and high longevity,
for which few are prepared.
Europe’s population of pen-
sioners, already the largest in
the world, continues to grow.
Looking at Europeans 65 or
older who aren’t working, there
are 42 for every 100 workers,
and this will rise to 65 per 100
by 2060, the European Union’s
data agency says. By compari-
son, the U.S. has 24 nonworking
people 65 or over for every 100
workers, says the Bureau of La-
bor Statistics, which doesn’t
have a projection for 2060.
While the problem has long
been building, it is gaining ur-
gency as European countries’
debt troubles, growing out of
the 2008 crisis, push govern-
ments to reassess their priori-
ties. Greece, the worst off, has
had to reduce the generosity of
its pension system repeatedly.
Though its situation is unusu-
ally dire, Greece isn’t the only
European government being
forced to acknowledge it has
made pension promises it can ill
afford.
“Western European govern-
ments are close to bankruptcy
because of the pension time
bomb,” said Roy Stockell, head
of asset management at Ernst &
Young. “We have so many baby
boomers moving into retire-
ment [with] the expectation
that the government will pro-
vide.”
Even the U.S., with a Social
Security Trust Fund of $2.8 tril-
lion, faces criticism for promis-
ing more than it can afford.
That is because the fund—
which is mostly in the form of
IOUs from the Treasury—is pro-
jected to fall short of the sums
needed to cover all benefits in a
dozen years or so, and run out
in 2035. Europe’s situation is
much worse.
Migrant factor
The demographic squeeze
could be eased by the influx of
more than a million migrants in
Pension Predicament
A growing mismatch in numbers of retirees and working-age people
poses a financial problem for Europe’s state pensions.
The share of Europe’s
population 65 years and
older is and will be larger
than in any other region…
30%
projections
25
20
15
10
5 Asia
0 35
1990 ’00 ’10 ’20 ’30 ’40 ’50
Government spending on public pensions
has climbed over the decades.
Public spending U.K.
20%
on old-age and
survivors’ 15
pensions; 10
measured as a
percentage of 5 When she was young and liv-
GDP 0 ing under communist rule, she
1990 ’95 ’00 ’05 ’11 ’90 ’95 ’00 ’05 ’11 ’90 ’95 ’00 ’05 ’11
20% Poland France
15
10
5 decades Ms. Trzcińska tilled a
0 her husband, Józef, retiring at
’90 ’95 ’00 ’05 ’11 ’90 ’95 ’00 ’05 ’11 ’90 ’95 ’00 ’05 ’11 ’95 ’95 ’00 ’05 ’11
*U.S., Canada, Bermuda, Greenland and Saint Pierre and Miquelon
Sources: UN Population Division, World Population Prospects, the 2015 Revision (population by
age group); Organization for Economic Cooperation and Development (public spending)
Hamilton no-show.
Jonathan Rosen, one of Mr.
de Blasio’s closest outside advis-
ers, is so self-conscious about
his deficiency that he tries to
fake his way through the ines-
capable “Hamilton” chitchat.
“When someone brings it up I
have no choice but to pretend I
know what they’re talking
about,” Mr. Rosen said.
Even far from the East Coast
corridors of power, “it’s a big
part of conversation” among po-
litical operatives, said Bill Bur-
ton, a California-based consul-
tant who was Mr. Obama’s
deputy White House press sec-
retary.
“I had this short but very
dedicated period of time where
I was working every angle to get
tickets,” Mr. Burton said. He fi-
nally scored a pair by calling in
a favor from a friend who used
to work in politics and now has
Broadway connections. (Mr.
Burton had given the friend
the past year. If many of them
eventually join the working
population, the result could be
increased tax revenue to keep
the pension model afloat. Be-
fore migrants are even given
the right to work, however, they
require housing, food, education
and medical treatment. Their
arrival will have effects on pub-
lic finances that officials have
only started to assess.
The pension squeeze doesn’t
follow the familiar battle lines
of the eurozone crisis, which
pits Europe’s more prosperous
north against a higher-spend-
ing, deeply indebted south.
Some of the governments facing
the toughest demographic chal-
lenges, such as Austria and Slo-
venia, have been among those
most critical of Greece.
Germans, meanwhile, “are
promoting fiscal rules in Spain
and other countries, but we are
softening the pension rules” at
home, said Christoph Müller, a
German academic who advises
the EU on pension statistics. He
pointed to a recent change al-
lowing some workers to collect
benefits two years early, at 63.
A German labor ministry
spokesman called that “a very
limited measure.”
Europe’s state pension plans
are rife with special provisions.
In Germany, employees of the
government make no pension
contributions. In the U.K., pen-
sioners get an extra winter pay-
ment for heating. In France,
manual laborers or those who
work night shifts, such as bak-
ers, can start their benefits
early without penalty.
While a few countries—in-
cluding Norway, the U.K. and
the Netherlands—have consid-
erable savings in public funds or
employer-sponsored pension
plans, many others have little.
Governments’ annual costs for
public pensions equal a tenth of
gross domestic product, accord-
ing to the EU data agency Euro-
stat. That GDP percentage
should be stable in coming de-
cades, Eurostat estimates,
though its forecast depends on
numerous economic assump-
tions.
Across Europe, the birthrate
…while the share of
Europe’s population
20–64 years old
is shrinking.
65%
Europe projections
60
Northern
America*
55
Latin
America 50
and the
Caribbean
45
Oceania
40
Africa
1990 ’00 ’10 ’20 ’30 ’40 ’50
Spain Germany
Greece Italy
THE WALL STREET JOURNAL.
FROM PAGE ONE
tickets to the 2009 Obama inau-
guration.)
The fact that Mr. Obama
himself is a “Hamilton” devotee
“makes it even more of a DC po-
litical thing that you have to
do,” said Brian Krebs, the digital
campaign director at Demo-
cratic Congressional Campaign
Committee.
Mr. Krebs, who has made
several attempts to secure tick-
ets, admits he has “definite
FOMO”—or, “fear of missing
out”—over the situation, espe-
cially since a co-worker, who is
aware of Mr. Krebs’s “Hamilton”
deficit, often urges him to listen
to the soundtrack, which both
“helps and hurts the addiction,”
he said.
Julie Wood, a longtime aide
to former New York City Mayor
Michael Bloomberg, recently ac-
costed a political colleague at a
party, imploring him to help her
get a ticket. Ms. Wood said vir-
tually all of her City Hall ac-
Małgorazata Olechowska, left, must work to a later age to collect a Polish pension than did her mother, Krystyna Trzcińska, right and
below, under a recent overhaul of the system. Many European governments’ pension systems face an eventual financial squeeze.
has fallen 40% since the 1960s
to around 1.5 children per
woman, according to the United
Nations. In that time, life expec-
tancies have risen to roughly 80
from 69.
In Poland, birthrates are
even lower, and here the demo-
graphic disconnect is com-
pounded by emigration. Taking
advantage of the EU’s freedom
of movement, many Polish
youth of working age flock to
the West, especially London, in
search of higher pay. A paper
published by the country’s cen-
tral-bank forecasts that by
2030, a quarter of Polish
women and a fifth of Polish
men will be 70 or older.
In 2012, the Polish govern-
ment launched a series of
changes in its main national
pension plan to make it more
affordable. One was a gradual
rise in the age to receive bene-
fits. It will reach 67 by 2040,
marking an increase of 12 years
for women and seven for men.
The changes mean the main
pension plan now is financially
sustainable, said Jacek Ros-
towski, a former finance minis-
ter and architect of the over-
haul.
The party that enacted the
changes lost an election in Oc-
tober, however, and a central
promise of the winning party is
to undo them. Recently, Poland’s
president introduced a bill to
reverse some of the measures.
“You have to take care of
people, of their dignity, not fi-
nances,” said Krzysztof Jurgiel,
agriculture minister in the cur-
rent Law & Justice Party gov-
ernment.
Ms. Trzcińska, the retired
grower of berries and rabbits,
doesn’t follow politics too
closely. She switches channels
when political debates such as
the one over pensions appear
on her TV screen. “They are all
yelling at each other, I don’t un-
derstand it, and it’s unpleasant,”
she said.
Retiring at 55
recalls, her family worked the
fields with horse-drawn plows
and rarely left the village. She
remembers winters so cold that
a glass of hot tea placed on a
window sill would freeze. For
tiny farm of about 17 acres with
55, then the age when women
could start collecting state pen-
sions. They eventually gave
most of their land to their son
and two daughters.
quaintances have seen “Hamil-
ton”—some multiple times—but
she has yet to secure a ticket.
“I feel like a fraud,” said Ms.
Wood, who is now a spokes-
woman for the crowdfunding
platform Kickstarter. “And I feel
like I don’t know anyone else
who hasn’t seen it who will go
with me.”
“Hamilton” chronicles the
early life and political travails of
Alexander Hamilton, the coun-
try’s first Treasury secretary
and one of America’s founding
fathers. Through hip-hop and
rap, the show charts Hamilton’s
orphan upbringing through his
fatal duel with adversary Aaron
Burr. The show’s ability to lend
modern relevance to the forma-
tive moments of American poli-
tics is especially alluring to
those who work in today’s civic
institutions.
In addition to the musical’s
roots in historical New York pol-
itics, it also has ties to contem-
For most of her working
years, Ms. Trzcińska made no
contributions to Poland’s special
pension scheme for farmers.
Modest though its payouts
are—she receives the zloty
equivalent of about $225 a
month—barely a tenth of the
plan’s benefits are covered by
contributions from current
farmers. Government budgets
fill the gap.
Because her husband worked
in a shop in addition to farming,
he draws his benefit from the
main national pension plan. Af-
ter taxes, it equals about $200 a
month. With their berry sales,
the two have a combined post-
tax income equal to $6,400,
about 60% of Poland’s median
for two people.
“I’m not worried about my-
self,” Ms. Trzcińska said. “They
already decided about my pen-
sion. But sometimes I see the
debate and worry about what
[my children’s] pensions will
be.”
Her first daughter, 46-year-
old Anna Mazurek, lives across
the lane in Zaraszów. She
teaches school—earning about
$1,375 a month—cares for two
children and spends many hours
minding a shop she and her
husband built. He too works at
the shop, as well as growing
wheat, barley and oats on their
piece of the farm. “To live in the
countryside, you have to have
five jobs,” Ms. Mazurek said.
Once a year, the pension plan
sends her an estimate of her
benefits when she retires. The
most recent was about $138 a
month. A spokesman for the
plan said it would provide at
least $224 before taxes, a legal
minimum the calculator doesn’t
take into account.
An hour’s drive away in Lu-
blin, a picturesque medieval
THE WALL STREET JOURNAL.
porary political life. The father
of the show’s star and creator,
Lin-Manuel Miranda, is Luis
Miranda Jr., a political consul-
tant who served in three New
York City mayoral administra-
tions and now runs a firm with
ties to many prominent elected
officials, including New York
state Assembly Speaker Carl
Heastie.
When Mr. Miranda attends
social events these days, he says
he is besieged by people beg-
ging for tickets. When the de-
mands become particularly tax-
ing, he hides in the kitchen or
bathroom.
Nearly two dozen requests he
has received have come from
sitting U.S. senators—a phe-
nomenon he blames on New
York Democratic Sen. Chuck
Schumer, for whom he once
worked.
“Every single one of them
said, ‘I spoke to Sen. Schumer,’ ”
Mr. Miranda said. “ ‘The sena-
town close to the Ukrainian bor-
der, her sister, Małgorazata
Olechowska, works as an office
manager for an EU-funded non-
profit for about $1,600 a month.
She pays at least a third of her
income in taxes, including 9.76%
that is earmarked for retiree
pensions. Her employer chips in
an equal amount. The govern-
ment pays all of that straight
out to current pensioners, sup-
plementing it with other tax
revenue.
The system is “a mysterious
machine,” Ms. Olechowska said.
To her, it feels as if “there’s a
huge black hole, and our money
is going inside, and we get
nothing from it.”
What both sisters do under-
stand is that they will have to
Most governments in
Europe have set
little cash aside for
promised pensions.
work long past the age at which
their parents stopped, contrib-
ute more and likely retire with a
less-generous pension.
It may be a more secure one,
however, thanks to the 2012
overhaul that made the plan fi-
nancially sounder. The changes
mean that contributions from
current workers and their em-
ployers now fund 84% of bene-
fits provided by Poland’s na-
tional social security system,
which includes not just pen-
sions but also health-care and
disability benefits.
Ms. Olechowska, 41, has con-
sidered investing in property to
help fund her retirement but
has taken no action. Her older
sister, Ms. Mazurek, doubts she
will be up to managing school-
tor’s very proud of you and your
son.’ ” A Schumer spokesman
confirmed the senator’s advo-
cacy.
Many political types take
their bragging rights seriously—
displaying mild derision for
those unable to, say, croon the
lyrics to “Aaron Burr, Sir.”
“Just buy the album and pre-
tend you’ve seen it,” suggested
Risa Heller, a public-affairs exec-
utive who was Mr. Schumer’s
communications director and
has seen “Hamilton” twice. “Save
yourself the embarrassment!”
For Ms. DeRosa, dodging
“Hamilton” barbs has affected
her work—so much so that she
hasn’t returned certain phone
calls “because I couldn’t handle
the anxiety” of being harangued
for her continued failure to see
the show.
Her suffering, she said, may
be soon be over: “I just secured
tickets to go at the end of
April.”
PIOTR MALECKI FOR THE WALL STREET JOURNAL (2)
children in her 60s but isn’t
sure what to do about it. When
the government raised the age
for receiving a pension, she
said: “I wasn’t angry, but I felt
helpless.”
The EU has pressed Euro-
pean governments to be more
upfront about their pension
costs. They are required to pub-
lish forecasts of each year’s
pension payouts. Only a few
countries estimate the total
debt burden of the pension
promises they have made. In
political discussion, most gov-
ernments treat this as a kind of
costless debt held off public bal-
ance sheets.
Starting in 2017, EU rules will
require European governments
to calculate the total amount
they must pay current and fu-
ture pensioners. Making this ob-
ligation more visible could spur
them to deal with it, said Hans
Hoogervorst, chairman of the
International Accounting Stan-
dards Board and a former Dutch
finance minister. “It will make
clear that the current situation
is unsustainable.”
That realization could trigger
some tough decisions. Moritz
Kramer, chief ratings officer for
sovereigns at Standard & Poor’s,
said European governments will
have to admit at some point
that current workers won’t re-
ceive as much from public pen-
sion plans.
Ernst & Young’s Mr. Stockell
says he regularly asks a son in
his 20s how much he is saving
for his retirement. The answer
is nothing. Mr. Stockell, who is
57, says even he hasn’t saved
enough. “My expectation was
that the company I worked for
would provide,” he said.
—Martin Sobczyk
and Andrea Thomas
contributed to this article.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL. Tuesday, March 8, 2016 | A9

ARTS & ENTERTAINMENT

The Rise
Of Cons
BY ELLEN GAMERMAN

ALL OF A SUDDEN, everybody’s got
a con. Exercise buffs go to FitCon
and dessert lovers hit CookieCon.
QuiltCon draws the bedspread set
while ParanoiaCon lures conspir-
acy theorists. This year, CatConLA
(pop culture for cat people) stalks
into California ahead of Mouse-
Con (for Disney memorabilia col-
lectors). Read a lot? Go to Book-
Con. Like makeup? Beautycon.
Drink beer? Why, there’s a Beer-
Con, of course.
The far-flung corners of fan-
dom used to thrive mostly online,
invisible to those who didn’t share
the same groupie passions. But re-
cently, more fans have been step-
ping out of the virtual world and
into convention centers—the phys-
ical manifestation of an obsessive-
ness bred by the Internet.
“You can see events about just
about any interest these days—
people crave that in-person inter-
action,” says Stephanie Dornhelm,
co-founder of this winter’s Broad-
wayCon, a first-time gathering for
theater lovers in New York City.
Fans heard “Hamilton” creator Lin-
Manuel Miranda perform a free-
style rap about the convention,
chatted by phone with Broadway
doyenne Patti LuPone and per-
formed singalongs.
The industry of the “con”—
short for convention—offers what
the Internet does not: face-to-face
experiences, custom swag, exclu-
sive sneak peeks and the bragging
rights that come with traveling to
the spinning center of a pop-cul-
ture universe for one intense
weekend. The con business also is
fueled by what the Internet does
best as organizers use social me-
dia to draw crowds and mine data
to predict what audiences will
want next.
The beating heart of the empire
is the comic con, which has
morphed steadily from scattered
niche events for comic-book lovers
to broad pop-culture fests embrac-
ing every genre. In an effort to
capitalize on recent growth, inter-
national event-planning firms have
been buying up mom-and-pop
cons, starting new events and div-
ing into unexplored markets.
ShowClix, a platform for live-event
organizers, tallied 519 major pop-
culture fan gatherings in the U.S.
last year, up from 469 in 2014.
Wizard World, which produces
fan conventions primarily in re-
gional markets, increased its
events to 24 last year from eight
in 2013. The El Segundo, Calif.-
based company places future
shows based on demographic sur-
veys and polling, says CEO John
Macaluso. Describing what he
asks himself before choosing each
venue, he says: “Where do you
feel the magic, where do you feel
the love, where are the fans ask-
ing you to come?”
As superhero movies kill the
competition at the box office and
superfans fixate on a hand-
ful of hot TV shows, Holly-
wood studios have made
comic cons essential to
many marketing cam-
paigns. Looking for new
ways to stand out, Walt
Disney Co. expanded its
own biennial fan gathering,
the D23 Expo, and is rolling
out bigger events tailored
to individual films. It re-
leased the first trailer for
“Star Wars: The Force
Awakens” at a fan gather-
ing at China’s Great Wall
last year.
Many participants view
these events as moments
for self-expression. Marie
Conte, an electrical engi-
neering Ph.D., plasters her
cubicle at Intel with pic-
tures from her con trips.
“Just let your fandom out
there, just go for it,” the
59-year-old advised, summing up
the general sentiment at a recent
Wizard World event in Portland,
Ore.
“You get the energy, the com-
munity, the collective experience—
people who are there for that thing
that’s never going to happen
again,” says Lance Festerman, head
of the fan-event firm ReedPOP.
ReedPOP, based in Norwalk,
Conn., says ticket sales for its flag-
ship New York Comic Con event
jumped to 167,000 last year from
95,000 in 2010. The business,
which also organizes gatherings
for fans of books, videogames and
other pursuits, went from one
show in 2006 to 30 events in 10
countries today. The subdivision of
global-event firm Reed Exhibitions,
part of information and analytics
company RELX Group, reported
$50 million in revenue last year
from sources such as ticket sales,
exhibitor fees and sponsorships.
One of the oldest and most lu-
crative fan events is Comic-Con In-
ternational: San Diego. It drew
more than 130,000 people last year
and generated $136 million for the
region, according to the San Diego
Convention Center Corporation.
The fan machine kicks in full
force this year to mark the 50th
anniversary of “Star Trek,” a series
responsible for the mother-of-all
fan fests, the “Star Trek” conven-
CON AIR A kilted Darth Vader
rides a unicycle at a recent
Portland show; left, the cat Lil
Bub and owner Mike
Bridavsky at CatConLA.
tion. CBS Consumer Products and
ReedPOP will stage a major gather-
ing, “Star Trek: Mission New York,”
in September. The “50 Year Mis-
sion Tour,” a fan event organized
by Creation Entertainment, will hit
six U.S. cities in 2016. A large an-
nual convention is set for Las Ve-
gas in August and a “Star Trek”
speaker series, traveling exhibit
and cruise also are in the works.
William Shatner, who played
Captain Kirk on the original TV
series and movies, says he has re-
ceived about 100 requests for fan
events this year. He will appear at
31 of them. The 84-year-old actor
says the unscripted events have
their challenges. “Here is this
huge room lined with all these
people and you don’t know what’s
going to come out of your mouth,”
Mr. Shatner says. “You hope you
don’t make a Freudian slip.”
Some experts see burnout
ahead. Rob Salkowitz, author of
the 2012 book “Comic-Con and the
Business of Pop Culture,” says se-
rious fans already call the shows
too generic, commercialized and
overcrowded. “If the hard-core
fans go, so will the exhibitors who
cater to them,” he says. “Then
what’s left? Cons just become an-
other consumer event.”
Some cities already are feeling
con fatigue. Indianapolis, which
hosted at least five major pop-cul-
CLOCKWISE FROM TOP RIGHT: ERICKA BURCHETT/THE WALL STREET JOURNAL (2); GETTY IMAGES (6); CATCON (2); LEAH NASH FOR THE WALL STREET JOURNAL (3); REEDPOP (3); BELOW: CARNIVAL FILM & TELEVISION/MASTERPIECE
Clockwise from left, the LA Cookie Con
& Sweets Show; Mindy Kaling and B.J.
Novak at BookCon last year; an
attendee at New York Comic Con 2015.
ture and gaming-fan events in the
past year and a half, will lose two of
those shows in 2016, including Wiz-
ard World Comic Con Indianapolis.
“We cut back some conventions
that we didn’t think could grow,”
Wizard World’s Mr. Macaluso says.
The history of the modern
“con” often is linked to the first
World Science Fiction Convention
in 1939, which later became known
as Worldcon. The event, whose at-
tendees included novelists Isaac
Asimov and Ray Bradbury, sparked
a dispute when members of a rival
science-fiction fan group were
barred entry, says writer and his-
torian Andrew Liptak, who re- agenda other than to lose himself
searched the convention’s history in a room full of like-minded devo-
in a column for Kirkus Reviews. In tees. “At these things, we usually
many years since then, the annual walk around and after that there’s
event has carried various “con” really not a lot to do if you’re not
names, including, when it was held buying anything,” he says. Looking
in Phoenix, IguanaCon II. to “hang out but still kill time,” he
Over the course of the three-day sat patiently while a tattoo artist
comic con in Portland last month, inked a large image of Han Solo’s
people waited in a line unofficially gravestone on his right arm.
patrolled by a costumed Iron Man As the show wound down, Heidi
with a giant fake gun, attended a Ring, 38, a comic con first-timer,
lecture on foam costume building gathered up her son Django, a 5-
and bought “Keep Calm and Comic year-old in a homemade Optimus
Con” T-shirts. A Darth Vader played Prime costume. Strangers had pho-
bagpipes on a unicycle. A boy tographed him all day. “He loved
dressed as a villain from “Mad Max: it. He had his little poses,” she
Fury Road” chewed absent-mind- says. Exhausted, the boy put his
edly on the tubes of his costume. head on a table. Ms. Ring looked
Jeremy Burton, a 28-year-old over and said, “He’s toast.”
“Star Wars” fan who flew in from —Lucy Feldman
Sacramento, Calif., had little contributed to this article.

MUSIC Los Angeles, Mr. Wyatt was surrounded by guitars,

Three
keyboards, a computer and an upright piano. While
his bandmates have pulled back from writing
songs for other artists, Mr. Wyatt has done more,
such as co-writing with Bruno Mars and Mark Ron-

Continents, son, along with Beck on his recent tune “Dreams.”

The singer says he was anxious about recon-
vening Miike Snow after a long hiatus caused by

One Album
interpersonal “issues,” which everyone in the group
chalks up to too much time together on their 2012
tour. But new music came quickly. Mr. Karlsson
says it took only about 30 minutes for the pieces
of one song, “Genghis Khan,” to gel. The song,
BY JOHN JURGENSEN
which demonstrates the group’s musical cross-
breeding, has a crisp hip-hop beat and a looping
THE THREE MEN who make up the band Miike vocal hook but the sentiments are sour, with lyrics
Snow are all successful songwriters whose group about jealousy and being so possessive that the
RANDY HOLMES/ABC

is the result of—and a reaction to—the work for
hire they did as individuals, producing songs for
stars such as Bruno Mars and Britney Spears.
With a sound that meshes dance, rock and
pop, Miike Snow’s musical identity is as enigmatic
as its logo. The horned silhouette of a jackalope
appears on all releases in lieu of images of the
band’s members, who are in their early 40s: two
Swedes (Christian Karlsson, Pontus Winnberg)
and an American (Andrew Wyatt).
“Musically, it’s as if the three of us got to-
gether to create a fourth entity,” Mr. Wyatt says.
“That’s why it’s appropriate that Miike Snow is a
person’s name, but a weird version of one. Like a
failed superhero.”
About four years after the group’s last album
and a concert tour that left the bandmates feel-
ing stir-crazy and done with each other, Miike
Snow released its third album “iii” on Friday.
The group zigzags away from “a lot of the
dance music out there, which is sort of linear and
not very emotional,” says Maureen Kenny, a se-
nior vice president of A&R at Atlantic Records.
She says Atlantic prevailed in “a derby” of labels
competing for “iii.” The album is a joint release
with Downtown Records, the independent label
that put out Miike Snow’s first two albums.
The band formed a decade ago after Mr. Wyatt,
Miike Snow on
‘Jimmy Kimmel
Live’ last week.
then in another group, admired
the beats Mr. Karlsson was
making for a project they’d both
been hired on, developing songs
for a pop singer who never quite
achieved liftoff. Later, they
bonded over music of their own
when Mr. Wyatt visited Stock-
holm, home base to Messrs.
Karlsson and Winnberg, who
built a career as a production
team called Bloodshy & Avant.
At the time the duo were
known exclusively for the songs they wrote for
other artists, especially Britney Spears and her
2003 hit “Toxic.” Later they produced songs for
Madonna, Jennifer Lopez and others. Messrs.
Karlsson and Winnberg are part of the Nordic in-
vasion of American pop music, driven by produc-
ers with a gift for infectious melodies and clean
arrangements. Among their ranks are Swedish
collaborators Max Martin and Shellback, whose
hits include the most popular
songs on Taylor Swift’s “1989.”
But the duo grew restless
with their role in the pop sys-
tem. As a contract songwriter,
“you’re in other people’s power
all the time: an artist, their
manager, the record label and
other people who want to have
a say,” Mr. Karlsson says.
“At the end of the day, you’re
hired to do something, so it’s a
job,” says Mr. Winnberg, who
runs two studios in Sweden, is opening a wine bar
there and works with tech company Teenage Engi-
neering, which makes pocket-size synthesizers.
Answering only to each other, the members of
Miike Snow recorded a self-titled album and an-
nounced themselves with a lead single (written
with collaborator Henrik Jonback) titled “Animal,” a
catchy song about feeling out of place in the world.
During a recent interview at his hillside home in
singer feels like a tyrant. Even when its drums
swagger, the band’s melodies and vocals tend to
give songs an undercoat of melancholy and soul.
After recording his verses and chorus, Mr. Wyatt
added “whoo-oo-oos” that he says were inspired by
hearing a kid in a deli singing along to “Sweet Es-
cape,” a 10-year-old hit by Gwen Stefani. Later, Mr.
Winnberg beefed up the beat by re-recording it live
on a drum kit. “Everybody in the band knows how
to add value, to put it in financial terms,” he says.
Within a couple of weeks, the band had rough
drafts of five of the album’s 10 songs. “I never
had a record come together easier or quicker,” Mr.
Karlsson says.
Promoting and performing “iii” could be more
challenging. During Miike Snow’s hiatus, Mr. Karls-
son threw himself into the electronic music scene,
performing with a fellow DJ, Linus Eklöw, as Galan-
tis. Last year, Galantis had a couple of hits, including
the Grammy-nominated “Runaway (U & I),” and
continues to tour. Mr. Karlsson, whose family lives
in Bangkok, where his wife is a diplomat for Swe-
den, says Galantis will perform on the same bill as
Miike Snow at some music festivals this year.
Despite the juggling in their careers, Mr. Winn-
berg says the band is a shared priority: “We have
this kid called Miike Snow and it needs some at-
tention. You can’t just leave it in the orphanage.”
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A10 | Tuesday, March 8, 2016 THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK
Emails Expose Obamanet
The GOP Race Isn’t Over A Senate commit-
tee has exposed
agency’s own chief economist has
dismissed as an “economics-free zone.”

C
ontrary to what you’ve heard, the Repub- pressed him to release his tax returns now. new details on In the year since Obamanet has been in
lican presidential race isn’t over. That He keeps trying to gull the gullible by pre- how the White effect, regulatory uncertainty has led to
House broke the a collapse in investment in broadband.
was clear enough on Saturday when Don- tending that his financial statement at the Fed-
law to get the In- Independent regulatory agencies
ald Trump and Ted Cruz eral Election Commission is ternet regulated as operate in a constitutional gray area,
fought to a draw, winning two Trump lost among the more revealing than his taxes. INFORMATION an old-fashioned separate from the executive and legis-
state contests each and divid- This is nonsense. His taxes go- AGE
ing the votes and delegates al-
late-deciders in ing back a decade would show By L. Gordon
utility, including lative branches. They have the power
emails that show to issue broad rules but are unac-
most equally. Many GOP voters Saturday’s contests. his sources and amount of an- Crovitz
how shocked regu- countable to voters. The rationale is
apparently haven’t received nual income, his deductions lators at the U.S. that agency staffers are experts in the
the joint Trump-media memo and tax rate, and how much he Federal Communications Commission fields they regulate. That justification
that they are supposed to stand down and hand gives to charity. For a candidate whose claim were at the violation of their agency’s collapses if they’re subject to political
over the party to a businessman who seems to to competence is based in part on his wealth independence. pressure.
have no fixed political convictions. and generosity, these are relevant details. The report, from Republicans on the In 1983, Ronald Reagan held a single
Senate Committee on Homeland Security meeting with his FCC chairman on the
Mr. Cruz won by large margins in caucuses in Mr. Trump remains the front-runner and he
and Governmental Affairs, finds that FCC issue of regulating television-rerun rev-
Kansas and Maine, while Mr. Trump won nar- still has the clearest path to the nomination. staff worked through a weekend in No- enues. Unlike Mr. Obama, Reagan didn’t
rowly over Mr. Cruz in the Louisiana primary and That path was helped by Marco Rubio’s weak- vember 2014 to finalize a plan backed by have his own staff working on the regu-
Kentucky caucuses. The Texas Senator seems to ness on Saturday, when he finished third or Chairman Tom Wheeler for light regula- lations. And Reagan didn’t express any
have the organizing edge over Mr. Trump in cau- worse in every contest. His competitors are now tion of the Internet. They were shocked opinion on the rules—also unlike Mr.
cuses, but the Maine victory is especially notable demanding that he drop out before Florida when, on Monday, Nov. 10, an agency of- Obama, who issued a video promoting
because it comes outside Mr. Cruz’s comfort zone votes on March 15, and winning there is make- ficial forwarded a news alert, which she utility regulation for the Internet.
in evangelical precincts. or-break for the Florida Senator. summarized as follows: “Obama says to
Meanwhile, Mr. Trump won Louisiana based But Mr. Rubio has closed some of the Florida make it Title II”—the heavy-handed law
mainly on his strength with early voters. He lost polling gap with Mr. Trump, and denying the regulating railroads and the old monop- ‘Obama says make it
among those who showed up on Election Day, state’s 99 delegates is crucial to denying Mr. oly phone system.
Staffers then shared a flurry of Title II’—then panic
and his 3.6% margin of victory was far below the Trump a delegate majority before the Cleveland
15.6% lead he had in the RealClearPolitics poll- convention. If that goal is best helped by fight-
emails: “Not sure how this will affect set in at a supposedly
the current draft and schedule—but I
ing average. This may reflect the unreliability ing to the end in Florida, then he should stay suspect substantially.” “This might ex- independent agency.
of polls when the primary electorate is rela- in. He also won Puerto Rico on Sunday. plain our delay.” “It might indeed.” “Will
tively small and hard to predict. Or it may re- The issue for Mr. Cruz continues to be whether try to get to the bottom of this this
flect that GOP voters are having second he can expand his appeal as the campaign heads morning.” “At least the delays in edits Yet Reagan’s modest involvement
thoughts about Mr. Trump’s volatile behavior north and west. Maine was a good sign but it was from above now makes [sic] sense.” was headline news. A congressional
and political vicissitudes. a caucus, not a primary. Mr. Trump on Saturday Panic struck when it became clear committee declared he “acted improp-
Until two weeks ago, the New Yorker had night was openly disdainful—his default mode to- the chairman would cave in to Presi- erly and undermined the fairness and
been among the least vetted major-party candi- ward competitors—of Mr. Cruz’s ability to win in dent Obama’s demand and surrender integrity” of the FCC. Sen. Daniel Pat-
the FCC’s independence. This is a ver- rick Moynihan said: “It is imperative
dates in history. He ducked serious media scru- New York, Pennsylvania and California. But that
batim quote from a draft media Q&A for the integrity of all regulatory pro-
tiny, as the press corps focused on his insults depends on how the campaign plays out and prepared for Mr. Wheeler: cesses that the president unequivocally
and tweets rather than digging into his record. whether the TV ads that will educate voters about “Q. Has there been discussions be- declare that he will express no view on
His opponents also gave him a pass as they beat Mr. Trump have an impact. tween the WH and the FCC leading up the matter.” The Washington Post edi-
up one another in the battle to become the last The other issue is how voters respond to Mr. to this rollout? torialized: “The danger lies in the kind
non-Trump standing. Trump’s increasingly obvious lack of convic- “A. The FCC kept the WH apprised of of chilling signal a certain kind of pres-
That is now changing, and we’ll see how Mr. tion about just about everything. He flip- the process thus far, but there have not idential participation might send to all
Trump performs under the scrutiny. We’ll also flopped twice within hours last week on visas been substantive discussions [IS THIS regulatory agencies about the possible
see whether he’s really willing to spend any of for high-skilled workers—though immigration RIGHT?].” fragility of their independence.”
that vast fortune he says he has to become Pres- is supposed to be his main claim to “telling it FCC staffers cited nine areas in A 1991 opinion from the Justice De-
ident. He’s had to spend very little so far. But like it is.” which the last-minute change violated partment’s Office of Legal Counsel
the Administrative Procedure Act, warns: “White House staff members
he may finally have to open his wallet to re- “I’m changing. I’m changing. We need highly
which requires advance public notice of should avoid even the mere appearance
spond to the TV ad war that’s likely to break out skilled people in this country, and if we can’t do significant regulatory changes. Agency of interest or influence—and the easiest
in Florida and Ohio. If he won’t spend in the pri- it, we’ll get them in,” he said in Thursday’s de- staffers noted “substantial litigation way to do so is to avoid discussing mat-
maries, why should anyone think he’d spend to bate. But within hours he issued a statement risk.” A media aide warned: “Need ters pending before the independent
beat Hillary Clinton? flipping back. We agree with the good Trump more on why we no longer think record regulatory agencies with interested par-
Even Mr. Trump’s supporters should want to that would welcome foreign talent. But the New is thin in some places.” ties and avoid making ex parte contacts
see how well he endures because Democrats and Yorker is Forrest Trump in that you never know These emails are a step-by-step dis- with agency personnel.”
the media will throw everything at him if he what you’re going to get. The GOP has to decide play of the destruction of the indepen- The appeals court has plenty of evi-
does win the nomination. This is why we’ve if it wants to buy that box of chocolates. dence of a regulatory agency. The Sen- dence proving White House meddling
ate report should make fascinating with a supposedly independent agency.
reading for the federal appellate Voters have more reason for outrage at
North Korean Rights Advance judges considering whether to invali-
date the regulations.
an administration that ignores limits
on its power. The Internet is too impor-

T
he United Nations Security Council
voted last week to impose new sanc-
tions on North Korea that China may
or may not enforce. The more surprising news
came from Seoul, where South Korean lawmak-
ers passed a North Korea Human Rights Act
that had stalled for 11 years.
The bill will fund North Korean defectors
and activists who send movies, books and
other materials into the Hermit Kingdom to
fight the Kim Jong Un regime’s information
controls. It will also establish an official center
to collect and publish records of North Korea’s
concentration camps, public executions, song-
bun political-apartheid system and other hor-
rors. Additional funds will educate the South
Korean public about the suffering of their
brethren across the border.
None of this should be controversial, ex-
cept that South Korean leftists have long
apologized for the Kim regime. The rights bill
was introduced in 2005, after a similar law
passed in the U.S. A year later Japan followed
suit. But at the time left-wing leaders in Seoul
were wooing Pyongyang with their Sunshine
Vermont Invades America’s Kitchens
Policy. One of its darker aspects was the cen-
sorship of defectors, newspapers and artists
critical of Pyongyang.
Right-of-center leaders have governed
since 2008 with less naïveté, but without
showing much interest in human rights. Then
came Kim Jong Un’s Jan. 6 nuclear test and
Feb. 7 long-range missile launch. Within days
Seoul shuttered the Kaesong industrial zone,
flagship of the Sunshine Policy since 2002,
where South Korean firms employed 50,000
North Korean workers north of the border.
“From now on,” declared President Park
Geun-hye, Seoul will force the North “to real-
ize that nuclear development is not a way to
ensure their survival but a way to ensure the
quick collapse of the regime.”
Seoul’s 220-0 vote (with 24 abstentions) to
pass the human-rights bill signals how far and
fast South Korean policy has shifted. It should
have long ago assisted defectors and others ad-
vocating freedom, who are essential to helping
the 23 million North Koreans still behind their
prison borders—and to preparing for reunifi-
cation after the Kim regime’s inevitable fall.
Mr. Obama’s edict resulted in 400
pages of slapdash regulations that the
Donald Trump’s
Latin Role Models
Donald Trump support-
ers believe they’ve got a
novel candidate whose
ideas have never been
tried. They might be
disappointed to learn
AMERICAS that Mr. Trump’s politi-
cal playbook is right out
By Mary
of 20th century Latin
Anastasia
America. If he should
O’Grady
become president, the
U.S. is likely to be about
as successful as that region has been un-
der this kind of leadership.
As Latin America has learned the
hard way, capital goes, and stays, where
there is a rule of law that treats it well.
Mr. Trump believes the rule of law is for
pansies. His fans adore him because he
promises to override institutional inertia
and simply decree whatever is on his
mind. This won’t end well.
tant to be left to politicians, especially
ones who violate the law.
U.S. economy in order to inflict harm on
Mexico. So either he’s blustering, or he
plans to circumvent U.S. law by issuing
a unilateral decree imposing the tariffs.
Trump supporters are backing this
promise of an unconstitutional use of ex-
ecutive power because they aim to raze
the “establishment.” But this is a dan-
gerous game.
It’s often easy to find an excuse, a
moral outrage, to grant permission for
the unconstitutional acts of a strong-
man. Venezuela—which until Hugo
Chávez came to power in 1999 was
among the longest-running democracies
in Latin America—comes to mind. In
1998 oil prices were low, the economy
was adrift, corruption was rampant,
and the outsider Chávez promised to
topple everything. He did. And once the
law was destroyed, there was no way to
control him.

T
he U.S. Constitution gives Congress the If elected, Mr. Trump would inherit a A half-century earlier Juan Perón had
Consumers will pay through higher grocery
country where the rule of law is already grabbed the mantle of Italy’s Benito
power to oversee interstate commerce, bills, perhaps $500 a year for a family of four, ac- under attack by President Obama. Long- Mussolini and became the champion of
including the right to pre-empt state cording to a Cornell University study of a similar winded and ruling by decree whenever Argentina’s “shirtless ones.” Perón un-
laws that dictate rules for busi- proposal in New York. A recent Congress—the constitutionally coequal dermined the rule of law so thoroughly
nesses that operate nation- A state rule to label study by economic consult John branch of government—doesn’t accom- that the rich nation of immigrants has
wide. The organic legislators GMO foods will raise Dunham & Associates found modate him, Mr. Obama is a classic Latin yet to recover.
of Vermont will soon mandate that if national companies react American demagogue. Republican candidates generally agree
deceptive and costly food la- costs nationwide. to Vermont’s law by switching Conservatives despise the 44th presi- about the economic malaise under Mr.
bels that would harm consum- to non-GMO commodities— dent’s refusal to acknowledge the plural- Obama. But there is a huge rift about
ers across the U.S., and it’s up most of which cost about 10% istic traditions of the republic and its how to fix the problem. Mr. Trump, who
to Congress to correct the overreach. more—a family would pay $1,050 more a year for constraints on the executive. Yet there ironically says he’s a good negotiator,
was a time when the loyal opposition has a plan that relies heavily on break-
The Vermont law, which becomes effective food. (Opponents of the law financed the study).
viewed this abuse of power as an anom- ing this country’s commitments under
July 1, would require labels on all genetically Among the law’s defenders is Democratic pres- aly. Now the Republican Party is host to international trade law.
modified foods produced or sold within the idential unhopeful and Vermont Senator Bernie another faction and it is asking for its The U.S. is a signatory to numerous
state. The ostensible purpose is to inform con- Sanders, and it’s rich to see the guy who rails own mano dura. Far from restoring World Trade Organization agreements,
sumers, not that shoppers learn anything. So- against the 1% defending Vermont’s 0.2% of the respect for the Constitution, Mr. Trump which are designed to keep members
called GMO foods are made from crops whose U.S. population dictating food prices for the other is promising to be more Obama than from sliding into the protectionism of
DNA was designed to withstand droughts or re- 99.8%. Another irony is Sen. Sanders’s supposed Obama. His supporters are fine with the 1930s. If Mr. Trump unilaterally de-
sist pests, and more than 2,000 studies have loathing for special interests: The Vermont law that; it’s their turn. Which is to say, crees a new tariff on foreign-made
found GMOs as safe as any food. exempts milk and cheese, which is great news for we’re becoming Bananalandia. goods, we’re supposed to believe that
Today’s technology builds on the breeding the state’s large dairy industry. The central plank of the Trump cam- U.S. trading partners will sit still. It’s
techniques that once helped turn a bitter green Enter Kansas Senator Pat Roberts, who is mov- paign is his pledge to violate the North more likely that they would challenge
American Free Trade Agreement, which his extralegal actions in court and the
plant into lettuce. The Food and Drug Administra- ing a bill to establish a voluntary federal program
was passed by the House and Senate and U.S. would lose. Meanwhile, Americans
tion mandates disclosure for nutritional or safety for labeling GMOs. His proposal would pre-empt signed into law by Bill Clinton in Decem- can expect trade wars that will hurt con-
characteristics, neither of which is altered by ge- Vermont and direct USDA to create a standard la- ber 1993. Mr. Trump says he will slap a sumers and exporters.
netic engineering. But consumers who see a “No bel that companies could choose to put on prod- 35% tariff on cars and car parts from Mr. Trump’s pledges that he is ready
GMO” label near a “No TransFat” mark might ucts. This is unnecessary: USDA already runs a vol- plants in Mexico as a way to bring man- to abuse the power of the presidency
think there is reason to avoid GMOs, though no untary GMO-labeling program, and it’s called the ufacturing jobs to the U.S. doesn’t end with economics. On Thurs-
evidence supports that conclusion. organic seal. But some 20 state legislatures are To destroy Nafta lawfully, a President day night he said again (before back-
The Vermont scheme is more expensive than considering labeling bills, and the Roberts plan Trump would have to convince Congress tracking) that the military will be forced
pasting a sticker on a box of crackers. Ingredi- would thwart a patchwork of state regulation— to repeal the legislation that imple- to obey unlawful orders if he gives them.
ents would need to be segregated from the grain and might win 60 votes in the Senate. mented it. That would be a heavy lift, One more similarity between the
elevator to the grocery store. No brand could la- given that the North American economy candidate and every generalissimo who
No agricultural innovation has been more ma-
is highly integrated after two decades ever lived is his plan to find a way to
bel only what sells in Vermont, lest an illicit bag ligned than GMOs, though the technology has and billions of dollars of investment that sue public critics. Maybe he’s been tak-
of Cheetos cross the New Hampshire border and proved safe, reliable, affordable and good for the interconnects all three economies. Hun- ing tips from Ecuadorean strongman
incur the $1,000 a day fine. Companies may opt environment. Congress should refuse to indulge dreds of thousands of jobs now depend Rafael Correa.
for noting that products “may” be produced by fads peddled by a minority in Vermont—com- on free continental trade flows. Investors are unlikely to cooperate
genetic engineering, which is acceptable under mands against gluten, butter or whatever comes It cannot be lost even on Mr. Trump with a mercurial President Trump. There
the law. So much for enlightening the public. next—and let consumers decide what to eat. that Congress is unlikely to blow up the are other destinations for their capital.
THE WALL STREET JOURNAL.
The Flawed Trump-Obama Tax Reforms
By Mihir A. Desai
R
emoving the incentive for
American companies to
move their headquarters
abroad is a widely recog-
nized goal. To do so, the
U.S. will need to join the rest of the
G-7 countries and tax business in-
come only once, in the country
where it was earned. Notably, this
principle—called territoriality—is
included in the bipartisan frame-
work for international tax reform
developed by Sens. Rob Portman
(R., Ohio) and Charles Schumer (D.,
N.Y.) in 2015.
Unfortunately, recent reform
proposals have a serious flaw: a
“minimum tax” on foreign business
income. This flaw is in President
Obama’s fiscal 2017 budget, and
Republican presidential front-runner,
Donald Trump, has broached a simi-
lar idea on the campaign trail.
They both want a minimum
tax on the foreign earnings
of U.S. companies. That’s
no ‘inversion’ cure.
Currently, the U.S. taxes the
world-wide income of its corpora-
tions at one of the highest rates in
the world, but defers that tax until
the profits are repatriated. The re-
sult is the worst of all worlds—a
high federal statutory rate (35%)
that encourages aggressive transfer
By Mark D. Weinberg
T
he too-common narrative
about Nancy Reagan—that
she was vain, manipulative
and the “power behind the
throne”—is simply inaccurate. I
worked for her and her husband in
the 1980 presidential campaign, all
eight years in the White House and
several years thereafter in Los
Angeles. Mrs. Reagan, who died
Sunday at age 94, was nothing like
the caricature now regarded in
many quarters as fact.
The last time I saw her was a
few months ago. She was in a
wheelchair but looked great. Her
voice was quieter than I remem-
bered, but she was in excellent
spirits. She seemed especially
happy to share memories of watch-
ing movies at Camp David. I knew
it might be the last time I would
see her.
The Reagans’ relationship initially
was a mystery to me. The first time
I heard Ronald Reagan say that he
missed Nancy even “when she’s just
in the next room,” such devotion
seemed way over the top.
But it soon became clear that
theirs was a rare and lifelong ro-
mance. What the public saw of the
Reagans together was how they
Let the People Speak on Filling the Empty Supreme Court Seat
By Ted Cruz
R
epublicans and Democrats are
deeply divided over the proper
role of the U.S. Supreme
Court. President Obama and Demo-
crats favor justices who see the Con-
stitution as a potter sees clay—
something that can be molded to
achieve their desired results. This
has led the Supreme Court to invent
rights that are nowhere in the Con-
stitution—like the right to an abor-
tion or to same-sex marriage—and
ignore or restrict rights that even
nonlawyers can’t miss—like the First
and Second Amendments.
Republicans view things very dif-
ferently. We believe the Constitution
has a fixed meaning and a judge’s
task is limited—to discover what
that meaning is, not to make it up.
Justice Antonin Scalia, whose
passing we mourn, was a passionate
champion of this humbler view of
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pricing, a significant restriction on
capital allocation that keeps cash
offshore, very little revenue for the
Treasury, and the loss of U.S. head-
quarters to countries with territorial
tax systems.
Major financing and investment
patterns now reflect these distor-
tions. A series of significant merger
announcements are driven by the de-
sire to get out from under the U.S.
tax regime and to use offshore cash.
The large debt offerings in American
capital markets are efforts by com-
panies to fund share repurchases
and dividends because repatriation
of their offshore cash would trigger
punitive U.S. taxes.
Tax reform is supposed to end
these distortions, but a global mini-
mum tax on foreign business earn-
ings would undermine reform. The
Obama administration’s budget, for
example, would end the deferral of
taxes on unrepatriated cash and
lower the statutory tax rate on cor-
porate income to 28% (still higher
than most other industrial nations).
A U.S. company would still be able,
as it can today, to take a credit on
the taxes it already paid to another
country. But if the taxes a U.S. com-
pany paid to another country were
less than 19%, it would be slapped
with an additional federal tax. The
minimum-tax is dressed up by rhet-
oric that it will protect jobs at
home and ensure that companies
pay a “fair share.”
Mr. Trump has recommended a
world-wide system without deferral
and a much-lower rate of 15%. As
such, American firms earning profits
Appreciating Nancy Reagan (1921-2016)
were behind the scenes—they held
hands, whispered to each other,
exchanged glances and were edgy
when the other was absent. The key
to understanding Nancy Reagan can
be found in what she once told an
interviewer: “I want everyone to feel
about Ronnie the way I do.”
The Reagans’ devotion to
each other was genuine—
and the caricatures of the
first lady completely unreal.
She never viewed the White
House as “her” home, but rather as
a treasure that belonged to the
American people, a place for which
she was responsible. “Families
think about coming to the White
House for years,” I recall her
saying. “They plan for it, they save
for it, they look forward to it, and
it means so much.”
She wanted White House visitors
to feel that they were seeing “the
best of America,” she said. “I don’t
ever want anyone to leave feeling
disappointed.” That’s why she wor-
ried about the condition of every-
thing from the White House furni-
the judicial role. It is nearly impos-
sible to overstate the significance of
his passing. If Justice Scalia is
replaced by a Democratic nominee,
many long-cherished rights will be
jeopardized.
The court would be poised to
allow the banning of movies and
books criticizing political candi-
dates like Hillary Clinton, to man-
date that states permit the barbaric
monstrosity known as partial-birth
abortion, to force the religiously
devout to provide abortion-induc-
ing drugs, and to allow the confis-
cation of guns by holding that the
Second Amendment doesn’t include
an individual right to keep and
bear arms.
In 2014 when the American peo-
ple last spoke in a nationwide
election, they clearly repudiated
Democratic governance and elected
a Republican Senate majority. Al-
though the president has the consti-
Robert Thomson
Chief Executive Officer, News Corp
William Lewis
Chief Executive Officer and Publisher
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Paul Meller, Chief Technology Officer;
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OPERATING EXECUTIVES:
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Ingrid Verschuren, Deputy Head
OPINION
abroad would still face home-coun-
try taxation and the Byzantine sys-
tem of foreign tax credits that cre-
ates numerous tax planning
opportunities.
The flaw in both proposals? Corpo-
rate-tax rates are declining around
the world, amid continuing competi-
tion for firm headquarters and intel-
lectual property. Ireland taxes most
corporate profits at 12.5%. A global
minimum tax means U.S. companies
earning income abroad would still be
subject to adverse U.S. taxes—pre-
cisely the distortion that tax reform is
supposed to end. Meanwhile, the dis-
incentives to be a U.S.-headquartered
multinational firm will persist.
Japan in 2009 and the United
Kingdom in 2010 shifted to a terri-
torial tax regime and lowered their
statutory corporate rates. The U.K.
The president and first lady dancing at a White House state dinner in 1985.
ture to the dinner plates.
The staff tried not to schedule
presidential events on the White
House State Floor during tour
hours, because that meant closing
the Blue Room and other rooms to
the public. When that happened,
there would inevitably be a call
from the first lady asking why the
event couldn’t take place in the
auditorium in the Executive Office
Building adjacent to the White
House.
tutional power to nominate Justice
Scalia’s replacement, no nominee
can be appointed without the
Senate’s “Advice and Consent.” And
as Minority Leader Harry Reid him-
self once said, “nowhere” in the
Constitution “does it say the Senate
has a duty to give presidential nom-
inees a vote.”
I believe the Senate should fulfill
its constitutional duty by letting
the American people be heard in
selecting the next Supreme Court
justice. Seldom has a Supreme
Court vacancy arisen before the
election in a presidential election
year. Benjamin Cardozo, whom the
Senate confirmed in February 1932,
was the last justice confirmed to
fill such a vacancy before the elec-
tion. That was more than 80 years
ago, and it occurred when the same
party controlled both the Senate
and presidency.
Rarer still has a vacancy arisen in
the lame-duck final year of a presi-
dency when the opposing party con-
trolled the Senate. One must look
back to 1888 to find a situation re-
motely similar to the one we face
today where a Senate confirmed the
nominee of a president from the
opposing party before the election
to fill a vacancy that arose in a
presidential election year.
But even this lone example is not
a suitable precedent. Unlike Presi-
dent Obama now, President Grover
Cleveland was eligible for re-elec-
tion and could have been held
accountable for his choice of nomi-
nee. The 1888 example is also an
outlier because on every other occa-
sion when a vacancy arose before
the vote in a presidential-election
year and the Senate and presidency
were not controlled by the same
party—1828, 1844, 1852 and 1956—
the Senate didn’t confirm a nominee
before the election.
Most important, the deep dis-
Tuesday, March 8, 2016 | A11
Ultimately, the proposal for a
minimum tax is driven by un-
founded fears that American multi-
national firms pose a risk to the
American worker by not showing
loyalty to America. This coarse
intuition is both naive and wrong.
It is naive to assume that U.S.
policy makers can exert market
power to limit the logic of global
opportunities and imperatives.
More important, it is mistaken to
demonize the foreign operations of
GETTY IMAGES/IKON IMAGES
American multinationals as working
contrary to the interests of Ameri-
can workers.
Instead the evidence, including re-
search by C. Fritz Foley, James R.
Hines and myself, suggests that U.S.
companies succeeding globally ex-
pand at home—contradicting the
did so to stop companies from mov- zero-sum intuition.
ing their headquarters abroad; Demonizing multinational firms
Japan was primarily interested in plays to populist impulses today. But
encouraging its multinationals to re- ensuring that the U.S. is a great
invest foreign earnings at home. home for global companies and a
Neither country adopted a minimum great place for them to invest is ac-
tax when it switched to territorial- tually the best prescription for rising
ity. And neither country experienced median wages.
the predicted dire consequence— Opportunities for corporate-tax
such as dramatic tax-revenue losses reform are infrequent. Including a
or job losses from outbound invest- global minimum tax would therefore
ment—of a switch to territoriality be something the U.S. would have to
without a minimum tax. live with for decades—during which
In fact, no significant country corporate-tax rates would fall
with a territorial tax regime has a around the world and the minimum
minimum tax on its companies’ tax, as well as its distortions, would
foreign earnings. In part, this deci- grow in importance.
sion reflects the considerable com-
plexity that such a minimum tax Mr. Desai is a professor of fi-
would create, a complexity that will nance at Harvard Business School
only serve the industry of tax and a professor of law at Harvard
planners. Law School.
Reagans’ first year in the White
House, it would have been under-
standable if she had kept a low
public profile, but she was a fighter.
Instead of withdrawing, she
launched a campaign against drug
abuse—a cause that she cared about
deeply and continued to focus on
after leaving the White House. Mrs.
Reagan’s efforts no doubt saved
countless lives.
The past dozen years for Mrs.
Reagan were difficult. She had
watched the love of her life grow
sicker, unable to share the memo-
ries of their time together. And
GETTY IMAGES
when Ronald Reagan died in 2004,
it was not the “relief” to her that
many predicted. Sadness never left
her. She gradually lost some of her
mobility and her vision began to go.
But she remained sharp, engaged
Mrs. Reagan was criticized for and interested in others—in a
what some perceived as her obses- kindly way, with little tolerance for
sion with fashion and fancy mean-spirited remarks. “You never
clothes. But as first lady, she felt know everything,” Mrs. Reagan
that she represented America and would admonish. “There’s always
should always look her best. Mrs. another side to the story.”
Reagan was happiest when she and
her husband were in jeans, soft Mr. Weinberg, special assistant
denim shirts and tennis shoes at to the president and assistant press
Camp David or at their ranch near secretary in the Reagan White
Santa Barbara. House, is writing a book, “Movie
Given the seemingly relentless Nights With the Reagans,” forth-
criticism she endured during the coming from Simon & Schuster.
agreement that divides the political proven just as devoted. After all,
parties today over constitutional justices Sonia Sotomayor and Elena
interpretation didn’t exist in the Kagan voted to invent a right to
19th century. This rift emerged in same-sex marriage.
the early 20th century as American Does anyone really believe that
progressives began to question the another Obama nominee would be
Constitution’s merits. Woodrow different? The stakes are too high to
Wilson—a Democrat and progres- allow President Obama, in the wan-
ing months of his final term, to
make a lifetime appointment that
The legal stakes are higher would reshape the Supreme Court
for a generation.
than ever, and historic Do the American people want a
precedent favors waiting justice who adheres to the un-
changing text, history and structure
for a new president. of the Constitution, or do they want
a justice who thinks the Constitu-
tion should evolve with the per-
sive leader—was the first president sonal beliefs of unelected lawyers?
to have openly declared that the Voters deserve the opportunity to
Constitution, with its separation of speak on this subject through the
powers, was outdated. And Demo- next president.
crats have been subverting the Con- That is why I will oppose any at-
stitution ever since. tempt by the Democrats to deny the
To overcome what he perceived American people their say. There
to be the Constitution’s defects, should be no hearing on any nomi-
President Wilson invoked the idea nation that President Obama makes,
of a living constitution, which and if any confirmation vote is
changes as society changes. “Gov- attempted, I will filibuster it. Nota-
ernment,” Wilson said, “is not a bly, this approach was advocated by
machine, but a living thing” and “is Vice President Joe Biden when he
accountable to Darwin, not to chaired the Senate Judiciary Com-
Newton.” mittee in 1992, and as recently as
That view has remained a foun- 2007 by the man now slated to be
dational principle of the Democratic the next Democratic leader in the
Party. In “The Audacity of Hope,” Senate, Chuck Schumer.
then-Sen. Obama wrote that the I strongly support Senate Major-
Constitution “is not a static but ity Leader Mitch McConnell, Senate
rather a living document, and must Judiciary Committee Chairman
be read in the context of an ever- Chuck Grassley and my fellow
changing world.” Republicans on the Judiciary Com-
The extreme positions that the mittee, who have drawn a line in the
Obama administration has taken in sand on behalf of the American peo-
the Supreme Court—for example, its ple: We will not consider any Su-
argument in Hosanna-Tabor that preme Court nominee until the peo-
the government can interfere with a ple have spoken and a new
church’s choice of ministers—are president is inaugurated.
further evidence of President
Obama’s devotion to living-constitu- Mr. Cruz, a U.S. senator from
tionalism. The president’s appoint- Texas, is a member of the Senate
ments to the Supreme Court have Judiciary Committee.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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A12 | Tuesday, March 8, 2016 THE WALL STREET JOURNAL.

PERSONAL JOURNAL.

In Search of Elixir of Life, Scientist Studies Fruit Flies

Experiments see if Mahtab Jafari, in white lab coat,
associate professor of pharmaceutical
cinnamon can extend the sciences at University of California,
number of years that Irvine, and Sally Pham, a senior in
pharmaceutical sciences, work to
people live healthily separate male and female fruit flies.

BY ANGELA CHEN ger, Dr. Jafari says. She hopes her

research will shed light on how
A research lab at a University the substance works in the body to
of California campus has a big am- create those positive effects.
bition—to extend the number of One substance that has passed
years people live disease-free. The all the lab’s tests is Rhodiola ro-
animal model it uses for its experi- sea, which has long been used in
ments is decidedly smaller: the Russian and Chinese folk medicine
tiny fruit fly. to treat fatigue and prevent alti-
The Jafari Lab, located at UC tude sickness, Dr. Jafari says. She
Irvine, has run tests on substances is now pursuing a grant to further
as diverse as green tea, cinnamon study Rhodiola in mice, which
and an Arctic plant called Rhodiola have even more in common geneti-
rosea, looking for an elixir of life. cally with humans than do fruit
To pass muster, each experimental flies. She also hopes to get a grant
compound must help the fruit flies to administer the plant to a group
FROM TOP: DR. VOLKAN COSKUN; CORBIS

live longer and not have adverse of nonagenarians to see how it af-
effects. fects cognition.
The researchers are currently Another substance tested—nu-
investigating the effects of cinna- trients in green tea called polyphe-
mon on lifespan. The spice passed nols—resulted in fruit flies living
the first test: A 25-milligram dose longer. But when the researchers
resulted in fruit flies living up to ran another test, they found the
37% longer. But to be declared a polyphenols, administered in large
success, the lab is putting cinna- doses, had harmful effects on the
mon through three additional insects’ reproduction and early de-
tests—does it harm reproductive velopment. That finding, recently
ability and locomotion and what reported in the Journal of Func-
impact does it have on cognitive
capacities such as memory.
Good Subjects tional Foods, resulted in Dr. Ja-
fari’s lab discarding green tea as a
“When you look at how we Fruit flies (Drosophila melanogaster) candidate for its research.
think about aging, we don’t really have been used to research the Fruit flies also figured in re-
consider it a disease—it’s just con- effects of drugs on such conditions as: search at King’s College London to
sidered a ‘natural’ thing. But I identify a gene that could be
think aging and lifespan research  Parkinson’s linked to Parkinson’s disease. The
really should be the future of med- researchers, led by senior lecturer
icine,” says Mahtab Jafari, an asso-  Huntington’s Dr. Joseph Bateman, damaged
ciate professor of pharmaceutical nerve cells in the flies’ mitochon-
sciences at UC Irvine for whom the  Alzheimer’s dria to mimic the effect of Parkin-
lab is named. son’s. They then genetically
Fruit flies, or Drosophila mela-  Diabetes “switched off” a gene called HIFal-
nogaster, are tiny insects com- pha, which is responsible for regu-
monly found hovering around  Cancer lating some of those nerve cells.
fresh fruit. The flies are frequently When HIFalpha blocked, the fly be-
used in scientific research, espe-  Aging gan to move more normally again.
cially genetics. They have been “The fly model enabled us to
studied to assess the effects of identify HIFalpha, which is present
drugs for several diseases, includ- more, 70% of the genes that cause test cognition, the researchers will other bad side effects,” Dr. Jafari in both humans and flies, has been
ing Parkinson’s, Huntington’s, Alz- disease in humans are also found record how long it takes groups of says. studied in many other contexts
heimer’s, diabetes and cancer. in the fruit fly, she says. flies to walk through mazes to find Cinnamon has been found in and is quite a well understood
Dr. Jafari says fruit flies are Tests so far show cinnamon has food. previous research to have various gene,” Dr. Bateman says. He says
ideal for her research. They are no adverse effect on reproduction, “We shouldn’t just be focused healthful properties for people—it HIFalpha might be a potential tar-
small and cheap and have short and locomotion was improved— on extending lifespan, but also the appears to help regulate insulin get for gene therapies for Parkin-
lifespans that make it easy to ob- flies given the spice were able to quality of life, so it’s important to levels in people with prediabetes, son’s, and that his team is now
serve the effects of a treatment on climb the wall of a vial almost 30% make sure that any compounds for example—but there is no evi- hoping to replicate the research on
successive generations. What’s faster than a control group. To that might be helpful don’t have dence it could help people live lon- animal models.

Weather The WSJ Daily Crossword | Edited by Mike Shenk

Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.
-15 1 2 3 4 5 6 7 8 9 10 11 12 13 Down 28 Geometric
-10 expanse
Riga
g 14 15 16
1 King Kong, for
-5
Glasgow
g w one 29 Make-up artist?
0
Moscow
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Copenhagen
C p h 5 2 Signal at 30 Ancient manual
10 20 21 22 Sotheby’s of divination
15 3 A little more than 31
Dublin
D bli Amsterdam
A d
Berlin
li Warsaw
arsaw 23 24 25 26 Fine distinction
20 907 kilograms
London
Londd 25 32 Physicist Hans
27 28 29 30 31 32
Brussels Frankfurt
kf 30 4 Proof of who studied
Kiev
e fallibility
Prague
P
Pragu 35 33 34 35 radiation
Paris Munich
i h 36 37 38 5 1992 David 34 Ingredient of
Vienna Warm Mamet play
Budapest
Budapes
some piecrusts
Geneva 39 40 41 42 43 44
Cold 6 Cry like a baby 40 Professional poet
Milan Bucharest
h 45 46 47
Stationary 7 “___ Baby” 41 The going rate?
48 49 (song from
Showers “Hair”) 42 Originally
Rome Istanbul
t b 50 51 52 53 54 55 43 Much of the
Madrid
d id Rain 8 Put back
56 57 58 59 60 61 together Earth’s core
T-storms 44 U.S. painter
Lisbon 62 63 64 9 “Let’s Stay
T i
Tunis Athens
Ath Together” singer John Singer ___
Snow
Al i
Algiers 65 66 67
10 Sights at malls 46 “Imagine” singer
Flurries
Rabat on Black Friday 50 Amorphous
Ice POKER PARTY | By Nancy Cole Stuart 11 Arizona native mass
Global Forecasts City
Today
Hi Lo W
Tomorrow
Hi Lo W City
Today
Hi Lo W
Tomorrow
Hi Lo W
Across 26 Objective 48 Prove one’s 12 “You’ve got that 51 Nuisance at the
s...sunny; pc... partly cloudy; c...cloudy; sh...showers; 1 Poker payment fallibility right!” bank
Geneva 5 -5 sf 6 0 r Ottawa 3 0 sh 10 1 sh 27 Puck serves him
t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice Hanoi 31 21 pc 29 18 pc Paris 8 3 pc 7 3 r 49 Painter of 52 Smidgen
5 “The Audacity of 28 Agreeable 13 Hunger signal
Havana 29 18 s 30 18 s Philadelphia 21 9 pc 24 13 s Picassos, say
Today Tomorrow Phoenix 23 11 pc 27 13 s
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Hong Kong 22 18 pc 22 14 c
33 Poker activity 21 Caiman’s cousin
City Hi Lo W Hi Lo W Honolulu 28 18 sh 25 19 c Pittsburgh 21 10 pc 22 12 pc 10 Bloke 50 Poker activity Girl”
Amsterdam 7 2 sh 6 2 r Houston 24 18 t 23 17 t Port-au-Prince 32 19 pc 33 18 s for a nasty 22 Scrambled wd.
for a kidnapper? 54 Pork cut
Anchorage 3 -3 c 4 -4 pc Istanbul 17 10 pc 16 9 c Portland, Ore. 10 6 r 12 8 r 14 Of inferior person?
Athens 18 10 s 17 10 t Jakarta 31 26 t 31 25 t Rio de Janeiro 32 24 t 33 25 c quality 56 C.S. Lewis’s 23 Bach
35 Signal to go on composition 55 Clothing,
Atlanta 24 12 pc 25 15 pc Johannesburg 26 15 r 19 14 c Riyadh 27 14 s 29 16 s Aslan, for one
Baghdad 25 10 pc 25 11 s Kansas City 21 11 t 15 8 sh Rome 14 5 sh 12 5 sh 15 Spot for care informally
Salt Lake City 12 2 pc 14 4 c instructions 36 Egyptian 24 Humiliated
Baltimore 21 7 pc 23 12 s Las Vegas 20 9 pc 23 11 pc 57 Love, along the 59 Pre-med course
Bangkok 35 28 pc 37 26 pc Lima 30 23 pc 30 21 pc San Diego 19 12 pc 20 13 pc serpent 25 Philadelphia
16 Città del Loire
Beijing 6 -5 s 6 -5 c London 8 5 sh 8 2 r San Francisco 15 12 s 19 13 c
university 60 Poker player’s
Berlin 7 -1 pc 8 1 pc Los Angeles 20 9 s 22 13 pc San Juan 27 23 pc 28 22 pc Vaticano setting 37 Top bond rating
58 StubHub’s founded by a “bullet”
Bogota 21 10 pc 23 9 r Madrid 11 0 s 14 3 pc Santiago 30 12 s 31 12 s 38 “Bali ___” parent company
Boise 11 2 c 12 8 c Manila 34 25 s 34 25 s Santo Domingo 30 20 pc 30 20 s 17 Author Ferber minister 61 “You bet!”
Boston 10 5 pc 17 11 pc Melbourne 37 26 pc 32 20 t Sao Paulo 28 21 t 29 21 c (“South Pacific”
18 Patrick in the 62 Aboard
Brussels 6 2 sh 5 2 r Mexico City 22 11 pc 19 4 sh Seattle 10 4 c 11 7 r song) Previous Puzzle’s Solution
Buenos Aires 28 14 pc 24 11 pc Miami 26 21 pc 26 23 pc Seoul 6 -3 pc 6 -4 s Basketball Hall 63 Woes for drug
Cairo 28 20 pc 32 16 s Milan 10 1 pc 10 3 pc Shanghai 11 5 r 10 3 r of Fame 39 ___ Aviv M E A T G O A P E K A T O
kingpins A B B A I F S A Y I D E A
Calgary 8 -4 c 9 -1 s Minneapolis 18 3 sh 10 3 pc Singapore 31 27 pc 32 26 c 40 Poker activity M O O N N F L N E T W O R K
Caracas 30 23 pc 32 22 pc Monterrey 31 16 pc 25 13 t Stockholm 4 -2 pc 4 -2 pc 19 Sign on a store 64 Agreeable B O U G H T R A I P S E
Charlotte 24 9 pc 24 14 s Montreal 3 1 sh 10 2 sh Sydney 29 22 s 31 23 s door for an Amish O K T O B E R F E S T T E N
S O L O E D E R A
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Dallas 24 15 r 21 15 r Mumbai 33 20 pc 33 21 pc Tehran 17 7 s 19 7 pc 20 Poker activity A R L O P E R I L S E M I
Denver 10 -2 pc 12 -1 s Nashville 23 15 c 26 17 pc Tel Aviv 24 17 pc 29 17 pc for an architect? 45 Capital of 66 ___ & Young B L O N D E A D O T A P
Detroit 19 12 c 19 11 r New Delhi 30 17 pc 31 17 pc Tokyo 18 10 pc 11 5 r South Australia (auditing firm) M EW B R O O D S
Dubai 28 22 c 28 21 t New Orleans 26 20 t 27 20 c Toronto 14 8 pc 17 8 sh
23 Its moons include AM S E MA I L F O L D E R
47 Hypnotic state B I O T E C H G A R D E
Dublin 9 2 sh 9 2 sh New York City 18 11 pc 22 13 pc Vancouver 9 3 r 11 6 pc Titan and Rhea 67 Tips of wingtips B A N K B R A N C H L A W S
Edinburgh 9 1 sh 8 0 sh Omaha 19 6 c 14 3 pc Washington, D.C. 22 10 pc 24 14 s O T T O I M O U T O F I T
Solve this puzzle online and discuss it at WSJ.com/Puzzles.
s

Frankfurt 7 -2 pc 8 0 pc Orlando 27 16 s 28 18 pc Zurich 4 -4 sf 6 -2 pc T A O S B A T E S M T N S

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EDF’s Finance Chief Steps Down

BY INTI LANDAURO put on review for a downgrade Hinkley Point plant. Areva SA.
Owners of
Lada Maker
AND SELINA WILLIAMS

PARIS—Electricité de
by Moody’s Investors Service
last month.
Mr. Piquemal didn’t respond
France’s chief financial officer
has resigned over how the
state-controlled power group
to requests for comment.
The company declined to
comment further about the
plans to finance a $26 billion letter or provide a reason for
nuclear-reactor project in the Mr. Piquemal’s departure. EDF
U.K., people familiar with the said Xavier Girre, chief finan-
matter said Monday. cial officer of its France opera-
EDF said the finance chief, tions, has been appointed as a
Thomas Piquemal, resigned temporary successor.
last week in a letter he sent to News of Mr. Piquemal’s sur-
the utility’s management. prise departure unnerved in-
A person familiar with the vestors, sending EDF’s shares
matter said Mr. Piquemal ar- down 6.7% in Paris. His resig-
gued in the letter that financ- nation comes as the group, one
ing the U.K. project would dan- of the world’s leading nuclear-
gerously stretch the utility’s power utilities, is close to a fi-
finances. EDF, which carries nal decision on building a new
€37.4 billion ($41.2 billion) in nuclear-power plant at Hinkley
net debt, had its credit rating Point in southwest England.
Union representatives on
EDF’s board have said that
Hinkley Point could saddle the
AGENCE FRANCE-PRESSE/GETTY IMAGES
company with even more debt
at a time of low electricity
prices, a view Mr. Piquemal
shares, a person familiar with
the matter said.
EDF has said it is taking
steps to control its debt load,
including the sale of assets
and cuts in capital spending.
Last month, the company also
Thomas Piquemal last month. said it would reduce its divi-
dend and offer stockholders
The project is the center- partial payment in shares to
piece of a series of business help bolster its finances.
deals between the U.K. and Meanwhile, the utility is
China announced last year, separately involved in the fi-
with China General Nuclear nancial rescue of France’s
Power Corp., or CGN, agreeing troubled state-controlled nu-
to take a 33.5% stake in the clear-engineering group,
EDF Chief Executive Jean-
Bernard Lévy said Monday
that a final investment deci-
sion on Hinkley Point would be
made “in the near future.” EDF
has said Hinkley Point is slated
to be commissioned in 2025,
eight years later than EDF had
originally planned.
Of Mr. Piquemal’s resigna-
tion, Mr. Lévy said: “I regret
the haste of his departure.”
The French government
owns an 85% stake in EDF. On
Monday, Economy Minister
Emmanuel Macron said he
supports the Hinkley Point
project. “It is an important
project for EDF,” he said, add-
ing that the venture will be
“very profitable” over the next
Please see EDF page B2
To Name
New Head
Bo Andersson, chief execu-
tive of OAO AvtoVAZ, Russia’s
largest car maker, plans to
step down, according to the
majority owner of the money-
losing firm.
By Jason Chow
in Paris and
James Marson
in Moscow
French car maker Renault
SA, along with its Japanese al-
liance partner Nissan Motor
Co., said Mr. Andersson would
be leaving his post after two
years on the job.

Drugmakers Scramble to Fight Zika Virus

State-owned conglomerate
Rostec is a minority share-
holder in AvtoVAZ, which
makes Lada-branded cars.
About 15 companies Rostec Chief Executive Sergei
Chemezov told The Wall Street
have been working on Journal on Friday that Mr. An-
vaccines, but most are dersson would be relieved of
his duties after AvtoVAZ re-
in the initial stages ported a net loss of 74 billion
rubles ($1.2 billion) for 2015
BY BETSY MCKAY and said it needed a bailout,
AND PETER LOFTUS its second since 2009.

International health officials

vowed after West Africa’s Ebola
Bo Andersson began
crisis to be better armed for the his stint at AvtoVAZ
next epidemic with vaccines,
drugs and diagnostic tests.
in 2014, slashing tens
Now the next one—Zika—is of thousands of jobs.
here and in an echo of Ebola,
researchers are scrambling to
develop medical tools to fight Renault and Nissan placed a
the virus. About 15 companies large bet on Russia’s auto
are working on Zika vaccines, market when they took a con-
most in the initial stages, ac- trolling stake in AvtoVAZ in
cording to the World Health Or- 2014. Russia is the French
ganization. company’s only significant
Among the more advanced growth prospect outside West-
are some in development by ern Europe, but the combina-
the U.S. National Institute of Al- tion of sanctions over the con-
lergy and Infectious Dis- flict in Ukraine and tumbling
eases and Bharat Biotech In- oil prices drove Russia into re-
ternational Pvt. Ltd. in India, cession last year.
SCRIPPS RESEARCH INSTITUTE

said Marie-Paule Kieny, the Total car sales in the coun-

WHO’s assistant director-gen- try slumped 36% to 1.6 million
eral for health systems and in- vehicles last year, according to
novation. She predicted it industry data, and are forecast
would take at least 18 months to fall to 1.3 million in 2016.
for large-scale trials to get un- Sales of AvtoVAZ’s mainstay
der way. Lada cars were down 31% last
Drugmakers Sanofi SA, In- A Scripps Research Institute lab in Florida is using a robot for test-tube screening of millions of potential Zika drug compounds. year to 269,000 vehicles com-
ovio Pharmaceuticals Inc. and pared with 2014.
NewLink Genetics Corp. say considered a low-level threat as dengue. Epidemics are unpredictable, tients to determine conclusively Mr. Andersson was picked
they are now developing Zika before serious complications Some companies and the NI- making for an uncertain reve- how well the drug worked. by Renault in 2013 after he
vaccines. The NIAID and the emerged in the second half of AID are trying to tweak existing nue stream, and often erupt in Other challenges in the case helped turnaround Russian
Scripps Research Institute are last year in Brazil. designs they have already de- poor parts of the world. Health of Zika include a dearth of prior truck maker GAZ Group. He
searching for potential drugs, Under the best-case sce- veloped for vaccines against officials are aware that current research on the mosquito-borne started his stint at AvtoVAZ in
while companies including nario, it will take until roughly similar viruses. research and development pro- virus; difficulties developing early 2014 and slashed tens of
Chembio Diagnostics Inc. are the end of 2017 to gather “I think we’re going to see a cesses are ill-suited for epi- drugs to ease an infection that thousands of jobs at its main
working on new diagnostic enough data from trials for reg- very robust field of vaccines demic diseases and have begun has short-lived symptoms; and Togliatti plant. He also rene-
tests. ulators to make a decision on coming forward,” said Dr. Fauci, working on changes in the wake possible cross reactions with gotiated contracts with local
In some ways, the efforts are one of NIAID’s two candidate adding that he spoke with “at of the Ebola crisis. related viruses like dengue. suppliers in a bid to cut costs.
even further behind than they Zika vaccines, institute director least two major companies” on Testing on the effectiveness Sanofi said last month it Mr. Andersson would be the
were with Ebola—for which Anthony Fauci said in an inter- a recent weekend. of medical products for Ebola started work on a Zika vaccine, most high-profile foreign CEO
there is still no licensed drug or view. The scramble to slow the didn’t get under way until the using 20 years of exper- to be ousted from a Russian
vaccine. At least a dozen Ebola Still, scientists are confident spread of Zika points to a larger epidemic was tapering off. One tise from developing a vaccine company since current BP PLC
vaccine and drug candidates that despite the late start, they problem: Epidemics move vaccine, developed by Merck & against dengue, which is in the chief Bob Dudley left TNK-BP
were already in development may be able to at least shorten faster than global institutions. Co. and NewLink, was shown to same family of viruses. “We Ltd. in 2008.
when the virus spread in West normal development timelines, There are no vaccines for many be effective in a clinical trial. aim to cut years off the normal Renault-Nissan said Av-
Africa in 2014. There were no which can take a decade or of the world’s largest health The NIAID halted a trial on a timelines,” a Sanofi spokes- toVAZ board members are ex-
products in advanced develop- more, by harnessing past re- threats in part because it isn’t a drug called ZMapp because woman said. pected to decide Mr. Anders-
ment for Zika, which had been search on similar viruses such very lucrative business. there weren’t enough Ebola pa- Please see ZIKA page B2 son’s replacement on March 15.

Russian Entrepreneurs Try Home Ground Apple’s Mac OS Is

BY OLGA RAZUMOVSKAYA
400 miles
resource: The country’s So-
viet-era hubs of scientific re-
Target of Ransomware
ULYANOVSK, Russia—A FIN. 400 km search, including Siberia’s BY ANNE STEELE affect Apple customers.
growing number of Russian Akademgorodok, or academic Ransomware is malicious
entrepreneurs are eschewing town. These once-prestigious Mac users with a certain file- software that allows a hacker
Silicon Valley and even Mos- St. Petersburg RUSSIA cities—part of the military and downloading app could be get- to access an individual or
cow, drawing instead on often- Tomsk technological contest with the ting ransom notes to unlock company’s computers, encrypt
remote towns, including Rus- Novosibirsk U.S.—were home to thousands their computers, which is be- sensitive data and then de-
Nizhny Novgorod Yekaterinburg
sia’s network of Soviet-era BEL.
Moscow
of physicists, chemists, biolo- lieved to be the first such attack mand some form of payment
Kazan Akademgorodok
hubs of scientific research. gists and mathematicians and on Apple Inc. products, typi- to decrypt it. Doing so essen-
Ruslan Fazlyev launched his Ulyanovsk enjoyed strong government cally seen as less likely to be hit tially lets hackers hold user
first startup to impress his fu- backing. by hackers and virus creators. data or a system hostage.
R.

ture wife—when he was nearly UKR. KA Z A K H STA N That state-subsidized sys- Palo Alto Networks Inc. These types of cyberat-
l ga
Vo

broke and living in Ulyanovsk, tem fell on hard times with said Sunday that it had de- tacks—which typically target
a town more than 500 miles THE WALL STREET JOURNAL. the collapse of the Soviet tected that the Transmission Microsoft Corp.’s Windows op-
east of Moscow, known for Union in 1991, but a genera- BitTorrent client installer for erating system as it has by far
producing cars and as the Shopify, isn’t the only startup sian ruble, a sharp decline in tion later, a robust startup cul- Apple’s OS X operating system the biggest market share—are
birthplace of Vladimir Lenin. outside the Russian capital. A oil prices, as well as Western ture has emerged. was infected with so-called expected to grow in 2016 as
More than a decade later, the few thousand tech startups sanctions on major Russian Today, cities like Novosi- “ransomware.” Transmission hackers target more compa-
35-year-old’s second startup, have appeared across Russia companies following the gov- birsk, Tomsk, Kazan, Yekater- is used to download files in a nies and advanced software is
Ecwid, has a second office in in recent years, and industry ernment’s annexation of Cri- inburg and Nizhny Novgorod crowdsourced way from other able to compromise more
San Diego and boasts clients experts estimate that a few mea in March 2014. The price have a reputation as regional users of the application. types of data, according to a
in 150 countries. hundred are successful. of imports has skyrocketed. IT hubs, as does St. Peters- An Apple spokesman con- report from Intel Corp.’s McA-
“Today Ulyanovsk is a little Russia’s economic crisis, Regional startups can now burg, Russia’s second-largest firmed the attack and said the fee Labs released late last year.
town with a lot of [informa- which began in late 2014, has take advantage of lower labor city. company had pulled the devel- Historically, Apple products,
tion technology] talent,” said been an unexpected boon, in- costs and a push for made-in- Evgeny Kaznacheyev, the oper certificate so no user can which have a much smaller
Mr. Fazlyev. dustry experts say. The coun- Russia products. 32-year-old head of the Rus- install the affected app. Palo share of the market, have been
Ecwid, a rival to virtual try’s economy was hit by a Many of the regional start- sian office of Ecwid, said Alto said it believes this is the considered mostly safe from vi-
storefront creators such as rapid weakening of the Rus- ups draw on a unique Russian Please see RUSSIA page B3 first such ransomware issue to Please see APPLE page B3
B2 | Tuesday, March 8, 2016
INDEX TO BUSINESSES
These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.
Alibaba Group
A
AGTech Holdings.........B7
Holding ................ B2,B5
Ant Financial Services
Group.........................B5
Apple...........................B2
Areva...........................B1
AvtoVAZ......................B1
B Pharmaceuticals.......B1
Betterment ................. B3
Bharat Biotech
International.............B1
BHP Billiton................B8
C J
Canaan Partners.........B3
Chembio Diagnostics..B1
Chevron ....................... B7
China Life Insurance...B7
China Pacific Insurance
Group.........................B7
CircleUp.......................B3
Cisco Systems.............B2
Credit Suisse...............B5
D-F
Daalo Airlines.............A2
Ecwid...........................B1
Electricite de
France .................. B1,B8
Ernst & Young.............B7
Fortescue Metals Group
.....................................B8
INDEX TO PEOPLE
A G
Andersson, Bo.............B1
Annenkov, Anatoli......B7
Arora, Nikesh..............B2
B P
Barrack Jr, Thomas.....B5
Beal, Andrew .............. B5
Bouhadi, Hassan.........B8
C Sato, Hitoshi...............B2
Caldbeck, Ryan............B3
E Kaznacheyev, Evgeny . B1
Eakin, Rory..................B3
Eskola, Jaakko............B2
F Kinnunen, Juha...........B2
Farzan, Michael...........B2
Fauci, Anthony............B1
Fazlyev, Ruslan...........B1
Feygin, Ilya..................B8
SoftBank to Forge
New Dual Structure
BY ALEXANDER MARTIN
AND ERIC PFANNER
TOKYO—SoftBank Group
Corp. of Japan said Monday
that it would separate its prof-
itable but slow-growing do-
mestic mobile business from
its fast-paced but riskier over-
seas operations, which include
a majority stake in U.S. mobile
operator Sprint Corp.
Under the reorganization,
SoftBank President Nikesh
Arora, a former Google Inc. ex-
ecutive, will head the overseas
management company, whose
holdings also include a 32%
share of Chinese e-commerce
company Alibaba Group Hold-
ing Ltd. and a range of other
Internet and technology com-
panies.
The domestic mobile
business will be
separated from
an overseas arm.
SoftBank’s Japanese tele-
communications business and
shares in domestic Internet
companies such as Yahoo
Japan Corp. will be managed
by a separate company led by
Ken Miyauchi, who now heads
SoftBank’s Japanese mobile
operations.
SoftBank said it would re-
tain full ownership of both
companies. But analysts said
the move could lay the
groundwork for a range of fu-
ture options, including a possi-
ble stock-market listing of the
overseas investment arm.
“It’s a reflection of how the
company’s weight is shifting
toward its overseas busi-
nesses,” said Hitoshi Sato, se-
nior analyst at InfoCom Re-
search.
The move to separate Soft-
Bank’s cash-cow domestic mo-
bile business from its overseas
investments could ease con-
cerns among some investors
that money earned in Japan
might be used to support turn-
around efforts at unprofitable
Sprint, he said.
SoftBank last year consid-
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THE WALL STREET JOURNAL.
BUSINESS NEWS
G-H
General Mills...............B3
Goldman Sachs
Group...................B5,B7
Primavera Capital.......B7
Qualcomm...................B2
R
Engine Maker Says Tests Altered
Renaissance BY CHARLES DUXBURY Analysts said that in the
Goldman Sachs Group B8 Technologies.............B3 marine-engine business, as
Google....................B2,B3 Renault........................B1
Huawei Technologies..B2
Finnish marine-engine with the aviation industry,
Rhythm Superfoods....B3 maker Wartsila Oyj said on fuel costs are of vital impor-
I Rio Tinto ..................... B8 Monday that members of its tance.
Inovio S staff in Italy had manipulated “Fuel efficiency is the key
Intel.............................B2
Samsung Electronics..B2 the results of some fuel-con- in this market, every percent-
Sanofi..........................B1 sumption tests. age point goes straight out of
International Business
Machines...................B2 Shanghai Financial While the wrongdoing ap- the profits of the client,” said
Development
Itech.mobile ................ B3 peared modest in scale, the Juha Kinnunen an analyst at
Investment Fund......B7
Shopify........................B1
disclosure comes after the Inderes Equity Research.
JD.com.........................B5 SoftBank Group..........B2 Volkswagen AG emissions Around 70% of shipping
J.P. Morgan Chase......B7 Southwestern Energy.B7 scandal broke last year. Wart- costs are related to fuel.
MATT CARDY/GETTY IMAGES
L Sprint .......................... B2 sila’s acknowledgment points As well as ship engines,
LendingClub.................B3 T-V to an increasing vigilance at Wartsila provides a range of
engine makers concerning en- other equipment, including
LG Electronics.............B2 Tencent Holdings........B5
gine testing. power plants for energy pro-
M-N Union Square
Ventures ................... B3 Last fall, Volkswagen admit- duction.
McKinsey.....................B7
MediaTek.....................B2 Vale..............................B8 ted to installing software in The company’s marine-en-
Murphy Oil..................B7 Vodafone Group..........B2 roughly 11 million diesel vehi- gine sales represented 12% of
New China Life...........B7 Volkswagen.................B2 cles world-wide that allowed Wartsila, which makes marine engines, said the deviation in fuel- annual group revenue in 2015.
NewLink Genetics.......B1 W-Z them to perform better on consumption test results was detected in an internal audit. Net sales at Wartsila, which
Nissan Motor..............B1 Wartsila Oyj................B2 emissions tests than on the employs roughly 18,800 em-
P-Q Wealthfront ................ B3 road. For Wartsila, the viola- caused by a limited number of into roughly a couple of hun- ployees, totaled €5 billion
Palo Alto Networks....B1 Yahoo...........................B5 tions it uncovered appeared to personnel, who have clearly dred engines of different sizes. ($5.5 billion) last year.
Postal Savings Bank of Yahoo Japan................B2 be concerned with meeting cli- acted against work instruc- The spokesman said the com- While Wartsila said its in-
China.........................B7 ZTE.........................B2,B8 ent demands on efficiency. tions and our code of conduct pany began discussions with vestigation was routine proce-
The company said the devi- by influencing the test re- affected clients on Monday. dure, Inderes’s Mr. Kinnunen
ation in test results was de-
tected in an internal audit at
the Wartsila Delivery Centre in
sults,” Wartsila said.
A total of 2% of all Wartsila
engine deliveries may have
“This is a hit to our brand
and reputation,” said Chief Ex-
ecutive Jaakko Eskola.
said it may have been the
Volkswagen case that led to
tighter internal processes.
Meyling, Trieste and constituted on av- been affected, the company Shares of Wartsila fell 2.7% “I would guess this is why
Galitsky, Alexander....B3 Marie-Helene............B2 erage 1% of fuel consumption. said. A spokesman for the to end at €38.22 ($42.06) in [Wartsila is] concentrating
Girre, Xavier................B1 Mittal, Alexander ....... B3
Miyauchi, Ken.............B2
“The deviations have been company said that translated Helsinki. more on this now,” he said.
H
Hamilton, Colin...........B8
Peng, Lucy...................B7
U.S. Restricts ZTE Over Iran Trade
Hu, Fred.......................B7
Piquemal, Thomas.B1,B8
I
S
Icahn, Carl...................B5
K Shcherbina, Alexander
Kalayev, Dmitry..........B3 .....................................B3 The U.S. Commerce Depart- the company’s handset and according to research firm technology companies. Some
Son, Masayoshi .......... B2 ment slapped ZTE Corp. with telecom-equipment businesses. IDC. of China’s biggest companies
Khan, Iqbal..................B5 T new trade restrictions, hinder- The new trade restrictions “ZTE is highly concerned have already struggled in the
Kieny, Marie-Paule.....B1 Thiam, Tidjane............B7 ing the Chinese technology will essentially prohibit U.S. about recent media reports re- U.S. market. Huawei Technol-
Turkot, Alexander.......B3 company’s ability to buy com- companies from selling to ZTE lating to a U.S. Department of ogies Co., ZTE’s bigger Chi-
Kovacs, John...............B8 V-W ponents and software from a wide array of restricted Commerce investigation,” the nese rival, is effectively
M Venditti, Andreas ....... B7 U.S. suppliers. goods, including computers, Chinese company said in a banned in the U.S. telecom-
Ma, Jack......................B5 Weissman, Andy.........B3 software and telecommunica- statement over the weekend. equipment market after a 2012
Meng, Cynthia.......B2,B8 Widmer, Michael.........B8 By Juro Osawa tions equipment. ZTE “maintains constant com- congressional report raised
in Hong Kong and U.S. companies could apply munications with associated concerns that Huawei’s net-
Eva Dou in Beijing for a license to sell such goods departments and is committed working gear could be used by
In a rule to be published
Tuesday, the Commerce De-
to ZTE but the Commerce De-
partment said it is operating
under a “policy of presump-
to fully address and resolve
any concerns,” it said.
Analysts say the restric-
Beijing to spy on Americans.
Huawei has denied the allega-
tions. U.S. technology firms
partment said ZTE had acted tion of denial,” indicating it tions would have a major im- such as Cisco Systems Inc.
“contrary to the national secu- has no plans to issue any such pact on ZTE’s business given and International Business
rity and foreign policy inter- licenses. its dependence on component Machines Corp., meanwhile,
ests of the United States.” The license requirements and software suppliers from have faced challenges in China
Specifically, ZTE broke U.S. apply to any transaction where the U.S. For example, some of as government agencies and
ered and rejected a plan to set rules by selling U.S.-made the products would be pro- ZTE’s smartphones, particu- state-owned enterprises in-
up a new company in London high-tech goods to Iran. ZTE posed for “export, re-export, larly high-end models, use creasingly rely on domestic
to oversee the investment also planned to use a series of or transfer” within the U.S. chips from Qualcomm Inc. In- companies for technology.
business, according to a docu- shell companies “to illicitly re- ZTE is a major global sup- tel Corp. is also a ZTE sup- China’s ministries for com-
ment reviewed by The Wall export controlled items to Iran plier of telecom-networking plier. Qualcomm and Intel merce and information tech-
Street Journal. in violation of U.S. export con- equipment such as base sta- didn’t comment on the restric- nology didn’t respond to re-
According to people famil- trol laws,” the U.S. govern- tions and antennas. It is also tions. “This may cause signifi- quests for comments on the
iar with the situation, Soft- ment agency said. the only Chinese smartphone cant supply problems to both U.S. restrictions on ZTE.
Bank founder and Chief Execu- ZTE’s Hong Kong-listed brand that has a substantial ZTE’s equipment and handset China’s foreign ministry has
tive Masayoshi Son also shares were suspended from presence in the U.S. market. businesses,” Jefferies analyst criticized the U.S. move, warn-
reviewed a proposal for a man- trading Monday after Reuters In the fourth quarter, ZTE Cynthia Meng wrote in a note ing that it potentially harms
agement buyout. reported this past weekend was the fourth-largest smart- to clients on Monday. relations.
The problems at Sprint, that the U.S. restrictions on phone vendor in the U.S. with Restrictions targeting ZTE —Jeffrey Sparshott
which SoftBank acquired in ZTE would take effect on a 7% market share, behind Ap- could further complicate the in Washington and
2013, and questions over Soft- Tuesday. Analysts said the re- ple Inc., Samsung Electronics political tensions between the Charles Hutzler in Beijing
Bank’s strategy have weighed strictions could severely hurt Co. and LG Electronics Inc., U.S. and China involving their contributed to this article.
on the company’s shares,
which are trading about 20%
below year-earlier levels.
They have rebounded
slightly since SoftBank last
month announced its largest-
ZIKA started seeing photos of babies
born with microcephaly—un-
dersized skulls and brains—
which researchers have tied to
to find a treatment, predicted
Michael Farzan, a professor of
immunology and microbial sci-
ence at Scripps.
EDF
to-date share buyback, valued Continued from the prior page Zika infections in the mothers. Researchers and companies Continued from the prior page
at ¥500 billion ($4.39 billion). The NIAID also is taking ad- “As a father of three young also are working on faster and 30 years.
While Sprint showed some vantage of earlier research, kids, it definitely moved me more accurate diagnostic The Hinkley Point project
signs of progress in the most modifying products that al- personally,” Dr. Kim said in an tests, as demand for testing has the backing of the U.K.
recent quarter, investors are ready were in development, Dr. interview. grows. Current tests are run government, which views nu-
concerned about whether Fauci said. It is inserting a gene The company plans to test only in advanced laboratories, clear energy as a way to re-
Sprint would be able to pay off for Zika virus into a vaccine its vaccine in monkeys infected and have limitations. Tests for duce carbon-dioxide emissions
its $32 billion in debt. originally developed for West with Zika, and, if successful, antibodies don’t always distin- and prevent electricity short-
The two new management Nile virus, for which the insti- move into human testing later guish between recent infection ages in the future as old coal-
companies will be based in tute couldn’t find a commercial this year, the company said. with Zika and related viruses fired power plants close.
Japan, but Mr. Sato of InfoCom partner. NIAID hopes to start Development of drugs has such as dengue. A second, con- The project remains contro-
said an eventual relocation of human clinical trials on the drawn less interest; Zika causes firmatory test is required. versial in the U.K., where the
the overseas arm outside of Zika vaccine candidate in Sep- mostly mild, short-lived symp- The Centers for Disease Con- government guaranteed EDF
Japan could be an option. tember in the U.S., Dr. Fauci toms, and 80% of those infected trol and Prevention said it has and its Chinese partner an
SoftBank said that the reor- said. never develop symptoms. The been receiving hundreds of electricity price of £92.50
ganization is part of its strat- Inovio Pharmaceuticals Scripps Research Institute is tests a day to process. It is now ($131.65) a megawatt hour—
egy to position its two core hadn’t done any Zika research one of the few that is searching distributing that test package about three times Britain’s
businesses as “future growth before last year. But after read- for potential treatments, using to other qualified labs to ease wholesale power price—for the
drivers.” ing about the spread of Zika in a robot at a lab in Jupiter the backlog. first reactor for 35 years when
The latest reorganization South America, Chief Executive Beach, Fla., that can perform Chembio Diagnostic Systems it is up and running.
shows how SoftBank continues Joseph Kim decided to try mak- test-tube screening of millions Inc. is working on a portable, The European Union ulti-
to evolve. The company was ing a Zika vaccine with the of chemical compounds. rapid-results Zika test. It aims mately approved the subsidy
started as a distributor of same technology it is using to Researchers inject a glowing to show from a drop of blood after a review to determine
packaged software, but later develop vaccines against other substance called luciferase— from a fingertip whether some- whether it was anticompeti-
branched out into telecommu- diseases, based on DNA se- also found in fireflies—into one is infected, said Chief Exec- tive.
nications, media and technol- quences found in the targeted modified Zika cells to help utive John Sperzel. He pre- EDF and CGN have agreed
ogy investments. viruses. show whether a potential drug dicted the company could to build two French-designed
SoftBank’s domestic mobile That initial, small-scale ef- candidate is halting replication develop a prototype by mid- reactors at Hinkley Point and
business, acquired from Voda- fort took on new urgency ear- of the virus. year, and then test its accuracy would seek approvals from
fone Group PLC of the U.K. in lier this winter after Dr. Kim It will take at least two years in the field. U.K. regulators for the Chinese
2006, was the main growth Hualong reactor to be built at
driver for much of the past de- Bradwell in Essex, eastern
cade, helped by its status as
the first seller of Apple Inc.’s
BMW Offers Glimpse of Future Design Goals England.
But the deal with the Chi-
iPhones in Japan. nese fell short of EDF’s origi-
In addition to Sprint and nal hope to find investors to
the Alibaba stake, its Internet take half of the project’s eq-
holdings include investments uity. U.K. utility Centrica PLC
in Chinese ride-hailing com- said in 2013 it didn’t want to
pany Didi Kuaidi Joint Co., In- take part, citing uncertainty
dian e-commerce company over overall project costs and
Snapdeal and South Korean the construction schedule.
online retailer Coupang. Marie-Helene Meyling, one
of the six worker representa-
tives at EDF’s board, said the
French utility would likely
have to take on extra debt as
the owner of two-thirds of the
Hinkley Point venture. Ratings
MICHAEL DALDER/REUTERS
agency Standard & Poor’s
Corp. recently said that a deci-
Businesses sion to proceed with the proj-
For Sale. ect could prompt a downgrade.
“It is a financial commit-
Advertise in The Mart.
Call +44 (0) 207 572 2123
ment too heavy and too risky
for the company,” Ms. Meyling
NEW ROAD: BMW unveiled a concept car called the Vision Next 100 that is packed with said. The other five represen-
technology including a digital ‘companion’ in a nod to the role of artificial intelligence in driving. tatives share her view on the
The vehicle points to a conviction that emissions-free, self-driving vehicles will be in BMW’s lineup. project, she said.
THE WALL STREET JOURNAL.
Software Is Disrupting Venture Capitalism
T
en years ago, bored by
the repetitive nature
of his work as a pri-
vate-equity analyst, Ryan
Caldbeck began to think that
the job could be done as well
by software. Today, he’s the
co-founder and chief execu-
tive of CircleUp, an online
crowdfunding
platform spe-
cializing in
consumer-
goods compa-
nies—think
KEYWORDS food, cosmet-
CHRISTOPHER ics and chain
MIMS restaurants.
Mr. Cald-
beck’s firm
has built software that he
says does more or less what
he once found so stultifying.
Internally, this software is
called the “Classifier.” It ap-
plies so-called machine
learning to a pool of big
data: more than 10,000 eval-
uations over four years by
CircleUp’s human analysts.
The software has been
prescreening investments for
analysts since March 2014.
The result is much higher
deal flow. Fewer than 10 ana-
lysts collectively evaluate
500 potential deals a month,
says a CircleUp spokes-
woman. By comparison, a
typical private-equity firm
evaluates fewer than 500
deals in a year.
During the prescreen, the
Classifier crunches a candi-
date company’s financial
data: revenue, growth, mar-
gins, distribution channels
and the like. Other sources
Microsoft to Open Database Program to Linux Users
BY JAY GREENE
REDMOND, Wash.—Micro-
soft Corp. will make one of its
most lucrative products avail-
able to users of the Linux op-
erating system, a move beyond
the company’s own Windows
system that would have been
unthinkable just a few years
ago.
The software company
said Monday that it will offer
a version of its SQL Server da-
tabase program, which ana-
lysts estimate generated more
than $7 billion in revenue in
2014, to work with the free
RUSSIA
Continued from page B1
places like Ulyanovsk are af-
fordable and family-friendly.
Ecwid, for example, is based in
a three-story house owned by
the company and located near
the city center. Staff treat it as
a home with a kitchen, a gym,
and spacious offices that are
open 24/7—plus a backyard
for barbecuing and brain-
storming.
While Silicon Valley has
lured away high-profile Rus-
sian talent, many Russian IT
entrepreneurs say they prefer
to stay closer to home. Alex-
ander Shcherbina, who owns
Ulyanovsk-based startup
Business
Watch
VALEANT
Earnings Report
Moved to Next Week
Valeant Pharmaceuticals In-
ternational Inc. said it would
outline its fourth-quarter results
and update investors on its fi-
nancial guidance next week, a
move that comes after the Ca-
nadian drugmaker had delayed
the call.
Valeant had previously been
slated to report results Feb. 29,
but the night before, the com-
pany postponed the call and
withdrew its guidance as it said
Chief Executive Michael Pearson
had returned from medical leave.
The call will now happen March
15, Valeant said Monday.
“Now that I have returned, I
have been working diligently to
review the business so that I
can share our latest perfor-
mance and outlook with share-
holders,” Mr. Pearson said in pre-
pared remarks.
The results come as Valeant
are also thrown into the mix,
including data from market-
research firm Nielsen and
quantitative measures of
reach and activity on social
media, for a total of 92,000
data points per company,
says Mr. Caldbeck. Then the
machine decides whether the
company merits further eval-
uation by human beings.
The Classifier is nowhere
close to fully automating the
process of investing in pri-
vate companies. And com-
pared with the tools available
for public markets—soft-
ware-driven hedge funds like
Renaissance Technologies,
or robo advisers for individ-
ual investors like Wealth-
front and Betterment—Cir-
cleUp’s software is primitive.
But CircleUp’s effort ex-
emplifies a larger trend in fi-
nance, where algorithms play
a growing role in markets for
areas as diverse as startups
and real estate. Software is
eating the world, again, only
this time it threatens the
jobs of precisely the finan-
ciers accustomed to disrupt-
ing everyone else.
One reason CircleUp could
build its Classifier is that the
companies in which it orga-
nizes investments tend to
have very similar business
models. The food companies,
for example, generally sell
similar types of products into
grocery stores with nearly
identical requirements.
The company’s software
wouldn’t work in tech, says
Rory Eakin, CircleUp’s other
co-founder and chief operat-
Windows alternative. The new
program will be ready by
mid-2017.
Embracing Linux, which is
available free of charge under
an open-source license, is an
about-face for Microsoft. Steve
Ballmer, the company’s former
chief executive, once called Li-
nux a “cancer” and made de-
fending Windows the heart of
the company’s strategy. His
successor Satya Nadella, how-
ever, has set out to broaden
the company’s reach into cor-
porate computing, where com-
panies rely on an increasing
variety of technology.
ITECH.mobile, said he
wouldn’t contemplate moving.
“I do not think that I should
lay my whole life on the altar
of the startup,” said Mr.
Shcherbina, when asked if he
would consider moving to Sili-
con Valley. “I don’t want to
move to Moscow either.” he
added.
Last year, Mr. Shcherbina
launched Wizl, a mobile app
that matches users with gift
ideas based on the recipient’s
age, gender and other traits.
He chalks up as many as 50
round-trip flights to Moscow a
year for his IT businesses. Mr.
Shcherbina, 34, says his family
and friends in Ulyanovsk are
important to him.
That concept of community
extends beyond office space.
United Continental named three new independent directors to its board, and plans to add a fourth.
faces an investigation by the
U.S. Securities and Exchange
Commission, among other is-
sues. The SEC has requested in-
formation about Valeant’s now-
terminated relationship with
drug distributor Philidor Rx Ser-
vices LLC, and Valeant has sub-
mitted emails, financial docu-
ments and other data to comply
with the request, according to a
person familiar with the matter.
—Anne Steele
ORIENT OVERSEAS
Net Profit Last Year
Increased by 4.9%
Orient Overseas (Interna-
tional) Ltd. posted a 4.9% in-
crease in 2015 profit, because of
TECHNOLOGY
ing officer. The business
models of tech startups vary
widely, and those companies
can tap a robust network of
incubators and venture capi-
talists. “I don’t think there’s
a problem to be solved in
tech investing, but if you
have an organic-kale-chip
company and you’re rein-
venting the salty-snack cate-
gory, there’s no ecosystem to
fund that,” says Mr. Eakin.
One such kale-chip maker
is Rhythm Superfoods. It
was first evaluated by the
Classifier, accepted into Cir-
cleUp, and is now in 5,000
U.S. stores. On the strength
Extending SQL Server to Li-
nux has a clear financial ratio-
nale. Microsoft was ceding 15%
of the $29.8 billion database
market, by IDC Research Inc.’s
measurements, to Linux-com-
patible products from rivals
such as Oracle Corp. and In-
ternational Business Ma-
chines Corp.
“This basically opens the
door to the entire market,”
said Scott Guthrie, the execu-
tive vice president who runs
Microsoft’s Cloud and Enter-
prise group.
SQL Server is used to store,
retrieve and interpret large
On a recent Saturday in Ulya-
novsk, Mr. Shcherbina had
helped organize an annual get-
together for IT professionals
and aficionados at a miniature
ski complex on the bank of the
Volga River. About 350 people
attended to ski, eat pasta and
talk shop.
The gathering—called Win-
ter Ulcamp—is an extension of
a summer networking event in
the city where about 800 IT
professionals have gathered
each year since 2011.
Russian regional startups
today have three choices: stay
local, go global or head to
Moscow. “For a regional
startup a move from a re-
gional hub to an international
hub is a big feat,” said Alexan-
der Turkot, the founder of the
lower fuel costs and a fair-value
gain.
Hong Kong-listed Orient
Overseas, controlled by the fam-
ily of former Hong Kong Chief
Executive Tung Chee-hwa, said
its full-year net profit rose to
US$283.9 million from US$270.5
million a year earlier, buoyed by
a higher fair-value gain on Wall
Street Plaza, an office building in
New York.
The company’s 2015 net
profit was higher than an aver-
age forecast of US$264.95 mil-
lion by five analysts polled in a
Thomson Reuters survey.
Its full-year revenue fell 8.7%
to US$5.95 billion from US$6.52
billion, weighed down by lower
freight rates. Total shipping vol-
Tuesday, March 8, 2016 | B3
RICHARD BORGE
of that growth, the company says his team is analyzing its
netted a financing round of four years of data to assess
$3 million, led by General which investors on Funders-
Mills. Club are best at judging
A challenge to further au- companies, as evidenced by
tomating the assessment of how their investments per-
private companies is a lack of form.
publicly available data. In Using software to pick the
general, only potential inves- humans who are best at pick-
tors get to see a private com- ing startups certainly seems
pany’s financials. like a baby step toward auto-
Once such data is col- mating the investment pro-
lected, however, there might cess. By analogy, think about
be other uses. Alexander how Google’s algorithm
Mittal, CEO of FundersClub, started out using signals
one of the first online invest- from humans—how often
ment marketplaces where ac- Web pages linked to one an-
credited investors could pool other—to pick the most rele-
their money in private deals, vant pages and has since be-
quantities of information. Cur- for 46% of overall database
rently, customers can use it sales in 2014, the latest year
only on computers that run for which numbers are avail-
Windows. Microsoft dominates able. Microsoft had a 19%
share, while IBM was third
with 16% of database sales.
A version of the “There is a lot of opportunity
SQL Server will be out there for Oracle and IBM
customers that would like an al-
available for Linux ternative,” Mr. Guthrie said.
users by mid-2017. SQL Server may further ap-
peal to such customers be-
cause it includes data-analysis
that segment of the database capabilities absent from some
market, with a 53% share in rival products, said Merv
2014, according to IDC. But Adrian, vice president of re-
more broadly the company search at Gartner Inc. And it is
trails Oracle, which accounted designed to work hand-in-
Maxfield VC fund, which has technical skills, but are short
invested roughly $3 million in on marketing savvy.
regional startups since it be- Still, only 5% of all Russian
gan 2½ years ago. “Most of startups are oriented toward
them look at Moscow.” the global market, Mr. Kalayev
A lack of international ex- said. For many, not being pro-
posure or unwillingness to go ficient in English poses a
to Moscow isn’t a voluntary problem for showcasing their
choice for some Russian entre- products abroad.
preneurs. Russia’s regional startup
“People in the regions are scene is a departure from the
more thorough and slower top-down efforts to kick-start
than Muscovites,” said Dmitry an IT culture in the country.
Kalayev, who heads the accel- Alexander Galitsky, a man-
erator program for Moscow- aging partner at early-stage
based Internet Initiatives De- venture-capital firm Almaz
velopment Fund, which has Capital, said a bigger obstacle
invested about 500 million ru- to Russian entrepreneurs is a
bles, or $6.8 million, in 197 cultural one: The risk-averse
Russian startups since it Russian mentality, he said,
launched in 2013. means there is a reluctance to
Mr. Kalayev said regional embrace risk and failure as a
startups may have excellent cost of doing business.
down from the board in connec-
tion with the new appointments.
James Kennedy, Robert Mil-
ton and James Whitehurst
would join the board effective
immediately, the company said.
DAVID J. PHILLIP/ASSOCIATED PRESS
—Joshua Jamerson
DIAGEO
Severance Halted for
Head of Indian Unit
An Indian tribunal Monday or-
dered Diageo PLC to temporarily
halt a $75 million severance
package due to the former head
of its Indian business, Vijay Mal-
ume fell 0.2% to 5.6 million 20- lya, after a group of creditors
foot-equivalent units, or TEUs, demanded the businessman set-
during the year. tle debts with them first.
It recommended a final divi- Indian billionaire Mr. Mallya,
dend of 1.85 U.S. cents, down who was offered the settlement
from 3.4 U.S. cents a year ear- last month in exchange for his
lier. resignation from Diageo-owned
—Joanne Chiu United Spirits Ltd., owes banks
for his now defunct Kingfisher
UNITED CONTINENTAL Airlines.
Monday’s order came after a
Three New Directors consortium of banks, owed part
Named to the Board of the airline’s $2.5 billion in
United Continental Holdings debt, petitioned the tribunal say-
Inc. named three new indepen- ing they had the “first right”
dent directors to its board, and over that money, a representing
said it intended to appoint a lawyer said.
fourth in the near term. A spokesman for Mr. Mallya
The airline company, without said he had no immediate com-
giving specifics, said that “cer- ment.
tain current directors” will step —Preetika Rana
@wsjd | wsjd.com
come more automated.
There’s an irony here: Cir-
cleUp, which is to some ex-
tent trying to disrupt tradi-
tional venture capital, is
itself funded by venture
funds including Union
Square Ventures, Canaan
Partners and Google Ven-
tures. That isn’t lost on Cir-
cleUp investor Andy Weiss-
man of Union Square
Ventures, who jokes that
“our hope is that CircleUp
will put us out of business.”
The complexities of iden-
tifying successful tech com-
panies will probably keep Mr.
Weissman safe for the fore-
seeable future. Still, the truth
is that CircleUp and compa-
nies like it could eventually
take a chunk out of the prof-
its earned by private inves-
tors.
It is possible, in other
words, that the Warren Buf-
fett of the 21st century will
be an artificially intelligent
software program.
There are also many cate-
gories of private investments
that might yield to this same
approach, especially in debt
financing for segments like
agriculture or industrial ma-
chinery. This is, after all,
what Lending Club is trying
to do for consumer debt.
Meanwhile, CircleUp’s
Classifier is simply making
the human analysts the com-
pany employs more effective.
Even in the relatively
straightforward world of in-
vesting in consumer goods,
people aren’t out of the
loop—yet.
glove with Microsoft’s Excel
spreadsheet program, a staple
in many companies. That
should give Microsoft “more
of an edge than your typical
entrant,” Mr. Adrian said.
“A few years out, Microsoft
could be much closer” to Ora-
cle in overall market share,
Mr. Adrian said.
Microsoft declined to dis-
close pricing for the Linux ver-
sion of SQL Server or how it
planned to sell the product.
The work has been in progress
for more than a year and re-
quired “quite a bit of effort,”
Mr. Guthrie said.
APPLE
Continued from page B1
ruses and other digital attacks.
Palo Alto Networks, which
has dubbed the ransomware
“KeRanger,” said the only pre-
vious known ransomware for
OS X was dubbed FileCoder,
but since it was incomplete
when discovered in 2014, the
researchers believe this is the
first fully functional ransom-
ware on the platform.
A representative for Trans-
mission said the affected soft-
ware was downloaded about
6,500 times, though he said
many users may have been un-
able to run it because of Apple’s
swift removal of the certificate.
Transmission, an open-source
project, already has released a
new version of the app without
the infection. An alert on the
app’s website warned custom-
ers and advised that they im-
mediately upgrade.
Palo Alto Networks said
KeRanger, which attackers in-
fected Transmission with on
March 4, begins encrypting
files three days after infecting
a computer, making them inac-
cessible. After completing the
encryption, KeRanger demands
victims pay one bitcoin—cur-
rently valued at about $400—
to retrieve their files.
The researchers said the
ransomware appears to still be
under active development and
also is attempting to encrypt
Apple’s Time Machine backup
files to prevent victims from
recovering their backup data.
The Federal Bureau of Inves-
tigation has wrestled with how
to deal with the increasingly
common type of computer
hacking. FBI Assistant Special
Agent in Charge Joseph Bo-
navolonta has said certain types
of ransomware are so good that
“to be honest, we often advise
people just to pay the ransom.”
His remarks prompted de-
bate about whether the FBI is
encouraging, directly or indi-
rectly, behavior that leads to
more hacking.
B4 | Tuesday, March 8, 2016 THE WALL STREET JOURNAL.

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Oil’s Rise Lifts Shares
Of Energy Companies
MONDAY’S MARKETS | B7
© 2016 Dow Jones & Company. All Rights Reserved.
As of 4 p.m. ET EUR/GBP 0.7724 g 0.13%
Why the Obvious Trade Isn’t Working
Sometimes a bet is so ob-
vious that it is hard to be-
lieve it isn’t working out.
The so-
called diver-
gence trade
is a leading
exam-
ple. This
STREETWISE week should
JAMES provide the
MACKINTOSH perfect op-
portunity
for betting
that the stronger U.S. econ-
omy and Europe’s struggle
No Easy
Way Up
For Swiss
Lender
BY JOHN LETZING
ZURICH—For Iqbal Khan,
the man charged with running
the international wealth-man-
agement business at Credit
Suisse Group AG, the timing
has been awful.
No sooner was the former
consultant handed the job last
year than conditions turned
against him. Stock markets
swung wildly, commodities
sank, and the unit’s well-
heeled clients saw their port-
folios depleted amid a broad
decline for the wealth-man-
agement industry. Mr. Khan’s
mission—revamping a patch-
work of disparate businesses—
would have been a challenge
even in good times.
Now, Credit Suisse needs all
the support it can get as it
pushes ahead with a restruc-
turing amid a sudden decline
in investor confidence. Shares
of the bank have lost nearly
29% of their value since the
beginning of the year.
Mr. Khan recently conceded
in an interview: “This will be a
bit of a journey.”
Mr. Khan’s territory in-
cludes all of Credit Suisse’s
wealth management opera-
tions outside of Switzerland
and Asia. To make his mark,
Mr. Khan, who recently turned
40, is forging back into emerg-
ing markets once written off
by Credit Suisse. He is hiring
hundreds of new bankers,
pressing clients with unde-
clared assets to come clean
and rebuilding a business in
Western Europe recently
drained by regional tax-eva-
sion crackdowns.
As he proceeds, Mr. Khan is
Please see SUISSE page B7
Iron Ore’s Jump Leaves Plenty of Doubters
BY ALEX MACDONALD
AND ESE ERHERIENE
LONDON—The price of iron
ore jumped almost 20% on
Monday as investors bet that
China will stimulate its econ-
omy and buoy demand for the
key steelmaking ingredient.
Iron ore’s surge came after
the Chinese government said
over the weekend that it will
emphasize growth over eco-
nomic restructuring this year.
The news added to rising opti-
mism about Chinese demand
that has helped industrial met-
als, from copper to tin, bounce
back from multiyear lows in
recent weeks. Other commodi-
ties, including oil, are also on
the upswing.
But not everybody is con-
vinced the rallies have legs.
Gains in iron ore and some
metals may be overly depen-
dent on hopes for Chinese
stimulus spending that might
not happen, analysts say.
“We expect the current rally
to be short-lived in the ab-
sence of a material increase in
Chinese steel demand,” said
Goldman Sachs analysts in a
MARKETS DIGEST B6 | HEARD ON THE STREET B8 | FINANCE WATCH B8
YEN/DLR ¥113.58 g 0.17% GOLD 1263.20 g 0.53%
with low inflation will pro-
duce a stronger dollar. The
European Central Bank has
indicated it will ease at its
meeting on Thursday, while
expectations for tightening
this year by the U.S. Federal
Reserve are once again pick-
ing up.
So much for theory. In re-
ality, the euro is stronger
than it was a year ago
against both the dollar and
the currencies of a broad
basket of trading partners.
While it fell slightly on Mon-
Donald Trump is supported by billionaire investors Carl Icahn, left, and Andrew Beal, right, who see him bringing radical change to Washington.
Donald Trump’s Friends in Finance
Donald Trump’s supporters
are a collection of strange bed-
fellows. Among the most sur-
prising: two billionaire finan-
ciers who teamed up against
Mr. Trump in a legal battle less
than a decade ago.
By Rachel Louise Ensign,
Craig Karmin
and David Benoit
More than six years ago, in-
vestors Carl Icahn and Andrew
Beal joined forces in bank-
ruptcy court to try to take con-
trol of Trump Entertainment
Resorts Inc., a deal Mr. Trump
opposed. Now as some on Wall
Street and in the Republican
Party are trying to derail Mr.
Trump’s campaign for presi-
dent, the two billionaires are
his most high-profile backers in
Bottom's Up
Iron-ore prices have rallied since the start of the year as Chinese iron-ore imports continue to rise
but analysts question whether the price rise is sustainable given China's shrinking steel output.
Iron-ore spot prices, daily data*
$200 a metric ton
150
100
50
0 –25
2013 ’14 ’15
*Spot for iron ore fines with 62% ferrous content delivered into China's Tianjin Port
Sources: The Steel Index (prices); CEIC (imports and output)
note Monday.
While Chinese demand for
iron ore and some industrial
metals is robust, that is mostly
because the country is taking
advantage of cheaper prices to
stockpile, some analysts say.
Without a material pickup in
industrial demand to back up
THE WALL STREET JOURNAL.
day, the euro is only fraction-
ally below its 200-day mov-
ing average against the
dollar, showing how little the
currency has moved recently.
Expectations of further
easing by the ECB aren’t do-
ing much to change the out-
look. Usually a rate cut
boosts risky assets, lowers
bond yields and weakens the
currency. This time the im-
pact on markets could be
very different, depending on
which of several options the
ECB picks.
the business community.
“There are no hard feelings,”
said Mr. Beal, who endorsed
Mr. Trump last week. “He’s
smart [and] gets things done.”
Mr. Beal, who founded Dal-
las-based Beal Bank and con-
siders himself a libertarian,
said he believes Mr. Trump will
be pro-business and can bring
“radical change” to Washing-
ton. One example: Mr. Beal said
he recently sent Mr. Trump’s
political-action committee a
donation for $100,000. It was
returned.
“I have never had a politi-
cian give me my money back,”
said Mr. Beal in an interview.
He previously backed Rand
Paul, contributing $250,000,
before the Kentucky senator
dropped out of the race.
Mr. Beal’s reasoning over-
Change in China’s iron-ore imports and steel output, monthly data
100%
75
50
25
0 services had been expected to
’16 2010 ’11 ’12
the buying, they add, prices
will fall back again unless the
hoped-for stimulus arrives.
Meanwhile, higher prices
are encouraging miners to put
off cuts in production that
would remove excess supply
from these markets.
“We don’t have enough evi-
Nickel Is Left Out of
Rise in Metals Prices
COMMODITIES | B8
OIL 37.90 À 5.51%
So here is the question for
investors: Should they bet on
the divergence trade coming
back to life?
The evidence in favor is
strong. Recent U.S. economic
reports have been beating
expectations, while in the eu-
rozone they have come in
well below forecasts. Euro-
pean inflation has come in
lower than hoped, too, with
February showing renewed
deflation and core inflation,
excluding energy and food,
unexpectedly dropping.
laps with Mr. Icahn’s. The 80-
year-old investor has called Mr.
Trump an outsider who can
help shake up politics, similar
to how Mr. Icahn tries to
change companies.
The men and real-estate in-
vestor Thomas Barrack Jr., who
also endorsed Mr. Trump last
week, said the main reason
they are backing the New York
businessman is they are exas-
perated with career politi-
cians—and not necessarily be-
cause they agree with all of his
policy positions.
Mr. Barrack, founder and ex-
ecutive chairman of Los Ange-
les-based Colony Capital Inc.,
said he didn’t think Mr. Trump
would put into practice every-
thing he has said on the cam-
paign trail.
“He would adapt and come
Imports
Output
’13 ’14 ’15 ’16
THE WALL STREET JOURNAL.
dence to suggest a turnaround.
We’re not seeing a huge up-
swing in [physical] buying,”
said Robin Bhar, a commodi-
ties analyst at Société Gé-
nérale. “This is a short-cover-
ing bounce,” he said, referring
to investors who had bet on a
price drop but are now closing
Tuesday, March 8, 2016 | B5
3-MONTH LIBOR 0.63610%
Meanwhile, in the U.S., infla-
tion has picked up, and core
inflation of 2.2% in January
approached the postcrisis
high of 2.3% in 2012.
Market expectations of in-
flation have rebounded rap-
idly in the past month, but
even here the trans-Atlantic
divergence persists. The like-
lihood that U.S. prices will be
lower in five years is less
than 9%, down from more
than 15% a month ago, ac-
cording to Deutsche Bank
calculations from the price of
FROM LEFT: CNBC/PHOTO BANK/GETTY IMAGES; HOUSTON CHRONICLE/POOL/ZUMA PRESS; JEFF WILSON/BLOOMBERG NEWS
to logical conclusions…that’s
my belief,” said Mr. Barrack.
“The rhetoric that seems harsh
would dissipate.”
Their support for Mr. Trump
contrasts with concerns from
many in the business commu-
nity who have said the candi-
date’s economic ideas are im-
practical and his temperament
unsuited to the presidency.
Goldman Sachs Group Inc.
Chief Executive Lloyd Blankfein
last year said the image of Mr.
Trump “with his finger on the
button blows my mind.”
Lawyers for Messrs. Beal
and Icahn also struck a differ-
ent tone in 2009. In a court fil-
ing then, the lawyers con-
tended that the Trump name
may no longer be “synonymous
with business acumen, high
Please see TRUMP page B7
out their positions to avoid po-
tential losses.
For the moment, prices are
on the rise. The benchmark
price for iron ore hit a nine-
month high of $62.60 a metric
ton on Monday. It was the
largest daily percentage in-
crease since 2009, when data
provider The Steel Index began
reporting daily iron ore prices.
Iron ore is up nearly 70% since
hitting its lowest level in more
than a decade at $37 a ton on
Dec. 11.
In China, a move away from
smokestack industries toward
act as a drag on global growth
this year and next. But iron
ore and other metals are now
being used to bet that China
will boost economic stimulus,
which will mean more infra-
structure projects that use
steel.
Chinese iron-ore imports
remain strong, rising 4.5% in
January from a year earlier.
But steel production, which is
what these imports supply, fell
by 7.8%, according to estimates
from the World Steel Associa-
Please see ORE page B8
REUTERS (2)
10-YR TREAS g 6/32 yield 1.902%
inflation options. Eurozone
inflation expectations have
surged in the past week, but
by less and from a lower
base. Options put a 12%
probability on lower inflation
five years from now, down
from 17% at the end of last
month.
On top of that, the extra
yield available from two-year
bonds in the U.S. compared
with Germany hit the highest
since 2006 on Monday. Cur-
rencies are typically very
Please see ECB page B7
Valuation
Fortifies
Ant’s Rise
Investors are hanging a val-
uation of more than $50 bil-
lion on Alibaba Group Hold-
ing Ltd.’s deal-hungry
financial-services affiliate, the
latest sign of appetite for
China’s financial technology
sector.
Ant Financial Services
Group, China’s most valuable
Internet finance company, is
planning to raise up to 20 bil-
lion yuan ($3.1 billion) in its
current funding round from a
clutch of new and existing in-
vestors, at a valuation of more
than $50 billion, according to
people familiar with the situa-
tion. The round is expected to
be completed by mid-April,
they said.
The fresh fundraising will
give the operator of popular
Chinese online payments plat-
form Alipay more financial
muscle as it buys stakes in
businesses ranging from a Chi-
nese lottery company to
China’s Postal Savings Bank.
It also sets the stage for
Ant Financial’s future initial
public offering—the most an-
ticipated Chinese share offer-
ing on the horizon. Bankers
expect it as early as 2017, po-
tentially on a Chinese stock
exchange. The company’s cur-
rent thinking on an IPO venue
remains unclear, though it said
earlier that it is raising money
in yuan, which would make a
domestic listing easier.
Investors have been pour-
ing money into Chinese finan-
cial technology companies,
sending valuations for some
soaring. After just over a year
of operations, WeBank—a unit
of Internet giant Tencent
Holdings Ltd. that competes
with Ant Financial’s MYbank—
is raising money at a $5.5 bil-
lion valuation, people familiar
with the matter said earlier.
Chinese Internet-finance
companies benefit from a
technology edge over the
country’s lumbering state
banking giants. Companies like
Ant Financial think they can
use their vast troves of data
and analytics to reduce the
risk of lending to small bor-
rowers—a market big Chinese
state banks have traditionally
eschewed in favor of making
big loans to other govern-
ment-owned companies. Now
those big companies are suf-
fering as e-commerce opera-
tions like Alibaba and JD.com
Inc. move into new corners of
the economy.
Ant Financial runs the Ali-
pay Internet payments plat-
form, China’s largest, which
used to be part of Alibaba. The
group’s chairman, Jack Ma,
controversially separated the
payment unit from the e-com-
merce company and brought it
under his control, drawing
criticism from major share-
holder Yahoo Inc. Alibaba said
the separation was driven by
Chinese government rules that
could limit the ability of Ali-
pay to provide certain pay-
ment services if it wasn’t a do-
mestic company.
Alibaba’s record $25 billion
initial public offering in 2014
didn’t include Ant Financial,
Please see ANT page B7
B6 | Tuesday, March 8, 2016 THE WALL STREET JOURNAL.

MARKETS DIGEST
Nikkei 225 Index STOXX 600 Index S&P 500 Index Data as of 4 p.m. New York time
Last Year ago
16911.32 t 103.46, or 0.61% Year-to-date t 11.15% 340.93 t 0.87, or 0.25% Year-to-date t 6.80% 2001.76 s 1.77, or 0.09% Trailing P/E ratio * 23.08 20.50
High, low, open and close for each 52-wk high/low20868.03 14952.61 High, low, open and close for each 52-wk high/low 414.06 303.58 High, low, open and close for each P/E estimate * 16.55 17.65
trading day of the past three months. All-time high 38915.87 12/29/89 trading day of the past three months. All-time high 414.06 4/15/15 trading day of the past three months. Dividend yield 2.27 1.97
All-time high: 2130.82, 05/21/15

20000 400 2100

65-day moving average

65-day moving average
19000 380 2050

65-day moving average

18000 360 2000

Session high 17000 340 1950

DOWN UP
t

Session open Close

16000 320 1900
Close Open
t

Session low 15000 300 1850

Bars measure the point change from session's open

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

International Stock Indexes Data as of 4 p.m. New York time Global government bonds
Latest 52-Week Range YTD Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year
Region/Country Index Close NetChg % chg Low Close High % chg and 10-year government bonds around the world. Data as of 3 p.m. ET
World The Global Dow 2265.44 5.36 0.24 2033.03 • 2643.78 –3.0 Country/ Spread Over Treasurys, in basis points Yield
MSCI EAFE 1626.61 –2.22 –0.14 1471.88 • 1956.39 –5.2 Coupon Maturity, in years Yield Latest Previous Month Ago Year ago Previous Month ago Year ago
MSCI EM USD 796.03 5.06 0.64 691.21 • 1067.74 0.2 5.500 Australia 2 1.967 105.4 107.8 113.4 119.8 1.940 1.864 1.925
4.250 10 2.592 69.0 68.5 72.6 40.4 2.562 2.560 2.649
Americas DJ Americas 480.00 1.15 0.24 433.38 • 525.25 –1.5
3.500 Belgium 2 -136.0 -126.9 -113.3 -86.8 -0.408 -0.403 -0.141
-0.446
Brazil Sao Paulo Bovespa 49258.73 173.86 0.35 37046.07 • 58574.79 13.6
0.800 10 0.530 -137.2 -130.9 -122.5 -171.7 0.568 0.609 0.529
Canada S&P/TSX Comp 13385.69 173.19 1.31 11531.22 • 15524.75 2.9
4.250 France 2 -0.436 -134.9 -128.2 -113.6 -85.3 -0.420 -0.406 -0.126
Mexico IPC All-Share 44962.45 113.43 0.25 39256.58 • 46078.07 4.6
1.000 10 0.550 -135.2 -129.1 -119.6 -154.6 0.586 0.638 0.699
Chile Santiago IPSA 3056.63 –5.00 –0.16 2730.24 • 3361.36 3.8
0.500 Germany 2 -0.511 -142.5 -138.0 -121.7 -92.7 -0.518 -0.487 -0.200
U.S. DJIA 17073.95 67.18 0.40 15370.33 • 18351.36 –2.0
0.500 10 0.225 -167.6 -163.3 -153.4 -189.4 0.244 0.300 0.351
Nasdaq Composite 4708.25 –8.77 –0.19 4209.76 • 5231.94 –6.0
4.500 Italy 2 -0.042 -95.6 -90.1 -71.5 -54.7 -0.040 0.015 0.181
S&P 500 2001.76 1.77 0.09 1810.10 • 2134.72 –2.1
2.000 10 1.464 -43.8 -40.6 -27.6 -92.9 1.470 1.559 1.316
CBOE Volatility 17.38 0.52 3.08 10.88 • 53.29 –4.6
0.100 Japan 2 -0.208 -112.2 -105.4 -92.3 -71.8 -0.192 -0.193 0.009
EMEA Stoxx Europe 600 340.93 –0.87 –0.25 303.58 • 414.06 –6.8 0.100 10 -0.047 -194.8 -191.2 -180.6 -186.0 -0.036 0.029 0.385
Stoxx Europe 50 2855.30 –4.96 –0.17 2556.96 • 3602.76 –7.9 0.500 Netherlands 2 -0.507 -142.1 -134.6 -119.1 -86.6 -0.484 -0.461 -0.139
Austria ATX 2232.72 2.22 0.10 1929.73 • 2695.57 –6.9 0.250 10 0.356 -154.5 -149.9 -140.3 -179.5 0.378 0.431 0.450
Belgium Bel-20 3398.22 –20.36 –0.60 3117.61 • 3910.33 –8.2 4.350 Portugal 2 0.207 -70.7 -72.4 -63.0 -54.1 0.137 0.100 0.187
France CAC 40 4442.29 –14.33 –0.32 3892.46 • 5283.71 –4.2 2.875 10 2.951 104.9 105.6 109.3 -49.3 2.933 2.927 1.752
Germany DAX 9778.93 –45.24 –0.46 8699.29 • 12390.75 –9.0 0.500 Spain 2 -0.039 -95.2 -89.0 -73.4 -58.8 -0.029 -0.004 0.140
Greece ATG 559.44 6.60 1.19 420.82 • 857.92 –11.4 2.150 10 1.582 -31.9 -31.9 -18.8 -95.9 1.558 1.647 1.286
Hungary BUX 24911.31 176.08 0.71 18262.97 • 24978.33 4.1 3.750 Sweden 2 -0.605 -151.9 -147.6 -129.3 -86.4 -0.614 -0.563 -0.136
Israel Tel Aviv 1457.48 –1.38 –0.09 1383.34 • 1728.89 –4.7 2.500 10 0.540 -136.1 -133.5 -130.0 -141.5 0.542 0.535 0.831
Italy FTSE MIB 18059.27 –219.71 –1.20 15773.00 • 24157.39 –15.7 1.000 U.K. 2 0.413 -50.1 -44.8 -35.9 -32.3 0.414 0.371 0.404
Netherlands AEX 436.00 –1.99 –0.45 378.53 • 510.55 –1.3 2.000 10 1.482 -41.9 -38.8 -27.0 -27.0 1.489 1.564 1.975
Poland WIG 46843.48 442.81 0.95 41747.01 • 57460.44 0.8 0.750 U.S. 2 0.914 ... ... ... ... 0.862 0.730 0.727
Russia RTS Index 839.23 20.98 2.56 607.14 • 1092.52 10.9 1.625 10 1.901 ... ... ... ... 1.877 1.834 2.245
Spain IBEX 35 8786.80 –24.80 –0.28 7746.30 • 11884.60 –7.9
Sweden SX All Share 485.08 –1.92 –0.39 432.78 • 564.90 –4.0 Commodities Prices of futures contracts with the most open interest 3:30 p.m. New York time
Switzerland Swiss Market 8019.13 36.56 0.46 7425.05 • 9537.90 –9.1 EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.; MDEX: Bursa Malaysia
South Africa Johannesburg All Share 52673.79 473.08 0.91 45975.78 • 55355.12 3.9 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 3/4/2016
Turkey BIST 100 77483.85 292.71 0.38 68230.47 • 88651.88 8.0
One-Day Change Year Year
U.K. FTSE 100 6182.40 –17.03 –0.27 5499.51 • 7122.74 –1.0 Commodity Exchange Last price Net Percentage high low
358.75 0.50 0.14% 378.25 354.25
Asia-Pacific DJ Asia-Pacific TSM 1329.81 1.41 0.11 1188.42 • 1621.10 –4.3 Corn (cents/bu.) CBOT
Soybeans (cents/bu.) 880.25 1.75 0.20 890.50 856.00
Australia S&P/ASX 200 5142.80 52.80 1.04 4765.30 • 5982.70 –2.9
Wheat (cents/bu.)
CBOT
CBOT 461.50 0.75 0.16 493.50 442.25
China Shanghai Composite 2897.34 23.19 0.81 2655.66 • 5166.35 –18.1
Live cattle (cents/lb.) CME 135.925 -0.425 -0.31% 138.550 127.150
Hong Kong Hang Seng 20159.72 –16.98 –0.08 18319.58 • 28442.75 –8.0
Cocoa ($/ton) ICE-US 3,000 -8 -0.27 3,215 2,738
India S&P BSE Sensex 24646.48 … Closed 22951.83 • 29448.95 –5.6
Coffee (cents/lb.) ICE-US 120.80 -0.25 -0.21 128.25 113.35
Japan Nikkei Stock Avg 16911.32 –103.46 –0.61 14952.61 • 20868.03 –11.2
Sugar (cents/lb.) ICE-US 14.65 -0.18 -1.21 14.93 12.61
Singapore Straits Times 2823.51 –13.49 –0.48 2532.70 • 3539.95 –2.1
Cotton (cents/lb.) ICE-US 57.34 0.23 0.40 64.30 54.53
South Korea Kospi 1957.87 2.24 0.11 1829.81 • 2173.41 –0.2 Robusta coffee ($/ton) ICE-EU 1394.00 1.00 0.07 1,568.00 1,342.00
Taiwan Weighted 8659.55 16.00 0.19 7410.34 • 9973.12 3.9
Copper ($/lb.) COMEX 2.2790 0.0045 0.20 2.3040 1.9440
Source: SIX Financial Information;WSJ Market Data Group Gold ($/troy oz.) COMEX 1267.70 -3.00 -0.24 1,280.70 1,061.90
Silver ($/troy oz.) COMEX 15.665 -0.029 -0.18 16.005 13.760
Currencies London close on March 7 Aluminum ($/mt)* LME 1,572.50 -15.50 -0.98 1,588.00 1,451.50
Tin ($/mt)* LME 16,850.00 390.00 2.37 16,850.00 13,225.00
Yen, euro vs. dollar; dollar vs. major U.S. trading partners US$vs,
Mon YTDchg Copper ($/mt)* LME 4,910.00 85.00 1.76 4,910.00 4,320.50
8% Country/currency in US$ per US$ (%) Lead ($/mt)* LME 1,847.00 15.00 0.82 1,852.00 1,598.00
6 Euro
s
WSJ Dollar index
s Europe Zinc ($/mt)* LME 1,843.00 3.00 0.16 1,843.00 1,467.00
4
Bulgaria lev 0.5618 1.7801 –1.1 Nickel ($/mt)* LME 9,055.00 235.00 2.66 9,055.00 7,750.00
2
Croatia kuna 0.1454 6.878 –1.9 Rubber (Y.01/ton) TCE 178.70 -0.80 -0.45 180.00 154.10
0
Euro zone euro 1.1015 0.9079 –1.4
–2 Palm oil (MYR/mt) MDEX 2537.00 30.00 1.20 2,653.00 2,425.00
Czech Rep. koruna-b 0.0407 24.563 –1.3
–4 sYen
Denmark krone 0.1476 6.7752 –1.4 Crude oil ($/bbl.) NYMEX 37.85 1.93 5.37 40.50 28.74
–6 0.003551 281.59 –3.1
Hungary forint NY Harbor ULSD ($/gal.) NYMEX 1.2180 0.0567 4.88 1.2273 0.8750
–8 Iceland krona 0.007753 128.99 –0.9
–10 RBOB gasoline ($/gal.) NYMEX 1.3887 0.0566 4.25 1.5695 1.1253
Norway krone 0.1177 8.4981 –3.9
0.2541 3.9350 0.3
Natural gas ($/mmBtu) NYMEX 1.708 0.042 2.52 2.5120 1.6110
2015 2016 Poland zloty
Russia ruble-d 0.01398 71.519 –0.5 Brent crude ($/bbl.) ICE-EU 40.69 1.97 5.09 41.04 28.58
US$vs, US$vs,
YTDchg YTDchg Sweden krona 0.1180 8.4757 0.4 Gas oil ($/ton) ICE-EU 366.50 24.50 7.16 369.50 260.25
Mon Mon
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Switzerland franc 1.0045 0.9955 –0.6
Turkey lira 0.3428 2.9170 –0.02 Sources: SIX Financial Information; WSJ Market Data Group
Americas Hong Kong dollar 0.1288 7.7643 0.2
Ukraine hryvnia 0.0381 26.2220 9.3
Argentina peso-a 0.0652 15.3415 18.6
India rupee
Indonesia rupiah
0.0149
0.0000767
66.9748
13039
1.2
–5.8
U.K. pound 1.4269 0.7008 3.3 Cross rates London close on Mar 7
Brazil real 0.2644 3.7820 –4.5 Middle East/Africa
Japan yen 0.008805 113.58 –5.6
Canada dollar 0.7523 1.3293 –3.9 USD GBP CHF JPY HKD EUR CDN AUD
Kazakhstan tenge 0.002896 345.30 1.9 Bahrain dinar 2.6522 0.3771 –0.01
Chile peso 0.001473 679.00 –4.2 Australia 1.3383 1.9087 1.3439 0.0118 0.1724 1.4738 1.0060 ...
Macau pataca 0.1251 7.9966 –0.1 Egypt pound-a 0.1277 7.8298 unch
Colombia peso 0.0003181 3144.08 –1.0 Canada 1.3293 1.8967 1.3356 0.0117 0.1712 1.4642 ... 0.9940
Malaysia ringgit-c 0.2454 4.0745 –5.3 Israel shekel 0.2554 3.9155 0.6
Ecuador US dollar-f 1 1 unch
New Zealand dollar 0.6803 1.4699 0.4 Kuwait dinar 3.3327 0.3001 –1.1 Euro 0.9079 1.2953 0.9122 0.0080 0.1169 ... 0.6830 0.6784
Mexico peso-a 0.0564 17.7400 3.1
Pakistan rupee 0.0096 104.650 –0.2 Oman sul rial 2.5977 0.3850 unch Hong Kong 7.7643 11.0780 7.7993 0.0684 ... 8.5510 5.8411 5.8014
Peru sol 0.2880 3.4721 1.7
Philippines peso 0.0213 46.882 0.1 Qatar rial 0.2747 3.641 –0.05 Japan 113.5760 162.0500 114.1300 ... 14.6280 125.1200 85.4527 84.9200
Uruguay peso-e 0.0309 32.340 8.1
Singapore dollar 0.7253 1.3787 –2.8 Saudi Arabia riyal 0.2667 3.7502 –0.1 0.9955 1.4201 ... 0.0088 0.1282 1.0963 0.7487 0.7441
Venezuela bolivar 0.158595 6.31 0.005 Switzerland
South Korea won 0.0008329 1200.67 2.1 South Africa rand 0.0655 15.2653 –1.4
U.K. 0.7008 ... 0.7042 0.0062 0.0903 0.7724 0.5272 0.5239
Asia-Pacific Sri Lanka rupee 0.0068970 144.99 0.5 Close Net Chg % Chg YTD % Chg
0.7472 1.3383 –2.5 Taiwan dollar 0.03070 32.574 U.S. ... 1.4269 1.0045 0.0088 0.1288 1.1015 0.7523 0.7472
Australia dollar –1.0 WSJ Dollar Index 88.65 –0.12 –0.13 –1.69
China yuan 0.1535 6.5166 0.4 Thailand baht 0.02824 35.410 –1.7 Sources: Tullett Prebon, WSJ Market Data Group Source: Tullett Prebon

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

Latest 52 wks ago % YTD% % YTD% % YTD%
Libor Cur Stock Sym Close Chg Chg Cur Stock Sym Close Chg Chg Cur Stock Sym Close Chg Chg Asia Titans 50
One month 0.44050% 0.17650% ¥ TakedaPharm 4502 5484.00 -0.65 -9.58 £ RioTinto RIO 2237.00 5.02 13.01 Last: 127.16 s 0.10, or 0.08% YTD t 6.7%
Three month 0.63610 0.26660 Asia Titans HK$ TencentHoldings 0700 146.50 -0.48 -4.06 CHF RocheHldgctf ROG 251.80 0.44 -8.90
150
Six month 0.90065 0.40410 HK$ AIAGroup 1299 41.70 -0.83 -10.52 ¥ TokioMarineHldg 8766 4012.00 -3.28 -14.86 £ RoyDtchShell A RDSA 1674.00 -0.21 9.70
One year 1.21225 0.71110 ¥ AstellasPharma 4503 1582.00 -0.60 -8.63 ¥ ToyotaMtr 7203 6100.00 -2.07 -18.54 € SAP SAP 69.57 -0.46 -5.19 50–day 140
25.48
moving average
Euro Libor AU$ AustNZBk ANZ 1.84 -8.77 AU$ Wesfarmers WES 40.52 0.37 -2.62 € Sanofi SAN 72.36 -0.10 -7.94
130
One month -0.28571% -0.00714% AU$ BHP BHP 18.55 4.98 3.86 AU$ WestpacBanking WBC 32.12 1.29 -4.29 € SchneiderElectric SU 56.71 1.27 7.90 t
Three month -0.23514 0.02214 HK$ BankofChina 3988 3.15 1.61 -8.96 AU$ Woolworths WOW 23.02 1.14 -6.04 € Siemens SIE 89.28 -0.62 -0.67 High 120
Six month -0.13229 0.08000 HK$ CKHutchison 0001 98.15 -0.71 -5.99 € Telefonica TEF 9.84 0.12 -3.84 Close 110
One year -0.02186 0.20929 HK$ CNOOC 0883 9.24 1.54 14.50 Stoxx 50 € Total FP 42.81 0.32 3.74 Low 100
Euribor ¥ Canon 7751 3330.00 -1.13 -9.39 CHF ABB ABBN 18.43 0.71 2.62 CHF UBSGroup UBSG 16.55 0.49 -15.22
One month -0.28500% -0.00800% ¥ CentralJapanRwy 9022 19345 -3.11 -10.44 € AXA CS 21.06 -1.38 -16.55 € Unilever UNA 39.72 -0.38 -0.97 11 18 25 31 8 15 22 29 5 12 19 26 4
Three month -0.21600 0.03500 HK$ ChinaConstructnBk 0939 4.87 1.67 -8.29 € Allianz ALV 141.10 -0.04 -13.73 £ Unilever ULVR 3087.00 -0.71 5.48 Jan. Feb. Mar.
Six month -0.13600 0.10500 HK$ ChinaLifeInsurance 2628 18.04 -0.33 -28.13 € Anheuser Busch ABI 105.60 -0.33 -7.69 £ VodafoneGroup VOD 218.30 -1.33 -1.22
One year -0.02400 0.22200 HK$ ChinaMobile 0941 84.65 -1.23 -3.26 £ AstraZeneca AZN 4016.50 -0.11 -13.00 CHF ZurichInsurance ZURN 225.50 0.18 -12.73
Yen Libor AU$ CmwlthBkAust CBA 76.89 1.52 -10.10 € BASF BAS 63.56 0.44 -10.12
DJIA Stoxx 50
One month 0.24429% 0.23571% ¥ EastJapanRailway 9020 9860.00 -1.99 -13.89 € BNP Paribas BNP 45.63 -1.84 -12.64
17830 1.36 -15.42 59.00 1.22 -15.17 Last: 2855.30 t 4.96, or 0.17% YTD t 7.9%
Three month 0.57571 0.38500 ¥ Fanuc 6954 £ BT Group BT.A 465.70 -0.91 -1.27 $ AmericanExpress AXP
Six month 0.90286 0.53929 ¥ Hitachi 6501 517.70 -0.31 -25.13 € BancoBilVizAr BBVA 6.17 -1.04 -8.44 $ Apple AAPL 101.69 -1.28 -3.39 3400
One year 1.27429 0.83929 TW$ Hon Hai Precisn 2317 81.60 -1.57 0.99 € BancoSantander SAN 4.10 -0.46 -9.98 $ Boeing BA 122.84 1.46 -15.04
¥ HondaMotor 7267 3170.00 -0.56 -18.93 £ Barclays BARC 173.70 -0.34 -20.65 $ Caterpillar CAT 74.74 2.61 9.98 3200
Offer
KRW HyundaiMtr 005380 146500 -0.68 -1.68 € Bayer BAYN 98.25 -0.24 -15.16 $ Chevron CVX 90.67 3.12 0.79 3000
Eurodollars
HK$ Ind&Comml 1398 4.13 0.98 -11.75 £ BP BP. 365.55 -0.64 3.26 $ CiscoSystems CSCO 27.14 1.27 -0.06
One month 0.4500% 0.3500%
43.99
2800
Three month 0.6500 0.5500
¥ JapanTobacco 2914 4624.00 -1.62 3.42 £ BritishAmTob BATS 4008.50 -0.89 6.30 $ CocaCola KO -0.27 2.40
¥ KDDI 9433 2861.00 -1.21 -9.29 CHF FinRichemont CFR 67.00 2.21 -7.07 $ Disney DIS 99.36 0.89 -5.44 2600
Six month 0.9000 0.8000
¥ Mitsubishi 8058 2060.50 0.34 1.60 CHF CreditSuisse CSGN 15.40 -0.32 -29.00 $ DuPont DD 64.71 2.42 -2.84 2400
One year 1.2500 1.1500
¥ MitsuUFJFin 8306 553.20 -1.20 -26.93 € Daimler DAI 66.98 -0.48 -13.66 $ ExxonMobil XOM 84.46 2.64 8.35
Latest 52 wks ago
1450.00 30.29 -0.56 -2.76 11 18 24 31 8 15 22 29 5 12 19 26 4
¥ Mitsui 8031 0.28 0.31 € Deutsche Bank DBK 17.74 -1.53 -21.24 $ GenElec GE
Prime rates 181.00 155.35 -0.95 -13.80 Jan. Feb. Mar.
¥ Mizuho Fin 8411 -2.00 -25.67 € DeutscheTelekom DTE 15.38 -0.49 -7.85 $ GoldmanSachs GS
U.S. 3.50% 3.25% ¥ NTTDoCoMo 9437 2541.50 -1.66 2.31 £ Diageo DGE 1859.00 -0.80 0.13 $ HomeDepot HD 126.08 0.41 -4.67
Canada 2.70 2.85 AU$ NatAustBnk NAB 27.23 2.25 -9.83 € ENI ENI 13.59 0.37 -1.52 $ Intel INTC 30.94 1.01 -10.19
Japan
Hong Kong
1.475
5.00
1.475
5.00
¥ NipponStl&SmtmoMtl 5401 2193.50 -0.70 -9.21 £ GlaxoSmithKline GSK 1375.00 0.36 0.15 $ IBM IBM 140.11
59.90
1.68
-0.25
1.81
-9.28
Dow Jones Industrial Average P/E: 18
¥ NipponTeleg 9432 4714.00 -0.86 -2.52 £ HSBC Hldgs HSBA 450.35 -0.71 -16.01 $ JPMorganChase JPM
Policy rates ¥ NissanMotor 7201 1120.50 2.19 -12.43 € INGGroep INGA 11.23 -1.97 -9.84 $ JohnsJohns JNJ 106.72 0.21 3.89 Last: 17073.95 s 67.18, or 0.40% YTD t 2.0%
ECB 0.05% 0.05% ¥ NomuraHldgs 8604 535.10 ... -21.20 £ ImperialBrands IMB 3660.50 -0.41 2.06 $ McDonalds MCD 117.15 -0.03 -0.84
$ Merck MRK 52.64 1.08 -0.34 18000
Britain 0.50 0.50 ¥ Panasonic 6752 1020.00 0.44 -17.78 € IntesaSanpaolo ISP 2.46 -2.38 -20.21
Switzerland 0.50 0.50 HK$ PetroChina 0857 5.41 0.56 6.29 € L'AirLiquide AI 98.63 1.09 -4.84
$ Microsoft MSFT 51.03 -1.92 -8.02 17400
Australia 2.00 2.25 HK$ PingAnInsofChina 2318 35.60 -0.56 -17.02 € LVMHMoetHennessy MC 154.65 0.85 6.73
$ NikeClB NKE 59.29 -3.22 -5.14
16800
U.S. discount 1.00 0.75 $ RelianceIndsGDR RIGD 30.00 0.17 -1.96 £ LloydsBankingGroup LLOY 72.75 -0.67 -0.44
$ Pfizer PFE 29.80 0.30 -7.68
Fed-funds target 0.25 0.00 46.47 3.50 3.94 $ Procter&Gamble PG 83.10 -0.47 4.65 16200
AU$ RioTinto RIO € LOreal OR 153.90 -1.16 -0.90
Call money 2.25 2.00 KRW SamsungElectronics 005930 1223000 0.66 -2.94 £ NationalGrid NG. 940.50 -0.42 0.32
$ 3M MMM 160.53 0.29 6.57 15600
4486.00 -3.46 -19.17 $ TravelersCos TRV 110.37 -0.03 -2.21
Overnight repurchase rates ¥ Seven&I Hldgs 3382 CHF Nestle NESN 71.55 0.07 -4.02 15000
5754.00 -1.83 -6.27 $ UnitedTech UTX 96.85 -0.15 0.81
U.S. 0.40% 0.18% ¥ SoftBankGroup 9984 CHF Novartis NOVN 72.20 0.77 -16.60
3615.00 -0.39 -21.52 $ UnitedHealthGroup UNH 121.70 -0.08 3.45 11 18 24 31 8 15 22 29 5 12 19 26 4
Euro zone n.a. n.a. ¥ Sumitomo Mitsui 8316 DKK NovoNordiskB NOVO-B 387.00 1.95 -3.23
94.60 0.53 0.91 $ VISAClA V 71.94 -2.65 -7.23 Jan. Feb. Mar.
HK$ SunHngKaiPrp 0016 £ Prudential PRU 1326.50 -1.49 -13.36
Sources: WSJ Market Data Group, SIX 152.00 -0.33 6.29
$ Verizon VZ 52.21 0.77 12.96 Note: Price-to-earnings ratios are for trailing 12 months
TW$ TaiwanSemiMfg 2330 £ ReckittBenckiser RB. 6436.00 -1.58 2.47
Financial Information, Tullett $ WalMart WMT 67.85 1.60 10.69 Sources: WSJ Market Data Group; Birinyi Associates
THE WALL STREET JOURNAL.
Oil Boosts Energy Shares
BY RIVA GOLD
AND AARON KURILOFF
Broad U.S. stocks extended
their recent rally Monday as a
surge in oil prices lifted en-
ergy shares, but not without a
struggle.
MONDAY’S In 4 p.m.
MARKETS trading, the Dow
Jones Industrial
Average rose
67.18 points, or 0.4%, to
17073.95. The S&P 500 gained
0.4% to 2001.76, while the Nas-
daq slipped 0.2%, to 4708.25.
Investors said Monday’s
small moves marked a pause
after improving U.S. economic
data helped stocks bounce
back from February lows to
near their highest levels this
year. Meanwhile, some inves-
tors and traders said they are
taking a wait-and-see ap-
proach until Thursday’s Euro-
pean Central Bank meeting.
“People are definitely
watching and being somewhat
ECB
Continued from page B5
sensitive to short-term yield
differentials, with traders
chasing the higher yield. As
market fear abates, money
should flow from Europe to
the U.S., pushing up the dollar.
All this makes it look like a
no-brainer to sell euros and
buy dollars, even for those
who were stung by the failure
of the trade to pay off recently.
The main problem is the
ECB: Its two obvious policy
tools, radical as they once
seemed, have lost their power
to shock and awe. Investors
now worry that negative rates
hurt bank profits. Moves this
year into negative rates by
Japan, and deeper into nega-
tive rates by Sweden, were fol-
lowed by currency strength,
not weakness.
Further quantitative easing
doesn’t offer a guaranteed
stimulus to markets, either.
The ECB’s €60 billion-a-month
($66 billion) bond-buying ef-
fort is due to run at least until
next March. Under its self-im-
posed limits on yield and max-
imum holdings of each bond,
as well as its decision to buy in
proportion to each country’s
capital contribution to the
ECB, there probably are just
enough German bonds to allow
the program to be completed,
says Anatoli Annenkov, an
economist at Société Générale.
Up the size, and the bond
buying just has to end earlier.
More bonds could be bought if
the restrictions could be re-
laxed. But the limits are there
to reassure Bundesbank policy
makers German savings aren’t
SUISSE
Continued from page B5
taking a page from the consul-
tancy world that he and his
boss, Credit Suisse Chief Exec-
utive Tidjane Thiam, come
from.
Mr. Khan, who was born in
Karachi to a Swiss mother and
Pakistani father, was a partner
at Ernst & Young until 2013,
when he joined Credit Suisse
in a finance role. Mr. Thiam, a
former McKinsey & Co. con-
sultant, took over as chief ex-
ecutive last July.
Under a new plan, Mr.
Khan’s relationship managers,
or bankers, may see smaller
clients with less than 5 million
francs ($5 million) in assets
booked in Switzerland “cen-
tralized,” or handed off to
other staff and pitched stan-
dardized sets of services. As
bankers train their focus on
higher-net-worth clients, they
receive a more senior supervi-
sor. Those senior figures have
say over the bankers’ compen-
sation, and are paid out of the
business’s overall bonus pool.
The goal, Mr. Khan, is focus.
He acknowledged that not all
of the changes have been wel-
comed, however. “Does it cre-
ate tension? Sure.”
Mr. Khan plans to hire
about 200 to 300 new rela-
tionship managers over the
next few years. The bulk of
those will be deployed in
emerging markets.
More bankers should equal
increased revenue, he argued.
“That’s just simple math.”
Recently, the math hasn’t
been on Mr. Khan’s side.
The private-banking arm of
the international wealth-man-
agement unit saw 4.2 billion
circumspect in their invest-
ing,” said Tom Carter, manag-
ing director at JonesTrading.
“I think that given what’s go-
ing on, guys are keeping one
foot out of the ring just in
case.”
A rebound in commodities
prices helped stoke the rally.
U.S. crude oil rose 5.5% to
$37.90 a barrel on hopes of
production cuts and after bet-
ter economic data fueled ex-
pectations of rising demand.
Chevron and Exxon Mobil
were among the biggest gain-
ers in the Dow. The energy
sector led gains in the S&P
500, with Murphy Oil and
Southwestern Energy rising
13% and 9.6%, respectively, by
late afternoon.
With the fear of recession
receding, investors have
bought back into some of the
assets they sold off earlier this
year, while junk-bond yield
spreads have narrowed and
volatility has receded.
Pricing Deflation
Investors see an elevated risk of deflation taking hold in the eurozone, as the
euro stops plunging and economic reports come in weaker than expected.
Chance of prices falling over 10 years, derived from inflation options*
16%
14
12
10
8 Eurozone
6 the end of this year.
4 U.S.
2 users, operates a number of
0 products closely linked with
2011 ’12
Citi Economic Surprise Index*
80
BETTER THAN EXPECTED
60
40
20
0 –10
–20
–40
–60
WORSE THAN EXPECTED
–80
2013 ’14
*Through Friday †Through 5 p.m. GMT Monday
Sources: Deutsche Bank (deflation); FactSet (index); Tullett Prebon (currencies)
being used to subsidize Italy
and other indebted countries.
Some tweaks to rules limit-
ing the ECB to holding no
more than one-third of any in-
dividual bond may be possible,
and the ECB might make
noises about adding corporate
bonds to the roster of permit-
ted holdings. Yet the strength
in eurozone stocks is making it
harder for ECB President Ma-
francs of outflows late last
year. For all of 2015, Mr.
Khan’s unit reported 709 mil-
lion francs in pretax profit.
Now, he is tasked with nearly
tripling that to 2.1 billion
francs by 2018—one target of
several set as part of the
bank’s overhaul under Mr.
Thiam.
“We did not put into that
target a stressed-market envi-
ronment,” Mr. Khan noted.
Wealthy clients in some of
Mr. Khan’s key geographies
have been particularly hard hit
by a recent combination of er-
ratic markets and tumbling oil
prices.
Negative interest
rates put the assets
of the bank’s large
clients at risk.
According to a report pub-
lished earlier this month by
real-estate broker Knight
Frank, the population of ultra-
high-net-worth individuals—
Mr. Khan’s target market—de-
clined last year by 5% in
Russia, 8% in Saudi Arabia and
12% in Brazil.
Meanwhile negative interest
rates, an increasingly preva-
lent central-bank tool that has
been deployed in Switzerland,
threatens to take a bite out of
the assets of large clients
booked in the Alpine country.
As it seeks to revamp under
Mr. Thiam, Credit Suisse has
mirrored the strategy of rival
UBS Group AG, by shifting fo-
cus toward wealth manage-
ment and away from tradition-
ally more volatile investment
banking. But UBS has suffered
its own wealth-management-
related declines. That bank
MONEY & INVESTING
Friday’s strong U.S. jobs re-
port further calmed concerns,
helping to push up the yield
on the 10-year Treasury note
to 1.902% from 1.883% Friday.
Gold prices fell 0.5% to
$1,263.20 an ounce.
“There’s been a collective
sigh of relief after starting the
year in such a sloppy manner,”
said Gordon Charlop, manag-
ing director at Rosenblatt Se-
curities.
Investors were also turning
their attention to efforts in
Europe and China to prop up
slowing economies. European
Central Bank officials are
widely expected to cut a key
interest rate further into nega-
tive territory Thursday and
expand stimulus measures to
combat persistent weakness.
“There are many different
combinations of additional
easing that [ECB President
Mario] Draghi can put out,”
said Nandini Ramakrishnan,
global market strategist at J.P.
’13 ’14
U.S.
Eurozone
’15 ’16
rio Draghi to push the political
and legal boundaries.
European bank shares are
up one-fifth from last month’s
low, while the broad Euro
Stoxx is up almost 12%. This is
good news for Europe. But
without a market meltdown,
the chances are higher that in-
vestors hoping for a big rise in
bond purchases, not merely
another cut in the deposit rate,
said last month that its core
wealth-management business
suffered billions of francs of
outflows late last year. That
rattled investors accustomed
to the idea of wealth manage-
ment as a relatively stable
business.
For Mr. Khan, there are
other distractions. Legal provi-
sions for his unit mounted late
last year, as a Georgian oli-
garch pressed claims that his
Credit Suisse banker misman-
aged his portfolio. Recently, a
pair of Russian clients of the
same relationship manager
filed their own complaint in
Geneva, alleging mismanage-
ment and fraud, and request-
ing a probe of the bank’s cul-
pability. Credit Suisse in
December filed a misconduct
claim against the relationship
manager, who has left the
bank.
Meanwhile, Mr. Khan is
pressing ahead under a rela-
tively new model for Swiss
private banking, which in-
volves carefully vetting
whether clients have declared
their accounts for tax pur-
poses in their home countries.
“Regulators want us to be
tax enforcers, which we are
not,” he said. Nonetheless,
Credit Suisse’s efforts to have
clients in Western Europe
come clean to tax authorities
have bled that business of tens
of billions of francs in assets
in recent years.
That process is coming to a
close but remains a source of
outflows. For emerging mar-
kets, Mr. Khan said his hope is
that inflows from clients can
outpace outflows related to
so-called regularization for tax
reasons.
As Mr. Khan pursues the
rapidly growing wealth in
emerging markets, including
Morgan Asset Management.
The Stoxx Europe 600 de-
clined 0.3% to 340.93 as bank-
ing companies fell, with BNP
Paribas and Deutsche Bank
down more than 1.5%.
Chinese shares rose slightly
after authorities mapped out
plans to buoy growth and said
they expect the economy to
grow between 6.5% and 7%
this year, which is the lowest
growth target Beijing has set
in 25 years.
The benchmark price for
iron ore, a key steelmaking in-
gredient, rallied to a nine-
month high after Chinese lead-
ers said they would prioritize
economic growth over restruc-
turing this year, signaling the
potential for more stimulus.
Shares in Australia closed
at their highest level in more
than two months as mining
companies gained.
Japan’s Nikkei fell 0.6%,
while shares in Hong Kong
were nearly flat.
8.9%
4.9%
’15 ’16
How many U.S. dollars €1 buys,
change from a year earlier†
5%
0 cussions to invest in Ant Fi-
–5
–15
–20
–25
–30
2015
THE WALL STREET JOURNAL.
will be disappointed.
Whether Mr. Draghi delivers
what markets expect on Thurs-
day, his challenge is to reas-
sure investors that his ammu-
nition box is full and that it
isn’t under German lock and
key. If he succeeds, the diver-
gence trade could come back
to life—at least as long as the
U.S. economy keeps chugging
along.
Eastern Europe and sub-Saha-
ran Africa, that is likely to
draw his bankers to some of
the most corruption-plagued
regions in the world.
To help prevent the intake
of problematic funds, Mr. Khan
said he would seek to weed
out “black sheep” among his
relationship managers. He also
says he will rely on face-to-
face sit-downs. “I want to look
into the eyes of the guys who
are working for us,” he said.
Some analysts are skeptical.
Andreas Venditti, an analyst at
Vontobel, said Mr. Khan’s busi-
ness will probably deliver 1.4
billion francs in annual pretax
profit for Credit Suisse by
2018, or about 700 million
francs short of the bank’s tar-
get.
“This unit is really the one
that is going to be most chal-
lenging for them,” Mr. Venditti
said.
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ANT
Continued from page B5
but a profit-sharing agreement
would allow Alibaba to cash in
on any Ant Financial IPO. The
affiliate is also effectively con-
trolled by Alibaba executives.
Ant Financial Chief Executive
Lucy Peng is also an Alibaba
senior executive, and Mr. Ma
personally owns a minority
stake in Ant Financial.
Ant Financial often teams
up with Alibaba on deals. Over
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deal to buy a controlling stake
in Hong Kong-listed lottery
company AGTech Holdings
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dollars (US$307.9 million).
In December, Ant Financial
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Alibaba’s e-commerce and on-
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money-market fund Yu’e Bao
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The new investors in dis-
nancial include CCB Interna-
tional (Holdings) Ltd.,
according to the people. Ant
TRUMP
Continued from page B5
’16 quality and style, a luxury life-
style and enormous success.”
At the time, Messrs. Icahn
and Beal were trying to take
control of Trump Entertain-
ment, which held properties in
Atlantic City, N.J., after the
company filed for bankruptcy,
an effort that was ultimately
unsuccessful.
The two men both say they
remained cordial with Mr.
Trump throughout the litiga-
tion. Mr. Beal has even at-
tended at least one Broadway
show with Mr. Trump.
“There was absolutely no
animosity,” Mr. Icahn said to-
day. “I respect him, and he
made a good deal with [bond-
holders] and there’s nothing
wrong with that.”
Mr. Beal was ranked No. 115
on this year’s Forbes magazine
list of the wealthiest people in
world, which put his net worth
at $9.9 billion.
When Trump Entertainment
filed for bankruptcy again in
September 2014, Mr. Icahn suc-
ceeded in gaining control and
settled another suit with Mr.
Trump, letting the Taj Mahal
continue to carry the Trump
name. The company emerged
from bankruptcy late last
month, and Mr. Trump lost his
small stake.
In a news release last week,
the Trump campaign an-
nounced the endorsements
from Messrs. Beal and Barrack.
It quoted Mr. Trump as saying
he was “proud to have their
support” and also cited Mr.
Icahn as a supporter.
Over the summer, Mr.
Trump declared that he would
like to name Mr. Icahn as Trea-
sury secretary, much to the
surprise of the investor who
said at the time he didn’t know
Mr. Trump was even running
for president.
Mr. Icahn, a famous night
owl in business negotiations,
turned down the offer, joking
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THE WALL STREET JOURNAL.
Financial’s existing backers,
which could put additional
money into the company, in-
clude big Chinese insurers, a
policy bank and other state
funds.
Goldman Sachs Group Inc.,
J.P. Morgan Chase & Co. and
China International Capital
Corp. are advising Ant Finan-
cial on the current fundrais-
ing, according to people famil-
iar with the situation.
Ant Financial raised more
than 12 billion yuan last year
in its first round of fundrais-
ing, attracting a dozen outside
investors led by China’s na-
tional social-security fund.
China’s four biggest insurance
companies—China Pacific In-
surance Group, People’s In-
surance Company of China,
China Life Insurance Co. and
New China Life Insurance Co.
Ltd.—each took stakes, accord-
ing to Ant Financial sharehold-
ing records.
Those disclosures also con-
firmed that private-equity
firm Primavera Capital, led
by former Goldman Sachs
partner Fred Hu, is a share-
holder.
Other investors include na-
tional postal service China
Post Group, Chinese policy
lender China Development
Bank and state-owned Shang-
hai Financial Development
Investment Fund.
—Anjie Zheng
contributed to this article.
BLOOMBERG NEWS
Real-estate investor and Trump
supporter Thomas Barrack Jr.
he doesn’t get up early enough
for the job. But he expressed
support for Mr. Trump’s candi-
dacy. It was a rare endorsement
from Mr. Icahn, who calls him-
self a centrist and has histori-
cally donated to candidates on
both sides of the aisle.
The investor supports Mr.
Trump’s push to stop the tax-
driven deals that have U.S.
companies fleeing to other
countries for cheaper head-
quarters. While he is a Wall
Street trader, Mr. Icahn sup-
ports changing carried-interest
taxes that help traders lower
their tax bill on profits, saying
that higher taxes for hedge
funds could help shrink the
wealth gap between the richest
and poorest Americans.
In October, Mr. Icahn said he
would launch a $150 million po-
litical-action committee, his
first major foray into lobbying
in politics.
In an interview at the time,
Mr. Icahn said he immediately
got pushback from fellow Wall
Streeters, who angrily opposed
Mr. Trump.
Mr. Barrack said in an inter-
view that he has worked with
Mr. Trump on real-estate deals
since the late 1980s, including
selling him the famed Plaza Ho-
tel in midtown Manhattan. Mr.
Trump sold his interests in the
hotel a few years later.
Before getting into real es-
tate, Mr. Barrack served as a
deputy undersecretary of the
interior in the Reagan adminis-
tration.
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B8 | Tuesday, March 8, 2016
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A Return to Emerging Markets?
The best time to take a va-
cation can be off-season.
There aren’t big crowds of
tourists and prices tend to be
cheaper. The same may be
true for investing in emerg-
ing markets in 2016.
Last year, investors pulled
back from emerging-market
stocks and bonds. Net out-
flows hit $76.6 billion, ac-
cording to data compiled by
J.P. Morgan. Currencies from
the ruble to the rand sank
sharply; the MSCI Emerging
Markets index lost 14.9%.
A welter of worries about
the slowdown in the emerg-
ing world, led by China,
sapped investor appetite for
risk and drove a stampede
out of emerging markets. In
fact, emerging stocks and
bonds have been out of favor
ever since the “taper tan-
trum” of 2013 marked the
start of markets weaning
themselves off ultraloose U.S.
monetary policy.
Yet even as money has
fled from the asset class,
there have been some star-
tling returns on offer in
niches of the market. In 2015,
Russian corporate bonds de-
French Utility EDF’s Toxic Mix of Business and Politics
Never mind the wrangling
over the U.K.’s plans to build
a new nuclear-power station
at Hinkley Point. It is util-
ity Electricité de France
that should carry a toxic-
warning sign.
EDF’s chief financial offi-
cer, Thomas Piquemal, has
resigned, seemingly in pro-
test over the strain that the
£18 billion ($25.6 billion)
Hinkley Point project would
put on its finances.
His decision sums up the
challenges of investing in (or
managing) EDF along com-
mercially or financially ratio-
nal lines, when its fortunes,
outlook and decision making
are so overtly political.
Political complexity is the
Metals Price Rally Misses Nickel
BY BIMAN MUKHERJI
Amid gloomy times for com-
modities, few are more beaten
down than nickel.
While metals such as copper
and aluminum trade at low lev-
els, they are at least still up
from depths reached during the
global financial crisis, espe-
cially after a rally in prices in
recent weeks.
Not so nickel, a key ingredi-
ent in stainless steel, which
slumped to a 13-year low last
month and remains well below
its prices in 2008 and 2009 de-
spite a partial recovery since
then.
The slump has confounded
market participants who had
expected nickel prices to re-
main buoyant for some time af-
ter Indonesia, the world’s larg-
est supplier of nickel ore,
imposed an export ban in 2014
that remains in place.
Instead, three-month nickel
futures prices on the London
Metal Exchange are about
$9,290 a metric ton now,
nearly one-third of their level
in May 2014 and one-sixth of
the peak hit in May 2007.
“Global consumers of nickel
built up significant stockpiles
of refined nickel and nickel ore
in the run-up to Indonesia’s ore
export ban, in anticipation of a
severe subsequent tightening
of the market,” said John Da-
vies, head of commodities re-
search at BMI Research. “How-
ORE
Continued from page B5
tion. China was responsible for
half the world’s steel output
last year.
The gains in iron ore and
other metals have lifted the
share prices of beleaguered
mining companies and helped
push up the currencies of pro-
ducing nations.
On Monday, shares in Aus-
tralian iron-ore mining com-
pany Fortescue Metals Group
Ltd. surged 24% in Sydney,
their biggest daily gain since
November 2008. BHP Billiton
and Rio Tinto gained 3.5% and
HEARD ON THE STREET
Submerged
Performance of emerging- and
developed-market stocks
10%
MSCI World
0 cal-currency government
–10
–20
MSCI Emerging Markets
–30
2015 ’16
Sources: FactSet; Getty Images (photo)
THE WALL STREET JOURNAL.
nominated in dollars re-
turned 24%; they have tacked
on another 2.8% this year.
The start of 2016 has of-
fered further signs of a shift.
Among 42 benchmark global
financial assets tracked by
Deutsche Bank, Brazil’s Bove-
spa and Russia’s Micex stock
indexes rank in the top five
to the end of February—up in
both local-currency and dol-
lar terms. Emerging-market
currencies have found some
stability against the dollar.
norm for European utilities.
But the 85% state-owned
company finds itself in a par-
ticularly tight bind.
A prolonged delay to Hin-
kley’s approval would be
acutely embarrassing for the
U.K. government, where the
project is meant to provide
7% of the country’s electric-
ity once operational, and in
France, eager to maintain its
reputation for nuclear prow-
ess in a low-carbon world.
But Hinkley would heap
pressure on EDF. French
power prices have collapsed
this year, thanks to slumping
commodities. Coinciding
with market liberalization in
France for industrial and
commercial customers, this
Tarnished Nickel
Nickel prices are close to a 13-year low due to vast stockpiles and
weak stainless steel demand in China.
Nickel stockpiles at the
Shanghai Futures Exchange
60,000 metric tons
50,000
40,000
30,000
20,000
10,000
0 0
2015 ’16
Sources: Shanghai Futures Exchange; Wind info (output)
ever, this tightening has been
extremely slow in materializ-
ing.”
Behind nickel’s woes lie the
familiar themes of weaker-
than-expected Chinese demand
and high global output.
China accounts for about
30% of the world’s nickel con-
sumption, with the vast major-
ity of its imports going into
making stainless steel. Because
of soft demand from the car-
making and construction indus-
tries, China’s stainless-steel
output slipped 1% last year.
Nickel prices have collapsed
in line with a 30% drop in
China’s domestic stainless-steel
5%, respectively, in London.
Since Jan. 12, the Australian
dollar has risen by around 5.7%
against the greenback. The
real, the currency of Brazil, an-
other big iron-ore-producing
nation, is up 8.7%. Analysts say
iron ore’s gains are one factor.
China also accounts for
around 45% of demand for
most other industrial metals.
They, too, have headed higher
this year. Zinc is up 13% and
tin has risen 19%. The rally is
even affecting metals whose
supply significantly exceeds
demand, including copper and
aluminum, which are both up
about 7%.
That underscores why some
analysts say prices are getting
FINANCIAL ANALYSIS & COMMENTARY
Copacabana beach, Rio de
Janeiro, Brazil
Local-currency bonds are in
positive territory, too.
Emerging-market econo-
mies have been rebalancing,
partly thanks to moves in
currencies. Current-account
deficits have narrowed, with
Brazil, Indonesia and India
among the most improved,
asset manager GAM notes.
Policy makers have more
room for maneuver and are
facing more traditional prob-
lems than those in advanced
economies, where it isn’t
is chopping away at EDF’s
earnings.
The company faces huge
investment demands, which
UBS puts at €100 billion
($110 billion) over 10 years
plus other nuclear replace-
ment and decommissioning
costs. Absent a power-price
recovery, the balance sheet
will suffer.
Further downgrades to
EDF’s credit rating are likely.
Its ability to continue paying
cash dividends is in question.
Meanwhile, EDF’s forced
involvement in the bailout of
nuclear-engineering peer
Areva adds to its burden.
Then there is the unfortu-
nate precedent that the Finn-
ish and French reactors be-
MONEY & INVESTING
China's monthly output of
stainless steel
60,000 metric tons
50,000
40,000
30,000
20,000
10,000
2015 ’16
THE WALL STREET JOURNAL.
price in the past year, accord-
ing to data from Bank of Amer-
ica-Merrill Lynch. In turn,
China’s imports of nickel ore
contracted by 26.3% in 2015
and are down about 9.6% year
over year in 2016 so far.
“Nickel is now in vast over-
supply. Stainless-steel produc-
tion in China is projected…to
show no growth until 2020,”
said Ilya Feygin, chief executive
of Wallachbeth Capital, an in-
vestment-services firm.
Despite weak nickel demand,
major producers are managing
to produce it profitably, thanks
partly to low energy costs.
Weak currencies in some pro-
ahead of themselves.
Meanwhile, mining compa-
nies continue to churn out
metals and ore.
The biggest iron-ore pro-
ducers—Vale, Rio Tinto, BHP
Billiton and Fortescue—can
maintain supply at current
high levels. As long as the
price of iron ore stays above
$50 a ton, these mining com-
panies will still make money.
“A combination of contin-
ued strong supply and a pos-
sible weakening in demand
would mean that we’re ex-
pecting prices to fall back,”
said John Kovacs, a commodi-
ties economist at Capital Eco-
nomics. Mr. Kovacs believes
that iron ore, for instance,
clear that unconventional
policies like negative interest
rates are proving beneficial.
Growth prospects remain
higher than in developed
markets.
Prices look attractive. Lo-
bonds yield around 6.9% in
aggregate, and hard-currency
bonds 6.3%—big numbers in
a world of low yields. If the
big rise in the U.S. dollar is
in the past, then the former
could offer good returns.
Even a relatively small re-
tracement in beaten-up
emerging-market currencies
could deliver double-digit re-
turns, notes BlackRock.
Meanwhile, the unloved
nature of emerging markets
is to their benefit. A lot of
money already has departed.
That which remains is likely
to be more dedicated and
hence “sticky.” Investors
should be cautious and selec-
tive in their choice of emerg-
ing-market destinations:
Countries continuing with re-
forms should top the list. But
they may regret staying
away much longer.
—Richard Barley
Powering Down
French power prices
€45 per megawatt/hour
40 Friday
€25.65
35
30
25
2015 ’16
Source: Platts
THE WALL STREET JOURNAL.
ing built using the same
technology as Hinkley are
wildly over-budget and be-
hind schedule.
The hope is that EDF is
shepherded into uneconomic
decisions but that govern-
ducing countries also have
helped. In turn, top producers
are proving reluctant to cut
output, even though that might
support prices, for fear of los-
ing market share.
Only Chinese manufacturers
of nickel pig iron—a low-grade
nickel alloy used as a cheaper
alternative to pure nickel—
have cut back output so far.
Even these reductions have
been largely offset by “very
strong” nickel production out-
side China, said Michael Wid-
mer, metals strategist at Bank
of America-Merrill Lynch.
Nickel stockpiles are mount-
ing. Stocks in London Metal Ex-
change warehouses have in-
creased fivefold since the
beginning of 2012 to around
445,000 metric tons, way
above a 10-year average of
158,000 metric tons.
They also have swelled at
the Shanghai Futures Exchange
by more than 10 times between
May 2015 and January 2016 to
58,778 metric tons.
Some of the nickel stocks
piling up in China appear to be
used as collateral to obtain
loans. Copper in the past has
been the metal of choice for
such trades. But after a number
of controversies, such financing
has shifted to being based on
lower-profile metals such as
nickel to avoid visibility, trad-
ers say.
—Yifan Xie
contributed to this article.
will fall back to $40 a ton.
To be sure, there are other
factors at play in the current
rally of iron ore and industrial
metals. Recent weakening in
the U.S. dollar makes green-
back-denominated commodi-
ties less expensive for buyers
using other currencies. Calmer
financial markets, particularly
in China, are encouraging in-
vestors to look again at the
more risky assets they fled
during recent bouts of market
turmoil. But the size of the
gains have left many analysts
scratching their heads.
It “doesn’t seem to me to be
backed up by fundamentals,”
said Colin Hamilton, an analyst
at Macquarie.
THE WALL STREET JOURNAL.
OVERHEARD
China finally got a
breather on foreign-exchange
depletion. A lasting change in
sentiment about the yuan,
however, will be harder to en-
gineer.
Official data showed
China’s reserves fell $28.5 bil-
lion in February, a relative re-
spite from the massive sell-
downs the previous three
months.
Tighter capital controls are
making it harder to bet
against the yuan. An inter-
view from central-bank chief
Zhou Xiaochuan, who had
been silent for months, re-
stored some lost confidence.
And China was able to push
the yuan to appreciate
slightly versus the dollar in
the past few weeks, which is
itself a confidence-bolstering
measure.
The risk is investors get
complacent after just one
month’s relative quiet. The
structural factors for yuan
weakness remain. China’s
economy is slowing, and
more monetary easing is
likely. The tide hasn’t turned
just yet.
ment intervention also helps
its predicament. That could
involve more “catch-up” pay-
ments of past revenues, sub-
sidies or reregulation of the
French nuclear market, or
more drastic restructuring,
much of which could strain
European rules. Meanwhile,
EDF’s efforts at self-help, in-
cluding cost cutting, job
losses and asset sales, could
themselves prove controver-
sial with politicians and
unions.
Minority investors, who
can only wait to see if the
French government can do
enough quickly enough to
offset the pressures on EDF,
should follow Mr. Piquemal’s
lead. —Helen Thomas
Finance
Watch
BARCLAYS
Bank Hires Nine
For Its M&A Team
LONDON—Barclays PLC is
bolstering its mergers-and-acqui-
sitions business, illustrating how
European banks aren’t pulling
back across the board in invest-
ment banking.
The U.K.-based bank said
Monday that it hired nine people,
including former Bank of America
Merrill Lynch banker Carlo Ca-
labria, who will be chairman of
Barclays’s M&A for Europe, Mid-
dle East and Africa. He will be
joined by eight others from CMC
Capital, the boutique Mr. Calabria
helped found four years ago.
Barclays said the veteran M&A
banker will work closely with Pier
Luigi Colizzi, head of M&A EMEA.
Barclays is restructuring glob-
ally, but has expanded in some
areas of investment banking and
has had a string of M&A hires. Its
M&A and financing groups
worked on some of last year’s
biggest deals, amid an all-time
high in global M&A volume, but
still didn’t break into the top-five
rankings for advisory.
Co-head of banking EMEA
Crispin Osborne said Mr. Ca-
labria’s hire would help drive mo-
mentum.
Europe’s big investment banks
in general have been getting
smaller in response to regulatory
constraints. Equities and M&A
have been relatively attractive
businesses, particularly as other
markets have weakened.
Mr. Calabria founded CMC
Capital to advise European com-
panies on M&A, fundraising and
capital structures.
—Margot Patrick
LIBYA SOVEREIGN FUND
Judge Delays Ruling
On Leadership Issue
A British judge adjourned a
case on Monday in which he
was asked to decide who is the
rightful leader of Libya’s $67 bil-
lion sovereign-wealth fund.
The Libyan Investment Au-
thority, or LIA, is the subject of
WSJ.com/Heard
U.S. Throws
Wrench Into
ZTE’s Plans
The U.S. government has
proved in the past decade
that it can stop Chinese
companies from buying
American ones. It also can
eviscerate a Chinese firm’s
business by blocking access
to American technology.
That is the significance of
reports that the U.S. Com-
merce Department planned
to restrict exports of Ameri-
can products to Chinese tele-
communications-equipment
maker ZTE because of al-
leged violations of U.S. rules
on exports to Iran. The com-
pany, listed in Hong Kong
and Shenzhen, suspended
trading of its stock on Mon-
day, citing the pending re-
lease of information related
to the Commerce Depart-
ment’s actions.
Banning only ZTE’s access
to U.S. hardware—not soft-
ware—still affects the tele-
com-equipment and phone
segments that generated
86% of revenue in 2014.
ZTE could replace Ameri-
can chipsets with those from
other countries in low-end
handsets, but that would
save only a small portion of
revenue, says Cynthia Meng
at Jefferies.
Even that may be not be
so simple, though, because
non-U.S. chips often use U.S.
components in this inte-
grated industry.
Such dependence on for-
eign hardware is precisely
why corporate China began
attempting to buy stakes in
U.S. and Taiwanese chip
companies last year, so it
could guarantee itself access.
The prospect of requiring
U.S. regulatory nods itself
killed some of these deals.
Seeing U.S. regulators now
actually hobble ZTE, China is
unlikely to give up on its am-
bition of technological self-
sufficiency.
—Abheek Bhattacharya
a power struggle between two
competing chairmen, Hassan
Bouhadi and AbdulMagid Breish.
The LIA was created during the
regime of Moammar Gadhafi,
who was killed in 2011.
The judge in the High Court
in London—William Blair, brother
of former British Prime Minister
Tony Blair—said it would be pre-
mature for him to make a deci-
sion after the U.K. Foreign and
Commonwealth Office sent a
letter on March 3 saying it ex-
pected Libyan officials to give
news on the leadership of the
fund in the “coming weeks.”
The dispute between the rival
chairmen risks delaying litigation
against Goldman Sachs Group
Inc. and Société Générale SA,
which are accused of losing hun-
dreds of millions of dollars of
the sovereign-wealth fund’s
money through mismanagement.
The banks have denied the alle-
gations. Some of the LIA’s alle-
gations against the banks have
statutes of limitations. The ad-
journment won’t affect the pro-
ceedings being brought against
the banks, the judge said.
—Simon Clark
and Margaret Coker
PRICEWATERHOUSE
Robert Moritz Picked
For Global Chairman
Accounting firm Pricewa-
terhouseCoopers has named
Robert E. Moritz as its global
chairman, effective July 1. Mr.
Moritz has been PwC’s U.S.
chairman and senior partner
since 2009. He was named
global chairman for a four-
year term, which is standard
at the major accounting firms.
Mr. Moritz will succeed
Dennis Nally, who will retire
in June after 42 years at the
firm. PwC and other major ac-
counting firms are global net-
works of separate, free-stand-
ing firms in each country in
which they do business, in-
cluding the U.S., so they have
both a global chairman and a
U.S. chairman.
The firm said Mr. Moritz’s
successor as U.S. chairman
will be announced later this
year, following a vote by the
firm’s 2,700 U.S. partners.
Mr. Moritz has spent his
entire career at PwC. He
joined the firm in 1985 and
became a partner in 1995.
—Michael Rapoport