For companies, a rocky road ahead in emerging markets

- International companies are taking steps to mitigate the effects of the turmoil in emerging markets, including hedging foreign currency exposure more aggressively, reducing some investment plans, cutting costs, and raising prices frequently.

While executives are not hitting the panic button just yet, and many say the risks they face are hardly unique, they are still aggressively tackling costs and making sure that revenue keeps up with inflationary pressures. And many warn that if China suffers a credit crisis as some fear, then things could get a whole lot worse.

From Africa to Asia to Latin America, policymakers are scrambling to prop up theircurrencies and prevent a sudden exodus of foreign capital by jacking up interest rates and taking other steps - all this just as many emerging economies were already starting to slow sharply after a decade-long boom.

The sudden onslaught of market volatility in Turkey, Argentina, South Africa and Brazil, along with worries about an abrupt slowdown in China, means companies are now bracing for deeper reversals in demand for their products in emerging economies. And this is happening at a time when their U.S. dollar or euro revenues from many of these countries are also taking a hit because of plunging emerging market currencies.

Automakers Ford Motor Co. (F.N) and Fiat SpA (FIA.MI), home appliance manufacturer Whirlpool Corp (WHR.N) and liquor giant Diageo (DGE.L) all cited weakness and a more sober outlook in once-roaring emerging markets in earnings reports this week.

Still, for many executives, especially those with decades of experience in the developing world, wild currency swings and economic ups and downs are a fact of life that they must deftly navigate.

"We have had quite a bit of currency changes, particularly in the very weak emerging markets. But let's put it in context," Jeff Fettig, Whirlpool's chairman and chief executive said. "We've been in the Brazilian market for over 60 years and we've managed hyper inflationary periods, busts, booms, and we've never had a loss-making year in Brazil."

Fettig said the appliance maker was not overly concerned that the downturn in emerging markets would significantly affect the company financially, since the most troubled economies account for less than 3 percent of overall revenue. The company has taken steps in countries where currency devaluations had occurred to recoup dollar-based raw materials costs.

Economists at Bank of America Merrill Lynch described the turmoil of the past week as "a perfect storm of idiosyncratic risks" within emerging markets - citing credit risks in China, political crises in Turkey, Ukraine and Thailand, and the currency devaluation in Argentina.

While all these events have further dimmed an already bearish outlook for many emerging economies, a full-fledged crisis does not look likely.

"We do not view the current wobble as the start of an EM-wide crisis," Alberto Ades, co-head of Global Economics Research at BofA Merrill Lynch wrote in a note on Thursday.

TAKING NO CHANCES

Companies with operations in emerging economies are nonetheless dusting off contingency plans, with strategies varying country by country.

"We are taking a wait-and-see attitude in terms of decisive action," said the treasurer of a multi-billion dollar advertising company that books about half its revenue outside the United States. The executive, who asked for anonymity because the company has not yet disclosed fourth-quarter results, said his traders are not actively hedging now for currency volatility but could begin doing so at any minute.

For others, like Swedish apparel retailer Hennes & Mauritz (HMb.ST), hedging is a permanent strategy in emerging markets.

"We always live with a bit of currency risk," said H&M Chief Executive Officer Karl-Johan Persson. "We will keep the hedging strategy that we have. We think it works well for us."

While it is impossible to predict exactly where and when economic or market turmoil might arise, most companies constantly monitor the political, economic and financial developments in the countries where they operate.

"Everybody right now is focusing on India, South Africa and Turkey, but the issues there are not new. They just haven't been on the front page," said another corporate treasurer who asked not to be identified.

Even the mightiest of global companies can run into trouble in emerging markets. Wal-Mart Stores Inc (WMT.N), the world's largest retailer, has struggled in hard-to-crack markets like India, Brazil and China. On Friday, it cut its outlook to account for the closure of 50 underperforming stores in the Brazilian and Chinese markets.

While voicing concerns about the year ahead in developing economies, executives from motorcycle manufacturer Harley-Davidson Inc (HOG.N), heavy equipment maker Caterpillar Inc (CAT.N) and Philips (PHG.AS) all stressed their long-term commitment to those markets.

"Overall, we like emerging markets. What worries me are the currency fluctuations and the unrest in some of the countries," said Frans van Houten, chief executive of Philips, the Dutch healthcare, lighting and consumer appliances company. "I'm cautiously optimistic for the longer term economic development."

Diageo, the world's biggest distilled drinks company, has also seen its sales growth slow in emerging markets in the last six months, especially in China. But the company, which gets about 42 percent of its sales in emerging markets, is betting big that the growing middle class in developing nations will be a driver of growth for years to come.

"You will have economic growth in the emerging markets, even when there are shocks and ups and downs," Diageo CEO Ivan Menezes told reporters on Thursday. He said the company is streamlining operations and seeking to become more agile in some of the more volatile markets.

The volatility is also an opportunity for deep-pocketed players looking to up the ante in emerging markets.

"As far as emerging markets go in real estate, there are some fantastic opportunities all of a sudden because of the flight of capital out ... and the tighter money in those countries," Blackstone Group LP's (BX.N) President Tony James said on a conference call with reporters.

"We're suddenly able to buy real estate properties in fast-growing markets at less than physical replacement cost."

THE WILD CARD: CHINA

For some newcomers and smaller players, though, the challenge in emerging markets may not be worth the headache.

British private equity group 3i (III.L) said on Thursday it had scrapped plans to raise a new Brazilian fund and that it would not make any new investments there because of changing macroeconomic conditions.

"Brazil remains a really interesting market but conditions have changed over the past 12 months, there is much greater market and political uncertainty and that has also been reflected in currency volatility," the firm's finance director, Julia Wilson, told reporters on a conference call.

Like China, India and other high-profile emerging markets, Brazil was one of the world's economic success stories of the past decade, chalking up lofty growth rates while also lifting more than 30 million people out of poverty. But Brazil has slowed sharply since 2010 under President Dilma Rousseff, whose heavy-handed economic policies have scared off some investors.

The real wild card for emerging markets seems to be China, where signs of strains in the banking system have stirred concerns about the sustainability of Chinese growth.

"China has now become the second-largest economy in the world with a GDP that is more than half that of the U.S. and since 2008 has functioned as the engine of global growth," said Robbert Van Batenburg, director of market strategy at Newedge USA LLC in New York.

"If this escalates into a credit crisis that causes Chinese economic growth to come to an abrupt stop, it will impact almost every nook and cranny of the global economy."

Keystone report raises pressure on Obama to approve pipeline

Keystone report raises pressure on Obama to approve pipeline

- Pressure for President Barack Obama to approve the Keystone XL pipeline increased after a State Department report played down the impact it would have on climate change, irking environmentalists and delighting the project's proponents.

But the White House signaled late on Friday that a decision on an application by TransCanada Corp to build the $5.4 billion project would be made "only after careful consideration" of the report, along with comments from the public and other government agencies.

"The Final Supplemental Environmental Impact Statement includes a range of estimates of the project's climate impacts, and that information will now need to be closely evaluated by Secretary (of State John) Kerry and other relevant agency heads in the weeks ahead," White House spokesman Matt Lehrich said.

The White House comment came after proponents of the pipeline, which would transport crude from Alberta's oil sands to refineries on the U.S. Gulf Coast, crowed about how the State Department report cleared the way for Obama to greenlight the project.

The agency made no explicit recommendation. But the State Department said blocking Keystone XL - or any pipeline - would do little to slow the expansion of Canada's vast oil sands, maintaining the central finding of a preliminary study issued last year.

The 11-volume report's publication opened a new and potentially final stage of an approval process that has dragged for more than five years, taking on enormous political significance.

With another three-month review process ahead and no firm deadline for a decision on the 1,179-mile (1,898-km) line, the issue threatens to drag into the 2014 congressional elections in November.

Obama is under pressure from several vulnerable Democratic senators who favor the pipeline and face re-election at a time when Democrats are scrambling to hang on to control of the U.S. Senate. The project looms over the president's economic and environmental legacy.

Canada's oil sands are the world's third-largest crude oil reserve, behind Venezuela andSaudi Arabia, and the largest open to private investment. The oil sands contain more than 170 billion barrels of bitumen, a tar-like form of crude that requires more energy to extract than conventional oil.

Obama said in June that he was closely watching the review and said he believed the pipeline should go ahead "only if this project does not significantly exacerbate the problem of carbon pollution."

NOT OVER YET

The report offered some solace to climate activists who want to stem the rise of oil sands output. It reaffirmed that Canada's heavy crude reserves require more energy to produce and process - and therefore result in higher greenhouse gas emissions - than conventional oil fields.

But after extensive economic modeling, it found that the line itself would not slow or accelerate the development of the oil sands. That finding is largely in line with what oil industry executives have long argued.

"This final review puts to rest any credible concerns about the pipeline's potential negative impact on the environment," said Jack Gerard, head of the oil industry's top lobby group, the American Petroleum Institute.

The optimism was echoed by the chief executive of TransCanada, and Canada's Natural Resources Minister Joe Oliver, who said he hoped Obama would approve the project in the first half of 2014.

U.S. Secretary of State John Kerry will consult with eight government agencies over the next three months about the broader national security, economic and environmental impacts of the project before deciding whether he thinks it should go ahead.

The public will have 30 days to comment, beginning next week. A previous comment period in March yielded more than 1.5 million comments.

Kerry has no set deadline. The open-ended review made some pipeline supporters nervous.

"The administration's strategy is to defeat the project with continuing delays," said Republican Senator John Hoeven of North Dakota, where the oil boom has boosted truck and rail traffic.

Some North Dakota oil would move on the pipeline, designed to take as much as 830,000 barrels of crude per day from Hardisty, Alberta, to Steele City, Nebraska, where it would meet the project's already complete southern leg to take the crude to the refining hub on the Texas Gulf coast.

MORE REVIEW AHEAD

The State Department's study found that oil from the Canadian oil sands is about 17 percent more "greenhouse gas intensive" than average oil used in the United States because of the energy required to extract and process it. It is 2 percent to 10 percent more greenhouse gas intensive than the heavy grades of oil it replaces.

The Sierra Club, an environmental advocacy group, said the report shows the pipeline would create as much pollution each year as the exhaust from almost 6 million cars - evidence that it said will be hard for Obama to ignore.

"Reports of an industry victory on the Keystone XL pipeline are vastly over-stated," said Michael Brune, the group's executive director.

The study found oil sands development could be curbed if pipelines were not expanded, oil prices were low, and rail shipping costs soared.

The study examines data from a 2010 pipeline spill in Michigan, where more than 20,000 barrels gushed into the Kalamazoo River system. Pipeline operator Enbridge Energy Partners was ordered last summer to do more to dredge up oil from the bottom of the river.

New big-headed fish species discovered in Idaho and Montana rivers

New big-headed fish species discovered in Idaho and Montana rivers

 - A tiny fish characterized by a disproportionately large head and previously unknown to scientists has been found in mountain rivers of Idaho and Montana in what biologists said on Thursday marked a rare discovery.

The new aquatic species is a type of freshwater sculpin, a class of fish that dwell at the bottom of cold, swiftly flowing streams throughout North America and are known for their oversized head and shoulder structure.

"The discovery of a new fish is something I never thought would happen in my career because it's very rare in the United States," said Michael Young, co-author of a scientific description of the find published in the latest edition of the peer-reviewed journal Zootaxa.

Scientists with the U.S. Forest Service Rocky Mountain Research Station in Montana first encountered the new species while conducting a genetic inventory of fish found in the upper Columbia River basin, said Young, also an agency fisheries biologist.

At first, researchers were not sure they had stumbled on a never-before-seen fish.

But genetic testing and examination of key physical differences proved that the specimens in question found in the Coeur d'Alene and St. Joe rivers in northern Idaho and in a stretch of the Clark Fork River in neighboring Montana were distinct from known varieties of the bottom-feeding fishes.

The fish has been named the cedar sculpin, after Western red cedars that line streams in the Idaho panhandle where it was first discovered.

Cedar sculpin differ from more common species by variations in spiny structures that sprout from their heads, which may protect them from predators, and the configuration of a line of tiny pores along each side of the body which fish use to detect movements and compounds in their environment, biologists said.

The big-headed fish, which eat aquatic insects and are typically no larger than six inches, are known for their ill-favored looks, but Young said the fish's merits are more than fin deep.

Sculpin are the preferred prey of prized sport fish like cutthroat trout and rare fish like bull trout, and anglers for nearly a century have lured trout with a fly-fishing pattern that imitates sculpin.

Don Johnson, professor emeritus in fishery biology at Idaho State University, said the discovery of a new species shows Mother Nature still has a few tricks up her sleeve.

"It tells you how much we still don't know about our environment and the interactions of its diverse components," he said.

Governor Christie 'Bridgegate' scandal flares up with new letter

Governor Christie 'Bridgegate' scandal flares up with new letter

- A former New Jersey official on Friday claimed Governor Chris Christie knew about politically motivated traffic jams as they happened, re-igniting a political scandal that has taken a toll on the prominent Republican.

The letter from a former official at the agency that oversees the busiest U.S. bridge sparked a quick response from Christie, who again denied wrongdoing, and prompted a top New Jersey newspaper to suggest the governor could face impeachment.

David Wildstein, who resigned his Port Authority post late last year, said in a letter that he had proof of the "inaccuracy" of some of Christie's statements about the so-called "Bridgegate" scandal, which polls show has already started to weigh on Christie's potential 2016 White House bid.

Since the scandal first came to light, Christie has denied knowing the cause of the George Washington Bridge lane closings, which occurred after the mayor of Fort Lee declined to endorse the governor in a re-election bid and caused four days of massive traffic jams in that city.

"It's the first time a high-level official has contradicted the governor," said Julian Zelizer, a Princeton University history professor who specializes in presidential politics.

The letter does not indicate that Christie orchestrated the closures in any way, does not specify exactly when he became aware of the jams, and offers no evidence to back up the claim.

"Mr. Wildstein contests the accuracy of various statements that the governor made about him and he can prove the inaccuracy of some," the letter said.

Wildstein and Christie attended Livingston High School at the same time, but Christie, a former federal prosecutor, has denied knowing Wildstein well.

One key question is exactly when and how Christie learned of the closures, said Fort Lee Mayor Mark Sokolich, a Democrat.

"There aren't enough facts. I'm not rooting for him to know or not to know. I will tell you, I remain very, very concerned about it," Sokolich told CNN. "If it was known at the very tail end, possibly, I'm not sure what this letter means at all."

Assemblyman John Wisniewski, who has led the investigation into the lane closures, told CNN late Friday that "these are serious allegations, because what Mr. Zegas's letter is saying is - you shouldn't believe the governor."

"But we need to see the documents to see whether there's any merit to that claim, to not believe the governor."

'SMOKING GUN'?

The key question, Zelizer said, is whether Wildstein can produce "smoking gun" evidence proving Christie's knowledge of the events. State Democrats probing the scandal are likely to jump on that vulnerability, Zelizer added.

The Newark Star-Ledger, one of New Jersey's largest newspapers, which endorsed Christie in his 2013 re-election bid, posted an editorial after the New York Times first reported about the letter, saying that if the accusations are true, the governor must resign or be impeached.

"Because it will show that everything he said at his famous two-hour press conference was a lie," the editorial said.

The paper had not endorsed Christie's initial run in 2009.

The Democratic National Committee, already targeting Christie, who won re-election in a landslide last November, as its greatest threat in the 2016 presidential election, was quick to pounce.

"He's repeatedly said that he had no knowledge of the lane closures," said Mo Elleithee, a DNC spokesman. "Today's revelations raise serious questions about whether that is true."

Polls taken since the emails emerged early this month showing Christie's now-fired deputy chief of staff, Bridget Anne Kelly, calling for "traffic" in Fort Lee, show Christie's popularity slipping in theoretical 2016 White House and primary matchups.

"If we assume it's true, then we're in the realm of an outright lie on the part of the governor, and that changes the entire story," said David Redlawsk, a New Jersey pollster. "It's the cover-up that gets you."

As for Wildstein, Redlawsk said, "It very much sounds like the message is quite clear to the U.S. Attorney's Office: Tell us what you need, and we'll cooperate."

The scandal has tarnished Christie's reputation as a politician ready to reach across the aisle at a time when partisan gridlock has defined Washington.

Christie bolstered his image as conciliator in 2012 when he walked beside President Barack Obama along the storm-hit New Jersey coastline after Superstorm Sandy, in the final months of the 2012 presidential campaign - a move that some supporters of Republican contender Mitt Romney said hurt their party's chances of retaking the White House.

In the marathon January 9 press conference, Christie repeatedly apologized for actions he blamed on his aides, expressed his shock and said: "I am who I am, but I am not a bully."

Justin Bieber released after private jet searched for drugs: source

 - Canadian pop singer Justin Bieber was allowed re-entry into the United States on Friday after a brief detention during which U.S. Customs officials used drug-sniffing dogs to search his private jet, according to a U.S. law enforcement source briefed on the incident.

No illegal drugs were found on the plane and no charges were brought, but the young singer and his fellow passengers were questioned for several hours, said the source.

The search of the plane was undertaken after U.S. customs officials believed they smelled marijuana on some of Bieber's entourage.

It was not immediately clear who or how many other passengers were on the plane that touched down at New Jersey's Teterboro Airport.

A Port Authority spokesman said his agency was notified at 8:20 p.m. local time (0120 GMT) that Bieber had been released from U.S. Customs, and had no further comment.

Earlier Friday, the Los Angeles County District Attorney's office charged a friend of Bieber's with drug possession in connection with a raid last month on the singer's home in Calabasas, California, about 30 miles northeast of Los Angeles.

Xavier Smith, 20, better known as rapper Lil Za, was charged with possession of MDMA and oxycodone and vandalizing the Los Angeles County Sheriff's jail where he was held, said Ricardo Santiago, a spokesman for the district attorney.

Bieber, 19, was arrested last week in Miami Beach on charges of driving under the influence, resisting arrest and driving with an expired license.

The Canadian was also charged on Wednesday with assaulting a limousine driver in Toronto.

In India, would-be Microsoft CEO showed inquisitive streak

 - In his university days in India, Satya Nadella, likely the next chief executive officer of Microsoft Corp, was a relentless questioner.

"When all other students will quietly listen to what I would teach, he will ask a lot of questions - 'why does it have to be like this, why can't we do it like this?'," said Harishchandra Hebbar, who taught digital electronics to Nadella at Manipal University.

"Sometimes it felt like he was just testing my patience," said Hebbar, laughing.

That questioning nature has served Nadella well in his 22-year career at Microsoft, the world's largest software company. Last year he was promoted to run the company's fast-expanding cloud, or Internet-based, computing initiatives.

His elevation to the top spot at Microsoft would end a five-month search for a tech-savvy heavy-hitter to lead the company co-founded by Bill Gates. A source familiar with the matter told Reuters on Thursday that Nadella's appointment was likely, although the board had not yet met to finalize it.

Nadella grew up in the southern Indian city of Hyderabad, a technology hub that is home to the biggest Microsoft research and development center outside of the United States.

His father was a member of the elite Indian Administrative Service and a member of the Planning Commission during 2004-2009 under Prime Minister Manmohan Singh. His father, B. N. Yugandhar, who still lives in Hyderabad, declined to speak with Reuters when reached by phone.

Born in 1967, Nadella attended the prestigious Hyderabad Public School, where he met his future wife. Nadella studied electronics and communication engineering, at Manipal University, where people who knew him at the time described him as friendly, modest and well-spoken.

Manipal is a mid-ranking private institution, and does not have the cachet of the elite Indian Institute of Technology (IIT) and Indian Institute of Management (IIM) where many of India's global power players were educated.

GLOBAL INDIAN

If he gets the top job at Microsoft, Nadella would join the growing list of Indian-born executives to head a major global corporation. They already include PepsiCo Inc CEO Indra Nooyi and Deutsche Bank co-CEO Executive Anshu Jain.

After graduating in 1988, Nadella, like many ambitious Indians, moved to the United States to study, earning a master's degree in computer science from the University of Wisconsin-Milwaukee.

Ganesh Prasad, a classmate of Nadella at Manipal who remains in touch with him, recalled a conversation in 1991 when Nadella was working at Sun Microsystems.

"We were having a conversation and talking about Sun as the future of hardware ... and he was like: 'you know where I need to go? I need to be in software and I need to be in marketing and I need to be in Microsoft'," Prasad recalled by phone from Bangalore, where he now lives.

Prasad, who worked for 20 years in the United States with Intel Inc, said Nadella started with a base in technology and then became interested in how to market it - a skill set that will be called upon in his new role.

By comparison, Microsoft's previous CEO, Steve Ballmer, was regarded more as a salesman and cheerleader than a technology visionary.

"While he comes from a very strong technology background, his outlook over the years has changed to: 'so, what, what am I going to do with this thing? How do I position it? How do I make sense of it all?'," said Prasad.

Attack on mass transit seen as top Super Bowl security risk

Attack on mass transit seen as top Super Bowl security risk

- Bomb attacks of the kind that tore through mass transit sites in Russia ahead of the upcoming Sochi Olympics are a top concern of security officials preparing for Sunday's Super Bowl, the head of the New Jersey State Police said on Wednesday.

While law enforcement officials said they were not aware of any specific threats targeting the February 2 National Football League championship in East Rutherford, New Jersey, attacks like those that killed 34 people in two days in Russia late last year are their biggest worry.

"Of particular concern to us is what was going on overseas in Volgograd in regard to the Sochi Olympics. As you know both of those bombings were targeting mass transit," Rick Fuentes, superintendent of the New Jersey State Police, told reporters. "That is a concern with the mass transit; we've prepared ourselves for it."

Officials have sharply limited parking at MetLife Stadium, where Sunday's game will be played, and expect as many as 30,000 people to arrive by bus or rail. Security screening will start at train stations, where fans will not be able to board stadium-bound trains or buses without tickets to the game, officials said.

New York Police Department Commissioner William Bratton said that while authorities were focused on a mass transit type of attack, they were not aware of any specific plans to target the game or surrounding events.

"We are keeping an eye on activities around the world, but certainly at this time there are no threats directed at this event that we're aware of," Bratton said.

The stadium is located about 10 miles west of New York City, the site of the September 11, 2001, attacks. It has been locked down all week, and authorities are scanning all vehicles that go in, a practice that will continue on game day, officials said.

Bratton noted that New York police were using extensive intelligence-gathering operations developed since the World Trade Center attack to watch for possible threats.

About 400,000 people are estimated to have traveled into the region for events surrounding the game, though only about 80,000 fans will get to see the Seattle Seahawks-Denver Broncos match-up in person.

Some 4,000 security officers will be on hand for Sunday's game, and fans will be prohibited from bringing bags into the stadium unless they are transparent and no larger than 12 inches by 6 inches by 12 inches, with women's purses limited to 4.5 inches by 6.5 inches.

Stadium gates will open at 2 p.m. on Sunday, more than four hours before kickoff, to allow fans to pass through a security cordon that will include metal detectors and pat-downs of fans bundled up for temperatures that could drop to 29 degrees Fahrenheit (minus-2 Celsius).

At an undisclosed location near the stadium, officials from some 100 security agencies are monitoring feeds related to security concerns 24 hours a day, Fuentes said.

'LONE WOLF' A WORRY

The contained nature of the game makes it easier to secure than public events such as the Boston Marathon, where two pressure-cooker bombs were detonated amid a finish line crowd of thousands of spectators, volunteers and athletes on April 15, killing three people and injuring 264.

The "Super Bowl Boulevard" street fair, along a 3/4-mile stretch of New York's Broadway, presents a different challenge, as it will be wide open, with up to 1 million people expected to visit attractions, including the Super Bowl trophy and a towering toboggan run.

Large numbers of police officers have been assigned to the event and organizers have taken steps such as removing trash bins along the route and replacing them with clear plastic bags that can be easily inspected visually. Large numbers of security cameras and plainclothes police officers will be deployed along the area, although officials would not disclose precise details.

In planning for the event, Bratton said New York police had prepared to respond to a variety of attacks.

"There was a lot of focus on the lone wolf, the 'backpack left unsecured' scenarios, so we're prepared," Bratton said.

The Boston bombers left their homemade explosives along the course in black backpacks.

Fans who visited the street fair on Wednesday said they were confident due to the large police presence.

"I can see cops all over, so I feel like it's pretty safe," said Steven Ferraro, 18, of New York's Brooklyn borough. "Anything can happen anywhere, but I think it's safe."

Security experts, however, note that it is all but impossible to secure open-air events entirely.

"No amount of technology or deployment of resources and 21st century technology is going to guarantee under all circumstances that something terrible cannot happen," said Tom Nolan, chairman of the criminal justice department at the State University of New York in Plattsburgh. "You have to accept some degree of risk and you have to accept a new level of intrusion into your privacy."