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Russia’s Long Road To the Middle East Obama’s Kumbaya In Hiroshima REVIEW | A7 OPINION | A10 MONDAY, MAY 30, 2016 ~ VOL XL NO 189 DJIA 17873.22 À 0.25% S&P 500 2099.06 À 0.43% What’s News NIKKEI 16834.84 À 0.37% STOXX 600 349.64 À 0.21% OIL 49.33 g 0.30% GOLD 1213.80 g 0.54% EURO 1.1136 g 0.53% Germany and France Show United Front on Europe’s Role Business & Finance il-supply outages are at their highest level in more than a decade even as spare capacity shrinks, contributing to a risk premium in the market A1 Energy firms are treating with caution the recent upswing in oil prices, wary of boosting spending and production too soon B1 O China’s stock exchanges tightened their rules on trading halts B13 Philippine rules allow untraceable cash to wash through casinos’ VIP junket rooms, opening the door to money launderers A1 The Fed’s Yellen signaled the central bank will likely raise rates within months if the U.S economy keeps strengthening A5 A U.S study found a link between cellphones and cancer in rats, but scientists said it was too early to draw conclusions B1 Shipbuilder STX filed for receivership B2 World-Wide Hundreds are thought to have died attempting to cross the Mediterranean Sea from North Africa in the past few days, the U.N.’s refugee agency said A3 Japan’s Abe sounded a warning on the global economy, opening the door to another delay in a sales-tax increase A4 Obama focused on victims and survivors and the ills of nuclear war on the first visit to Hiroshima by a sitting U.S president A4 Iran canceled its participation in this year’s holy pilgrimage to Mecca, blaming Saudi Arabia amid increasing tensions A1 Long before EgyptAir Flight 804’s pilots received a smoke alert, U.S watchdogs documented such warnings were often erroneous A3 France is girding for security challenges at the Euro 2016 soccer championship in the shadow of the November attacks A3 A court in Argentina sentenced the country’s last dictator and 14 other ex-military officials to jail over Operation Condor A3 Romney is among the few Republicans still publicly resisting Trump’s candidacy, though advisers discouraged him A5 CONTENTS Business & Tech B1-3 Crossword A12 Heard on Street B16 Markets Digest B14 Money & Inv B13-16 Opinion A10-11 Review A7-9 Technology B3 U.S News A5 Weather A12 World News A2-4 China: RMB28.00; Hong Kong: HK$23.00; Indonesia: Rp25,000 (incl PPN); Japan: Yen620 (incl JCT); Korea: Won4,000; Malaysia: RM7.50; Singapore: S$5.00 (incl GST) KDN PP 9315/10/2012 (031275); MCI (P) NO 106/10/2015; SK MENPEN R.I NO: 01/ SK/MENPEN/SCJJ/1998 TGL SEPT 1998 s Copyright 2016 Dow Jones & Company All Rights Reserved Concern About Output Aids Oil SOLEMN GROUND: German Chancellor Angela Merkel and French President François Hollande spoke of the need for a united Europe to fight terrorism and ease the refugee crisis, at ceremonies Sunday for the 100th anniversary of the Battle of Verdun in Verdun, France Gamblers Exploit Loophole Philippine regulatory exemption means VIP junket rooms can be used to launder money at the baccarat tables to pay for their weekend But the real action happens upstairs, in a small but highend part of the Philippines casino scene that is now drawing scrutiny from Filipino and foreign investigators There, major junket operators from China and Macau bring guests to seven VIP rooms, decorated with paintings, and their ceilings studded with crystals Croupiers wait in silence for players who might win or lose BY TREFOR MOSS AND CRIS LARANO MANILA—In the main gambling hall at the Solaire Resort & Casino here one recent afternoon, hundreds of casual gamblers tried to win enough millions on a roll of the dice or the turn of a card These rooms, critics say, represent a loophole in efforts to stem the flow of ill-gotten money through the country The Philippine Amusement and Gaming Corp., or Pagcor, which is both the industry regulator and a casino operator, succeeded in exempting casinos from new anti-moneylaundering regulations when they were introduced in 2013 That means large amounts of untraceable cash can wash through without casino operators having to identify its source or report it to financial regulators—something which simplifies business at the casinos, but also opens the door to money launderers This loophole was exploited in February, Philippines investigators say, when millions of dollars stolen from Bangladesh’s central bank were used to buy large volumes of chips Please see CASINO page A2 NAVY DEVELOPS NEW SUPERGUN The experimental railgun is designed to keep the U.S military’s edge over Russia and China BY JULIAN E BARNES DAHLGREN, Va.—A warning siren bellowed through the concrete bunker of a top-secret Naval facility where U.S military engineers prepared to demonstrate a weapon for which there is little defense Officials huddled at a video screen for a first look at a deadly new supergun that can fire a 25-pound projectile through seven steel plates and leave a 5-inch hole The weapon is called a railgun and requires neither gunpowder nor explosive It is powered by electromagnetic rails that accelerate a hardened projectile to staggering velocity—a battlefield meteorite with the power to one day transform military strategy, say supporters, and keep the U.S ahead of advancing Russian and Chinese weaponry In conventional guns, a bullet begins losing acceleration moments after the gunpowder ignites The railgun projectile gains more speed as it travels the length of a 32-foot barrel, exiting the muzzle at 4,500 miles an hour, or more than a mile a second “This is going to change the way we fight,” said U.S Navy Adm Mat Winter, the head of the Office of Naval Research The Navy developed the railgun as a potent offensive weapon to blow holes in enemy ships, destroy tanks and level terrorist camps The weapon system has the attention of top Pentagon officials also interested in its potential to knock enemy missiles out of the sky more inexpensively and in greater numPlease see GUN page A6 Oil-supply outages are at their highest level in more than a decade, bolstering the “fear premium” that has helped push crude prices higher to $50 a barrel About 3.5 million barrels a day worth of production is off line because of disruptions such as militant attacks in Nigeria, wildfires in Canada and political unrest in Libya—more than 3% of the global total, says research firm ClearView Energy Partners LLC That is likely the highest since the Iraq war hit output there in 2003, says Jacques Rousseau, the firm’s managing director of oil and gas At the same time, there is less slack to fill supply gaps Unused production capacity that the Organization of the Petroleum Exporting Countries can bring on quickly has dwindled, and the glut of output from other producers, including U.S shale companies, has ebbed as companies cut back amid lower prices “There isn’t a lot of extra supply out there,” said AnnLouise Hittle, lead oil-market analyst at energy-consulting firm Wood Mackenzie “That’s when you start to get a risk premium back in the market It is absolutely to be expected and it is, in our opinion, just the beginning.” Natural disasters or political unrest in oil-producing nations can halt production and disrupt shipping routes Such events have historically boosted oil prices because traders worry about the availability of future supplies In 2014 and 2015, however, the oil market mostly ignored occasional supply disruptions, from sanctions on Iran to export-terminal closures in Libya Traders focused instead on the growing crude surplus produced by U.S shale companies, sending prices tumbling 76% before they bottomed out in February After talks of an output freeze among major producing nations fizzled in April, traders say, the reduced supply from Please see OIL page A2 Oil firms treat rally with caution B1 Everyone, even mom, is trading crude B13 Isolated Indian Soldiers Create New Saints to Maintain Sanity i i i JAVIER SORIANO/AGENCE FRANCE-PRESSE/GETTY IMAGES Zoomlion ended its pursuit of crane maker Terex, joining a line of failed efforts by Chinese firms to buy U.S rivals B1, B16 DLR ¥109.90 À 0.12% BY NICOLE FRIEDMAN JEAN-CHRISTOPHE VERHAEGEN/EUROPEAN PRESSPHOTO AGENCY Car makers recalled millions more vehicles world-wide with faulty Takata air bags B1 ASIA EDITION WSJ.com On one base, troops revere a serviceman who died in 1968; ‘How can I not believe?’ BY SHEFALI ANAND AND JOANNA SUGDEN this remote mountainous base, and the threat of armed conflict is never far away To get NATHU LA, India—Indian through the days, and to exarmy enlisted man Jitender plain the inexplicable, troops Singh Sehrawat has had a few have added a series of beloved close calls figures to the traWhen lightning ditional Hindu tore through the pantheon roof of his bunker “Without Baba’s at a high-altitude blessings, it’s impost on the Chipossible to live up nese border one there,” the 24year-old Mr Sehrecent afternoon, rawat says “How it blasted a hole in can I not believe?” a metal mess plate Baba is an honorHarbhajan Singh lying feet from ific bestowed on where he was standing Miraculously, Mr Hindu saints The Hindus are a devout Sehrawat says, he and his squad mates were unharmed people, believing in millions of He doesn’t think it was gods and numerous saints luck Rather, he believes he Many believe in rebirth, and was saved by Harbhajan Singh, some in the afterlife Few rea serviceman who died in 1968 vere a dead person as if he is and who is revered as a god At Nathu La, a strategic pass watchful spirit by soldiers Please see SAINT page A6 It is lonely and hostile in Rain Can’t Damp Joy In Spain HOMECOMING: Real Madrid players held the Champions League trophy as fans surrounded their bus in Madrid on Sunday Tens of thousands turned out despite gray weather to celebrate the team’s win over Atlético Madrid on Saturday in Milan A4 Iranians Won’t Join in Mecca Pilgrimage Iran on Sunday canceled its participation in this year’s holy pilgrimage to Mecca, By Aresu Eqbali in Tehran, Asa Fitch in Dubai and Ahmed Al Omran in Riyadh blaming rival Saudi Arabia, as the regional powerhouses’ troubled relationship reached a new low “Unfortunately, Iranian pilgrims cannot go to hajj this year,” Iranian Culture Minister Ali Jannati told state television Iran’s Hajj and Pilgrimage Organization blamed “Saudi sabotage” for the cancellation “Despite all the Islamic Republic’s efforts, the Saudis ignored the absolute right of the Iranians to perform the hajj rituals,” it said The annual pilgrimage takes place in the western Saudi city, the holiest in Islam The decision followed months of talks over how Iranians would obtain Saudi visas after Riyadh severed diplomatic ties with Iran in January The break was a response to attacks on Saudi diplomatic compounds in Iran Please see IRAN page A2 THE WALL STREET JOURNAL A2 | Monday, May 30, 2016 WORLD NEWS Problems at the Pumps Unplanned oil outages are at the highest level in more than a decade, helping to boost crude prices Unplanned production disruptions Nymex crude-oil futures Non-OPEC million barrels a day OPEC $50 a barrel May forecast 45 40 DARRYL DYCK/BLOOMBERG NEWS 35 30 25 2008 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 Sources: ClearView Energy Partners; WSJ Market Data Group (crude oil futures) OIL Continued from Page One unplanned outages has been a primary factor driving U.S oil prices from below $27 a barrel in February to more than $50 a barrel intraday on Thursday U.S crude settled Friday at $49.33 a barrel, down 0.3% A strike by oil workers in Kuwait in April briefly shut down nearly half the Gulf nation’s production Wildfires in Alberta, Canada, this month forced the shutdown of production facilities in the country’s oil-sands region In Nigeria, a militant group calling itself the Niger Delta CASINO Continued from Page One used in high-stakes VIP junket rooms at Solaire and another Manila casino The saga began early this year when investigators found that hackers planted malware on computers at the central bank’s Dhaka headquarters and accessed an international funds-transfer system On Feb 5, someone instructed the New York Federal Reserve to withdraw $951 million from Bangladesh Bank’s account there, transaction records show Some $81 million went to bank accounts in the Philippines and $20 million to Sri Lanka before the New York Fed stopped the payments, records show The money directed to Sri Lanka was intercepted and returned But in the Philippines, efforts to trace the cash have been hampered because money was transferred to junkets operating in the casinos, according to testimony at Philippines Sen- IRAN F M A M THE WALL STREET JOURNAL Avengers has claimed responsibility for attacks on a production facility and an export terminal The country’s output has fallen to the lowest level since 2009 Some think the rise in outages is in part a byproduct of depressed crude prices When oil is cheap, producing nations’ budgets suffer That makes it harder for some governments to boost spending to head off unrest and deprives oil facilities of money needed for maintenance and recovery “At $100 a barrel, you can paper over a lot of problems with money,” said Helima Croft, head of commodities strategy at RBC Capital Markets “2016 is proving to be the year of reckoning for the weakest producers.” Some analysts think the boost from the disruptions may already be waning Canadian officials have lifted a mandatory evacuation order on certain production sites in Alberta, and Kuwait’s output has returned to normal Even in Libya, where unrest has kept the country’s production below capacity for years, some analysts expect exports to increase “Some of the bullish sentiment has to ease,” said Rob Haworth, senior investment strategist at U.S Bank Wealth Management, which oversees $128 billion “There’s some limits to how far this can go.” Others aren’t so sure that ate hearings on the theft “It’s not hard to imagine why those guys chose Manila to clean their money,” said Ben Lee, a gaming-industry analyst at Macau-based consultancy IGamiX In other jurisdictions, notably Macau, the world’s biggest gambling center by revenue, anti-money-laundering legislation does apply to casinos Authorities in the southern Chinese territory recently stepped up enforcement of the laws there amid a crackdown on corruption initiated by China’s communist leaders “We have to put more teeth in our laws so we could stop criminal elements from exploiting the deficiencies in our existing laws,” Emmanuel Dooc, a member of the Philippines’ Anti-Money Laundering Council, told the Senate hearings “There are gaping holes in our law We have to include casinos as covered entities” under the anti-money-laundering law, he said Operating like a casino within a casino, a junket lures high rollers to play in its exclusive gambling rooms and guar- antees a casino a set amount of revenue Junkets propelled Macau’s success, and Pagcor won a small slice of this business after lobbying for the money-laundering exemption for junkets and casinos The Solaire was the first privately operated casino opened on Manila’s seafront in 2013, by ports magnate Enrique Razon Jr It was followed by City of Dreams, operated by Laurence Ho and James Packer, sons of billionaires Stanley Ho and Kerry Packer Japanese pachinko billionaire Kazuo Okada is currently building a $2 billion casino nearby Total gambling revenue rose 17% to $2.78 billion last year, according to Pagcor—though still a fraction of Macau’s $29 billion 2015 casino take One junket operator, Kim Wong, a Chinese national who has lived in the Philippines for decades, told the Senate inquiry that he helped clients from China open the bank accounts that received the stolen money, but said he had no idea where the money originated The Philippines’ Anti-Money cials—including Saeed Ohadi, the head of its hajj organization—the two sides failed to reach a deal to resolve differences over issues including how visas would be issued Iranian officials insisted on having visas issued in Iran, while Saudi officials countered that Iranians could apply for and receive hajj visas through an online portal An Iranian official suggested this month that time had run out to adequately plan Iranian participation in the hajj, prompting Saudi’s Ministry of Hajj and Umrah to blame Iran for instigating any disruption Mr Jubeir said Saudi Arabia had worked to organize the attendance of Iranian pilgrims “We believe that if Iran has intended from the start to maneuver and find excuses to prevent its citizens from per- forming hajj, then that’s very negative,” he said “If the matter is over procedures and arrangements, then we believe we have gone above and beyond the call of duty to respond to these needs and that the Iranians are the ones who rejected [them].” The Saudi cabinet has criticized Iran for allegedly politicizing a religious rite “The kingdom rejects Iranian attempts aimed at putting obstacles to prevent the arrival of Iranian pilgrims in order to politicize hajj and use it to insult Saudi Arabia,” it said recently on the official Saudi Press Agency After the Iranian delegation left the kingdom on Friday without reaching an agreement, the Saudi government said Iranian officials “will be responsible in front of Allah Almighty and its people for Mourners in a procession in Tehran in October for Iranians killed in a stampede at last year’s hajj Wildfires raged in early May near an oil hub in Alberta, Canada, reducing oil-sands output supply disruptions are going away Iraq, Nigeria and Venezuela together produced 25% of OPEC’s total crude output in April, according to the International Energy Agency Each is struggling with outages or potential disruptions Iraq is trying to keep its production high amid the threat of Islamic State Many analysts warn that production could fall in Venezuela because of chronic power outages in the cashstrapped nation and disputes about payments to international oil-field-service providers Militant attacks continue in Nigeria, including one related to a Chevron Corp facility on Thursday “You could be looking at a sustained outage for a long period,” Ms Croft at RBC said of the country’s total output Unplanned production outages are the highest since at least 2003, when the war in Iraq briefly halted nearly all production in that country, analysts say During the 2011 Arab Spring uprisings and the overthrow of Libyan leader Moammar Gadhafi, supply disruptions helped lift global crude prices above $110 a barrel on average that year and in 2012, up from an average of about $80 a barrel in 2010 Since late 2012, global supply disruptions have held more than two million barrels a day off the global crude market, ac- VIP junket rooms at Manila casinos are under investigation ROUZBEH FOULADI/ZUMA PRESS Continued from Page One by people angry with the kingdom’s execution of a prominent Shiite cleric and activist Saudi Foreign Minister Adel al-Jubeir on Sunday said the kingdom had agreed to most of Iran’s demands, and accused Tehran of asking for special treatment beyond what’s usually provided to other Muslim countries “It was demanding the right to stage semi-protests, and it was demanding for privileges outside the framework of the normal organization which would create chaos during the hajj period,” he said “This is unacceptable.” Despite several visits to Saudi Arabia to negotiate visas and other logistics for the September hajj by Iranian offi- J cording to ClearView Fear of lost production after Islamic State seized some Iraqi cities briefly helped push global oil prices above $110 a barrel in mid-2014 If supply was still growing fast, disruptions might not affect prices as much But production in the U.S and other parts of the world is falling as companies cut back “Today, it doesn’t look like we will see a return to excess supply conditions,” said Bo Christensen, chief analyst at Danske Invest, which manages $100 billion in assets “That makes the market susceptible to other types of risks, of course including geopolitical risks.” TAYLOR WEIDMAN/BLOOMBERG NEWS Laundering Council has filed a criminal complaint against Mr Wong, who denies any wrongdoing and has since handed over to the council $15 million he received from his clients Macau-based junket Gold Moon said it received some of the money In one instance, it issued 100 million pesos ($2.1 million) of chips for use at its Solaire VIP rooms, a lawyer for Gold Moon told the Senate hearings Another chunk went to another Macau-based junket, Suncity, whose lawyer told the hearings that it was still checking how much it received In Gold Moon’s VIP room, two Chinese high-rollers allegedly gambled 33 million pesos inability of the Iranian citizens to perform hajj for this year.” Iran last boycotted the pilgrimage for three years between 1988 and 1990, after clashes between Shiite pilgrims and Saudi security forces led to the deaths of more than 400 Iranians during the 1987 hajj The event also led Saudi Arabia to lower the maximum number of Iranians approved to take the hajj to 45,000 The quota has since been raised The cancellation will force thousands of Iranians to wait at least a year to make the pilgrimage, potentially deepening popular anger toward Saudi Arabia “They don’t want to go there, be fingerprinted or sniffed by dogs at the airport for something,” one pilgrimage tour operator in Tehran said, asking not to be named because of the political sensitivity of the issue The tour operator added, “Iranians don’t want to be disrespected by Saudis.” Travel to Saudi Arabia for the hajj is tightly controlled, with visas granted based on agreements between Saudi Arabia and other countries About 64,000 Iranians participated in last year’s hajj, a religious duty that able-bodied Muslims are called upon to perform at least once in their lifetime Tensions between Saudi Arabia and Iran have risen sharply since last year, in part due to disputes over Saudi Arabia’s handling of the hajj and off-season pilgrimages called umrah Allegations that Saudi security personnel molested two Iranian boys returning from umrah last March led Iran to briefly suspend umrah pilgrimages pending an investi- gation A Saudi court sentenced two men over the incident in June The death of more than 400 Iranians last September in the worst stampede in the hajj’s history further stoked Iranian anger at Saudi Arabia Iranian officials criticized Riyadh for failing to manage large crowds properly and ensure pilgrims’ safety Enmity between the countries peaked early this year, after Iranian demonstrators angry about Saudi Arabia’s execution of Shiite cleric Nemer al-Nemer stormed the Saudi embassy in Tehran and set parts of it ablaze After Saudi Arabia severed diplomatic and commercial ties with Iran, several Saudi allies downgraded their own relations with the Islamic Republic The Iranian decision is a reminder that those tensions are unlikely to abate in the coming months, said Sabahat Khan, a senior analyst at the Dubai-based Institute for Near Notice to Readers Simon Nixon’s Europe File column will resume next week CORRECTIONS AMPLIFICATIONS The Television Centre in London will still have three television studios on the premises after it is converted into luxury apartments A Mansion article in the FridaySunday edition about the conversion incorrectly said only one studio would remain Readers can alert The Wall Street Journal to any errors in news articles by emailing wsjcontact@wsj.com worth of the chips during a marathon two-day stint, turning that into 38.5 million pesos before leaving, according to the junket’s lawyer The other 67 million pesos in chips remain unaccounted for, according to the casino Gold Moon’s attorney said the two men may have walked out with the chips and could have sold them to other gamblers Solaire declined to comment Midas, a Pagcor-run casino where investigators say another $11 million of the stolen Bangladesh money was gambled, didn’t respond to requests for comment Executives at the Pagcor have said stricter anti-moneylaundering rules for casinos wouldn’t have stopped the stolen money entering the VIP junket rooms They blamed banks for failing to stop the funds entering the country The Philippines’ central bank Gov Amando Tetangco has said the bank will work with the nation’s Congress to enhance money laundering laws —Yang Jie contributed to this article East and Gulf Military Analysis “Tehran will pin the blame on Riyadh, but the Saudis will obviously reject this and blame the Iranian government,” he said “For ordinary Iranians, there will certainly be anger—for some against the Saudi government and for others against their own government.” THE WALL STREET JOURNAL Dow Jones Publishing Company (Asia) 25/F, Central Plaza, 18 Harbour Road, Hong Kong Tel: 852 2573 7121 Fax 852 2834 5291 Paul Beckett, Asia Editor Troy McCullough, Senior News Editor, 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By web: http://wsj-asia.com By email: service@wsj-asia.com By phone: Hong Kong: 800 901 216; Australia: 0011 8000 322 8482; China: 400 991 1174; India: 000 800 440 1938; Indonesia: +62 21 2970 2702; Japan: 0120 779 868; Korea: 0030 844 0063; Malaysia: 1800 804 612; New Zealand: 0800 442 434; Philippines: 1800 1441 0033; Singapore: 1800 823 2042; Taiwan: 00801 444 141; Thailand: 001800 441 8323 THE WALL STREET JOURNAL Monday, May 30, 2016 | A3 WORLD NEWS Investigators say such warnings on A320s can be wrong and trigger risky reactions BY ANDY PASZTOR Long before EgyptAir Flight 804’s pilots received an alert signaling smoke in a vital electronics compartment, U.S safety watchdogs documented that such warnings on that airliner model were frequently erroneous and sometimes prompted unnecessary and risky cockpit responses Investigators are trying to determine whether the pilots reacted to the smoke message by following an emergency checklist that can lead to shutting down essential safety systems, including automated flight-control protections, people familiar with the probe into the May 19 crash of the Airbus Group SE A320 said Possible pitfalls of that procedure emerged vividly in an April 2011 incident Shortly after United Airlines Flight 497 took off from New Orleans, the pilots of the A320 plane received a smoke alert from its avionics system, but investigators from the National Transportation Safety Board later said they found “no evidence of fire or overheated components.” The pilots told investigators that “after they began to re- spond to the smoke warning, electrically powered items in the airplane ceased to function,” according to National Transportation Safety Board documents The crew lost some radios and a transponder, and needed air-traffic controllers to direct the jet back to the runway, where it landed with impaired steering and its nose wheel veered into grass beside the runway Nobody was injured Ten days later, United sent pilots a bulletin saying its “Airbus fleet has experienced cases of spurious avionics smoke warnings” and stressing that emergency electric shutdowns are required only in the event of “perceptible smoke.” It isn’t known if the EgyptAir alert was false, or what actions the crew took The newer-model, optical smoke sensors installed on the 13year-old jet have been deemed more reliable than older technology like that on the United plane But the more recent variants continued to issue false warnings—though at significantly lower rates than the older ones—and were “still sensitive to dust and some aerosols,” Airbus told U.S crash investigators in 2011 Recovery of the black-box voice and data recorders is expected to reveal whether the aviators got the warning and began the prescribed series of KHALED DESOUKI/AGENCE FRANCE-PRESSE/GETTY IMAGES Flight 804 Smoke Alert Draws Scrutiny Egyptians lighted candles in Cairo on Friday for the 66 victims of the May 19 EgyptAir plane crash complex, computer-aided steps intended to isolate the problem by shedding electrical load from the main circuits Going back to 2011, that procedure, designed by Airbus, was controversial among critics who said it could be confusing and overly complicated The prospects that the EgyptAir crew inadvertently cut off power to some essential systems or otherwise failed to react appropriately during the checklist procedure are among the investigative strands being pursued by the international team of experts involved in the EgyptAir probe, people familiar with the issue said The effort includes running ground-based simulator sessions to re-create possible sequences of events Given the scant information now available, it isn’t clear which of the scenarios examined so far—ranging from aircraft malfunctions and pilot missteps to a terrorist act— can be considered the most likely, these people said Airbus has been working on the problem of erroneous avi- onics smoke alerts since the late 1990s An Airbus spokesman on Friday declined to comment, citing the continuing investigation EgyptAir officials couldn’t be reached to comment Theories about what might have occurred in the avionics bay of Flight 804—an underfloor compartment near the cockpit that houses the jet’s electrical brains—don’t seem to fit with the relatively few system-failure messages the aircraft automatically transmitted before it stopped com- municating with the ground, safety experts said In addition to the avionics smoke warning, the six other messages included malfunctions of cockpit-window systems and of a flight-control system The avionics smoke checklist rarely pops up during recurrent training, said several pilots who fly the workhorse A320, one of the world’s most widely used jetliners “We only get to practice the procedure once or twice in the simulator every couple of years,” said Ben Riecken, who flies A320s for a U.S carrier Barely hours after the EgyptAir crash killed all 66 people on board, Egyptian officials appeared to jump on the idea of terrorism But since then, with President Abdel Fattah Al Sisi saying nothing has been ruled out, public attention has shifted to other potential causes spanning an array of airplane malfunctions and cockpit errors In the case of EgyptAir Flight 804, safety experts said turning off both generators could account for the sudden loss of automated transmission of system updates as well as dropping off air-traffic control radar screens But they cautioned that other combinations of problems also could lead to such communication loss —Robert Wall contributed to this article BY WILLIAM HOROBIN AND JOSHUA ROBINSON The French public appears sanguine about the risks According to a survey of 1,002 French people at the end of March, 82% thought Euro 2016 and the Tour de France should go ahead despite the official state of emergency that was declared after the Nov 13 attacks and remains in place France has deployed thousands of police and soldiers at sensitive locations after those The Euro 2016 tournament will overlap with the Tour de France bicycle race terror threat, for the first time a SWAT team will accompany cyclists along the 2,200-mile race, and 23,000 police and gendarmes will be deployed on the route For the Euro matches—the first major men’s soccer championship held in Western Europe in eight years—two million fans from abroad are expected to flock to French stadiums and town centers Despite the security fears, 30 of the 36 opening-round games are completely sold out, according to the official tournament ticketing website attacks, which highlighted the vulnerabilities of so-called soft targets such as sports events and concerts Police investigators say the Islamic State operatives who killed 32 in suicide-bomb attacks in Brussels in March were planning attacks in France, including at the soccer championship Tournament organizers raised the security budget after Nov 13 by 15% to €34 million ($38 million) for locations directly connected to matches and teams But fan zones, where thousands of people SPEICH FREDERIC/ZUMA PRESS PARIS—When soccer fans set off smoke bombs and firecrackers at the Stade de France on May 21, the explosions did more than add to the drama of a French cup final between bitter rivals They exposed gaps in France’s efforts to tighten security just two weeks before hosting Euro 2016, the continent’s largest sporting event Still in a terror-induced state of emergency after 130 people were killed in the November attacks, French authorities are preparing to manage eight million fans and secure around 100 locations for the European soccer championships France’s apparatus was being tested at the Saturday game between Paris Saint-Germain and Olympique de Marseille, held in the same stadium suicide bombers targeted in November Despite new security barriers where all attendees were supposed to be searched, soccer fans were able to smuggle in banned smoke bombs When they went off, stewards had to cope with waves of people moving through the stands to get away The breaches highlighted the unprecedented challenge France faces in securing Euro 2016, a sprawling tournament that will run in 10 French cities from June 10 to July 10 and overlap with the threeweek Tour de France bicycle race, for which security is also being beefed up Due to the Fans faced a phalanx of security forces at a game on May 21 at the Stade de France in Saint-Denis without tickets gather to watch the games, have caused more consternation In previous tournaments, such as the 2006 World Cup in Germany, the wide-open areas ringed with big screens were hailed as the beating heart of a national celebration In Paris, a zone at the foot of the Eiffel Tower is expected to draw 90,000 fans on an almost daily basis The state and local authorities will spend €17 million securing fan zones and installing video surveillance at the sites Authorities will carry out systematic frisking around the areas and ban open-air screenings and gatherings outside the fan zones The French state will mobilize 73,000 police officers and gendarmes for Euro 2016 and redeploy some of the 10,000 soldiers on the homeland antiterror mission Some participating teams have expressed concerns about security “After what happened in November you can’t just ignore it,” said Germany manager Joachim Löw, who remembers hearing the explosions around the stadium as his team played France that Friday night in November Each of the 24 squads will travel with a delegation of police, private security and at least two French SWAT-team members The high state of alert contrasts with France’s most recent experience with an event of this scale: the 32-team World Cup in 1998, when the national team, Les Bleus, lifted the trophy on home soil “This has led us to deploy security measures that are much more complex, much more complete and much tougher,” said Jacques Lambert, the head of the Euro 2016 organizing committee who also ran that World Cup “We are taking maximum precautions to ensure safety, even if, as everyone knows, there is no such thing as zero risk,” said French Interior Minister Bernard Cazeneuve GIOVANNI ISOLINO/AGENCE FRANCE-PRESSE/GETTY IMAGES French Soccer Tourney Tests Security A naval ship brought migrants to an Italian port on Sunday New Migrant Drownings Highlight Crossing Risk BY ERIC SYLVERS MILAN—About 700 people are thought to have died attempting to cross the Mediterranean Sea from North Africa in the past few days, the United Nations’ refugee agency said on Sunday, further highlighting the perils of the world’s deadliest migration route That figure is “a conservative estimate,” with most of the deaths the result of three large shipwrecks, said Carlotta Sami, spokeswoman for the U.N High Commissioner for Refugees Most of the migrants were from sub-Saharan Africa On Wednesday, a ship went down with about 100 people thought to have been trapped inside, Ms Sami said, citing witnesses The following day, a ship sank with about 550 on board, migrants watching from a nearby vessel said On Friday, several dozen bodies were recovered from another ship that sank About 15,000 migrants have left Libya, and to a much lesser extent Egypt, in the past week headed toward Italy, the UNHCR said, putting fresh strain on the government’s efforts to accommodate new arrivals The vast majority are from sub-Saharan Africa— largely Nigeria, Gambia, Somalia, Ivory Coast and Eritrea After a lull over the winter, the spring weather has led to a surge in migrants departing from Libya and attempting to reach Italy This year, about 40,000 migrants have arrived in Italy by sea—largely in line with the past two years Excluding the 700 feared dead on Sunday, 1,000 people have lost their lives this year attempting the crossing, the International Organization for Migration said More than 150,000 arrivals took the Libya-Italy route last year, but the phenomenon was overshadowed by a surge of migrants arriving in Greece from Turkey, most from Syria, Afghanistan and Iraq A deal between the EU and Turkey has helped slow that flow to a trickle in recent weeks Thousands of migrants have been rescued from rickety boats in recent days On Saturday, 668 were picked up at sea, with no deaths reported, said a spokesman for the Italian coast guard Those rescue efforts were carried out by ships belonging to the Italian coast guard, the Italian and Irish navies, and nongovernmental organization Sea Watch After being rescued, migrants are taken to reception centers in southern Italy The country is currently hosting 125,000 migrants in its reception system, the Interior Ministry said Argentine Court Sentences Ex-Dictator for Dissent Crackdown Associated Press BUENOS AIRES—An Argentine federal court sentenced the country’s last dictator and 14 other former military officials to prison for humanrights crimes, in the first ruling that Operation Condor was a criminal conspiracy to kidnap and forcibly make people disappear across international borders Six South American dictatorships launched the covert oper- ation in the 1970s, using secret police networks in a coordinated effort to track down opponents abroad and eliminate them Many leftist dissidents had sought refuge in neighboring countries and elsewhere An Argentine federal court on Friday sentenced former junta leader Reynaldo Bignone, 88 years old, to 20 years in prison for being part of an illicit association, kidnapping and abusing his powers in the forced disappearance of more than 100 people The ex-general, who ruled Argentina in 1982-1983, is already serving life sentences for multiple human-rights violations during the 1976-1983 dictatorship In the landmark trial, 14 other former military officials received prison sentences of eight to 25 years for criminal association, kidnapping and torture They include an Uruguayan army colonel, Manuel Cordero Piacentini, who allegedly tortured prisoners inside Automotores Orletti, the Buenos Aires repair shop where many captured leftists were interrogated under orders from their home countries Two of the accused were absolved The sentences are seen as a milestone because they mark the first time a court has proved that Operation Condor was an international criminal conspiracy carried out by U.S.backed regimes in Chile, Argentina, Bolivia, Brazil, Paraguay and Uruguay “Operation Condor affected my life, my family,” Chilean Laura Elgueta said outside the courtroom Her brother, Luis Elgueta, had taken refuge in Buenos Aires from Gen Augusto Pinochet’s forces, only to be forcibly disappeared in Buenos Aires in 1976 The investigation was launched in the 1990s when an amnesty law still protected many of the accused Argentina’s Supreme Court overturned the amnesty in 2005 at the urging of then-President Néstor Kirchner “Forty years after Operation Condor was formally founded, and 16 years after the judicial investigation began, this trial produced valuable contributions to knowledge of the truth about the era of state terrorism and this regional criminal network,” said the Buenos Aires-based Center for Legal and Social Studies, which is part of the legal team representing plaintiffs in the case A4 | Monday, May 30, 2016 HK JP KO ML SI IN UK FR THE WALL STREET JOURNAL MN PR WORLD NEWS Japanese Leader Hints at Delay For Tax Increase Mr Obama hugged Shigeaki Mori, a survivor of the 1945 atomic bombing of Hiroshima, at the Hiroshima Peace Memorial Park on Friday ObamaUrgesNuclearCurbs BY CAROL E LEE AND ALEXANDER MARTIN HIROSHIMA, Japan—President Barack Obama mourned the victims of the U.S atomic bombing of Japan at the memorial honoring those who died in the Aug 6, 1945 attack on Hiroshima, the first visit to this city by a sitting U.S leader In solemn comments, Mr Obama neither apologized for nor justified the U.S atomic bombs dropped both here and in Nagasaki that killed more than 200,000 people, and instead focused on a nonnuclear future, seeking to avoid inflaming passions on either side of the Pacific After laying a wreath at the Hiroshima Peace Memorial Park, the president reflected on the day “death fell from the sky” and how America’s decision during World War II ended the conflict but also forever changed the world “We stand here in the middle of this city and force ourselves to imagine the moment the bomb fell,” Mr Obama said, standing alongside Japanese Prime Minister Shinzo Abe “We remember all the innocents killed across the arc of that terrible war,” he said “We have a shared responsibility to look directly into the World Watch SPAIN Real Madrid’s Reign Celebrated in Rain Tens of thousands of fans endured rain to greet Real Madrid players as they returned home to celebrate the Champions League title Many waited all night after celebrating the team’s win over crosstown rival Atlético Madrid on Saturday in Milan The final score was 1-1, with Real prevailing 5-3 in a penalty shootout The players arrived in Madrid early Sunday and traveled on an open bus to the club’s traditional celebration spot, the Cibeles fountain, where an estimated 30,000 supporters marked the club’s 11th European title Real Madrid captain Sergio Ramos draped the statue of the Cibeles goddess with the club’s scarf and flag —Associated Press BRAZIL WHO Says Olympics Are Safe From Zika The World Health Organization said there is “no public health justification” for postponing or canceling the Rio de Janeiro Olympics because of the Zika outbreak The assessment came after 150 health experts issued an open letter to the U.N health agency calling for the games to be delayed or relocated “in the name of public health.” The letter cited recent scientific evidence that the Zika virus causes severe birth defects In adults, it eye of history and ask what we must differently to curb such suffering again.” Mr Obama’s focus on victims and survivors and the ills of nuclear war, after earlier saying he would leave the thornier questions to history, was viewed favorably across Japan “It’s like a dream come true,” said Shigeaki Mori, 79 years old, one of two bombing survivors who briefly met Mr Obama and who created a memorial for U.S prisoners of war killed in Hiroshima The president hugged Mr Mori as the two spoke “I suffered so much, so today was the best day that was given by America,” he said Mr Abe also spoke, saying it took courage for Mr Obama to visit Hiroshima “Even today there are victims who are suffering unbearably,” he said “This tragedy must not be repeated again.” The visit was delicate for Mr Obama The military and moral questions posed by the atomic bombings have provoked fierce debate in the U.S through the seven decades since the end of World War II Sen Tom Cotton (R., Ark.) who often clashes with the White House on foreign policy, avoided directly criticizing Mr Obama’s comments, but he offered a counterpoint “Using nuclear weapons in World War II was not a mistake—it was a moral necessity to halt tyranny, save lives, and end the most destructive war in history,” he said can cause neurological problems The authors also noted that despite increased efforts to wipe out the mosquitoes that spread Zika, the number of infections in Rio have gone up WHO, however, said that “based on current assessment, canceling or changing the location of the 2016 Olympics will not significantly alter the international spread of Zika virus.” —Associated Press UKRAINE Fire Kills 17 People At Home for Elderly A fire swept through a private home for the elderly in a Ukrainian village shortly before dawn on Sunday, killing 17 people and injuring five others, an emergency official said The head of the emergency services, Mykola Chechetkin, said 35 people were in the house when the fire broke out It was unclear whether any staff members were among the dead Police said they are working to determine the cause of the fire and to learn whether the home was operating legally The owner of the business was detained for questioning, police said —Associated Press FRANCE Would-Be Migrant, Hit by Truck, Dies An Afghan man was killed after being hit by a truck on a freeway near the French coastal town of Calais in an apparent attempt to sneak onto a vehicle bound for the U.K., officials said The 25-year-old man, who lived in the city’s sprawling migrant camp, is one of at least 20 people killed in the Calais region while attempting to reach the U.K since June 2015 —Noemie Bisserbe In the U.S as well as Japan, Mr Obama’s visit was received with mixed emotions among arms-control advocates, who welcomed the president’s gesture but drew a contrast between his call to action and his administration’s modest record on arms reductions “It was especially meaningful for the hibakusha—the Japanese A-bomb survivors—who have dedicated their lives not to the extraction of an apology, but to ensuring that no Mr Obama has struggled to end two wars and entered new conflicts one else suffers an atomicbomb attack,” said Darryl Kimball, executive director of the Arms Control Association, a Washington nonproliferation advocacy group Mr Obama has conceded his nonproliferation efforts have made only modest progress during his two terms In that time, he has struggled to end two wars and entered new conflicts Negotiating last year’s Iran nuclear deal—seen by the administration as a nonproliferation achievement but questioned by critics—has consumed his administration’s effort, and a deterioration in ties with Russia has slowed disarmament efforts In 2009, Mr Obama delivered an address in Prague in which he called for specific measures to avoid the global development of nuclear weapons But those measures—such as U.S Senate ratification of a treaty banning nuclear testing and a new global effort to halt the production of fissile material—have remained stalled Meanwhile, Mr Obama has outlined plans to spend nearly $1 trillion in 30 years to modernize and upgrade the U.S nuclear arsenal One survivor of the Nagasaki bombing who attended the event, 84-year-old Terumi Tanaka, praised the president’s speech but was disappointed to not hear specifics on how to eliminate nuclear weapons Others agreed, saying a plan for disarmament was more important than an apology “It’s far too late to be asking Mr Obama for an apology If there was to be one, it should have come from previous presidents,” said 73-yearold Masashi Ieshima, who was at home about a mile and a half from ground zero when the bomb fell on Hiroshima “Rather than an apology, it’s my strong wish for him to set out a course to eliminate all nuclear weapons.” At the museum, Mr Obama wrote a message in the guest book: “We have known the agony of war Let us now find the courage, together, to spread peace and pursue a world without nuclear weapons.” —Siobhan Hughes contributed to this article Mr Abe at a news conference during the G-7 summit on Friday China Swaps Troupes for Troops Cultural ensembles with the military are swept up in President Xi’s overhaul BY JEREMY PAGE BEIJING—One military unit in China has racked up some notable victories They’re just not the kind President Xi Jinping wants as he undertakes the biggest revamp of the People’s Liberation Army since the 1950s Among them are accolades for performing “Lion Dance and Trick-Cycling by Girls” at a festival in France, “Juggling Umbrellas with Feet” in Sweden and for plate spinning in Poland Known as the “Advance Cultural Troupe” of the Shenyang Military Region, the unit is among dozens of the PLA’s acrobatic, theatrical and song and dance groups in the firing line of Mr Xi’s plans to cut 300,000 of its 2.3 million troops—including many in noncombat roles Many have been merged, renamed or shrunk, and all have been banned from commercial performances Formed in the 1930s to spread propaganda among illiterate soldiers and peasants, the troupes have performed live across China and overseas, produced hundreds of plays, operas, ballets and films, and been regular features on state television The ensembles have created stars, some linked romantically to Chinese leaders from Mao Zedong to Mr Xi, whose wife Peng Liyuan rose to fame as a singer in one In recent years, however, PLA performers’ commercial activities and glamorous lifestyles have fallen foul of Mr Xi’s drive to curb military corruption and focus the PLA on preparing to “fight and win wars.” He fired a warning shot in a 2014 speech when he asked: “If our PLA cultural workers don’t have a military flavor, a taste of war, then why they wear uniforms?” Yang Yujun, a Defense Ministry spokesman, said recently that authorities were still researching how to reorganize the troupes But the process has already begun In February, Mr Xi eliminated the PLA’s seven Military Regions, each with its own troupe, usually including a dance ensemble, chorus, orchestra, television arts center and acrobatic team They were replaced with five new combat zones, leaving two regional troupes to be merged with others “As noncombat troops, all the performers are facing the question of whether they are staying or leaving,” the army website cited the leader of the “Advance Cultural Troupe” as saying Mr Xi has banned surviving cultural troupes from charging fees, which had supplemented PLA performers’ salaries “We used to some commercial performances but since we received orders from our headquarters, we stopped doing that,” said a troupe official There were no such restrictions when Tong Yao joined Beijing’s “Comradesin-arms” troupe in 1999 She GETTY IMAGES On visit to Hiroshima, U.S president urges world: ‘Look directly into the eye of history’ SHIMA, Japan—Prime Minister Shinzo Abe failed last week to persuade the Group of Seven industrialized nations that the world faced a possible economic crisis, then went on to issue a warning himself His grim view served to open the door to another delay in a planned sales-tax increase in Japan, a possibility he acknowledged for the first time Friday, saying it was prompted by G-7 commitments to foster growth This followed more than a year of vows by Mr Abe that the tax increase would proceed as scheduled next year unless the world faced conditions similar in magnitude to the 2008 “Lehman shock” and global financial crisis After the G-7 issued a communiqué that warned of rising risks to the global economy but didn’t call for coordinated fiscal spending, Mr Abe pointed to slowing growth in China and emerging markets, as well as the long slump in commodity prices, as conditions that could herald an economic crisis “The world economy is at risk of falling into a crisis” unless an appropriate policy course is chosen, he said “The extent of the decline, comparable to what happened around the time of the socalled Lehman shock, is causing a major blow to emergingmarket economies that depend on exports of commodities and basic materials for growth.” A grimmer assessment by the G-7 and a stronger call for looser fiscal policy would have helped Mr Abe counter the objections of Japan’s fiscal hawks to his plans for a stimulus package of up to ¥10 trillion ($91 billion) The prime minister’s move toward delaying the tax increase, along with the stimulus plan, amounts to a tacit acknowledgment that the “Abenomics” program is in trouble Mr Abe found himself on the defensive Friday, saying in a news conference that “Abenomics is not a failure” and citing the number of jobs created during his tenure The latest bad news came earlier in the day, when the government reported that consumer prices, excluding fresh food, fell 0.3% in April The data showed that the Bank of Japan’s goal of reaching 2% inflation, a key pillar of Abenomics, remains as elusive as when it was set in early 2013 The robust growth promised by Mr Abe hasn’t materialized either Though the economy grew 1.7% on an annualized basis during the first quarter, it contracted in two of the three previous quarters A previous sales-tax increase in April 2014—to 8% from 5%—was blamed for derailing a recovery early in Mr Abe’s tenure Consumer spending has yet to fully recover, and some economists say the prospect of another tax rise next year is causing consumers to save more Mr Abe said he would make a decision on the tax before an upper house election scheduled for July ISSEI KATO/REUTERS JIM WATSON/AGENCE FRANCE-PRESSE/GETTY IMAGES BY MITSURU OBE Vocalist Peng Liyuan, Mr Xi’s wife, performed during a military anniversary celebration at the Great Hall of the People in 2007 was soon in huge demand, principally as she looked and sounded like the late Teresa Teng, a Taiwanese singer Ms Tong performed Teresa Teng medleys in concerts nationwide and toured Southeast Asia By 2012, Ms Tong was a lieutenant colonel with an official salary of around 6,000 yuan ($930) a month, supplemented with income from commercial performances, she said Comrades in combat units were jealous “They felt we cultural troupe members were singing and dancing every day, just playing around, yet we earned more than them,” she said She resigned to pursue an independent career in 2012, the year Mr Xi came to power Military propaganda has shifted focus toward online images of combat exercises and modern weaponry “The military propaganda system and the entire political system is focusing much more on training and equipment than song and dance fluff,” said Dennis Blasko, a PLA expert at the Virginiabased CNA Corporation The PLA doesn’t reveal the exact number of troupes, but before the overhauls, the Navy, Army, Air Force and Armed Police each had one too It is unclear how many will survive: The Navy troupe, among those that has, performed songs for Chinese forces on a disputed artificial island in the South China Sea this month —Olivia Geng in Beijing contributed to this article Monday, May 30, 2016 | A5 THE WALL STREET JOURNAL U.S NEWS Republicans’ 2012 nominee stands by claim that New Yorker is unfit to be president BY MONICA LANGLEY SAN DIEGO—Mitt Romney’s advisers begged him not to go to war with Donald Trump After he decided to go ahead, Mr Trump dismissed him as “lightweight” and a “failed candidate.” This week, Newt Gingrich called him “pathetic.” Mr Romney, sticking to his guns, has become a rare figure in American history—a former presidential nominee openly defying the man succeeding him as his party’s standardbearer Sitting at his home on the Pacific Ocean, Mr Romney reflected on the waves he created by attacking Mr Trump, how his family helped persuade him it was the right thing to do, and how he increasingly finds himself a voice in the wilderness “Friends warned me, ‘Don’t speak out, stay out of the fray,’ because criticizing Mr Trump will only help him by giving him someone else to attack,” Mr Romney said in an interview—the first time the 2012 GOP nominee discussed in depth his reasons for going after Mr Trump “They were right I became his next target, and the incoming attacks have been constant and brutal.” He said he had no illusions he would alter Mr Trump’s progress toward the nomination or spark a meaningful independent candidacy His motivation: “I wanted my grandkids to see that I simply couldn’t ignore what Mr Trump was saying and doing, which revealed a character and temperament unfit for the leader of the free world.” Today, the GOP anti-Trump chorus is dwindling, leaving Mr Romney among the few making the case publicly Mr Trump, in an interview, said of Mr Romney: “Once a choker, always a choker I’ve got a store worth more than he is.” He said Mr Romney’s attack “has nothing to with his country It has to with me I’m the one who forced him out” of running in 2016 Mr Romney said he is acting on his own behalf and acknowledged many Republicans think his Trump attacks could help the likely Democratic nominee, Hillary Clinton Still, he said, “others, including myself, believe our first priority should be to stand by our principles and if those are in conflict with the nominee, the principles come first.” Hewlett Packard Enterprise Co Chief Executive Meg Whitman, who has known Mr Romney for 25 years, said: “Mitt’s clarity about his position is helping others thinking about their patriotism and their country.” After losing in 2012 to President Barack Obama, the former Massachusetts governor and longtime businessman moved on to what he called a “balanced and full life.” He and his wife, Ann, who has multiple sclerosis, started the Ann Romney Center for Neurologic Diseases For the 2014 midterm elections, he stumped for MATT ROURKE/ASSOCIATED PRESS Romney’s Lonely Crusade Against Trump ‘I wanted my grandkids to see that I simply couldn’t ignore’ Mr Trump’s actions, Mitt Romney says GOP candidates in 27 states Mr Romney, 69, wasn’t worried when Mr Trump joined the race in June, believing the 16 other Republicans made up a “very capable, well-experienced, very deep field.” Along with other politicians, he expected the businessman to implode after his pronouncement attacking illegal immigrants On July 18, Mr Trump said he wouldn’t call Arizona Sen John McCain, the 2008 GOP presidential nominee and a Vietnam prisoner of war, a “war hero.” Mr Romney and many of his 2012 staff, who were attending a pre-wedding event in Massachusetts for two staffers, saw their phones light up with Mr Trump’s comment: “I like people who weren’t captured.” Mr Romney tweeted on the spot: “Trump shot himself down McCain and American veterans are true heroes.” As Mr Trump surged ahead in debates, touting positions including a temporary ban on Muslims coming to the U.S., Mr Romney held back in public Instead, he called an adviser to Florida Sen Marco Rubio, Lanhee Chen, and recommended Mr Rubio hit Mr Trump for not releasing his tax returns, Mr Chen said, adding that Mr Rubio didn’t oblige After Mr Trump’s January second-place finish in Iowa to Texas Sen Ted Cruz, Mr Rom- ney saw a chance to publicly confront the front-runner heading into the Feb New Hampshire primary, said Stuart Stevens, his longtime political strategist Political aides advised against it “Trump can say something crazy and inflammatory against you and get nonstop coverage,” Mr Stevens said he told him In early March, Mr Romney said, he and his wife were getting ready for church when their son Tagg told them about Mr Trump’s refusal to disavow the endorsement of David Duke, a former Ku Klux Klan leader (Mr Trump later attributed his ambiguous answer to a defective earpiece.) Mr Rom- ney tweeted: “His coddling of repugnant bigotry is not in the character of America.” Hope Hicks, Mr Trump’s communications director, said: “Mr Trump has disavowed David Duke on every occasion.” Days later, Mr Romney recalled, his son Josh, driving him to the Salt Lake City airport, inquired: “When the grandkids ask ‘What did you to stop Donald Trump?’ what are you going to say?’ ” Tagg and Josh Romney, through a family spokeswoman, confirmed their father’s accounts On the plane, he began drafting a speech that he delivered March He said Mr Trump’s policies could lead to recession and “make America and the world less safe.” He tallied what he saw as the candidate’s sins: dishonesty, bullying, greed, misogyny, “absurd third-grade theatrics.” Mr Trump fired back that day, contending Mr Romney had begged for his endorsement for 2012 On Wednesday, he said: “He shouldn’t have accepted my money if he felt that way about me.” Mr Romney’s speech may have helped Trump rivals win in Utah and Wisconsin Mr Trump quickly recovered and essentially locked up the nomination with his Indiana victory At his oceanfront home, Mr Romney said he didn’t expect to criticize Mr Trump further but wouldn’t rule it out “I know that some people are offended that someone who lost and is the former nominee continues to speak, but that’s how I can sleep at night,” he said Yellen Sees Rate Rise Coming Soon VITO DI STEFANO/ZUMA PRESS BY KATE DAVIDSON AND BEN LEUBSDORF Donald Trump attacked Judge Gonzalo Curiel by name on Friday Judge Sets Release Of School’s Papers BY JACOB GERSHMAN AND REID J EPSTEIN A federal judge in San Diego has ordered the unsealing of hundreds of pages of internal documents produced by Donald Trump’s Trump University in connection with a fraud lawsuit against the company, the latest twist in the long-running lawsuit against the school U.S District Judge Gonzalo Curiel’s order releasing the documents came the same day that the presumptive Republican nominee attacked the judge by name during a campaign rally at the San Diego Convention Center Students of defunct Trump University say the GOP nominee defrauded them “I have a judge who is a hater of Donald Trump, a hater He’s a hater His name is Gonzalo Curiel,” Mr Trump said Friday, as the crowd of several thousand booed “He is not doing the right thing And I figure, what the hell? Why not talk about it for two minutes?” Mr Trump ended up devoting 12 minutes of a 58-minute address to Judge Curiel and the Trump University case, which is scheduled to go to trial in San Diego federal court on Nov 28—after the presidential election Mr Trump’s attorney said earlier this month that he will testify in the six-year-old case Mr Trump also told the audience, which had previously chanted the Republican standard-bearer’s signature “build that wall” mantra in reference to Mr Trump’s proposed wall along the Mexican border, that Judge Curiel, who was born in Indiana, is “Mexican.” “What happens is the judge, who happens to be, we believe, Mexican, which is great, I think that’s fine,” Mr Trump said A spokeswoman for the Trump campaign declined to comment about the judge’s ruling Among the documents to be unsealed are two sets of Trump University “playbooks,” outlining rules and procedures for running Trump University events and employee scripts for engaging with customers Some of the documents have already surfaced online Politico in March posted a 2010 Trump University playbook, which instructed employees to rank students by liquid assets to help determine what kind of course packages they could afford to buy Other documents would be made public for the first time, including a sales playbook the judge said contained marketing techniques for selling Trump University programs The unsealed versions will redact phone numbers and noncorporate email addresses Judge Curiel ordered the documents released by June He was responding to an April request by the Washington Post for the records to be unsealed Lawyers for Mr Trump opposed making the documents public, arguing that the materials contained trade secrets In his order, Judge Curiel alluded to Mr Trump’s recent commentary, noting that the candidate has “placed the integrity of these court proceedings at issue.” The plaintiffs accuse Mr Trump and the now-defunct school of defrauding people who paid as much as $35,000 for real estate advice Mr Trump said Trump University received “mostly unbelievable reviews” from its 10,000 students Federal Reserve Chairwoman Janet Yellen is signaling the central bank will likely raise interest rates within months if the U.S economy keeps gaining strength “It’s appropriate…for the Fed to gradually and cautiously increase our overnight interest rate over time, and probably in the coming months such a move would be appropriate,” she said Friday during a panel discussion at the Radcliffe Institute for Advanced Study at Harvard University This leaves the door open for a move as soon as the Fed’s next policy meeting June 14-15 or at its gatherings in July or September if officials prefer to wait for more economic data One reason for action: After a couple of weak quarters, “growth looks to be picking up from the various data that we monitor,” Ms Yellen said Gauges of consumer confidence and spending, housingmarket activity and industrial production all gained steam during the spring months Forecasting firm Macroeconomic Advisers on Friday projected growth in gross domestic product, a broad measure of the goods and services produced across the economy, would accelerate to a 2.5% annual rate in the second quarter from the first quarter’s 0.8% pace In another positive sign, U.S corporate profits show signs of stabilizing, though American companies still face earnings pressure due to rising wage growth and a still-weak global economic expansion A key measure of corporate profits— after taxes, without inventory valuation and capital-consumption adjustments—rose at a 1.9% pace in the first three U.S Watch DEMOCRATIC PRIMARY months of 2016 after declining the prior two quarters, the Commerce Department said Still, on an annual basis, profits in the first quarter were down 3.6% for the second straight quarter, and profits as a share of the overall economy remain depressed from the record levels reached earlier in the expansion The resilience of corporate profits in the months ahead will be key to supporting the stock market, which is back near the record highs reached in the spring of 2015, and critical to firms’ ability to hire workers and invest in new equipment and facilities Ms Yellen’s comments on a possible rate increase echoed those of other Fed officials who have said in recent days they see two or three rate increases this year and could see moving in June or July Investors on Friday afternoon saw roughly a 61% chance that the Fed would raise rates either in June or July, up from 56% a day earlier, according to fed-fund futures tracked by CME Group The central bank in December raised its benchmark federal-funds rate, which had been near zero for seven years, to a range between 0.25% and 0.5% Since then, policy makers have held rates steady through a U.S economic slowdown, financialmarket volatility and worries about global growth Two forces that have weighed on business earnings campaign sent a letter to Democratic National Committee officials asking them to disqualify former congressman Barney Frank and Connecticut Gov Dannel Malloy as co-chairmen of the convention’s rules and platform committees, respectively —Peter Nicholas ing only While widespread use of driverless cars may be years away, lawmakers and transportation leaders say the technology is progressing so rapidly that Michigan must stay ahead of the curve or risk losing automotive research and development to other states —Associated press and the broader economy seem to be fading: the energy slump and the strong dollar Crude prices touched $50 a barrel this past week for the first time since last year, propelled by the most powerful rally in seven years Higher prices are set to ease pressure on energy firms that have shed workers and pulled back on drilling The dollar, meanwhile, has been more or less stable over the past year after rising sharply against other major currencies in late 2014 and early 2015 as the Fed prepared to begin raising rates A stronger dollar has made U.S.-made products more expensive for foreign customers, reducing demand for exports and squeezing the domestic manufacturing sector Incomes and Outcomes The worst may be over from the oil downturn and effects of A sharp drop in U.S corporate profits has pressured businesses a strong dollar But a tightening to cut back on investments in structures and equipment labor market is pushing up Change from a year earlier wages “and that probably is 8% Q1 ’16 8% Corporate cutting into margins” more –0.5% –3.6% profits, broadly, said Jesse Edgerton, a 6 after tax* J.P Morgan Chase economist 4 Ms Yellen emphasized the Business 2 Fed is likely to raise interest investment 0 rates “gradually and cautiously” because raising them –2 –2 too quickly could trigger a –4 –4 downturn to which the Fed may 2013 ’14 ’15 ’16 2013 ’14 ’15 ’16 have limited tools to respond .leaving consumers, buoyed by slow-but-steady income growth, One possible impediment to to prop up GDP with their sturdy spending habits a June rate increase is the U.K.’s June 23 referendum on 8% 8% Consumer Disposable whether to leave the European 3.3% 2.7% personal spending 6 3.3% 2.7% Union Several Fed officials income 4 have flagged the so-called Brexit vote—which falls one week 2 after the Fed’s June meeting— 0 as a possible source of uncer–2 –2 tainty that could cause them to –4 –4 hold off on another rate rise 2013 ’14 ’15 ’16 2013 ’14 ’15 ’16 until later this summer Ms Yellen wasn’t asked *Without inventory valuation and capital consumption adjustments about the risks from a Brexit Note: All figures are seasonally adjusted; income, investment and spending are also vote during her appearadjusted for inflation Source: Commerce Department via St Louis Fed THE WALL STREET JOURNAL ance Friday Sanders Wants Key MICHIGAN Clinton Allies Ousted Motor State May Bernie Sanders is fighting to OK Self-Driving Cars oust two Hillary Clinton supporters heading key Democratic National Convention committees, despite the party’s refusal to remove them, in the latest sign of disunity amid a bitter fight for the party’s presidential nomination An attorney for Mr Sanders’s The U.S auto industry’s home state of Michigan is preparing for the advent of self-driving cars by pushing legislation to allow for public sales and operation—a significant expansion beyond an existing state law that sanctions such vehicles for test- NEW YORK Pilot in Fatal Plane Crash Found in River The body pulled from a World War-II era plane that crashed in the Hudson River was identified Saturday as a 56-year-old pilot from Florida, the New York Police Department said William Gordon of Key West, Fla., had taken off from Republic Airport on Long Island in a P-47 Thunderbolt and was flying in a three-plane formation Friday over the river for a local air show when he sent a distress signal at around 7:30 p.m., authorities said The single-seat plane crashed a short while later into the river across from 79th Street Boat Basin on the New Jersey side of the river and then sank in about 25 feet of water, authorities said Divers with the NYPD and Fire Department of New York secured the boat and pulled Mr Gordon’s body from the river, authorities said He was pronounced dead at the scene —Pervaiz Shallwani THE WALL STREET JOURNAL A6 | Monday, May 30, 2016 FROM PAGE ONE The high-tech railgun projectile exits the muzzle at 4,500 miles an hour The railgun’s prospective military advantage has made the developing technology a priority of hackers in China and Russia, officials said Chinese hackers in particular have tried to penetrate the computer systems of the Pentagon and its defense contractors to probe railgun secrets, U.S defense officials said Pentagon officials declined to discuss the matter further The Navy began working on the railgun a decade ago and has spent more than half a billion dollars The Pentagon’s Strategic Capabilities office is investing another $800 million—the largest share for any project—to develop the weapon’s defensive ability, as well as to adapt existing guns to fire the railgun’s high-tech projectiles Some officials expressed concern the technology has SAINT Continued from Page One to Tibet high in the Himalayas, the army has built a shrine to Mr Singh, who was a sepoy, the equivalent of a private, when he drowned in a rushing alpine stream at age 22 Believers say he patrols the frontier, wakes sleeping sentries and keeps soldiers from harm “Life is tough,” says Maj Gen Vinod Karnik, a retired officer who served in Nathu La There is “a lot of snow and the Chinese are just about 50 yards in front of you, eyeball to eyeball.” Though India’s urban youth are less inclined to believe in spirits than their elders, Indian army soldiers are an exception For men stationed at the Siachen Glacier on India’s frontier with Pakistan, there is Om Prakash, or O.P Baba Legend says that in the 1980s, Mr Prakash single-handedly fended off an enemy advance His body was never found The glacier, at 20,000 feet above sea level, is the world’s highest military base Soldiers pay their respects to Mr Prakash at a shrine at the foot of the massive ice sheet It contains a bust and a few personal effects Over in the northeastern In- Railgun components Projectile A non-explosive bullet filled with tungsten pellets Weight: approx 25 pounds Approx 24 inches Power A 25 megawatt power plant and large capacitor bank are required to provide enough pulse power to fire the weapon 10 times a minute Shoe An aluminum jacket that supports the bullet in the gun barrel; also provides a bridge for the current between the rails Electromagnetic railgun (as seen in the lab setting) 32 feet Firing mechanics Faster, smarter Electromagnetic field Rail Railguns have for years been limited to laboratories and videogames Former President Ronald Reagan’s Strategic Defense Initiative—the so-called Star Wars missile defense—at one time envisioned using the railgun to shoot down nuclear missiles Those plans were stalled by 1980s technology One problem was that the gun barrel and electromagnetic rails had to be replaced after a single shot The Navy now believes it has a design that soon will be able to fire 10 times a minute through a barrel capable of lasting 1,000 rounds Besides speed, the railgun also has a capacity advantage A typical U.S Navy destroyer can carry as many as 96 missiles—either offensive cruise missiles or defensive interceptors A ship armed with a railgun could potentially carry a thousand rounds, allowing the vessel to shoot incoming missiles or attack enemy forces for longer periods and at a faster rate of fire Unlike the Reagan-era initiative, the Pentagon doesn’t see the railgun as a shield against intercontinental ballistic missiles but defense against shorter-range conventional missiles The U.S has kept its mili- tary dominance over the past quarter-century largely through such precision weaponry as guided missiles and munitions It also has spent billions of dollars on interceptormissile based defense systems to shoot down ballistic missiles fired at the U.S or its allies That monopoly is about over China is perfecting a ship-killing ballistic missile Russia mostly impressed U.S military planners with the power and precision of its cruise missiles deployed in Syria, and its improved artillery precision revealed in Ukraine “I am very worried about the U.S conventional advantage The loss of that advantage is terribly destabilizing,” said Elbridge Colby, a military analyst with the Center for a New American Security Defense planners believe the U.S needs new military advances Russia, for example, is believed to be developing longer-range surface-to-air missiles and new electronic warfare technology to blunt any forces near its borders Prospects for an armed conflict among the great powers still seem remote But for the first time since the end of the Cold War, the Pentagon is again looking closely at responses to rising tensions with China and Russia Military planners say the railgun would be useful if the U.S had to defend the Baltic states against Russia, or support an ally against China in the South China Sea Moscow and Beijing are investing in missile systems aimed at keeping the U.S out of those respective regions A railgun-based missile defense could defend naval forces or ground troops, making it easier to move U.S reinforcements closer to the borders of Russia or China, officials said Hitting a missile with a bullet—a technical obstacle that hampered Mr Reagan’s initiative—remains a challenge Railgun research leans heavily on commercial advances in supercomputing to aim and on smartphone technology to steer the railgun’s projectile using the Global Positioning System “Ten years ago, we wouldn’t have been able to build a projectile like this because the cellphone industry, the smartphone industry, hadn’t perfected the components,” said William Roper, the director of the Pentagon’s Strategic Capabilities Office “It is a really smart bullet.” Development of the railgun guidance system is about done, officials said, but circuits in the projectile must be hardened to withstand gravitational forces strong enough to turn most miniaturized electronics to scrap Missile defense by the railgun is at least a decade away, but Pentagon officials believe the weapon’s projectiles can be used much sooner They are filled with tungsten pellets harder than many kinds of steel, officials said, and will likely cost between $25,000 and $50,000, a bargain compared with a $10 million interceptor missile The electrical energy required to fire a railgun means it is likely to be used first as a ship-mounted weapon Only one class of Navy ship, the Zumwalt-class destroyer, has such a power plant, officials said The Navy is building just three of those destroyers, so the Pentagon is working to adapt the projectile to use in existing Naval guns on other vessels, as well as for Army artillery While slower than a railgun, a powder-fired railgun projectile still flies at 2,800 miles an hour, which extends the range and power of existing weapons At Dalhgren last year, military engineers test-fired 5- and 6-inch Navy guns loaded with a version of the railgun projectile The range of the Navy’s 6inch guns was extended to 38 miles from 15 miles The Pentagon also tested the railgun projectile in 155 mm Army howitzers, successfully extending its range “The Navy is on the cusp of having a tactical system, a next generation offensive weapon,” Mr Roper said “It could be a game changer.” dian state of Arunachal Pradesh, scene of intense fighting during India’s 1962 war with China, soldiers turn to rifleman Jaswant Singh Rawat, who is said to have perished battling a Chinese advance In Nathu La, it is all about Mr Singh His shrine includes a bedroom and office along with a chapel Each morning, an orderly prepares tea for Mr Singh, now an honorary captain, and lays out his uniform for the day Other meals arrive with military precision The shrine contains a room where visitors can leave bottles of water next to a picture of Mr Singh to receive his bless- ings Believers say drinking this water will relieve aches and pains above the waist Wearing slippers kept in the room is said to cure ailments in the lower extremities Mr Sehrawat, a sepoy, says acclimatizing to duty at the Nathu La post, which is 15,000 feet above sea level, was a challenge The altitude can cause headaches and wreak havoc with soldiers’ digestion Soon after he arrived in Nathu La in 2013, Mr Sehrawat found himself in a convoy of army trucks towing artillery along a winding mountain road He watched horrified as a landslide swept down a hill toward him The cascade narrowly missed the vehicles “Baba ji is our support,” Mr Sehrawat says “He is protecting us.” On a recent morning, files of sepoys jumped out of passing army trucks, headed up to the shrine and bowed their heads Some snapped pictures of Mr Singh’s rooms, each of which contains a picture of him wearing a uniform and an olive-drab turban Shambhu Jha, 49-year-old soldier based in Kolkata who goes to Nathu La periodically for training, believes Mr Singh is guarding the long Chinese boundary between India and Tibet and helps keep the area secure “Those who are on duty on the border are able to live in peace thanks to Baba ji,” says Mr Jha Pamphlets available at Mr Singh’s shrine propagate the mystery “Even Chinese troops have been reported saying that they had seen a man in white clothes on a white horse patrolling the watershed,” says the pamphlet Like other soldiers and officers in the Nathu La area, Mr Sehrawat says he doesn’t eat meat or drink alcohol on Sundays, as a mark of respect for the saint In the bunker where he sleeps, a picture of Mr Singh is placed in a shrine with images of Hindu gods Soldiers offer him daily prayers Many set a place for the soldier-saint when they eat meals Capt Ashwani Chandel, 25, says last year he saw a troop truck skid off a road during a heavy snowfall, plunge into a ravine and crumple No one was hurt, he says “How can someone escape without a scratch from such an accident?” the captain says “This was because of Baba ji.” Parthiban Chandrasekharan, who has been in the army for nearly 30 years, says he saw a jeep pass a shrine to another soldier-saint, rifleman Jaswant Singh Rawat in Arunachal Pradesh, without stopping The jeep then lost control One officer who failed to salute the Baba died, Mr Chandrasekharan was told by the driver of the vehicle—who saluted and survived “For those who don’t pay their respects, the punishment is immediate,” says Mr Chandrasekharan Current A surge of electrical current from a capacitor bank is sent into one rail, through the projectile and into the second rail Since the current flows in opposite directions in the rails, an electromagnetic field is created that repels each rail from the other and the projectile This repulsive force pushes the projectile forward — out of the magnetic field — accelerating it down the barrel at 4,500 miles an hour Star Wars sequel The enormous amount of energy generated from the bullet’s speed is transferred to the target on impact Christopher Kaeser/THE WALL STREET JOURNAL Sources: Office of Naval Research commanded too large a portion of resources and focus “This better work,” one defense official said The age of the gun faded after World War II, hampered by the limited range and accuracy of gunpowder weapons Missiles and jet fighters dominated the Cold War years, prompting the Navy to retire its big-gun battleships The railgun—and its newly developed projectiles—could launch a new generation of the vessels “Part of the reason we moved away from big guns is the chemistry and the physics of getting the range,” said Jerry DeMuro, the chief executive of BAE Systems, a railgun developer “The railgun can create the kind of massive effect you want without chemistry.” The Navy’s current 6-inch guns have a range of 15 miles The 16-inch guns of mothballed World War II-era battleships could fire a distance of 24 miles and penetrate 30 feet of concrete In contrast, the railgun has a range of 125 miles, officials said, and five times the impact “Anytime you have a projectile screaming in at extremely high speeds—kilometers per second—the sheer kinetic energy of that projectile is awesome,” Mr Work said “There are not a lot of things that can stop it.” After exiting the barrel, the bullet’s shoe falls away U.S DEPARTMENT OF DEFENSE Continued from Page One bers than current missile-defense systems—perhaps within a decade The future challenge for the U.S military, in broad terms, is maintaining a global reach with declining numbers of Navy ships and land forces Growing expenses and fixed budgets make it more difficult to maintain large forces in the right places to deter aggression “I can’t conceive of a future where we would replicate Cold War forces in Europe,” said Deputy Secretary of Defense Robert Work, one of the weapon’s chief boosters “But I could conceive of a set of railguns that would be inexpensive but would have enormous deterrent value They would have value against airplanes, missiles, tanks, almost anything.” Inside the test bunker at Dahlgren, military officials turned to the video monitor showing the rectangular railgun barrel Engineer Tom Boucher, program manager for the railgun in the Office of Naval Research, explained: “We are watching the system charge We are taking power from the grid.” Wires splay out the back of the railgun, which requires a power plant that generates 25 megawatts—enough electricity to power 18,750 homes The siren blared again, and the weapon fired The video replay was slowed so officials could see aluminum shavings ignite in a fireball and the projectile emerge from its protective shell “This,” Mr Boucher said, “is a thing of beauty going off.” The railgun faces many technical barriers before it is battle ready Policy makers also must weigh geopolitical questions China and Russia see the railgun and other advances in U.S missile defense as upending the world’s balance of power because it negates their own missile arsenals Railgun technology accelerates a hardened projectile to staggering velocity, a battlefield meteorite with the power to one day transform military strategy and keep the U.S ahead of advancing Russian and Chinese weaponry, say supporters Deputy Secretary of Defense Robert Work, right, after a railgun demonstration in Dahlgren, Va SHEFALI ANAND/THE WALL STREET JOURNAL GUN “You can’t ignore the fact that Russia has great ability to mass conventional munitions and fire them over great range We have to be able to fight through those salvos,” said Mr Work, of the Pentagon “And the railgun potentially will give us the means to that.” Russian officials, meanwhile, including Alexander Grushko, Moscow’s envoy to the North Atlantic Treaty Organization, have said technological advances by the U.S., including missile defense, could undermine the strategic stability currently guaranteed by the relative balance between the Russian and U.S nuclear arsenal Breaking Out the Big Guns Soldiers at the high-altitude Indian army post keep a shrine to the spirit of Harbhajan Singh Do today’s antidepression drugs help? Yes, says a doctor who saw the old days In Thailand, where fair skin is prized, a rapper has made tanning a cause A9 A9 BOOKS | CULTURE | SCIENCE | COMMERCE | HUMOR | POLITICS | LANGUAGE | TECHNOLOGY THE WALL STREET JOURNAL CLOCKWISE FROM LEFT: VASILY YEGOROV/TASS/GETTY IMAGES; KRISTINA KORMILITSYNA/KOMMERSANT/GETTY IMAGES; VITALY ARMAND/AGENCE FRANCE-PRESSE/GETTY IMAGES; RAMIL SITDIKOV/SPUTNIK/ASSOCIATED PRESS © 2016 Dow Jones & Company All Rights Reserved | ART | IDEAS Monday, May 30, 2016 | A7 Russia’s Long Road to the Middle East Vladimir Putin’s intervention in Syria caught many by surprise, but it is a return to Russian geopolitical aspirations that stretch back to the czars SOVIET LEADER Nikita Khrushchev and Egypt’s President Gamal Abdel Nasser raised hands during Khrushchev’s visit to the Middle East in 1964, above left Top right, Muslims gathered outside the Moscow Grand Mosque for morning prayers during the Eid al-Adha festival on Sept 24, 2015 Above right, a convoy of Soviet armored vehicles crossed a bridge in Termez at the Soviet-Afghan border on May 21, 1988, during the withdrawal of the Soviet Army from Afghanistan E BY YAROSLAV TROFIMOV VERY RUSSIAN SCHOOLCHILD IS TAUGHT about the violent death of Aleksandr Griboyedov in 1829 A poet and playwright whose work is enshrined in the country’s literary canon, Griboyedov had the misfortune to be Czar Nicholas I’s ambassador to Tehran in the wake of Persia’s humiliating loss of territory to Moscow’s spreading empire A Tehran mob, furious at the czar and his infidel representatives, stormed the embassy, slaughtering the unlucky ambassador and 36 other Russian diplomatic staff H A century and a half later, in 1979, those events were almost replayed in Iran (as Persia is now known) When five leaders of the Iranian revolutionary students gathered in Tehran to decide which foreign embassy to target, two of them advocated seizing the Soviet legation They were persuaded instead to overrun the U.S embassy, creating a no less historic trauma for another world power entangled in the politics of the Middle East Russia’s long history of involvement—and warfare—in the region is largely unknown to Westerners, but it helps to explain President Vladimir Putin’s decision last fall to intervene in Syria’s civil war Mr Putin’s gambit on behalf of the Syrian dictator Bashar al-Assad caught many in the West by surprise Critics have assailed it as a miscalculated bid to replace the U.S as the dominant outside power in the region But when viewed from Moscow, Mr Putin’s Middle Eastern adventure looks like something very different: an overdue return to geopolitical aspirations that stretch back not only to the Soviet era but to centuries of czarist rule “The Middle East is a way to showcase that the period of Russia’s absence from the international scene as a first-rate state has ended,” said Fyodor Lukyanov, the head of the Council on Foreign and Defense Policy in Moscow, which advises the Kremlin and other government institutions In Syria, Mr Putin has achieved notable results Russia has prevented the collapse of the Assad regime, Salim al-Jabouri, the speaker of the Iraqi parliament and the country’s leading Sunni politician But today’s Russia can no longer dictate outcomes in the Middle East, as it once did in 19th-century Persia Mr Putin’s Syria campaign is limited by design and necessity—a modest investment by a power that can only afford to invest modestly It is an attempt to become relevant again in a region that, historically, Russia has seen as its strategic backyard Russia has been in contact with the Muslim world, often unhappily, for more than a millennium In the seventh century—long before the emergence of the Slavic principalities that would eventually form the Russian state—Arab armies of the early caliphate brought Islam to Derbent, the oldest city in today’s Russian Federation Ibn Fadlan, a 10th-century Arab diplomat and traveler, described meeting early Russians while visiting Muslim towns along the Volga River He was struck by their “perfect bodies,” their poor hygiene and their practice of burning slave girls in the shipborne funeral pyres of dead noblemen Ibn Battuta, a 14th-century Arab globe-trotter, was less impressed: He wrote off the Russians as “an ugly and perfidious people with red hair and blue eyes.” At the time, the prince of Muscovy was a vassal of the Muslim khan of the Golden Horde, and Moscow’s coinage bore Arabic script Only in 1480 did Muscovy become fully independent and stop paying tribute to its Muslim overlords A few decades later, Czar Ivan the Terrible began a series of wars that destroyed the vast Muslim khanPlease turn to the next page Russia’s history with Islam goes back well over a millennium A BADGE on a serviceman’s uniform at Russia’s Hmeimim airbase in Syria showing Bashar al-Assad and Vladimir Putin, March 10 which seemed imminent just a year ago It also has positioned itself at the center of the Middle East’s diplomatic maneuvering, challenging the formerly unrivaled influence of the U.S in the region “Russia sent a message to the Middle East with its direct intervention in Syria: We are more serious in settling the region’s problems than the Americans are,” said WSJ PROMOTION PEOPLE WHO PEOPLE WHODON’T DON’THAVE HAVETIME TIME MAKE TIME TO READ MAKE TIMESTREET TO READ THE WALL THE WALL STREETJOURNAL JOURNAL Punit Renjen Deloitte Global CEO and Wall Street Journal reader ©2015 Dow Jones & Co Inc All rights reserved 6DJ2855 #MakeTime Find out why you should make time for the Journal Visit WSJ.com/MakeTime Photography by Craig LaCourt Find out why you should make time for the Journal Visit WSJ.com/MakeTime #MakeTime Zhang Xin CEO, entrepreneur and philanthropist ©2016 Dow Jones & Co Inc All rights reserved 6DJ3671 THE WALL STREET JOURNAL A8 | Monday, May 30, 2016 REVIEW MIND & MATTER: ROBERT M SAPOLSKY Continued from the prior page ates in Kazan, Astrakhan and Siberia, pushing Russia’s boundaries far to the south and east In the following centuries, Russia fought more than a dozen wars against the receding Ottoman Empire and steadily advanced into Persian-held lands In the “Great Game” of the 19th century, Russia punched further south toward British India, gobbling up one Central Asian principality after another and almost coming to blows with the British over Afghanistan Moscow also positioned itself as the protector of the Middle East’s Christians—many of whom, like the Russians, were Orthodox (The current head of the Russian Orthodox Church, Patriarch Kirill, alluded to this history when he recently described Russia’s military campaign in Syria as a “holy war” and called Russian troops there “Christ-loving warriors.”) When World War I erupted, Britain and France promised Russia that, once the Ottoman Empire was defeated, the ultimate prize of Constantinople—today’s Istanbul—would come under Russian rule That promise went unfulfilled after the 1917 Bolshevik Revolution The Soviet Union, which retained most of the territories that had been conquered by the czars, also hungered for more influence in the Middle East In 1941, working as partners during World War II, the Soviet Union and the U.K occupied Iran and ousted its shah, ostensibly to prevent German activities there By the 1960s, Soviet weapons, pilots and military instructors were pouring into Arab client states, transforming the Middle East into an arena for Cold War competition While the U.S backed Arab monarchies and Israel, the Soviets sided with leftist regimes in Egypt, Syria, Iraq, Libya and South Yemen, which became the Arab world’s only Marxist state With Iran’s revolution in 1979 and the rise of political Islam, Moscow’s influence began to wane Egypt, the most populous Arab state, signed a U.S.-brokered peace treaty with Israel, and Moscow presided over a textbook case of imperial overreach by invading Afghanistan—undermining its regional influence and speeding up the Soviet Union’s own demise After Saddam Hussein’s invasion of Kuwait in 1990, Mikhail Gorbachev went along with the U.S.-led war to expel Iraq from its conquered neighbor As Moscow’s influence in the region hit its nadir, Washington’s involvement grew larger In the following decade, Russia was too busy trying to prevent the breakup of its own rump post-Soviet state, bloodied by separatist uprisings in Chechnya and other Muslim regions Mr Putin successfully pacified those borderlands and, at first, largely left unchallenged the Middle East’s Pax Americana As recently as 2011, when the Arab Spring started blazing through the region, Moscow chose not to use its veto in the U.N Security Council to block a resolution that paved the way for the U.S and its allies to intervene militarily in Libya and oust dictator Moammar Gadhafi But Mr Putin has repeatedly blocked any such action in Syria, where 400,000 people have been killed and more than half the population displaced since 2011, according to the United Nations Moscow’s relationship with the Syrian regime goes back many decades—to the days of Hafez al-Assad, the current president’s father—and the country is also home to Russia’s only naval facility in the Mediterranean, at Tartus While the U.S has long stated that Mr Assad must go, Washington has refrained from openly attacking his regime Mr Putin, by contrast, has deployed Russia’s latest weaponry against Mr Assad’s opponents, including groups backed by Washington Few people in the Middle East—even Moscow’s beneficiaries— assign charitable motives to Russia’s new activism in the region “The Russians are not doing it because they are part of the Red Cross They are doing it because they have interests,” said Yassine Jaber, a Lebanese Shiite member of parliament and a former cabinet minister “Now they’ve achieved their historical dream of having bases in the warm waters of the region, and they will make sure no gas pipelines will come from Central Asia or Qatar without their approval They have gained a foothold in the region.” Mr Putin’s ambition to re-establish Russia as a major power in the Middle East (and the rest of the world) has been constrained by his country’s declining economy, now roughly the size of Italy’s and still shrinking Already suffering from sanctions imposed by the West after Mr Putin’s 2014 invasion of Ukraine, Russia has been hit hard by the low prices of oil and gas, the country’s main exports But such limits are familiar to Russia, which has never been particularly prosperous but has frequently sought a leading role in global affairs “Putin understands that Russia, based on its economic weight today, can’t be a great power, but he refuses to act in accordance with this weight,” explained Dmitri Trenin, head of the Carnegie Center in Moscow and a former Soviet military officer whose career included a stint as an adviser in Iraq “He aims to punch well above Russia’s economic might The worldview is: We are either a great power, or we disintegrate and are nothing.” Nor is it just a lackluster economy that limits the reach of Rus- sian influence Russia also lacks the kind of soft power that the U.S has long exercised world-wide Young Arabs and Iranians are not particularly eager to watch Russian movies, listen to Russian pop music or study in Russia “No one in this part of the world loves or hates Russia today Russia in the Arab mind is just political strategy and weapons These are its only commodities,” said the Lebanese writer and commentator Hazem Saghieh “It can’t give much because it doesn’t have much.” If anything, there is a stronger social and cultural influence spreading in the other direction Today’s Russian population is about 15% Muslim—a proportion that has grown with the influx of millions of migrant workers from Central Asia Russia is also, by some counts, the world’s second-largest source of recruits for Islamic State From a city like Derbent, the distance to Baghdad is roughly the same as from Boston to Chicago “The Middle East is too close to us for Russia to be a mere observer,” said Andrey Kortunov, the head of the Russian International Affairs Council, a think tank affiliated with the Russian foreign ministry “It’s not remote Australia or Argentina; it is a world that we see on the streets of our cities, behind the counters of our stores, among the workers of our construction sites and, yes, also inside our jails All of this requires playing an active role.” An active role does not mean, however, attempting to imitate the massive Middle East engagements of the U.S over the past decade “The American experience in Iraq is being studied with great attention,” said Mr Lukyanov of the Council on Foreign and Defense Policy “The lesson is that we can’t get involved too deeply—but we also can’t withdraw too quickly.” Despite concern about maintaining limits on its involvement in Syria, Moscow may yet—as President Barack Obama publicly warned last year—get “stuck in a quagmire.” Russia also risks alienating the Muslim world’s majority Sunnis by siding with Mr Assad, who is backed by Shiite Iran and Shiite militias in his war against mostly Sunni rebels In a region increasingly split across sectarian lines, such alliances may make Russia more of a target for Islamic State and other Sunni Islamist terrorist groups Aware of that danger, Russia has avoided casting today’s Middle East as a zero-sum game or seeking to push the U.S from the region Despite occasional bombast, Moscow quietly welcomed Mr Obama’s recent decision to extend the deployment of nearly 10,000 U.S troops in Afghanistan, a move that could prevent the spread of Islamist militancy into former Soviet states in neighboring Central Asia Unlike the U.S.—or the former Soviet Union, whose Middle Eastern alliances were constrained by ideology—Mr Putin’s Russia has the advantage of being on speaking terms with all of the region’s main powers (The lone exception is Turkey, a bitter foe of the Assad regime that, to Mr Putin’s fury, downed a Russian warplane in November.) “While the American influence has receded, Moscow has built unique relationships in the Middle East On one side, it has strategic ties with Israel, and on the other, no less important ties with Iran,” said Yelena Suponina, a Middle East expert at Russia’s Institute of Strategic Studies, a think tank affiliated with the Kremlin Moscow also keeps up ties with Hamas and Hezbollah, which the West considers terrorist groups “Not a single Western country can repeat what Russia is doing,” she added This readiness to deal with all sides has meant, however, that Russia finds itself with no bedrock allies in the region Even as Russia has joined with Iran to save Mr Assad’s regime, overall Iranian-Russian relations remain cool, and the two countries haven’t become major trade partners The Iranians resent Moscow’s cooperation with Israel, and Russia does not want to get dragged into Iran’s sectarian conflict with Sunni powers led by Saudi Arabia “The Iranians feel they are constantly being duped [by the Russians]…and that they are not going to follow through with their promises,” said Dina Esfandiary, a fellow at King’s College London “There is no love for Iran in Russia, and for Russia in Iran The beauty of this relationship is that it’s purely pragmatic,” agreed Mr Trenin of the Carnegie Center The only country in the Middle East with which a significant proportion of Russians empathize, he added, is Israel, in part because so many Israelis hail from the former Soviet Union and speak Russian As it happens, of course, Israel is also the closest regional ally of the U.S The Russia-Israel connection is likely to grow even warmer with the return to government of the most prominent of the Soviet-born Israelis, Avigdor Lieberman, who became Israel’s defense minister this past week Mr Lieberman, an ultranationalist and a former foreign minister, has called the Russian-sponsored deal to remove Syria’s chemical weapons a major boon to Israeli security “My experience is that you can business with [the Russians] They are pragmatic, and you can close a deal and get a clear answer,” Mr Lieberman said in an interview before taking his new post “Russia is nearby, and it will never renounce its interests in the Middle East It is too big a power to be ignored.” ALEXEY DRUZHINYN/RIA NOVOSTI/EUROPEAN PRESSPHOTO AGENCY ‘Russia is nearby, and it will never renounce its interests in the Middle East.’ SYRIAN PRESIDENT Bashar al-Assad and Russian President Vladimir Putin during their meeting at the Kremlin in Moscow, Oct 20, 2015 FINE ART IMAGES/HERITAGE IMAGES/GETTY IMAGES Putin Plays an Old Russian Game FAMILY FEUD Paolo Guidotti’s ‘Cain and Abel,’ painted around 1610 (detail) In Families, Small Disputes Can Set Off Major Mayhem FEW THINGS are more shocking than the intentional, violent killing of one person by another But there are circumstances that can compound the horror Consider an incident earlier this month in St Cloud, Fla Police say that 25-year-old Benjamin Middendorf shot and killed his older brother Nicholas after an argument over a cheeseburger (Mr Middendorf has pleaded not guilty to a charge of second-degree murder in Osceola County Circuit Court.) The mere existence of homicide within families is a puzzle Evolutionary success means passing on copies of one’s genes, typically by reproducing as successfully as possible But another route is “kin selection.” A parent and child share half their genes, as two full siblings Thus, mathematically, an organism achieves the same genetic success if it manages to reproduce once on its own or to help a full sibling reproduce twice This prompted a famous quip attributed to the British scientist J.B.S Haldane: “I’d lay down my life for two brothers or eight cousins.” So evolution favors cooperation and altruism among relatives This explains a whole range of social behaviors: how, for example, a young, untested female baboon achieves a relatively high rank in her group because her older, higher-ranking sister has her back, or how lion siblings form cooperative coalitions Why would humans ever kill a relative? In research published in several different journals in recent years, the psychiatrists Susan Hatters Friedman of the University of Auckland, Phillip Resnick of Case Western Reserve and colleagues have reviewed the varied and ghastly literature about such events They found a list of causes familiar to any reader of police reports Sometimes severe psychiatric illness is to blame—say, murder/ suicide by someone deeply depressed, or psychotically delusional “altruism,” in which a parent kills a newborn to prevent a sinful life and damnation Revenge may also play a part: A child attacks an abusive parent or a spouse kills a partner demanding a divorce In some societies, “honor” killings are committed by families against a (usually female) relative who has violated cultural norms Other families will put to death an ill child or one of the “wrong” sex—again, typically girls Then there’s material gain In Beverly Hills in 1989, the Menendez brothers shot their parents; prosecutors said that they wanted to get their hands on the family fortune Parents, in turn, can see their children as mere commodities In 2014, Kenyan television reported that the father of a 5year-old albino girl attempted to sell her, trying to capitalize on a market for albino body parts thought to have magical properties As I said, varied and breathtakingly ghastly, and utterly puzzling One corner of zoology provides an example of vaguely similar behavior: “brood reduction,” which occurs in numerous bird species (and one species of hyena) When a mother has more offspring than the available resources can support, the strongest siblings sometimes kill the others This would lead you expect that human “siblicide” would occur over valuable resources—God’s approval, birthrights or kingdoms—and it does sometimes, famously But more typically it results instead from years of tension prompted by competition, envy or bullying And the immediate cause of the killings can be shockingly petty: a snide comment, music played too loud, a late arrival at a family get-together The historian Richard Mc Mahon has found a pattern of mundane triggers of intrafamily violence in famine-era Ireland It’s overwhelmingly rooted in everyday life Evolutionary theory often comes up short in explaining the extremes of human behavior We sometimes bequeath wealth to charities instead of to our own children We adopt and raise other children who are completely unrelated to us And brothers may sometimes grievous harm to one another over the smallest disputes From an evolutionary standpoint, we are one weird species A puzzle that defies the rules of evolution THE WALL STREET JOURNAL Monday, May 30, 2016 | A9 KEITH NEGLEY REVIEW In Defense of Antidepressants Studies now question their effectiveness, but a doctor has seen dramatic benefits BY PETER D KRAMER DO ANTIDEPRESSANTS WORK? The notion that they don’t—that Prozac, Lexapro and other drugs are little more than placebos with side effects—has become mainstream “Antidepressant Lift May Be All in Your Head,” a typical headline reads, atop an article citing research from medical journals With as many as one in eight American adults now taking an antidepressant, the stakes are high Concerned about providing effective care to my own patients, I have spent the past five years exploring the evidence on treatment for depression As I read the formal findings, they jibe with what my clinical work as a psychiatrist had led me to expect Antidepressants are harmful in a subset of depressed patients but helpful for most Little of the benefit comes from the classic placebo effect—that is, hopeful expectancy based on the fact of pill-taking Most of it comes instead from the inherent, chemical properties of the drugs, perhaps through their ability to restore resilience in the brain I base these conclusions largely on the results of randomized trials, in which patients received medication or dummy pills and were followed over time In psychiatry, however, such outcome studies are often flawed, and their implications are open to competing interpretations I read the data with a doctorly eye Today, when evidence-based medicine is a byword, mere mention of the practitioner’s viewpoint is transgressive But I have a further confession to make: There are reasons beyond the numbers—even beyond the progress of my patients—that make it hard for me to believe that antidepressants not work Chief among them is the apparent decrease in the sort of end-ofthe-line depression that I encountered regularly during my medical training in the late 1970s Back then I saw men and women who suffered depression at the deepest level On general hospital wards, such patients were not rare Thin, stooped, immobile suffering souls, prematurely aged, they had the classic depressive habitus, the attitude or physique of the disease They spoke slowly and repetitively They were hard to interview I was known to have an interest in psychiatry, so when a depressed woman—call her Irma—fell silent, the team on rounds asked me to sit with her In time, she shared her story Long ago, her husband had died and then a daughter Now Irma had heart disease She was content to join them Depression hardly captures the bleakness she suffered Her brain transmitted a single message: despair I trained at Harvard Medical School, a center of American psychoanalysis Antidepressants had been available since the late 1950s, but to prescribe them was considered a failure of imagination Psychiatrists believed that the drugs robbed patients of their autonomy For my psychiatry rotation, I was sent to a hospital staffed by eminent psychoanalysts The ward housed many patients like Irma In the activity room, depleted depressives sat still, distinguishable from catatonic patients only by their hand-wringing We offered psychotherapy Otherwise, depression was allowed to run its course In much of the country, antidepressants had gained acceptance In time, I learned to sup- plement talk therapy with prescribing Nowhere did I see the volume of end-stage depression I had previously encountered, nor have I ever again During 30-plus years of outpatient practice in Providence, R.I., none of my patients has begun with or, to my knowledge, moved on to paralyzing melancholy Is end-of-the-line, immobilizing depression in decline? Public Health Service surveys on mental illness are not fine-grained enough to tell us But I have asked students and colleagues what they see Their response is uniform: little endstage depression—much less of it (say the oldest doctors) than four decades back Of their gravest cases, trainees say: A patient who had been doing well in treatment lost his job, could not afford his medicine, resumed drinking, missed his clinic appointments, and was brought to the emergency room by the police Paralyzing melancholy has become an element in a tale of care interrupted Further testimony comes from a psychiatrist at the University of Massachusetts, Anthony Rothschild—arguably our premier expert on psychotic depression, which includes hallucinations or delusions In 2014, I asked him if he was seeing classic, immobilizing melancholy—in the absence of psychosis No, he said There’s much less of it His thought was that primary-care doctors nip progressive mood disorders in the bud People used to move from depression to severe depression to paralyzing melancholy Since the 1980s, with the advent of easier-to-use antidepressants, often the slide is interrupted With the deinstitutionalization of mentally ill patients, we should all know people with catastrophic depression For the sweep of human history, they have been with us, sufferers with wasting bodies, tortured eyes and downturned gazes They were a familiar sight at church and in family homes Now, we seldom encounter them Diagnoses shift Increased awareness of dementia, drug abuse and post-traumatic states has made depression a more limited category And diseases come and go, for unknown reasons If treatment has helped to reshape the face of mood disorders, antidepressants may not deserve all the credit New psychotherapies aim to target depression directly, to interrupt episodes Still, my impression is that end-stage depression is less common in part because—haphazardly, with many cases missed altogether—doctors employ antidepressants They have broad effects, preventing recurrences, improving patients’ quality of life Even partial successes count I see patients who, though still afflicted, function as attentive parents and pursue careers With depression as with cancer, we can turn terminal cases into chronic ones If that effort matters, then the practice I observed in my training years—of letting depression linger—was, for all its idealism, barbaric Imagine Irma at critical junctures, struggling with worsening symptoms Should she have been offered a trial of antidepressants? Surely she should have—unless they not work Because I rarely see a patient like her any more, I believe that they There are weak links in this chain of reasoning, but every doctor approaches research findings from a perspective shaped by professional experience I work under this influence: time spent with depression when prescribing for it was taboo Immobilizing melancholy was once a familiar sight; now it is rare Dr Kramer is a psychiatrist and professor at Brown Medical School His latest book, “Ordinarily Well: The Case for Antidepressants,” will be published on June by Farrar, Straus and Giroux ARE THAIS READY TO LET THEMSELVES TAN? TANNED SKIN is a tough sell in Thailand, where both men and women prize fair complexions and spend large sums on skin-whitening pills and lotions When Thais visit the beach, they often wrap themselves up in beach towels or wear long-sleeved spandex outfits Magazine models are usually ivory-white Around Siam Square, Bangkok’s equivalent of New York’s SoHo or Shibuya in Tokyo, skin-whitening clinics abound For young women in particular, the pressure to have a fair complexion is intense Sociologists say that skin tone in many Asian countries is widely linked with both social class and beauty As in 17th-century Europe, darker skin is associated with manual laborers or farmers exposed to the sun, while lighter tones are seen as a sign of wealth and privilege But attitudes may be shifting A pro-tan camp has emerged in Thailand, and one of its biggest advocates is the rapper Joey Boy, who is investing a chunk of his fortune in a magazine called Tan “The idea is to go outside and something Don’t stay at home worrying about your skinwhitening cream,” said Joey Boy, who at 41 is one of Thailand’s best-known performers Recent issues of his magazine ran articles on surfing and skateboarding Models featured on the cover often sport deep tans, and one piece explained how to apply self-tanning creams to get a bronzed beach look These are radical notions across much of Asia, where the market for skin-whitening products is projected to swell to $20 billion a year by the end of the decade, according to the consulting firm Global Industry Analysts Inc At the same time, however, many Thais are ATHIT PERAWONGMETHA/REUTERS BY JAMES HOOKWAY A CROWD waiting for a boat at Maiton Island in Phuket, Thailand, March 18 beginning to reflect on the deeper significance of their attitudes about skin color The country’s political upheavals over the past decade, including two military coups, have raised an uneasy awareness of rural and urban divides in the country—with darker skin traditionally more associated with rural residents Consumers, meanwhile, are beginning to push back against the aggressive and, in some cases, offensive advertising of skin-whitening products One Bangkok-based firm selling skinlightening pills apologized recently after one of its commercials provoked an uproar for its slo- gan: “You just need to be white to win.” Authorities are casting a more critical eye, too, investigating other skin-whitening products claiming to contain salmon sperm, among other things Joey Boy (whose real name is Apisit Opasaimlikit) has helped to expand the debate Raised in Bangkok’s Chinatown, where his parents ran an auto-parts business, he spent much of his youth skateboarding and dabbling in hip-hop His rapping career took off in 1995 with a hit single, “Fun Fun Fun,” that is still played on Thai radio Later he collaborated with will.i.am from the Black Eyed Peas before taking on some movie and TV roles His new magazine has struck a chord At its launch in February, singers and actors sipped from glasses of organic cider as they posed for photographs with fans Waitresses glided around, offering Thai beach treats such as black herbal jelly before Joey Boy entered to the soundtrack from the “Hawaii Five-O” television series Leafing through an issue of Tan during a break from her job selling cars in a Bangkok showroom, Kanyana Sontinen, 24, said that she was struck by the selection of models in the magazine “This sends a positive message for darker-skinned people like me,” she said “In the past I wanted to be white, but I can see that things are beginning to change.” TV host Patcharasri Benjamas—whose nickname, Kalamare, refers to a dark Thai dessert and alludes to her darker skin—also thinks that Tan is helping Thais open up to the idea of getting a suntan or revealing their natural skin color “If people can see models on the beach with tanned skin, maybe they will feel they can that, too,” she said “Not like now, when they cover up their arms and legs as soon as they arrive at the beach and sit in the shade all the time.” Interest from advertisers is picking up The biggest so far is Rip Curl, which advertises bikinis and other leisure-wear in the magazine Others include Brazilian footwear brand Havaianas and the Italian maker of Vespa scooters Editorial meetings can still be a little fraught, though “Some of the team were complaining that not all the models are tanned,” Joey Boy said “It’s really, really sensitive.” —Wilawan Watcharasakwet contributed to this article THE WALL STREET JOURNAL A10 | Monday, May 30, 2016 OPINION REVIEW & OUTLOOK N Obama’s Hiroshima Genie o phrase in national security is more fa- define our nations not by our capacity to demiliar than the notion of putting the nu- stroy but by what we build And perhaps above clear genie back in the bottle In his all, we must reimagine our connection to one speech Friday in Hiroshima, another as members of one A ‘moral revolution’ President Obama proposed human race.” such a miracle: “Among those That statement may stand in won’t stop the spread nations like my own that hold history as the apotheosis of Mr of nuclear weapons nuclear stockpiles, we must Obama’s view of world affairs have the courage to escape the It also summarizes the basis logic of fear, and pursue a for most criticism of the Presiworld without them.” dent’s foreign-policy legacy, which is its nearly The genie was not the mere existence of nu- unbounded credulousness It is belief without ofclear weapons but the technical knowledge to fering adequate evidence for its beliefs produce them North Korea, one of the world’s Mr Obama’s sentiments are undeniably nomost economically bereft nations, has nonethe- ble, but they are in conflict with the observable less acquired knowledge to produce nuclear and growing disorder of the world his successor bombs and missile-delivery systems And it dis- will inherit One word that describes that unplays no inclination to stop producing nuclear- certain inheritance is alliances As virtually all weapons technology—for itself or for export to his postwar predecessors understood, limiting other nations war and especially the spread of nuclear weapThis is known as proliferation, the most vex- ons depends crucially on the willing participaing problem of the nuclear age, one that states- tion of other nations men have worked tirelessly to address across Mr Obama’s policies toward Iran, Russia, the seven decades since Hiroshima and Naga- Syria, Iraq, China and North Korea have caused saki, which by the way saved millions of lives important allies in each instance to doubt by ending World War II America’s traditional postwar resolve to supMr Obama’s contribution at the end of his port and protect them Presidency is to anathematize war: “We must Saying, as he did in Hiroshima, that what the change our mind-set about war itself To pre- world needs in the nuclear age is “a moral revovent conflict through diplomacy and strive to lution” is inadequate to the growing proliferaend conflicts after they’ve begun To see our tion he has presided over Mr Obama’s speech growing interdependence as a cause for peace- was eloquent, but the next President’s policies ful cooperation and not violent competition To will have to be much more than that N Democrats vs Israel ot too long ago Democrats were Amer- country—including a genuine occupier like ica’s pro-Israel party Harry Truman China in Tibet—is being singled out for boyrecognized Israel moments after the cotts the way Israel is The suggestion that IsJewish state declared inderael deliberately “massacres” pendence in 1948 JFK sold Sanders puts two hostile innocent Palestinians is false advanced anti-aircraft misbased on everything we know voices on the party’s siles to Jerusalem, ending a about Israel’s military replatform committee de facto U.S arms embargo straint and war practices If Bill Clinton was famously Palestinians wanted to end close to the late Israeli Prime Israel’s occupation, they Minister Yitzhak Rabin could have taken the deal offered to them at If that party isn’t dead, it’s close This week Camp David in 2000 when Bill Clinton was Bernie Sanders named James Zogby of the President Arab-American Institute and professor Cornel Pro-Israel Democrats might reply that West to the party’s platform-drafting commit- Messrs West and Zogby are only two of a 15tee The pair are expected to push hard for a person panel, and Hillary Clinton has taken a more “even-handed” position on the Israeli- more mainstream line But there’s no gainsayPalestinian conflict, which in practice means ing the increasingly anti-Israel tilt of progresdenouncing Israel at every turn sive politics A Pew poll from April found that Mr West offered a flavor of his even-hand- while moderate Democrats still sympathized edness on Facebook in 2014 during Israel’s last with Israel over the Palestinians by a 53% to war with Hamas “Let us not be deceived,” he 19% margin, self-identified liberal Democrats wrote “The Israeli massacre of innocent Pales- now tilt to the Palestinians, 40% to 33% tinians, especially the precious children, is a Even Mrs Clinton is only moderate on Iscrime against humanity! The rockets of Hamas rael when compared to the Democratic left indeed are morally wrong and politically inef- Her State Department was notorious for its defective—but these crimes pale in the face of nunciations of Israel, and some of her closest the U.S supported Israeli slaughters of inno- advisers are often quicker to denounce Israeli cent civilians.” self-defense than Palestinian terror Mr Zogby has prominently endorsed the The shame of all this is that support for a Boycott, Divestment and Sanctions (BDS) robust liberal democracy like Israel should movement against Israel, calling it “a legiti- come naturally to the Democratic Party Last mate and moral response to Israeli policy.” we checked, it was better to be a woman, or BDS has gained steam in recent years on col- homosexual, or environmentalist, or political lege campuses, where Palestinian victimology dissident in Tel Aviv than in Gaza As they plays well and students are easily misled about write their party’s platform, Democrats might the causes of the Arab-Israeli conflict ask why Israel, the one Middle Eastern country These views go well beyond the usual that fully shares their values, should be the bounds of fair criticism of Israel No other one they most seek to condemn H The TSA’s Summer of Lines ours of standing in line at airports has ployees without security training, while giving never topped anyone’s list of holiday local directors more flexibility in allocating pastimes, but the U.S Transportation staff than they generally have now TSA must Security Administration seems also consider deploying emThey’re from the intent on imposing this equalployees from headquarters, ity of misery this summer On the bill tells the agency to government and they’re and Thursday House Republicans finish the private partnerships here to make you wait that might reduce the hassle unveiled legislation to reduce wait times, and the agency deof enrolling in expedited serves a full body scan screening For months passengers have languished in Here’s what the House should add: TSA runs lines in Chicago, Atlanta, Charlotte, Seattle and a Screening Partnership Program, which in fill in the blank American Airlines says more theory allows an airport to “opt out” of TSA and than 70,000 of its passengers have missed flights bring in a certified private security firm In a this year due to lines Some airports are telling 2011 report, the House Committee on Transporfolks to show up three hours before takeoff—and tation and Infrastructure compared Los Angeles that’s before you wait on the tarmac Passenger data with a private operation running San Franoutrage has been so potent that the government cisco’s airport A contract screener in San Fran even held someone accountable: TSA’s security moved through 65% more passengers than TSA chief resigned this week employees in L.A One reason for the bottlenecks is that TSA But only a handful of airports participate, as has reduced screening staff more than 10% since TSA chooses the security company and micro2011, while travelers increased 11% The agency manages the contract That isn’t a partnership hoped to shuttle people into its PreCheck pro- Congress could stipulate that an airport mangram, which expedites security for those who age its own bidding and operations; the governshow up somewhere for fingerprinting and pay ment would remain a safety regulator Execu$85 More time at this glorified DMV hasn’t tives at Hartsfield-Jackson in Atlanta and been as popular as the agency thought TSA has elsewhere have floated dropping TSA, but withthrice since 2013 invited private companies to out Congress that’s about as useful as hiring cirdevelop new advanced screening techniques So cus entertainers to distract the disgruntled, as far, no results San Diego International tried recently TSA says its $7.6 billion annual budget is a Congress nationalized airport screening after pittance, and so Congress freed up $34 million 9/ll, as Democrats saw a political opening to add more for the agency Senate Democrats want to thousands of new union workers But after pour even more cash into TSA for hiring thou- nearly a decade and a half, TSA’s legend of insands of new staff But ask anyone who has ever competence grows Last year Department of hired an employee how easy it is to find 1,000 Homeland Security Inspector General John Roth workers, and add that screeners spend weeks told Congress that a secret performance investiin Washington for training That won’t help gation had turned up “failures in the technology, summer travelers failures in TSA procedures, and human error.” A better solution is from the House Home- Safety oversights are common land Security Committee Its bill directs TSA to One bill won’t end the dysfunction, but forcreassign as screening staff some thousands of ing government to shift priorities to serve pas“behavior detection officers” who currently sengers would at least offer relief to anyone unstare or bark at travelers The bill also instructs lucky enough to pass through an airport over TSA to reserve jobs like stacking bins for em- the summer Trump Rakes The Clinton Muck If the political class had a theme song, it would be that old Toby Keith tune, “I Wanna Talk About Me.” Donald Trump knows the feelPOTOMAC ing, though of late he has been focusing on WATCH others He wants to talk By Kimberley about Bill He wants to A Strassel talk about Hillary He wants to talk about the 1990s, and Vince Foster, and Juanita Broaddrick He wants to talk about things that could help him win an election That Hillary Clinton today has a shot at the White House comes down to one reality: People forget This is a politician utterly defined by scandal, and with more baggage than the carousels at Dulles International She ought to be disqualified And yet the Clintons thrive, the beneficiaries of forgetfulness They’ve spent decades bulling through their messes, blaming their woes on right-wing plots, and depending on a fickle press and a busy nation to lose interest in their wretchedness It works every time Yet Mr Trump has a way of disrupting the status quo He does this in part by behaving in ways most politicians wouldn’t or couldn’t Unlike Republicans who may be wary of resurrecting the Clinton past, for instance, Mr Trump is not afraid of being labeled “obsessive.” But there is usually a method to his madness And his current let’s-campaign-like-it’s-1999 strategy has purpose—it’s part offense, part defense On offensive, Mr Trump’s goal is to play off the soaring distrust Americans have in Mrs Clinton by tying the past to the present He wants voters to realize that the Whitewater land deal and Paula Jones aren’t dusty, closed chapters in the Clintons’ history They are, rather, markers on a long continuum, one that begins with young Bill’s draft-dodging and continues today with mature Hillary’s private-email-server deletions and Clinton Foundation money-grubbing And those scandals would accompany the Clintons back to the White House and define the next eight years “[W]hether it’s Whitewater or whether it’s Vince or whether it’s Benghazi It’s always a mess with Hillary,” said Mr Trump in a recent interview The Clintons will claim that nobody cares It’s also possible that younger Americans—some of whom were in diapers during the Clinton administration— can’t figure out why people are suddenly talking about blue dresses Still, give Mr Trump marks for doing more than any politician in recent memory to educate The newspapers are suddenly brimming with synopses of Filegate, Chinagate, Travelgate, cattle futures, the Marc Rich pardon, Kathleen Willey and White House looting Which is also part of the Trump offense: Energizing GOP base voters Older Republicans in particular remain frustrated that the Clintons have never been held to account, and that the media so easily lost interest in the scandals Mr Trump’s hits about the 1990s are also defensive moves, against what might otherwise be Mrs Clinton’s biggest strength—the “women’s issue.” Democrats have used the “war on women” theme against Republicans for more than a decade, and for the most part successfully Mrs Clinton is already playing the women’s card, accusing Mr Trump of insulting women His response goes like this: “You want to talk about women? Awesome Let’s talk about Bill.” The Clintons have never run into a foe willing to go where this one goes—gleefully His ad on Instagram, featuring Bill Clinton chomping on a cigar, with the voices of women describing his unwanted sexual advances in the background, along with an ominous Hillary cackle, was a study in full-throttle bluntness Mrs Clinton now knows that attacking Mr Trump about women will invite a counterattack from him citing Paula Jones, another of Bill’s accusers So perhaps Mrs Clinton will lay off that front Which is Mr Trump’s goal He’s playing for a draw on this issue Does Mr Trump’s Bad Bill approach risk making Mrs Clinton look like a victim? It might, if this were the 1990s, and she were still viewed as the victim of a philandering husband But Hillary has spent the past 16 years embracing her womanizer, using his fame and fortune to bolster her presidential run And this is the woman who, according to her longtime friend Diane Blair, railed that Monica Lewinsky was a “narcissistic loonytune.” It’s hard to feel sorry for a woman willing to blame her husband’s dishonor on a 22-year-old intern What matters most about this Trump strategy is that it’s a marker of what’s to come The Clintons play hardball Mr Trump intends to play smashball For them, that’s new Write to kim@wsj.com That Slow Hissing Sound? The Deflating Jet Bubble What happened to the jet bubble we wrote about between 2010 and 2013? It popped Last year, sales by Boeing and Airbus were down 40% from BUSINESS the previous two WORLD years In 2016, the By Holman W sledding, so far, has Jenkins, Jr been even rougher Boeing’s stock price is down only a bit, but trails the market Break-even for its spiffy 787 Dreamliner, which ran up $30 billion in deferred production costs, has been delayed Profits are even more remote for Airbus’s gigantic A380, a plane popular with travelers and unlikely to earn a nickel for Airbus shareholders But jet bubbles don’t pop the way dotcom or telecom bubbles If the plane makers never booked another order, they would still work eight years or more to meet those already penciled in Airbus’s backlog, at list prices, officially tops $1 trillion, and Boeing’s isn’t far off Naturally, both worry about cancellations and deferrals by airlines whose eyes were bigger than their tummies In many ways, though, the duo have lucked out New invaders from Russia, China, Japan and elsewhere, aiming to challenge their dominant, workaday narrowbodies, the 737 and A320, have been slow to get off the ground Canada’s Bombardier a few weeks ago racked up its first big order from a U.S carrier (Delta) for its CS100, but the company still is seeking a billion-dollar bailout from the Canadian government Was bubble ever the right word? What is a bubble anyway? As this column has detailed, political and market factors lay behind the boom in orders that barely took a hiatus even during the financial crash of 2008 The courts in the U.S keep bankrupt carriers flying, wiping out their debts and freeing up balance sheets for new plane purchases and leases An authentic air-travel boom in Asia generated lots of sales, but so did cheap, government-subsidized lending Europe pitched in with noise- and carbon-abatement rules that artificially encouraged carriers to park older but perfectly serviceable aircraft High oil prices further rewarded carriers for retiring 10-year-old jets to the desert in favor of newer jets promising a 10% improvement in fuel efficiency Even so, the latter dynamic was already fraying before 2014’s fracking-induced bust in oil prices Delta, Southwest and others noticed that high-quality, older planes had become so cheap on the secondary market that flying them would be profitable even with their higher fuel-burn One of our cohorts in bubble-saying, Adam Pilarski of the Avitas consultancy, was already predicting six years ago that, by 2018, oil prices would fall to $40 based on sluggish global growth and shale The Boeing-Airbus duopoly, you might think, would be capable of disciplining itself, but being a duopolist is not all it’s cracked up to be Boeing, despite evidence of doubts, followed Airbus in rolling out expensive commitments to develop new aircraft even when these planes would undercut the value of hundreds of planes that customers had not yet taken delivery of Still, the bubble thesis may have been overstated if you were expecting a sudden meltdown Both manufacturers deliberately sought to increase production in locales where law and culture are less friendly to organized labor, giving themselves the flexibility to slash costs and output if needed Boeing built its second 787 line in South Carolina; Airbus last year started production of A320s in Mobile, Alabama But the risk remains Both have the potential to blow themselves up by guessing wrong on future deliveries and trying to build too many planes too fast, creating the kind of production snafu that almost undid Boeing in the 1990s Not only are both companies, as their struggles with the A380 and 787 show, tempted to overestimate their own competence in the most complex manufacturing task known to man The future of commercial aviation is also a question Does air travel seize up under security fears, environmental costs, the closing of markets and the appeal of telepresence? Or does globalization, despite Trumpian and Brexit hiccups, continue? Do the happy trends prevail that recently saw Chinese police officers deployed to Italy to cooperate in keeping Chinese tourists safe and comfy? Will growing hordes continue to wander the globe in search of business, adventure and new scenery? Of course, both manufacturers also have large military businesses to fall back on should the future choose a darker path THE WALL STREET JOURNAL B2 | Monday, May 30, 2016 INDEX TO BUSINESSES BUSINESS NEWS These indexes cite notable references to most parent companies and businesspeople in today’s edition Articles on regional page inserts aren’t cited in these indexes A G Rystad Energy B2 Alphabet B3 American Airlines Group .B1 Anglo American B2 Google B3 S H Samsung Electronics B16 Seven West Media B2 SGL Carbon B2 State Bank of India B16 STX Offshore & Shipbuilding B2 Sumitomo Mitsui Financial Group .B15 C Chevron A2,B2 China National Chemical B2 China National Nuclear Power B2 CHS B13 Citigroup B15 CME Group B16 Condor .A3 D De Beers B2 E Energy Transfer Equity B16 Exxon Mobil B1 F Ferrari B1 Fiat Chrysler Automobiles B1 Fieldwood Energy B15 Fuji Heavy Industries B1 K Konecranes B1 L LinkedIn B16 M Mazda Motors B1 Mitsubishi Motors B1 Mitsubishi UFJ Financial Group .B15 Mizuho Financial Group .B13 N News Corp B2 Nissan Motor B1 Novorossia TV A12 O V Oracle B3 Valeant Pharmaceuticals International B16 P Parsley Energy B15 Philippine Amusement and Gaming A1 Q W Wells Fargo .B15 Williams B16 Qualcomm B3 Z R Zoomlion Heavy Industry B16 Zoomlion Heavy Industry Science & Technology B1 Riverstone Holdings.B15 Royal Dutch Shell .B1 Royal London Asset Management B15 INDEX TO PEOPLE A K O Aberle, Derek B3 Ackman, William B16 Kalfas, Mina B3 Olsen, Yngvild B3 Omens, Mark B16 B Kauffman, Nathan B15 L Bignone, Reynaldo A3 Bucher, John R B1 Lindell, Grant B15 C Lindzon, Howard .B16 Christensen, Bo A2 Cleaver, Bruce B2 Croft, Helima A2 M H Hittle, Ann-Louise A1 Makukhin, Alexey A12 McRae, Eric .B15 Mellier, Philippe B2 J N Jensen, Mark B15 Nelson, Randy B15 R Rousseau, Jacques A1 S Sem, Claude B13 Seppala, Marvin B3 Sheldon, Behshad .B3 Swanson, Michael B13 T Takada, Shigehisa .B1 V Volkow, Nora .B3 SGL Carbon Surges As ChemChina Circles BY FRIEDRICH GEIGER BERLIN—Shares in Germany’s SGL Carbon SE jumped 12% on Friday following a magazine report that China National Chemical Corp was interested in acquiring the graphite-electrode and carbon-fiber maker ChemChina Chairman Ren Jianxin has held talks several times with SGL Carbon Chief Executive Juergen Koehler and its main shareholder Susanne Klatten, Germany’s Manager Magazin reported SGL Carbon wants to spin off its carbon electrodes business, which supplies the steel sector where weak prices have been weighing on demand BY IN-SOO NAM T Takata B1 Takeda Pharmaceutical .B16 Terex B1 Titan Pharmaceuticals .B3 Toyota Motor B1 Twitter B16 Government-owned ChemChina is interested in acquiring all of SGL Carbon but is open to other options, according to Manager Magazin A spokesman for SGL Carbon said the company has provided potential investors with information about its graphite electrodes business He said the possible sale of the entire company was “pure speculation” and declined to comment further on it Ms Klatten’s investment vehicle, Skion, holds a 27% stake in SGL Carbon A ChemChina spokesman didn’t immediately respond with a comment and Ms Klatten couldn’t immediately be reached OLIVIA HARRIS/REUTERS B Betfair Group B13 Bonanza Creek Energy B15 BP B1 Braeburn Pharmaceuticals .B3 Hercules Offshore B2 Honda Motor .B1 Korean Shipbuilder Could Be Liquidated De Beers is among the biggest diamond producers in the world and is the gem’s most important seller De Beers Gets New CEO Change at top comes as diamond company is coping with weak demand, low prices BY ALEX MACDONALD LONDON—De Beers named a new chief executive on Friday as the storied diamond company steers through a rough patch of weak demand and low prices for the precious gems Bruce Cleaver, 51 years old, will succeed Philippe Mellier as chief executive on July Mr Cleaver currently heads strategy and business development at U.K.-based mining company Anglo American PLC, which owns 85% of De Beers Mr Mellier, 60, is stepping down after serving what he had said would be a five-year stint to revive De Beers’s fortunes De Beers is among the biggest diamond producers in the world and is the gem’s most important seller, having effectively marketed diamonds as AIRLINES Continued from the prior page meeting in Miami form part of a class-action lawsuit lodged against four U.S carriers, which all deny the charges Cheaper jet fuel has been the biggest driver of higher profits, but prices have been rising since January Still, the airline industry should deliver strong earnings this year, said Peter Morris, chief economist at aviation consultant Ascend Worldwide Ltd Many carriers in Europe and Asia are only starting to see the benefit from cheaper fuel as costly fuel hedges, made before crude tumbled, are replaced by ones made at weight divisions of years past— such as iron ore, copper and platinum—have struggled due to a drop in metal prices to multiyear lows In a news release, Mr Mellier said he steered the company “through some of the diamond industry’s toughest times and with the market showing signs of recovery, now is the right time for me to pass the baton to the next generation.” Mr Cleaver joined De Beers as general counsel in 2005, becoming commercial director in 2007 In 2010 he was appointed an interim co-CEO of the company before Mr Mellier became CEO in 2011 Mr Cleaver headed strategy and business development for De Beers before assuming his current role in 2015 Anglo American CEO Mark Cutifani said Mr Cleaver’s appointment will provide continuity to Mr Mellier’s work given that the two spent much of the past decade working together on executing strategy more favorable rates Also on the Dublin agenda is the prospect of a new cost headwind as regulators consider making carriers pay for carbon-dioxide emissions Airlines are exempt from the global climate change deal struck in Paris last December, but pressure has been mounting on politicians and regulators to curtail the CO2 output from commercial flights Environmental groups fret that the airline industry’s rapid growth could undermine other climate-change initiatives unless limits are imposed The International Civil Aviation Organization, an arm of the United Nations, is trying to secure agreement on a mechanism to limit the indus- try’s C02 output without curtailing growth ICAO members pledged to improve the fuel efficiency of commercial aircraft by 2% a year and to see that any industry growth beyond 2020 won’t increase pollution ICAO representatives convened in May to help bridge differences between member states about what the system might look like Exactly how much of an airline’s carbon emissions will need to be offset is still being negotiated IATA estimates that the airline industry’s annual bill would be about $2.8 billion compared with projected profits this year of $36 billion, a forecast expected to be updated this week OIL Business Watch HERCULES OFFSHORE HERCULES OFFSHORE INC Company to File Again for Bankruptcy Hercules Offshore Inc said it would again file for bankruptcy, this time planning to liquidate as the ocean driller goes out of business amid the long swoon in oil prices Less than seven months after exiting bankruptcy court with $450 million in fresh financing and a lighter debt load, Hercules said Friday that it reached a deal with 99% of its senior lenders that will be executed with a “prepackaged” chapter 11 filing In a prepackaged bankruptcy, companies line up creditor support for their debt-payment plans before seeking chapter 11 protection, allowing them a speedier—and cheaper—trip through bankruptcy Hercules’s plan would see the company liquidate its assets and use the proceeds to repay creditors The company expects to be able to pay unsecured creditors in full and provide as much as $12.5 million to shareholders Senior lender recoveries will be based on the success of the asset sales The company said Friday that it already has lined up a $196 million offer for its harsh environment jackup rig, formerly named Hercules Highlander, to Maersk Highlander UK Ltd As reasons for its distress, Hercules cited “the ongoing decline in oil prices, the consolidation of its U.S customer base and the addition of new capacity [that] negatively impacted day rates and demand for Hercules’s services.” —Stephanie Gleason and Anne Steele an essential engagement gift since the mid-20th century But the South African company has struggled in the past year amid an economic slowdown in China, where burgeoning wealth had previously fueled sales of diamonds De Beers’s underlying earnings shrank 72% last year to $258 million De Beers cut production to help rebalance supply and demand That led diamond traders to sell down bloated inventories of polished diamonds as consumer demand reached its seasonal year-end holiday peak The production cutbacks have helped buoy rough-diamond prices, although demand ebbed recently due to a seasonal lull in buying activity Still, De Beers has become an important profit center for parent company Anglo American Diamonds accounted for 31% of Anglo’s underlying earnings last year, making it the group’s second-most important earnings driver after coal Anglo’s heavy- Hercules Offshore plans to liquidate amid the long swoon in oil prices SEVEN WEST MEDIA Company in Talks To Buy Newspaper Seven West Media Ltd is in discussions with News Corp to buy Western Australian newspaper The Sunday Times and news website Perth Now The Perth-based company, which owns the West Australian newspaper as well as free-to-air broadcaster Seven Network, on Friday said any deal would boost earnings in the first year after the acquisition but would be subject to approval from Australia’s antitrust regulator As part of the agreement, Seven West Media and News Corp plan to implement a news content sharing agreement for the West Australian with News’ daily brands in Adelaide, Bris- bane, Melbourne and Sydney The company said the acquisition would allow it to explore expansion of its printing operations which could deliver scale benefits and synergies —Rebecca Thurlow CHINA Nuclear Company To Build Sudan Plant China is to build Sudan’s first nuclear reactor, as the East African nation moves to boost electricity generation and avert a looming power crisis The reactor will be built by China National Nuclear Power Co The 600-megawatt power plant would supply electricity to the Sudanese capital, Khartoum, as well as several other towns —Nicholas Bariyo Continued from the prior page might be modest Although many of Chevron Corp.’s mega projects around the globe need higher prices to be profitable, the company recently said that its Permian Basin operations in West Texas can hum along with crude at $50 Chevron has slashed 40% from its costs in the area and now has 4,000 wells there that give a 10% rate of return when West Texas Intermediate, the U.S benchmark price, is at $50 “We are now in full horizontal factory mode in the Permian,” said Joe Geagea, an executive vice president for technology and services at Chevron, comparing drilling operations there to a streamlined manufacturing process Exxon hit the brakes this year, slashing its budget by 25% and dropping the number of drilling rigs it runs in the U.S from close to 60 at the height of the oil boom to about 16 as it delayed shale production “It’s not really a price SUITOR Continued from the prior page China Development Bank was expected to lead the financing, they said However, the policy bank hadn’t yet provided a commitment letter to Zoomlion, one of the people said Chinese officials have been trying to slow an exodus of money from the country, making life tougher for companies that need to trade the yuan for U.S dollars to business The Wall Street Journal earlier reported that China’s foreign-exchange regulator had asked banks to more closely review foreign-currency transactions; trigger for us,” said Jeff Woodbury, vice president of investor relations, when Exxon discussed first-quarter earnings in late April The company cares more about the broad supply-anddemand balance across the whole world, he said Global oil demand is growing, but not fast enough to outpace the crude supply glut that has built up over the past two years A forecast from the In- SEOUL—South Korea’s STX Offshore & Shipbuilding Co has filed for receivership, in further evidence of the challenges facing global shipbuilders mired in one of the industry’s worst slumps The filing with the Seoul Central District Court on Friday came just two days after creditors for STX Offshore discontinued providing a lifeline after years of financial assistance failed to keep the company afloat The court will soon determine whether STX Offshore should be liquidated or given a chance for survival after rigorous debt restructuring, the company said State-run Korea Development Bank, the company’s main creditor, said Wednesday that any additional bailout funds would little to help the company while it struggles to get shipbuilding orders in its current situation STX Offshore, once the country’s fourth-largest shipbuilder by revenue, has been under the control of its creditors since April 2013 after losing money from operations and amassing huge debt The creditors injected billions of dollars to bail it out, but it still ran a 314 billion won ($265 million) operating loss last year, following a 1.5 trillion won loss in 2014 The company owes financial institutions nearly trillion won As a glut of vessels and low freight rates have created a financial nightmare for many shipbuilders, the Korean government said last month that it would push for sector consolidation, particularly in the troubled shipbuilding and shipping industries Profits at Korean shipbuilders began sliding after the 2008 global economic crisis damped orders from shipping companies, and lower-cost Chinese rivals made market inroads The world’s three largest shipbuilders, all Korean— Hyundai Heavy Industries Co., Daewoo Shipbuilding & Marine Engineering Co and Samsung Heavy Industries Co.—are also staggering under heavy debt loads ternational Energy Agency now projects a strong rebound in the second half of 2016, with oil demand rising by 1.8 million barrels a day to 96.8 million barrels a day by the fourth quarter Although many U.S producers have said $50 oil won’t spur them to rush out and tap new wells, one of the bigger uncertainties is whether the $50 threshold will lead them to finish the many wells that are drilled but not yet pumping in fields from Texas to North Dakota—estimated at nearly 4,000 according to data from consulting firm Rystad Energy “Consensus appears to be building around the notion that $50 to $55 is tantamount to an industry ‘all clear,’ ” analysts at Tudor, Pickering, Holt & Co said Further out in the futures market, oil is trading over $50 a barrel into 2017 That allows companies to hedge their future output by locking in higher prices today for oil they won’t pump until next year, said John England, a vice chairman of oil for Deloitte LLP in Houston The prevailing view on Wall Street is that $60-a-barrel oil is the new $90, the price needed to trigger the sort of production growth seen during the last upswing, said Evan Calio, head of U.S oil research at Morgan Stanley —Erin Ailworth contributed to this article and that scrutiny could delay many of China’s outbound deals, according to bankers and lawyers Zoomlion joins a growing list of Chinese companies unable to complete acquisitions outside of the country In a prominent case, Anbang Insurance Group Co entered into a bidding war with Marriott International Inc for control of Starwood Hotels & Resorts Worldwide Inc., but abandoned its $14 billion bid in March, citing only “various market considerations.” Such failed attempts could make bankers and potential acquisition targets wary of entertaining overtures from China That said, there have been some high-profile deals struck by Chinese businesses this year, including China National Chemical Corp.’s $43 billion offer for Swiss seed giant Syngenta AG So far this year, overseas buying by Chinese companies totals $119 billion, according to Dealogic, which compares with $107 billion for all of 2015 China’s construction-equipment market has been mired in a slump Zoomlion went public in January with an unsolicited $30-a-share offer for Westport, Conn.-based Terex The offer disrupted Terex’s plan from last August for an all-stock merger with Konecranes —Joanne Chiu contributed to this article $60-a-barrel oil is the price needed to kindle a production rise, analysts say THE WALL STREET JOURNAL Monday, May 30, 2016 | B3 TECHNOLOGY @wsjd | wsjd.com Qualcomm Starts China Venture BY EVA DOU Silicon Valley Driverless-Car StartupRaises Fresh Capital BY MIKE RAMSEY The backer of a Silicon Valley autonomous-car developer called Zoox said the secretive startup raised a fresh round of capital valuing it at more than $1 billion, roughly equal to a similar company General Motors Co acquired earlier this month Zoox executives have been tight-lipped, saying little in public about the Palo Alto, Calif., company’s plans The firm is developing technology similar to Alphabet Inc.’s Google car project and Cruise Automation, which GM purchased in a deal valuing it at more than $1 billion, according to people familiar with the terms Zoox’s profile, however, has increased recently amid heightened interest in autonomous cars and the potential for using them as self-driving taxis that can be deployed by ride-sharing services such as Uber Technologies Inc While auto makers including GM have been working on self-driving cars for several years, companies such as Zoox could play an important role refining the technology Zoox is one of 13 companies that have received licenses from California to test autonomous vehicles on public roads Hong Kong-based AID Partners Capital Holdings Ltd this week disclosed a $20 million investment for a Zoox stake that implies a $1 billionplus valuation for the startup AID Chairman and Chief Investment Officer Kevin Wu believes Zoox can deploy a fleet of fully autonomous vehicles by 2020 for ride-sharing services like those Uber offers The company’s co-founder, Tim Kentley-Klay, declined to comment on the investment Zoox’s other co-founder is Jesse Levinson, who formerly led Stanford University’s selfdriving car program Zoox is designing its own self-driving taxi and control system It employs 140 people, according to AID, including dozens of scientists from universities It also has attracted more than 50 engineers and professionals from Alphabet, electric-car maker Tesla Motors Inc., Apple Inc., Nvidia Corp and NASA, the investment firm said Revenue $8 billion BY JACK NICAS China Woes Qualcomm's overall revenue has fallen, hit by difficulties in collecting royalties in China FY2014 ’15 ’16 Note: Fiscal years end in late September Source: the company REUTERS THE WALL STREET JOURNAL Qualcomm President Derek Aberle expects China’s server demand to eclipse that of the U.S Over the past two years, China has tightened requirements for foreign technology vendors, requiring them to share more information with Beijing to prove their products are secure This is especially true for sales to the Chinese government and state-owned enterprises, according to people familiar with the process The Qualcomm joint venture will likely address the matter of security by developing “something very specific to China,” Mr Aberle said “That’s a difference from where you’ve got a complete solution and you’re trying to bring that in.” Qualcomm, which is based in San Diego, has two major units, one that sells chips and another that licenses patents on cellular technology to smartphone makers Its licensing business has had trouble collecting royalties in China following an investigation by China’s National Development and Reform Commission The regulator said Qualcomm had used its market dominance to charge Chinese smartphone makers overly high prices to license technology needed for their handsets Qualcomm said it was disappointed in that finding, but agreed not to contest it in further legal proceedings The company settled early last year, agreeing to pay a fine of $975 million and renegotiate licensing agreements with Chinese customers While Qualcomm has signed new contracts with more than 100 Chinese clients, there are still some holdouts, and some companies are underreporting their sales, Mr Aberle said Qualcomm’s global licensing revenue fell 12% in the most recent quarter; the company doesn’t break out its licensing revenue by country Mr Aberle said Qualcomm is working with customs officials in China and other Asian countries to track down smartphone sales that clients aren’t reporting “I would say we had very high compliance prior to the investigation by the NDRC,” he said “And I think through that process, companies looked to try to leverage the fact that we had the investigation.” Mr Aberle said that Qualcomm’s business will be able to grow faster than the market if it can solve the underreporting problem Qualcomm is considering other investments in China in new technology areas, Mr Aberle said In March, it set up a $2.8 million joint venture with China’s Thunder Software Technology Co to develop software for drones Device Cleared toTreat Opioid Addicts BY JEANNE WHALEN The U.S Food and Drug Administration approved a drugemitting arm implant to treat addiction to heroin and other opioids, providing a new tool against a condition that has proved extraordinarily difficult to manage Some addiction experts said the implant could offer a more reliable way to keep addicts on their medication But like all drugs meant to treat drug addiction, the device could face opposition from those who embrace the total-sobriety approach to treatment long advocated by 12-step programs Despite a new push by the Obama administration and many public-health officials to promote medication for opioid addiction, some treatment centers still shun or discourage it The match-stick-size implant, called Probuphine, emits buprenorphine, a drug that eases cravings for opioids and prevents withdrawal symptoms Four implants are inserted into the upper arm at a PHONE Continued from page B1 mors weren’t observed in female rats exposed during the tests And rats that were exposed to radio-frequency energy lived longer than the control group, which had no exposure “There is a long way to go from the findings reported here…and a finding that radiofrequency [electromagnetic radiation] is a human carcinogen,” said Jonathan Samet, a professor at the University of Southern California who was chairman of the World Health Organization committee that in 2011 determined cellphones were possibly carcinogenic The report was released late Thursday night after some of the study’s conclusions began to leak to the media More than half of the 74page document was scientific reviewers’ responses to the findings Michael Lauer, deputy director for extramural research at the National Institutes of Health, whose review of the results were included with the findings, said he couldn’t support the study’s conclusions “The higher survival with [radio-frequency radiation], along with the prior epidemio- time, providing six months’ worth of drug Behshad Sheldon, chief executive of the implant’s marketer, Braeburn Pharmaceuticals, said Probuphine would cost less than $6,000 for a sixmonth supply She declined to be more specific Titan Pharmaceuticals Inc co-developed the device with Braeburn, and will receive royalties on sales Buprenorphine is already available in tablet form, or as films that dissolve in the mouth, but addicts sometimes run out of doses, or skip them and use illegal narcotics in- stead Some also sell their buprenorphine to other addicts The implant makes this behavior impossible, and so has won support from some addiction experts “For someone with an opioid-use disorder, they have to decide on a daily basis if they’re going to take their buprenorphine,” said Marvin Seppala, chief medical officer of Hazelden Betty Ford Foundation, a nonprofit treatment provider “That decision every day to remain abstinent from opioids is difficult The implant takes away that decision.” Public-health officials say better treatment is desperately needed to fight the growing epidemic of opioid abuse More than 47,000 Americans died of drug overdoses in 2014—a record that exceeded the number killed in car accidents, according to the Centers for Disease Control and Prevention The biggest drivers of those deaths were opioid painkillers and heroin The FDA approved Probuphine’s use in people who are already stable on a low or moderate dose of oral buprenorphine The agency said Probuphine should be used alongside counseling and other “psychosocial support.” Health-care providers must complete a training program on inserting the implants before they will become certified to administer them, the FDA said A recent clinical study tested the implant in 175 people who had already been taking an oral form of buprenorphine for six months Half continued to take oral doses and the other half received Probuphine; both groups received 10 urine tests over six months, to screen for illicit opioids The study, financed by Braeburn Pharmaceuticals, found that rates of illicit opioid use were no worse in the Probuphine group than in the oral buprenorphine group, according to results summarized in FDA documents The most common side effects of Probuphine include pain, itching and redness at the implant site, as well as headache, depression and other issues, the FDA said logical literature, leaves me even more skeptical of the authors’ claims,” he wrote The researchers said it wasn’t uncommon for toxicology studies to find results in one sex but not the other “It’s often not explainable, but it’s not unusual,” Dr Bucher said “It is very difficult to explain why something doesn’t happen.” Dr Bucher said between 70% and 80% of the people who reviewed the results before its release felt there was a significant association “This is not a universal conclusion as you can tell by the reviewers’ comments,” Dr Bucher said “Overall, we feel that the tumors are in fact likely to be related to the exposures.” Wireless carriers and phone manufacturers deferred questions to a trade group called CTIA, which said it was reviewing the findings In a statement, the CTIA said numerous international and U.S organizations “have determined that the already existing body of peer-reviewed and published studies shows that there are no established health effects from radio frequency signals used in cellphones.” In May, a survey of brain-cancer rates in Aus- tralia reported no increase since the introduction of mobile phones there almost three decades ago, a result found in other countries, too The Federal Communications Commission, which administers cellphone safety standards in the U.S., said it had been briefed on the results The NTP study was designed to expose rats to levels of cellphone radiation that could be considered similar to what humans may experience by using a cellphone at maximum power Tumors were found in rats that were exposed to levels FDA BEIJING—Qualcomm Inc expects to start making some computer chips for the China market next year through a Chinese government-owned venture, in an example of how U.S tech companies are localizing products as Beijing tightens control of technology within its borders The customized chips will go into servers, the hardware for running websites, storing companies’ data and powering data centers For Qualcomm, the world’s leading supplier of smartphone chips, servers are a new growth initiative as demand in the smartphone market softens Qualcomm President Derek Aberle said his company set up a joint-venture with China’s Guizhou province last year partly because he expects China’s server demand to eventually eclipse that of the U.S While Western companies have long licensed older technology to Chinese counterparts, Mr Aberle said the China venture is more central to Qualcomm’s plans “This is really going to be the primary vehicle from which we build our data-center business in China,” he said in an interview on Friday “We are actually trying to create the company that is going to be able to win the market here as opposed to just licensing old technology.” The joint venture, in which the Guizhou government has a 55% stake and Qualcomm the remainder, was set up last year with initial funding of about $280 million Chip production is expected to begin in the latter half of next year Google Gains Win In Dispute Over Java The arm implant won approval Surrounding Waves A new federal study links cancer in some laboratory rats to chronic exposure to electromagnetic radiation from cellphones, which previous studies have found harmless Ionizing radiation can change molecular structure, potentially damaging DNA Common sources are radioactive elements, cosmic particles, and X-rays Non-ionizing radiation typically does not have enough energy to change atomic structure or DNA Electromagnetic spectrum Hz KHz 10 10 MHz 10 Non-ionizing radiation Computer FM Radio 60-100 Hz 8.75-108 MHz Source: NIH EHz GHz 10 10 10 Cellphone* 1.9-2.2 GHz 10 12 Microwave 3-30 GHz *Third generation mobile cell system 10 14 10 16 10 18 10 20 10 22 Ionizing radiation Visible light Ultraviolet X-rays Gamma radiation rays THE WALL STREET JOURNAL SAN FRANCISCO—A federal jury in the U.S found Google’s use of Oracle Corp.’s Java software in its mobile products didn’t violate copyright law, a verdict cheered by many in Silicon Valley who believe it will protect how they write and use software Thursday’s decision, which Oracle said it would appeal, marked the latest chapter in a six-year legal battle in which Oracle sought as much as $9 billion from Google for using 11,000 lines of Java software code in its Android software Oracle sued Google, a unit of Alphabet Inc., in 2010 for using parts of Java without permission A federal appeals court later ruled that Oracle could copyright the Java parts, but Google argued in a new trial this month that its use of Java was limited and covered by rules permitting “fair use” of copyright material The verdict “represents a win for the Android ecosystem, for the Java programming community, and for software developers who rely on open and free programming languages,” Google said Oracle General Counsel Dorian Daley said, “Google developed Android by illegally copying core Java technology to rush into the mobile device market.” She added: “there are numerous grounds for appeal.” The technology industry has watched the case closely because it could determine how software programs use application program interfaces, or APIs, computer code that helps programs, websites or apps talk to one another Oracle sued Google over its use of 37 Java APIs in Android, which runs most of the world’s smartphones Google said it used the APIs to help software engineers, many of whom are familiar with Java, build Android apps Google and others in Silicon Valley said an Oracle victory in the case would have stifled software innovation by discouraging programmers from using APIs That would make software development harder and could render some apps inoperable, they said “We are popping the bubbly here,” said Uri Sarid, chief technology officer of MuleSoft Inc., which helps firms build APIs He said APIs help programs reach broader audiences and “there’s a chilling effect if your building block can’t talk to mine.” Pamela Samuelson, an intellectual-property law professor at the University of California at Berkeley, said an Oracle victory would have given big tech companies too much power, by allowing them to require others to obtain licenses to work with their software below the current U.S exposure limits of 1.6 watts per kilogram Tumors were also found in rats that had been exposed to levels above legal limits, but not high enough to cause the animals to heat up, researchers said A key element of the debate is what the biological mechanism might be that is causing the health effect Unlike Xrays, or other types of radiation, cellphones operate at frequencies that aren’t known to affect cells or destroy DNA If the rats weren’t exposed to enough radio-frequency radiation to heat cells, yet still had health effects, the question is what mechanism might be causing that There also didn’t appear to be an increased risk based on increased exposure in the rats That could mean radio-frequency energy isn’t the direct cause—or it could mean that the amount of exposure isn’t the determining factor The NTP said it was unlikely that other similar studies could be conducted, given the size and scale of this one Another factor is that new cellular technologies, such as high-speed LTE networks, weren’t around when this study first began in 2005 It plans to release the complete results by autumn 2017 B4 | Monday, May 30, 2016 THE WALL STREET JOURNAL THE WALL STREET JOURNAL ADVERTISEMENT FIABCI World Prix D’ Excellence Awards Monday, May 30, 2016 | B5 B6 | Monday, May 30, 2016 THE WALL STREET JOURNAL THE WALL STREET JOURNAL Monday, May 30, 2016 | B7 B8 | Monday, May 30, 2016 THE WALL STREET JOURNAL THE WALL STREET JOURNAL Monday, May 30, 2016 | B9 B10 | Monday, May 30, 2016 THE WALL STREET JOURNAL THE WALL STREET JOURNAL Monday, May 30, 2016 | B11 B12 | Monday, May 30, 2016 ADVERTISEMENT FIABCI World Prix D’ Excellence Awards THE WALL STREET JOURNAL MARKETS DIGEST B14 | FINANCE WATCH B16 An Oil Driller Looks Beyond Banks for Cash Another Chinese Bidder Scraps an Acquisition CREDIT MARKETS | B15 HEARD ON THE STREET | B16 THE WALL STREET JOURNAL © 2016 Dow Jones & Company All Rights Reserved As of p.m ET Friday EUR/GBP 0.7606 g 0.34% YEN/DLR ¥109.90 À 0.12% GOLD 1213.80 g 0.54% OIL 49.33 g 0.30% Monday, May 30, 2016 | B13 3-MONTH LIBOR 0.67305% 10-YR TREAS g 8/32 yield 1.851% Mizuho Chief Warns on Sales-Tax Risks Banks in U.S Grow Pickier on Farm Debt Fallow Period Net farm income has fallen sharply from its recent peak $125 million 100 75 50 25 2008 ’10 ’12 ’14 Note: 2015 and 2016 are forecasts Source: U.S Department of Agriculture THE WALL STREET JOURNAL ’16 ment debt is among the largest in the world relative to the size of its economy Moody’s Investors Service said in a March report, “Postponing the next [sales-tax] increase regardless of the reason would pose a big fiscal burden for Japan.” Moody’s downgraded Japan’s credit rating by one notch from Aa3 to A1, the same rating it has assigned to Israel and the Czech Republic, after Mr Abe decided in November 2014 to delay the tax increase the first time The following day, Moody’s also downgraded five Japanese banks, including the Please see TAX page B15 Mizuho Financial Group President Yasuhiro Sato Shanghai: New Rules On Halts For Stocks Erupting Trading has increased in some commodity-tracking investments Daily volume, exchange-traded products* 50 million shares SPDR Gold Trust VelocityShares 3x Long Crude Oil ETN 40 BY JESSE NEWMAN Banks are tightening credit for U.S farmers amid a rise in delinquencies, forcing some growers to turn to alternative sources of loans When U.S agriculture was booming this decade, banks doled out ample credit to strong performers and weaker growers alike, said Michael Swanson, an agricultural economist at Wells Fargo & Co But with the farm slump moving into its third year, banks have become pickier, requiring some growers to cough up more collateral and denying financing outright to some customers who need it to pay for seeds, crop chemicals and rent Farmers this year have been grappling with low commodity prices, mounting debt and weaker incomes Claude Sem, chief executive of Farm Credit Services of North Dakota, said he asked some farmers to put up more land or machinery to back loans this spring Collateral requirements could increase for more farmers if crop prices remain low, he said, noting that the cash price for wheat in northern North Dakota recently was about $4.50 a bushel, roughly a dollar below what it costs many farmers to raise the crop “Below break-even, everything tightens up,” Mr Sem said, adding that falling land values also have spurred lenders to boost collateral requirements, with cropland prices down as much as 20% in some parts of North Dakota With traditional bank loans harder to come by, farmers are turning to sources like CHS Inc., a large farmerowned cooperative in the U.S., which operates grain elevators and retail stores across the Midwest CHS said its loans to farmers increased 48% in both number and volume in the 12 months to Please see FARM page B15 would pose a risk to Japan’s economy “There will be a risk in either case of raising the tax or not, so as long as the government demonstrates a clear road map for fiscal reconstruction, Japanese credibility likely won’t be hurt so much,” he said Some bankers say Japan could damage its international credibility if it fails to raise taxes on schedule The tax increases are part of longstanding efforts to reach a primary government surplus by 2020 A primary surplus is a fiscal surplus excluding interest payments on government debt Japan’s govern- KIYOSHI OTA/BLOOMBERG NEWS TOKYO—The chief of Mizuho Financial Group Inc said Japan risks a credit-rating downgrade if Prime Minister Shinzo Abe delays a scheduled sales-tax increase without explaining how the government plans to cut its deficit Yasuhiro Sato, president of Japan’s second-largest bank by assets, said Mr Abe’s increase in the sales tax to 10% from 8% scheduled to take effect in April next year He said he would decide before an upper house election to be held in July, but Japanese media have reported that a decision could come this week Mr Abe has delayed the tax increase once, after the rise to 8% in April 2014 derailed an economic recovery Consumer spending has yet to fully rebound, and some economists say the prospect of another tax increase next year is already weighing on spending Mr Sato acknowledged that raising the tax again 30 20 IAN PATTERSON FOR THE WALL STREET JOURNAL BY ATSUKO FUKASE framing of such a decision would determine whether it sparked concerns about the government’s credibility regarding its plans for fiscal consolidation “The worst scenario is [the government] will just announce a delay in the tax increase That could send a message that Abenomics has failed or Japan is heading for a fiscal danger zone and then it will harm Japanese government bonds’ credit ratings,” Mr Sato said in an interview, referring to the prime minister’s growth program Mr Abe acknowledged for the first time Friday that he was considering delaying an 10 2015 ’16 2015 ’16 *Split-adjusted Source: FactSet THE WALL STREET JOURNAL Erika Cajic, a mother of two, made money from trades betting oil prices would rise using an investment linked to crude Everyone’s Trading Crude, From Moms to Millennials When Erika Cajic woke before dawn one morning in early May and read that wildfires were breaking out in an oil-producing region of Alberta, she sat down on the By Ben Eisen, Nicole Friedman and Saumya Vaishampayan family-room couch with a cup of hot chocolate and her laptop and bought shares of an investment linked to crude The 45-year-old full-time parent of two in Mississauga, Ontario, like many investors, reasoned that the production outages would drive up the price of oil By buying the VelocityShares 3x Long Crude Oil exchange-traded note, she tripled down on her hunch, as the product uses derivatives that aim to rise and fall at triple the daily change in oil Within about four days, she estimated she made about 500 Canadian dollars (US$384) on those trades after converting from U.S dollars “The swings are gigantic lately,” she said of the product, known by its ticker UWTI, and the other energy products she has traded in recent months For some individual, or retail, investors, crude is the new hot trade Oil in the U.S fell to its lowest level since 2003 in February but has surged roughly 90% since then On Thursday, it traded above $50 a barrel for the first time since October, and it settled Friday at $49.33 That Please see CRUDE page B16 T-shirt with tickers on front of two hot crude-oil investments SHANGHAI—China’s stock exchanges tightened their rules on companies halting trading in their shares, in a move that could boost the chances of Chinese stocks being included in MSCI Inc.’s indexes this summer Under regulations released by the Shanghai and Shenzhen stock exchanges Friday, listed Chinese companies involved in major restructuring won’t be allowed to halt trading in their stocks for more than three months Firms planning private placements of stock will no longer be allowed to suspend trading for more than a month In addition, the Shanghai Stock Exchange will be able to stop accepting applications for trading halts, based on the recommendation of the China Securities Regulatory Commission or on market conditions, according to a statement on the exchange’s microblog The rules come ahead of a decision due next month by MSCI that could see mainlandtraded shares included in its indexes Inclusion could cause funds that track the benchmarks to channel billions of dollars into Chinese stocks MSCI said in March that China must prevent widespread trading halts before stocks here can be included When the Shanghai stock market started to tumble last June, listed companies scrambled to halt trading in their Please see RULES page B16 Investors Shrug Off Possibility U.K Will Exit EU BY MIKE BIRD AND JON SINDREU Investors appear to have concluded that the U.K will vote to stay in the European Union this June, leaving them exposed to steep losses should Britain elect to leave Opinion polls show Britain leaning toward a vote to stay in the EU in the June 23 referendum Bookmakers have cut the odds on a vote to leave to 19%, from 37% in April, according to Betfair Group PLC That shift appears to have reassured investors that Britain will remain in the EU The country’s bond and stock markets have barely reacted to the possibility of a so-called Brexit While the pound had declined on such a prospect, the currency began reversing course in late February Some analysts point out that political polls and betting have called British political events incorrectly before, and that sentiment in referendums can swing in the closing days of campaigning “In the early months of this year, there was a big selloff in Brexit-related stocks,” said James Ross, who manages Henderson Global Investors’ U.K Alpha Fund “But since around the turn of this month, we’ve seen a rapid reversal, and complacency has reached a bit of a dangerous level.” In recent months, a host of major financial institutions, from the Bank of England to the International Monetary Fund, have warned British voters of dire consequences should they vote to leave the world’s largest trading bloc Supporters of Brexit say the British economy will thrive freed of EU red tape and able to carve out its own trade deals The U.K.’s main equity markets haven’t budged much on the prospect of an exit, performing broadly in line with U.S markets Nor have foreign investors withdrawn capital from British banks or sold the country’s sovereign bonds, known as gilts, data from the Bank of England shows The 10-year gilt was yielding 1.438% Friday, down from 1.94% about a year ago Yields fall as prices rise The Treasury is having no problems selling bonds, with one measure of demand for new issues, SIMON DAWSON/BLOOMBERG NEWS Japan debt rating may be hit if rise in levy is postponed without a ‘road map,’ Sato says British opposition Labour Party leader Jeremy Corbyn spoke at a rally in London this month the bid-to-cover ratio, recently touching its highest level since the middle of 2014, according to analysts at Capital Economics On corporate debt, the yield on sterling-denominated bonds has fallen relative to their euro-denominated peers since early March The exception has been the pound Sterling fell by as much as 11% from November to early April, as measured against a basket of other currencies The BOE estimated that half of that decline was due to Brexitrelated uncertainty But the pound has since retraced some of that decline, rising by more than 4% to Thursday, underscoring how investors are more relaxed about the referendum as the date gets closer It also is unclear how much of the pound’s decline is due to the referendum and how much is attributable to concern over the U.K economy Leveraged funds—which include hedge funds—now have the smallest net short position Please see EXIT page B15 THE WALL STREET JOURNAL B14 | Monday, May 30, 2016 MARKETS DIGEST Nikkei 225 Index STOXX 600 Index Year-to-date 16834.84 s 62.38, or 0.37% t 11.55% 52-wk high/low20868.03 14952.61 High, low, open and close for each trading day of the past three months All-time high 38915.87 12/29/89 349.64 s 0.73, or 0.21% High, low, open and close for each trading day of the past three months UP Close t DOWN Session open Open t Close S&P 500 Index p.m New York time Last 2099.06 s 8.96, or 0.43% High, low, open and close for each trading day of the past three months Year-to-date t 4.42% 52-wk high/low 406.80 303.58 All-time high 414.06 4/15/15 Year ago Trailing P/E ratio * 24.04 21.46 P/E estimate * 17.75 18.25 Dividend yield 2.19 1.97 All-time high: 2130.82, 05/21/15 * P/E data based on as-reported earnings from Birinyi Associates Inc Session high 65-day moving average Data as of Friday, May 27, 2016 18000 360 2100 17500 350 2060 17000 340 2020 16500 330 1980 Session low 16000 320 1940 65-day moving average 65-day moving average 15500 310 1900 Bars measure the point change from session's open 15000 Mar Apr 300 May Feb International Stock Indexes Region/Country Index World The Global Dow MSCI EAFE MSCI EM USD Close Latest NetChg 2344.41 1668.76 808.29 4.39 –1.08 5.36 DJ Americas Sao Paulo Bovespa S&P/TSX Comp IPC All-Share Santiago IPSA 504.04 2.07 49051.49 –431.37 14105.23 56.03 46124.15 84.46 3076.57 –4.10 U.S DJIA Nasdaq Composite S&P 500 CBOE Volatility 17873.22 4933.50 2099.06 13.12 % chg 0.67 –0.87 0.40 0.18 –0.13 0.25 0.65 0.43 15660.18 4266.84 1829.08 11.95 349.64 0.73 2933.05 10.84 4514.74 2.10 10286.31 13.60 1430.50 … 18186.14 –30.78 450.94 1.85 917.52 –1.27 9107.30 28.10 8292.45 62.90 54105.37 184.37 78028.90 –6.73 6270.79 5.14 0.21 0.37 0.05 0.13 Closed –0.17 0.41 –0.14 0.31 0.76 0.34 –0.01 0.08 303.58 2566.26 3896.71 8752.87 1383.34 15773.00 382.61 628.41 7746.30 7496.62 46282.02 68567.89 5536.97 Asia-Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand 1355.79 8.13 5405.90 17.80 2821.05 –1.40 20576.77 179.66 26653.60 286.92 4814.73 30.17 16834.84 62.38 1637.19 6.10 6992.55 44.67 36694.26 153.29 7411.68 35.30 2802.51 29.20 1969.17 12.11 8463.61 69.49 1412.67 11.03 0.60 0.33 1190.45 4765.30 2655.66 18319.58 22951.83 4120.50 14952.61 1532.14 5546.88 30564.50 6084.28 2532.70 1829.81 7410.34 1224.83 –0.05 0.88 1.09 0.63 0.37 0.37 0.64 0.42 0.48 1.05 0.62 0.83 0.79 • • • • • • • • • • • • • • • • • • Coupon Commodities 14% 12 10 –2 –4 –6 –8 s s s Euro Yen 2015 2016 Fri Country/currency in US$ US$vs, YTDchg per US$ (%) Americas Argentina peso-a 0.0715 13.9830 8.1 Brazil real 0.2770 3.6104 –8.8 Canada dollar 0.7689 1.3006 –6.0 Chile peso 0.001458 686.10 –3.2 Colombia peso 0.0003276 3052.50 –3.8 Ecuador US dollar-f 1 unch Mexico peso-a 0.0542 18.4342 7.2 Peru sol 0.2991 3.3430 –2.1 Uruguay peso-e 0.0320 31.250 4.5 Venezuela bolivar 0.100150 9.99 58.4 Asia-Pacific 0.7203 1.3883 0.1523 6.5645 Australia dollar China yuan 1.2 1.1 Key Rates Fri Country/currency Hong Kong dollar India rupee Indonesia rupiah Japan yen Kazakhstan tenge Macau pataca Malaysia ringgit-c New Zealand dollar Pakistan rupee Philippines peso Singapore dollar South Korea won Sri Lanka rupee Taiwan dollar Thailand baht Cur Stock 0.45665% 0.67305 0.97810 1.31670 0.18400% 0.28375 0.42465 0.74970 Euro Libor One month Three month Six month One year -0.35286% -0.28171 -0.16129 -0.03386 -0.06857% -0.01571 0.05500 0.17286 Euribor One month Three month Six month One year -0.34900% -0.26000 -0.14900 -0.01500 -0.05900% -0.01200 0.04900 0.16000 -0.04914% -0.02493 -0.00329 0.09143 Offer 0.06357% 0.09643 0.13500 0.25257 Bid 0.5000% 0.6500 1.0000 1.3500 Latest 0.4000% 0.5500 0.9000 1.2500 52 wks ago 3.50% 2.70 1.475 5.00 3.25% 2.85 1.475 5.00 0.00% 0.50 0.50 1.75 1.00 0.25 2.25 0.05% 0.50 0.50 2.00 0.75 0.00 2.00 Overnight repurchase rates U.S 0.32% Euro zone n.a 0.19% n.a Prime rates U.S Canada Japan Hong Kong Policy rates ECB Britain Switzerland Australia U.S discount Fed-funds target Call money 7.7665 66.9623 13600 109.90 333.64 7.9967 4.0783 1.4868 104.700 46.675 1.3756 1182.62 147.16 32.553 35.700 52 wks ago Libor One month Three month Six month One year Eurodollars One month Three month Six month One year 0.1288 0.0149 0.0000735 0.009099 0.002997 0.1251 0.2452 0.6726 0.0096 0.0214 0.7270 0.0008456 0.0067953 0.03072 0.02801 0.2 1.1 –1.7 –8.6 –1.5 –0.1 –5.2 1.6 –0.2 –0.4 –3.0 0.6 2.0 –1.1 –0.9 2.6532 0.1126 0.2603 3.3082 2.5976 0.2747 0.2667 0.0639 0.3769 –0.05 8.8823 13.4 3.8410 –1.3 0.3023 –0.4 0.3850 0.003 3.640 –0.08 3.7496 –0.1 15.6555 1.2 Close Net Chg % Chg YTD % Chg WSJ Dollar Index 87.63 0.27 0.31 –2.82 1.628 2.269 -0.502 0.369 -0.435 0.478 -0.503 0.143 -0.043 1.361 -0.238 -0.117 -0.530 0.227 0.208 3.031 -0.086 1.496 -0.424 0.771 0.464 1.438 0.915 1.851 71.4 41.8 -141.7 -148.2 -135.0 -137.3 -141.7 -170.8 -95.8 -49.0 -115.3 -196.8 -144.5 -162.5 -70.7 118.0 -100.0 -35.5 -133.8 -108.0 -45.1 -41.3 CBOT CBOT CBOT CME ICE-US ICE-US ICE-US ICE-US ICE-EU COMEX COMEX COMEX LME LME LME LME LME LME TCE Palm oil (MYR/mt) MDEX NYMEX Crude oil ($/bbl.) NY Harbor ULSD ($/gal.) NYMEX RBOB gasoline ($/gal.) NYMEX Natural gas ($/mmBtu) NYMEX Brent crude ($/bbl.) ICE-EU ICE-EU Gas oil ($/ton) Spread Over Treasurys, in basis points Previous Month Ago Year ago 112.9 77.1 -129.8 -132.1 -126.7 -121.2 -130.9 -156.5 -82.7 -34.4 -107.4 -192.1 -130.7 -147.7 -49.3 114.9 -84.5 -23.4 -122.2 -94.3 -27.8 -22.5 75.7 45.9 -137.3 -145.8 -130.6 -135.1 -137.5 -168.2 -92.2 -45.7 -110.6 -194.5 -139.8 -160.4 -68.2 117.6 -97.8 -33.2 -129.5 -104.3 -42.2 -41.3 Previous Yield Month ago 1.629 2.288 -0.502 0.372 -0.435 0.479 -0.504 0.148 -0.051 1.373 -0.235 -0.115 -0.527 0.226 0.189 3.006 -0.106 1.498 -0.423 0.787 0.449 1.417 0.871 1.830 1.950 2.625 -0.477 0.532 -0.446 0.642 -0.488 0.289 -0.006 1.510 -0.253 -0.067 -0.486 0.377 0.328 3.002 -0.024 1.620 -0.401 0.911 0.543 1.629 0.821 1.854 135.7 71.7 -83.3 -127.3 -81.0 -128.2 -86.8 -157.2 -51.4 -26.5 -64.9 -174.2 -84.7 -138.9 -54.6 35.3 -61.5 -30.6 -92.4 -138.7 4.4 -23.3 413.25 1087.25 480.75 116.400 2,993 121.35 17.57 64.39 1642.00 5.00 7.50 -0.50 1.050 77 -0.15 0.15 0.06 3.00 2.1105 1210.20 16.185 1,559.00 15,695.00 4,687.00 1,670.00 1,880.00 8,435.00 160.80 0.0080 -12.50 -0.158 13.50 240.00 67.00 21.00 54.00 55.00 -0.10 2536.00 49.39 1.5015 1.6368 2.164 49.95 447.00 -12.00 -0.09 -0.0047 0.0101 0.013 -0.22 -1.75 Sources: WSJ Market Data Group, SIX Financial Information, Tullett Sym Last AIAGroup AstellasPharma AustNZBk BHP BankofChina CKHutchison CNOOC Canon CentralJapanRwy ChinaConstructnBk ChinaLifeInsurance ChinaMobile CmwlthBkAust EastJapanRailway Fanuc Hitachi Hon Hai Precisn HondaMotor HyundaiMtr Ind&Comml JapanTobacco KDDI Mitsubishi MitsuUFJFin Mitsui Mizuho Fin NTTDoCoMo NatAustBnk NipponStl&SmtmoMtl NipponTeleg NissanMotor NomuraHldgs Panasonic PetroChina PingAnInsofChina RelianceIndsGDR RioTinto SamsungElectronics Seven&I Hldgs SoftBankGroup Sumitomo Mitsui SunHngKaiPrp TaiwanSemiMfg 1299 4503 ANZ BHP 3988 0001 0883 7751 9022 0939 2628 0941 CBA 9020 6954 6501 2317 7267 005380 1398 2914 9433 8058 8306 8031 8411 9437 NAB 5401 9432 7201 8604 6752 0857 2318 RIGD RIO 005930 3382 9984 8316 0016 2330 44.85 1466.00 25.85 19.37 3.14 90.35 9.44 3131.00 19305 4.94 16.92 87.15 78.90 9942.00 16350 483.60 78.40 3027.00 136000 4.08 4312.00 3174.00 1919.50 542.70 1304.00 171.30 2731.00 27.30 2260.00 4815.00 1064.50 472.40 965.00 5.35 33.65 28.90 44.83 1282000 4700.00 6053.00 3504.00 89.25 156.50 0.79 0.45 1.21 -0.21 0.96 0.84 0.75 0.68 -1.45 1.65 0.59 0.23 0.39 0.81 -0.09 0.96 0.38 -0.62 0.74 1.49 -0.05 0.22 0.89 1.42 0.85 1.12 -0.22 -0.22 1.39 0.10 -0.09 0.60 -0.35 0.60 1.94 -1.43 -1.08 1.31 1.48 0.68 0.97 2.006 2.847 -0.184 0.857 -0.161 0.849 -0.220 0.558 0.134 1.865 -0.000 0.388 -0.199 0.741 0.102 2.484 0.034 1.824 -0.275 0.743 0.692 1.898 0.649 2.130 p.m New York time 1.22% 0.69 -0.10% 0.91 2.64 -0.12 0.86 0.09 0.18 0.38 -1.02 -0.97 0.87 1.55 1.45 1.27 2.96 0.66 -0.06 -0.47 -0.18 -0.31 0.62 0.60 -0.44 -0.39 Year low 413.50 1,098.00 518.50 125.350 3,240 138.20 17.59 64.92 1,707.00 351.25 862.00 449.50 110.925 2,746 115.35 12.68 54.33 1,372.00 2.3290 1,308.00 18.060 1,675.00 17,500.00 5,070.50 1,888.00 1,946.00 9,575.00 203.50 1.9580 1,065.70 13.810 1,451.50 13,225.00 4,320.50 1,598.00 1,467.00 7,750.00 154.30 2,707.00 50.21 1.5245 1.6707 2.6350 50.96 454.50 2,374.00 31.61 0.9406 1.1485 1.9390 30.70 278.50 Cross rates London close on May 27 Australia USD 1.3883 GBP 2.0334 CHF 1.3998 JPY 0.0126 HKD 0.1788 EUR 1.5461 CDN 1.0675 AUD Canada 1.3006 1.9043 1.3108 0.0118 0.1674 Euro 0.8980 1.3149 0.9053 0.0082 0.1156 1.4480 0.9367 0.6905 Hong Kong 7.7665 11.3732 7.8275 0.0707 0.6468 8.6480 5.9721 5.5934 79.1500 109.8990 160.9200 110.7700 14.1500 122.3400 84.5058 Switzerland 0.9922 1.4527 0.0090 0.1278 1.1046 0.7629 0.7144 U.K 0.6829 0.6884 0.0062 0.0879 0.7606 0.5252 0.4918 U.S 1.4643 1.0079 0.0091 0.1288 1.1136 0.7689 0.7203 Japan Source: Tullett Prebon Sources: Tullett Prebon, WSJ Market Data Group p.m New York time % YTD% Chg Chg Asia Titans HK$ ¥ AU$ AU$ HK$ HK$ HK$ ¥ ¥ HK$ HK$ HK$ AU$ ¥ ¥ ¥ TW$ ¥ KRW HK$ ¥ ¥ ¥ ¥ ¥ ¥ ¥ AU$ ¥ ¥ ¥ ¥ ¥ HK$ HK$ $ AU$ KRW ¥ ¥ ¥ HK$ TW$ Year ago Sources: SIX Financial Information; WSJ Market Data Group Middle East/Africa Bahrain dinar Egypt pound-a Israel shekel Kuwait dinar Oman sul rial Qatar rial Saudi Arabia riyal South Africa rand Latest Top Stock Listings Latest Yen Libor One month Three month Six month One year in US$ US$vs, YTDchg per US$ (%) Bulgaria lev 0.5694 1.7561 –2.4 Croatia kuna 0.1486 6.729 –4.0 Euro zone euro 1.1136 0.8980 –2.5 Czech Rep koruna-b 0.0412 24.273 –2.5 Denmark krone 0.1497 6.6791 –2.8 Hungary forint 0.003545 282.07 –2.9 Iceland krona 0.008008 124.88 –4.1 Norway krone 0.1201 8.3245 –5.9 Poland zloty 0.2537 3.9420 0.5 Russia ruble-d 0.01513 66.091 –8.1 Sweden krona 0.1201 8.3278 –1.4 Switzerland franc 1.0079 0.9922 –1.0 Turkey lira 0.3384 2.9547 1.3 Ukraine hryvnia 0.0399 25.0770 4.5 U.K pound 1.4643 0.6829 0.6 May Prices of futures contracts with the most open interest Copper ($/lb.) Gold ($/troy oz.) Silver ($/troy oz.) Aluminum ($/mt)* Tin ($/mt)* Copper ($/mt)* Lead ($/mt)* Zinc ($/mt)* Nickel ($/mt)* Rubber (Y.01/ton) Europe WSJ Dollar index Yield Corn (cents/bu.) Soybeans (cents/bu.) Wheat (cents/bu.) Live cattle (cents/lb.) Cocoa ($/ton) Coffee (cents/lb.) Sugar (cents/lb.) Cotton (cents/lb.) Robusta coffee ($/ton) US$vs, YTDchg Fri in US$ per US$ (%) Country/currency Apr EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.; MDEX: Bursa Malaysia Derivatives Berhad; TCE: Tokyo Commodity Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange; NYMEX: New York Mercantile Exchange; ICE-EU: ICE Futures Europe *Data as of 5/26/2016 Year One-Day Change Commodity Exchange Last price Net Percentage high London close on May 27 Yen, euro vs dollar; dollar vs major U.S trading partners Country/ Maturity, in years 3.250 Australia 4.250 10 3.500 Belgium 0.800 10 1.000 France 0.500 10 0.000 Germany 0.500 10 4.500 Italy 2.000 10 0.100 Japan 0.100 10 0.500 Netherlands 0.250 10 4.350 Portugal 2.875 10 4.500 Spain 1.950 10 4.250 Sweden 1.000 10 1.250 U.K 2.000 10 0.875 U.S 1.625 10 Source: SIX Financial Information;WSJ Market Data Group Currencies Mar Latest, month-ago and year-ago yields and spreads over or under U.S Treasurys on benchmark two-year and 10-year government bonds around the world Data as of p.m ET 522.13 3.4 54477.78 13.2 15154.68 8.4 46191.51 7.3 3261.27 4.5 1570.23 –2.4 5777.20 2.1 5166.35 –20.3 27657.47 –6.1 28504.93 2.1 5216.38 4.8 20868.03 –11.6 1749.17 –3.3 6992.55 10.6 36723.35 11.8 7670.37 6.6 3392.11 –2.8 2114.80 0.4 9701.07 1.5 1519.47 9.7 Feb Global government bonds 406.80 –4.4 3520.48 –5.4 5196.73 –2.6 11735.72 –4.3 1723.56 –6.4 24031.19 –15.1 503.48 2.1 981.82 21.2 11556.10 –4.6 9526.79 –6.0 54609.01 6.7 86343.65 8.8 6984.43 0.5 • • • • • 1860 May 18144.07 2.6 5218.86 –1.5 2128.28 2.7 40.74 –28.0 • • • • • • • • • • • YTD % chg 2604.27 0.3 1924.31 –2.8 1004.22 1.8 • • • 433.35 37497.48 11843.11 40265.37 2759.77 0.41 High • • • 2047.44 1491.52 688.52 0.19 –0.06 44.93 31.74 8.96 –0.31 –2.31 52-Week Range Close Low Stoxx Europe 600 Stoxx Europe 50 France CAC 40 Germany DAX Israel Tel Aviv Italy FTSE MIB Netherlands AEX Russia RTS Index Spain IBEX 35 Switzerland Swiss Market South Africa Johannesburg All Share Turkey BIST 100 U.K FTSE 100 DJ Asia-Pacific TSM S&P/ASX 200 Shanghai Composite Hang Seng S&P BSE Sensex Jakarta Composite Nikkei Stock Avg Kuala Lumpur Composite S&P/NZX 50 KSE 100 PSEi Straits Times Kospi Weighted SET Apr Data as of p.m New York time Americas Brazil Canada Mexico Chile EMEA Mar -3.76 -15.33 -7.45 8.45 -9.25 -13.46 16.98 -14.80 -10.62 -6.97 -32.59 -0.40 -7.75 -13.17 -22.44 -30.07 -2.97 -22.58 -8.72 -12.82 -3.56 0.63 -5.35 -28.32 -9.79 -29.65 9.94 -9.60 -6.46 -0.43 -16.80 -30.44 -22.21 5.11 -21.56 -5.56 0.27 1.75 -15.32 -1.40 -23.93 -4.80 9.44 Cur Stock Sym Last ¥ HK$ ¥ ¥ AU$ AU$ AU$ 4502 0700 8766 7203 WES WBC WOW 4797.00 171.20 3837.00 5589.00 41.17 30.98 22.08 TakedaPharm TencentHoldings TokioMarineHldg ToyotaMtr Wesfarmers WestpacBanking Woolworths Stoxx 50 CHF € € € € £ € € £ € € £ € £ £ CHF CHF € € € £ € £ £ € £ € € £ € £ CHF CHF DKK £ £ ABB AXA AirLiquide Allianz Anheuser Busch AstraZeneca BASF BNP Paribas BT Group BancoBilVizAr BancoSantander Barclays Bayer BP BritishAmTob FinRichemont CreditSuisse Daimler Deutsche Bank DeutscheTelekom Diageo ENI GlaxoSmithKline HSBC Hldgs INGGroep ImperialBrands IntesaSanpaolo LVMHMoetHennessy LloydsBankingGroup LOreal NationalGrid Nestle Novartis NovoNordiskB Prudential ReckittBenckiser ABBN CS AI ALV ABI AZN BAS BNP BT.A BBVA SAN BARC BAYN BP BATS CFR CSGN DAI DBK DTE DGE ENI GSK HSBA INGA IMB ISP MC LLOY OR NG NESN NOVN NOVO-B PRU RB 20.96 22.70 97.73 146.75 113.95 4022.50 69.92 49.77 451.90 6.06 4.40 186.20 85.33 361.95 4205.50 58.75 14.15 60.68 16.29 15.89 1883.00 13.83 1452.50 448.45 11.38 3786.00 2.36 145.05 72.45 166.90 1009.00 74.25 79.60 371.00 1394.00 6873.00 % YTD% Chg Chg Cur Stock RioTinto 0.13 -20.91 £ 4.52 12.12 CHF RocheHldgctf RoyDtchShell A 1.27 -18.57 £ SAP -0.13 -25.36 € € Sanofi 1.91 -1.06 SchneiderElectric 0.75 -7.69 € Siemens 0.32 -9.88 € € Telefonica € Total 0.72 16.70 CHF UBSGroup Unilever 0.60 -10.01 € Unilever -0.45 -5.71 £ £ VodafoneGroup 0.03 -10.27 -0.04 -0.39 CHF ZurichInsurance 0.27 -12.87 -0.19 -1.13 AmericanExpress -0.47 -4.72 $ Apple 0.74 -4.20 $ Boeing 0.23 -9.21 $ Caterpillar 0.96 -3.47 $ $ Chevron 0.76 -14.94 CiscoSystems -0.37 -26.31 $ CocaCola -0.69 2.25 $ Disney 0.49 11.52 $ $ DuPont -1.18 -18.52 ExxonMobil -0.21 -34.76 $ GenElec -0.34 -21.78 $ $ GoldmanSachs 0.59 -27.70 $ HomeDepot -0.44 -3.81 Intel 0.86 1.43 $ IBM -0.36 0.22 $ $ JPMorganChase -0.31 5.79 JohnsJohns 0.56 -16.37 $ McDonalds 0.49 -8.59 $ $ Merck 0.45 5.56 $ Microsoft -0.76 -23.70 $ NikeClB 0.87 0.10 $ Pfizer -0.49 -0.85 $ Procter&Gamble 0.69 7.47 $ 3M 0.90 7.63 $ TravelersCos -0.40 $ UnitedTech 0.32 -8.29 UnitedHealthGroup $ -0.30 -7.23 $ VISAClA 0.43 -8.95 $ Verizon -0.15 9.43 $ WalMart Sym Last RIO ROG RDSA SAP SAN SU SIE TEF FP UBSG UNA ULVR VOD ZURN 1964.00 263.40 1675.00 72.77 73.80 58.30 98.69 9.53 43.90 15.34 40.72 3152.50 232.60 243.90 DJIA AXP AAPL BA CAT CVX CSCO KO DIS DD XOM GE GS HD INTC IBM JPM JNJ MCD MRK MSFT NKE PFE PG MMM TRV UTX UNH V VZ WMT 65.52 100.35 129.22 71.96 102.02 28.92 44.78 100.29 67.17 90.01 30.12 159.53 133.94 31.57 152.84 65.43 113.06 123.25 56.48 52.32 56.19 34.61 81.43 168.89 114.18 100.76 134.00 79.66 50.62 70.75 % YTD% Chg Chg -0.25 -0.78 4.03 -4.70 -0.45 9.76 0.21 -0.83 0.45 -6.11 0.40 10.92 1.01 9.80 -0.31 -6.88 -0.30 7.45 -0.26 -21.41 0.98 1.52 0.80 7.72 0.24 5.25 -0.45 -5.61 0.44 -5.79 -0.06 -4.66 -0.07 -10.63 -0.17 5.89 0.51 13.41 0.07 6.50 0.20 4.24 0.48 -4.56 0.31 0.86 0.23 15.47 0.33 -3.31 0.61 -11.49 -0.08 1.28 0.25 -8.36 0.26 11.06 0.62 -0.91 0.14 10.07 -0.44 4.33 0.16 6.93 0.83 -5.70 0.63 -10.10 0.52 7.22 0.26 2.54 -0.01 12.11 0.51 1.17 0.35 4.88 0.77 13.91 0.84 2.72 0.92 9.52 -0.14 15.42 Asia Titans 50 Last: 127.86 s 0.67, or 0.53% YTD t 6.2% High Close Low Mar 11 140 130 120 110 100 90 t Feb 50–day moving average 18 25 Apr 15 22 29 May 13 20 27 Stoxx 50 Last: 2933.05 s 10.84, or 0.37% YTD t 5.4% 3000 2925 2850 2775 2700 2625 Mar 11 18 24 Apr 15 22 29 May 13 20 27 Dow Jones Industrial Average P/E: 19 Last: 17873.22 s 44.93, or 0.25% YTD s 2.6% 18800 18200 17600 17000 16400 15800 Mar 11 18 24 Apr 15 22 Note: Price-to-earnings ratios are for trailing 12 months Sources: WSJ Market Data Group; Birinyi Associates 29 May 13 20 27 Monday, May 30, 2016 | B15 THE WALL STREET JOURNAL MONEY & INVESTING TAX Oil Driller Looks Beyond Banks Fieldwood, which is controlled by energy investment firm Riverstone Holdings Inc., in February was downgraded four notches deeper into junk territory by credit-rating firm Moody’s Investors Service, which cited the company’s “unsustainably high debt burden in relation to its cash flow potential in a low commodity price environment.” Fieldwood’s borrowing limit was cut to $1.75 billion in April 2015 from $2.25 billion and reduced again in autumn to $1.3 billion by the 23 banks that make up its lending group, the people said That last cut made Fieldwood, one of the largest producers in the Gulf of Mexico, overdrawn and triggered a series of financial moves and negotiations with its other debt investors that culminated in Friday’s deal Continued from page B13 banking units of Mitsubishi UFJ Financial Group Inc and Sumitomo Mitsui Financial Group Inc., giving them the same credit rating as Mizuho Standard & Poor’s and Fitch Ratings have also lowered Japan’s credit rating in the past two years, but investors continue to accept nearrecord-low yields on the government’s debt On Sunday, Yasufumi Tanahashi, a senior member of the ruling Liberal Democratic Party, explained why the tax increase might need to be delayed “If tax revenue doesn’t grow despite increasing the tax rate, then from a mediumto-long-term perspective it’s necessary to respond flexibly,” he said during a political TV program Mr Tanahashi said a delay would require a law to be amended and debate within the ruling coalition to reach a consensus Mr Sato, who didn’t take a position on whether the tax increase should proceed as scheduled, said Japanese banks’ dollar-funding costs could rise further if a creditrating firm downgrades them again “We’ve seen a rise in dollar-funding costs since the second half of 2014,” he said “There is no way lending will boost our profitability.” To balance weakness in lending, Mizuho has focused on income from fees, including from its M&A advisory and underwriting businesses Mizuho aims to increase its fee income to 60% from 54% of the total in the three years through March 2019 “We have a business model of making profits from fee businesses, so a rise in dollarfunding costs likely won’t affect our profitability,” Mr Sato said —Alexander Martin contributed to this article set Management, which has about £88 billion ($129 billion) under management But some investors and analysts warn that there is a risk that investors have become too relaxed Pollsters have frequently called major political events incorrectly Surveys suggested a statistical dead heat between two political parties in the U.K’s May 2015 general election, but the Conservative Party swept to a majority Voting intentions also can shift closer to the actual referendum day, as they did with 2014’s vote on Scottish independence Those who want Britain to leave the EU argue that any effect on markets will be brief, once it becomes clear the economy hasn’t sustained any damage A fall in the pound also would be good news for exporters But most analysts and economists argue that a vote to leave the EU would have a drastic effect across Europe Morgan Stanley said the pound could fall to $1.30, from about $1.46 now, by the end of the year in the event of a “leave” vote HSBC forecast an even bigger decline, suggesting sterling could fall by as much as 20% Analysts say a slower economy likely would drive the Bank of England to keep interest rates ultralow for longer An expectation of lower rates pushes down the currency In equity markets, Goldman Sachs Group Inc predicts the FTSE 250 could fall by between 15% and 20% As lenders cut financing to energy firms, Fieldwood sells debt to investors Banks have been reducing their exposure to energy companies since oil prices started to collapse in 2014 Now, one oil producer, weary of its lenders cutting its credit line, is reducing its exposure to banks Fieldwood Energy LLC, a closely held Houston-based driller, sold about $390 million of new debt on Friday to a group of institutional investors, according to people familiar with the matter The company is using the proceeds to repay its bank lenders, these people said While this move means Fieldwood is taking on $20 million a year in additional interest expenses, the company opted for the new loan because the banks had cut the company’s credit limit by nearly $1 billion and it wanted to eliminate the possibility of further reductions, people familiar with the matter said The deal is another sign that many investors are becoming optimistic about the oil-price rebound, which lifted crude prices temporarily back to $50 last week Still, prices are down 44% since September 2014 In contrast, many banks are trying to cut their exposure to energy producers Lenders have been cutting many of these companies’ credit lines, which are based on the value of their untapped oil and gas reserves Credit cuts this spring— when banks typically conduct the first of twice-annual collateral reviews—have been the steepest since the downturn, even as oil prices have nearly RICK WILKING/REUTERS BY RYAN DEZEMBER Wells Fargo reduced the value of its loans and unfunded commitments to oil companies by 3% in the first quarter doubled from the 52-week low hit in February Credit limits of 29 companies were cut an average of 33%, according to Citi Research, part of Citigroup Inc One of the largest lenders in the oil patch, Wells Fargo & Co., said last week that it has decreased two-thirds of the reserve-backed loans it has reviewed this spring During the first quarter, Wells reduced the value of its loans and unfunded commitments to oil companies by 3%, to $40.7 billion Yet as bank financing flows out of the energy sector, investor appetite for energy exposure has increased North American oil and gas producers have sold more than $30 billion of new shares since the start of 2015, with much of the money used to pay down bank loans Investor interest has been aided by gains in energy stocks The energy sector in the S&P 500 is up 11% year to date Oil-price gains also have prompted a rally in junk bonds from energy companies Citi’s High Yield Energy Index is up 15% on the year, more than twice the gains seen in the broader junk-bond market One frequent seller of stock over the past two years is Parsley Energy Inc Parsley’s stock is up 40% this year, and last week it became the first exploration-and-production company to sell junk bonds in 2016 Investors placed orders for more than 10 times the $200 million of debt that the Texas oil producer sold, according to people familiar with the matter Parsley said it plans to use proceeds to help pay for property Still, in a couple of in- stances, buyers of recent stock offerings have been hurt badly Bonanza Creek Energy Inc in February 2015 tapped investors’ willingness to bet on a quick rebound in oil prices by selling new shares in a followon offering Bonanza Creek sold shares at $26 and used the roughly $200 million of proceeds to pay down its bank debt, according to securities filings This month, its banks cut the company’s credit line to below what it had borrowed Bonanza Creek’s shares plunged 35% on Tuesday, to $2.06, after the company disclosed that it was overdrawn by $88 million and working with lenders to figure out how to pay it back A Bonanza Creek spokesman declined to comment On Friday, Bonanza Creek’s shares closed at $2.53, up 2.4% for the day EXIT RICHARD HAMILTON SMITH/DPA/ZUMA PRESS Continued from page B13 since December, according to data from the U.S Commodity Futures Trading Commission As recently as mid-March, leveraged funds had 74,920 more short than long positions As of May 17, there were 7,957 more short than long contracts The investment division of pension provider Royal London is among the funds that aren’t hedged against the possibility of the pound falling after a vote to leave “We think it’s very likely there’s a ‘remain’ vote and we are investing accordingly,” said Trevor Greetham, multiasset head at Royal London As- Farmers in North Dakota U.S net farm income is seen falling this year to the lowest since 2002 FARM Continued from page B13 March and have more than doubled since 2014 It “suggests there are many farmers struggling to obtain financing,” said Randy Nelson, president of the co-op’s financing subsidiary, CHS Capital CHS said its interest rates on farm loans for crop-production expenses generally range from 3.75% to 6% Commercial banks in the Farm Belt recently have charged about 4.9%, according to the Chicago Federal Reserve Bank of Chicago and bankers A recent rally in some U.S agricultural markets has brightened the picture considerably for growers of crops like soybeans, but many farmers still are facing losses this year thanks to a large buildup in global grain stockpiles that has pressured prices for other U.S commodities like corn and wheat The Chicago Fed earlier this year said the volume of the district’s farm-loan portfolio with major or severe repayment difficulties hit 5% in late 2015, which compares with 2.9% a year earlier and is the highest in more than a decade Illinois banker Eric McRae said repayment problems are deemed serious when growers carry debt from year to year or are 90 days delinquent on loan payments Farmers typically take out loans in the first three months of the year before spring planting begins But this year, growers, including some who had been turned away by their primary lenders, had been searching for financing as late as April, when planters already were rolling in fields across the Farm Belt “There’s hardly a day that goes by that I don’t get approached by someone turned down by another bank,” said Grant Lindell, vice president of First United Bank in Michigan, N.D As late as May, Mr Lindell said he still was working with several longtime customers to help them make ends meet by selling equipment or taking out a mortgage on their land Farmers also are seeking more help from the government Demand for loans from the Farm Service Agency, an arm of the U.S Department of Agriculture that administers financial support to growers, is projected to increase 23% in 2016, according to the USDA That rise in part reflects banks’ requests for government guarantees on farm loans and other types of loans like microloans to beginning farmers Loan demand has been so strong that the Farm Service Agency already has spent 75% of its allotted funds for the fiscal year, which ends Sept 30, triggering an obligation to alert Congress to the quickerthan-normal lending pace The USDA has said net farm income will slide this year to $54.8 billion, down 56% from its peak in 2013 and the lowest level since 2002 Debt-to-asset ratios among farmers are expected to rise for the fourth year in a row Bankers said they generally don’t expect anything like the financial strain of the 1980s, when tumbling land values and rising indebtedness pushed many growers and agricultural lenders out of business Lending activity in the U.S is still strong, and delinquency rates on farm loans remain relatively low, though they have risen in some parts of the Farm Belt But lenders are closely watching their portfolios for signs of stress Data from the nation’s Federal Reserve Banks in mid-May showed growers are appealing to lenders for more loans to cover farm operations even as the rate at which existing debt is being paid off falls Some borrowers this spring faced tough decisions over whether to sell assets like farmland or equipment, appeal to landlords to reduce rents or stop farming altogether, said Mark Jensen, chief risk officer at Farm Credit Services of America About 90% to 95% of the bank’s farm loans are classified as “acceptable,” but its list of loans to watch is building, he said Nathan Kauffman, Omaha branch executive at the Kansas City Fed, said lenders in his district are working to restructure debt for borrowers but can’t so indefinitely Mr Kauffman said, “2016 is going to be a critical year.” INTERNATIONAL INVESTMENT FUNDS Advertisement [ Search by company, category or country at asia.WSJ.com/funds ] FUND NAME Data as shown is for information purposes only No offer is being made by Morningstar, Ltd or this publication Funds shown aren’t registered with the U.S Securities and Exchange Commission and aren’t available for sale to United States citizens and/or residents except as noted Prices are in local currencies All performance figures are calculated using the most recent prices available FUND NAME NAV GF AT LB DATE CR NAV —%RETURN— YTD 12-MO 2-YR n Chartered Asset Management Pte Ltd - Tel No: 65-6835-8866 Fax No: 65-6835 8865, Website: www.cam.com.sg, Email: cam@cam.com.sg CAM-GTF Limited OT OT MUS 05/20 USD 282850.33 1.0 -16.1 n Website: Www.Valuepartners.Com.Hk, Tel: (852) 2880 9263 China A-Share Fund Cls A AUD H OT China A-Share Fund Cls A AUD UnH OT China A-Share Fund Cls A CAD H OT China A-Share Fund Cls A EUR H OT China A-Share Fund Cls A EUR UnH OT China A-Share Fund Cls A GBP H OT China A-Share Fund Cls A GBP UnH OT China A-Share Fund Cls A HKD H OT China A-Share Fund Cls A HKD UnH OT China A-Share Fund Cls A NZD H OT China A-Share Fund Cls A NZD UnH OT China A-Share Fund Cls A RMB (CNH) OT China A-Share Fund Cls A USD OT China A-Share Fund Cls A USD H OT China Greenchip-A Units AS China Greenchip-A Units AUD H AS China Greenchip-A Units CAD H AS China Greenchip-A Units NZD H AS China Greenchip-A Units USD AS China Greenchip-A2 QDIs Units AS GC Hi Yield Inc - Cls A MDIs GBP H OT GC Hi Yield Inc-Cls A MDIs AUD H OT GC Hi Yield Inc-Cls A MDIs CAD H OT GC Hi Yield Inc-Cls A MDIs NZD H OT GC Hi Yield Inc-Cls P HKD Acc sh OT GC Hi Yield Inc-Cls P HKD MDIs sh OT GC Hi Yield Inc-Cls P MDIs SGD H OT GC Hi Yield Inc-Cls P USD Acc sh OT GC Hi Yield Inc-Cls P USD MDIs sh OT GC Hi Yield Inc-ClsA MDIs EUR H OT Hi-Div Stk Cls A RMB H Acc OT Hi-Div Stk Cls A RMB UnH Acc OT Hi-Div Stk Cls A1 OT Hi-Div Stk Cls A2 AUD H MDIs OT Hi-Div Stk Cls A2 CAD H MDIs OT Hi-Div Stk Cls A2 GBP H MDIs OT Hi-Div Stk Cls A2 HKD MDIs OT Hi-Div Stk Cls A2 MDIs OT Hi-Div Stk Cls A2 NZD H MDIs OT Hi-Div Stk Cls A2 RMB H MDIs OT Hi-Div Stk Cls A2 RMB UnH MDIs OT Intel-China Converg Fund-A AUD H AS Intel-China Converg Fund-A CAD H AS Intel-China Converg Fund-A NZD H AS Intel-China Converg Fund-A Units AS Intel-Chinese Mainland Foc Fund AS VP Classic-A Units AS OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG EQ CYM EQ CYM EQ CYM EQ CYM EQ CYM EQ CYM OT CYM OT CYM OT CYM OT CYM OT CYM OT CYM OT CYM OT CYM OT CYM OT CYM OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG EQ CYM EQ CYM EQ CYM EQ CYM EQ CYM EQ HKG 05/26 AUD 05/26 AUD 05/26 CAD 05/26 EUR 05/26 EUR 05/26 GBP 05/26 GBP 05/26 HKD 05/26 HKD 05/26 NZD 05/26 NZD 05/26 CNH 05/26 USD 05/26 USD 05/26 HKD 05/26 AUD 05/26 CAD 05/26 NZD 05/26 USD 05/26 HKD 05/26 GBP 05/26 AUD 05/26 CAD 05/26 NZD 05/26 HKD 05/26 HKD 05/26 SGD 05/26 USD 05/26 USD 05/26 EUR 05/26 CNH 05/26 CNH 05/26 USD 05/26 AUD 05/26 CAD 05/26 GBP 05/26 HKD 05/26 USD 05/26 NZD 05/26 CNH 05/26 CNH 05/26 AUD 05/26 CAD 05/26 NZD 05/26 USD 05/26 USD 05/26 USD 10.63 10.43 9.93 10.52 10.32 10.18 10.62 10.57 10.73 10.43 9.81 11.22 10.58 10.52 46.79 7.87 7.72 8.04 7.73 8.53 9.32 8.88 8.91 9.14 12.83 8.73 9.54 12.91 8.77 9.74 9.21 10.79 66.58 8.60 8.62 8.15 8.74 9.58 8.75 8.25 8.38 8.12 9.31 9.56 121.93 33.55 227.61 -16.2 -13.8 -16.7 -17.0 NS -16.9 -14.5 -17.0 -14.0 -16.3 -13.3 -15.3 -15.2 -16.5 -11.7 -11.5 -11.9 -11.1 -11.9 -11.6 5.1 5.8 5.2 6.1 5.6 5.6 5.6 5.3 5.3 4.8 -6.1 -7.4 -7.3 -7.1 -7.8 -7.7 -7.1 -7.4 -7.0 -6.1 -7.4 -13.6 NS NS -16.6 -18.8 -13.5 -31.3 -28.2 -32.2 -31.3 NS -32.1 -30.2 -31.7 -31.7 -30.9 -27.3 -29.7 -32.3 -31.8 -36.4 -37.5 -37.9 -36.8 -37.7 -36.5 2.9 4.6 3.0 5.6 3.4 3.3 4.0 3.2 3.1 2.5 -21.8 -18.9 -23.3 -23.2 -24.4 -24.9 -23.6 -23.4 -22.2 -22.1 -19.3 NS NS NS -40.6 -39.9 -33.2 -8.6 NS NS NS NS NS NS NS NS NS NS NS NS NS NS -10.9 -11.3 -12.1 -10.3 -12.1 -10.9 NS 7.7 6.0 9.0 5.9 5.9 NS 5.8 5.8 NS NS 0.5 -2.0 -0.7 -2.3 NS -2.1 -2.0 0.1 NS NS NS NS NS 1.4 0.3 1.7 NAV GF AT LB DATE CR VP Classic-B Units VP Classic-C Units VP Classic-C Units AUD H VP Classic-C Units CAD H VP Classic-C Units HKD H VP Classic-C Units NZD H VP Classic-C Units RMB VP Classic-C Units RMB H VP Multi-Asset Fund Cls A USD VP Taiwan Fund AS AS AS AS AS AS AS AS OT AS EQ HKG EQ HKG EQ HKG EQ HKG EQ HKG EQ HKG EQ HKG EQ HKG OT CYM EQ CYM 05/26 USD 05/26 USD 05/26 AUD 05/26 CAD 05/26 HKD 05/26 NZD 05/26 CNH 05/26 CNH 04/30 USD 05/26 USD NAV —%RETURN— YTD 12-MO 2-YR 102.74 12.95 10.61 10.32 8.86 10.76 8.82 8.56 119.02 14.98 -13.6 -13.7 -13.5 -13.9 -13.6 -13.2 -13.5 -12.6 3.7 4.0 -33.6 -34.0 -34.0 -35.3 NS -32.9 NS NS 4.5 -8.8 1.2 1.3 3.2 1.9 NS 3.9 NS NS 17.3 -4.5 For information about listing your funds, please contact: Freda Fung tel: +852 2831 2504; email: freda.fung@wsj.com LIST YOUR FUNDS In print & online Contact: wsja.advertising@dowjones.com THE WALL STREET JOURNAL B16 | Monday, May 30, 2016 HEARD ON THE STREET FINANCIAL ANALYSIS & COMMENTARY Email: heard@wsj.com WSJ.com/Heard Another Chinese Purchase Bites the Dust A key concern about Chinese firms bidding for U.S assets used to be politics Zoomlion Heavy Industry Science & Technology is reminding investors of a more ordinary one: that Chinese firms abruptly terminate bids, for whatever reason Zoomlion scrapped its acquisition of U.S equipment maker Terex on Friday Recall that the Chinese machinery maker was the one who interrupted Terex’s 2015 all-share merger with Finnish peer Konecranes by first offering cash valued at $30 a share and then $31 a share That second $3.4 billion bid was about 60% higher than Konecranes’s offer Terex responded this month by canceling the Konecranes merger and instead announcing a sale of only its port and industrialcrane segment to the Finns That is the asset Konecranes wanted the most and the one whose political sensitivity may have created the biggest headache for Zoomlion It seemed designed to make all parties happy Yet Zoomlion says it couldn’t agree with Terex “on the crucial terms,” without giving details One theory is that price suddenly emerged as a sore spot After adjusting for the reduced value of Terex after its Konecranes side deal, Terex wanted a slightly higher offer because its side deal had avoided the need for paying Konecranes the termination fee the previous merger required, according to a person familiar with the situation Zoomlion, on the other hand, wanted to offer slightly less due to tax complications as well as Terex’s terrible first-quarter results If Zoomlion is balking over what might be less than $1 a share, this appears to be a pretext for re- lion two weeks to make a fully financed $31 bid for the whole company, including the port and crane segment, if it wanted to, likely an attempt to force the Chinese to line up the dollars Zoomlion’s Hong Kong shares fell slightly on the deal’s collapse Its shareholders are worse off They don’t get access to Terex’s world-class crane technology Meanwhile, Konecranes shares rose 3.3% Friday Investors perhaps sense that Terex could come back to discuss a full merger The surest loser is Terex The reversal comes a few months after Chinese insurer Anbang Insurance Group mysteriously dropped its bid for Starwood Hotels & Resorts Worldwide Other acquisition targets might want to grill their Chinese suitors on whether they have the cash or are truly willing to pay the price —Abheek Bhattacharya Terra Not-So-Firma Terex’s quarterly net profit/loss $100 million 50 $1.6M –50 –100 2015 ’16 Sources: S&P Global Market Intelligence; Reuters (photo) THE WALL STREET JOURNAL Zoomlion excavators in Shanghai examining what was always a rich deal Zoomlion’s $31 bid valued Terex at 22.8 times 2016 earnings during an equipment-industry downturn At that valuation, compared with Terex’s 10year average of 15.7 times, it isn’t surprising the buyer got cold feet Another theory is that Zoomlion, already heavily indebted, didn’t get its financing in order If so, being partly owned by a provincial Chinese government didn’t provide a backstop Terex executives already seemed concerned about Zoomlion’s financing After announcing the Konecranes side deal, Terex gave Zoom- OVERHEARD One thing to be said for activist investor William Ackman: His investors get what they see Valeant Pharmaceuticals International’s shares leapt Friday after The Wall Street Journal reported it had recently rejected a takeover approach from Takeda Pharmaceutical and private-equity firm TPG That should comfort shareholders; it confirms Valeant has some assets with value But the approach never included a price, and there are no talks Considering public statements from Mr Ackman, a Valeant director, investors shouldn’t be surprised a bid didn’t get off the ground After all, Mr Ackman told CNBC last month that the board was “only considering selling noncore assets” in a bid to lighten the company’s debt burden Repairing Valeant won’t be easy or certain But Mr Ackman looks like he really intends to stick with it No Rhyme or Reason in an Energy Deal At Samsung, Parts Are Fitting Together Define “reasonable.” The latest accusation in the troubled merger between Energy Transfer Equity and Williams Cos isn’t ETE, which claimed earlier this month that it “can’t close” the deal and is being sued by Williams for some of its actions, filed a counterclaim It says Williams breached the agreement and that Williams should pay a hefty breakup fee The main offense is failure to use Williams’s “reasonable best efforts” to complete the deal But ETE should be worrying about how a court may one day interpret that term It clearly regrets its $6 billion cash sweetener now that sector values have crashed ETE claims it can’t get a necessary tax opinion by The chips are lining up for Samsung Electronics After a spell during which several of its big businesses struggled at once, a turnaround may be at hand Its display segment, which dipped into a loss last quarter, is back on a path to growth thanks to its marketleading position in organic light-emitting diodes OLED screens, thinner and lighter, are seen as the future for mobile phones Analysts have long speculated that Apple, the last major phone maker not on board with the technology, will finally join in A surge in Applied Materials’ new orders for displaypanel equipment seems to support this speculation Samsung, which has nearly all of the mobile Pipe Bomb Six-month performance 20% S&P 500 index -20 Energy Transfer Equity -40 -60 -80 Williams Cos D J F M A M Source: SIX Financial Information THE WALL STREET JOURNAL the June 28 deadline It has almost no legal scope to pull out except, perhaps, saying it used its “reasonable best efforts” to get that opinion One way ETE alleges Williams has attempted to thwart the deal was its refusal to cooperate with a dil- utive public issue of convertible preferred shares ETE sold some anyway to “accredited investors” with over half going to boss Kelcy Warren Its terms are seen by some as a way to insulate buyers from a likely cut in regular cash distributions ETE says the deal was a step to raise cash for the merger Since Williams is keener on the deal happening than ETE, thwarting a legitimate money-raising exercise its shareholders will receive makes no sense Instead, it appears ETE saw a tactic to make the deal less attractive to Williams shareholders so that they walk away That is what a reasonable observer would say —Spencer Jakab OLED market, stands to benefit Goldman Sachs estimates Samsung’s operating income from OLED could more than double in 2018 Samsung’s smartphone business also appears in better shape Industrywide, smartphone inventory at sales channels fell in the first quarter to a 5.6-week supply, the lowest since early 2014, according to Sanford C Bernstein Samsung’s channel inventory fell to 6.2 weeks, from 9.9 weeks at the end of last year Its smartphone sales picked up last quarter as it introduced the Galaxy S7 Phone makers still face a demand challenge, but oversupply has subsided Then there is Samsung’s memory business, which looks to be bottoming Prices for DRAM, a type of memory chip used for processing, have fallen by more than half in the past few years as manufacturers flooded the market while demand dwindled The flood may be set to abate: Memory-chip makers cut capital spending in the DRAM industry around 30% this year, notes Morgan Stanley Meanwhile, sales of NAND, the type of memory used for storage, could pick up as demand grows for faster solid-state drives Samsung is a leading maker of both types of chip At a forward price-toearnings ratio of 9.4 times— slightly above the five-year average—Samsung shares are a cheap bet on the recovery of its major businesses —Jacky Wong MONEY & INVESTING CRUDE Continued from page B13 compares with a stock market that has offered nowhere near that momentum “I just thought, let’s throw a couple of hundred dollars in it…and try it out,” said Matt Krasnoff, 26, of New York, who bought shares of UWTI last year after hearing about it from a friend “I just enjoy the risk and the thrill of the market in general.” CME Group Inc., the world’s largest futures-market operator, estimates that crude oil has been its second-most traded contract among retail investors this year after a contract tied to the S&P 500, and such investors make up about 10% of daily trading volume in oil, a record high, said Mark Omens, executive director of retail sales at CME Total assets in the 15 U.S exchange-traded products that track crude, including UWTI, hit a record $8.5 billion in early March and had nearly $8 billion Wednesday, according to Bi- anco Research LLC, which specializes in investment analysis That figure doesn’t distinguish between retail and institutional investors, which also have a large presence in the market Brokerages are keen to make sure that if traders lose money in these products, which can happen quickly, they are aware of that possibility Some have spilled hundreds of words detailing the inner workings and risks of such products, which are prone to large daily percentage moves, even into the double digits Frederick Bailey, 59, of Savannah, Ga., said he put a modest amount of money in UWTI in January as crude broke below $30 a barrel and rode it higher as oil prices rebounded Mr Bailey, who said he is between jobs, once worked at banks that dealt with exchange-traded funds Mr Bailey also visits online chatter sites talking about oil, such as StockTwits Millennials also are fans of crude-related trading, said Howard Lindzon, chairman and chief executive officer of Stock- Twits UWTI and the VelocityShares 3x Inverse Crude Oil ETN, which bets on oil to decline, were the second- and third-most-visited pages during the first quarter on StockTwits, prompting the company to sell a T-shirt with the two ticker symbols on the front Grant Heimer, a 25-year-old in Dallas, trades stocks as a hobby and learned about commodity exchange-traded funds from his friends last year, he said An energy-industry software consultant who studied finance in college, he has traded oil and natural-gas exchange-traded funds a few times using a smartphone app called Robinhood “Oil just seemed to make a lot of sense to me,” said Mr Heimer He has never held a position longer than five days and still has most of his portfolio in stock investments Most of his oil trades made money, he said, but not all “I’m not careless,” Mr Heimer said “It’s a very appealing thing to for somebody like me who’s OK with a small risk and a short amount of time.” Tapping Into Oil Exchange-traded products have become a popular way for individual investors to make bets on the big moves in crude Share of short-term crude futures owned by exchange-traded products* Performance 25% 50% 40 30 –25 20 –50 10 –75 –100 2014 ’15 ’16 2014 ’15 ’16 *Net long positions as a percentage of front-month and second-month futures contracts As of May 25 Sources: Citigroup (share); WSJ Market Data Group, FactSet (performance) Some have ventured into selling the underlying futures contracts, where retail investors need permission to access the market Archna Jagtiani, a 42-yearold who lives in the Chicago suburbs, started trading after THE WALL STREET JOURNAL the financial crisis “After 2010 when the market was up…my account had not come back and I was just paying fees,” she said “It’s better this way I cannot blame anybody if I lose money.” She said she spends her days trading and tutoring ness, the company said AXA and its peers in Europe have been grappling with the region’s uncertain investment market and low interest rates The transaction with Phoenix Group, which includes AXA’s direct protection business Sunlife in the U.K., is expected to close in the second half of 2016 —Nick Kostov Finance Watch STATE BANK OF INDIA Quarterly Profit Declines Sharply BANK OF AMERICA Sale of a Card Unit Is in Works Again DANISH SIDDIQUI/REUTERS State Bank of India said Friday that its fiscal fourth-quarter net profit fell steeply, after the country’s largest lender set aside more money to cover potential losses on nonperforming assets, which are increasing rapidly Net profit at the bank fell 66% to 12.64 billion rupees ($189 million) in the three months to April from 37.42 billion rupees in the same period a year earlier Net bad loans—a problem for most Indian banks—rose to 3.81% of total loans from 2.12% a year earlier Gross nonperforming assets advanced to 6.5% of the bank’s assets from 4.25% a year earlier The stock gained 2.8% on Friday, —Gabriele Parussini Nymex crude oil United States Oil Fund VelocityShares 3x Long Crude Oil ETN Like other Indian lenders, State Bank of India is dealing with an increase in nonperforming assets AXA Insurer Is Selling Some Assets in U.K AXA SA has agreed to sell its investment, pensions and direct protection businesses in the U.K to insurer Phoenix Group Hold- ings for £375 million ($548 million) in cash as it leaves parts of Europe to invest in faster-growing markets AXA said last month that it had already agreed to sell one part of its U.K business—an adviser platform business called El- evate—to Standard Life PLC for an undisclosed amount It announced the sale of its offshore investment bonds business, based in the Isle of Man, in April Combined, AXA has raised £632 million from the sale of its entire U.K life and savings busi- Bank of America Corp has relaunched the sale of MBNA, a big U.K credit-card company, according to people familiar with the matter The card business is being offered to a number of potential buyers including Lloyds Banking Group PLC, according to people familiar with the matter Bank of America decided to sell the U.K MBNA card business in 2011 as it ditched several international card businesses, but the sale was axed a year later MBNA is now attracting interest from retail banks looking to put excess capital reserves to work —Max Colchester kids in math after the market closes Ms Jagtiani used to trade oil exchange-traded funds, but a few months ago switched to buying and selling oil-futures contracts because of the quirks of holding some oil exchange-traded products for a long period “If oil goes from $43.50 [a barrel] to $43.70, you’ve made a hundred bucks,” she said of oil futures, which she holds for intervals as short as 15 minutes Mr Krasnoff works at LinkedIn Corp in New York and keeps a list of his investments displayed on Yahoo Finance on his computer screen during the day He said he typically invests in technology companies that he is familiar with and reads articles about the industry and watches Twitter to stay up to date He ditched UWTI within a few months of trying it, after losing money “It was outside of the realm of what I knew….The last straw was realizing that I wasn’t informed enough,” he said Now, he says, he is going to stick to investing in what he knows, like tech RULES Continued from page B13 stocks citing various reasons, the most common among them being restructuring Trading in large numbers of other stocks was halted because the shares had moved by the daily limit On July 9, stock in just 3% of Chinese-listed companies could be traded In January, more than 1,000 stocks plunged by the 10% daily limit, triggering trading halts, when a newly installed circuit-breaker system exacerbated panic selling over four trading sessions As of Friday, trading in 304 A-share listed firms, or roughly 10% of total Chinese listed stocks, was halted, according to Wind Information, a data provider The new rules are meant to “maintain trading continuity and market liquidity as well as to protect investors’ right to trade,” the Shanghai Stock Exchange statement said —Yifan Xie [...]... ($ /lb .) Gold ($ /troy oz .) Silver ($ /troy oz .) Aluminum ($ /mt)* Tin ($ /mt)* Copper ($ /mt)* Lead ($ /mt)* Zinc ($ /mt)* Nickel ($ /mt)* Rubber (Y.01/ton) Europe WSJ Dollar index Yield Corn (cents/bu .) Soybeans (cents/bu .) Wheat (cents/bu .) Live cattle (cents/lb .) Cocoa ($ /ton) Coffee (cents/lb .) Sugar (cents/lb .) Cotton (cents/lb .) Robusta coffee ($ /ton) US$vs, YTDchg Fri in US$ per US$ (% ) Country/currency... CBOT CME ICE-US ICE-US ICE-US ICE-US ICE-EU COMEX COMEX COMEX LME LME LME LME LME LME TCE Palm oil (MYR/mt) MDEX NYMEX Crude oil ($ /bbl .) NY Harbor ULSD ($ /gal .) NYMEX RBOB gasoline ($ /gal .) NYMEX Natural gas ($ /mmBtu) NYMEX Brent crude ($ /bbl .) ICE-EU ICE-EU Gas oil ($ /ton) Spread Over Treasurys, in basis points Previous Month Ago Year ago 112.9 77.1 -129.8 -132.1 -126.7 -121.2 -130.9 -156.5 -82.7 -34.4... running into hurdles, ranging from securing financing to overcoming national-security concerns among local regulators and lawmakers Terex makes cranes for loading ship cargo, and deals involving U.S port infrastructure have long been politically sensitive Airline Executives Look to Soothe Investors The industry will need to confront looming signs of trouble amid a gathering in Dublin 14% BY ROBERT WALL... moves and negotiations with its other debt investors that culminated in Friday’s deal Continued from page B13 banking units of Mitsubishi UFJ Financial Group Inc and Sumitomo Mitsui Financial Group Inc., giving them the same credit rating as Mizuho Standard & Poor’s and Fitch Ratings have also lowered Japan’s credit rating in the past two years, but investors continue to accept nearrecord-low yields on... Its licensing business has had trouble collecting royalties in China following an investigation by China’s National Development and Reform Commission The regulator said Qualcomm had used its market dominance to charge Chinese smartphone makers overly high prices to license technology needed for their handsets Qualcomm said it was disappointed in that finding, but agreed not to contest it in further... AXA Insurer Is Selling Some Assets in U.K AXA SA has agreed to sell its investment, pensions and direct protection businesses in the U.K to insurer Phoenix Group Hold- ings for £375 million ($ 548 million) in cash as it leaves parts of Europe to invest in faster-growing markets AXA said last month that it had already agreed to sell one part of its U.K business—an adviser platform business called El- evate—to... increase should proceed as scheduled, said Japanese banks’ dollar-funding costs could rise further if a creditrating firm downgrades them again “We’ve seen a rise in dollar-funding costs since the second half of 2014,” he said “There is no way lending will boost our profitability.” To balance weakness in lending, Mizuho has focused on income from fees, including from its M&A advisory and underwriting... year in a row Bankers said they generally don’t expect anything like the financial strain of the 1980s, when tumbling land values and rising indebtedness pushed many growers and agricultural lenders out of business Lending activity in the U.S is still strong, and delinquency rates on farm loans remain relatively low, though they have risen in some parts of the Farm Belt But lenders are closely watching... NZD UnH OT China A-Share Fund Cls A RMB (CNH) OT China A-Share Fund Cls A USD OT China A-Share Fund Cls A USD H OT China Greenchip-A Units AS China Greenchip-A Units AUD H AS China Greenchip-A Units CAD H AS China Greenchip-A Units NZD H AS China Greenchip-A Units USD AS China Greenchip-A2 QDIs Units AS GC Hi Yield Inc - Cls A MDIs GBP H OT GC Hi Yield Inc-Cls A MDIs AUD H OT GC Hi Yield Inc-Cls A MDIs... her days trading and tutoring ness, the company said AXA and its peers in Europe have been grappling with the region’s uncertain investment market and low interest rates The transaction with Phoenix Group, which includes AXA’s direct protection business Sunlife in the U.K., is expected to close in the second half of 2016 —Nick Kostov Finance Watch STATE BANK OF INDIA Quarterly Profit Declines Sharply