The Wall Street Journal Europe - 30 June 2016

Turkey Pays
The Price for

Inaction on ISIS
PERSONAL JOURNAL | A12
OPINION | A10
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eutsche Bank and

Santander again failed
the Feds stress tests,
while all but two of 33
large U.S. banks passed. A1
Computers fared better

than human traders in the
post-Brexit market turmoil
as many investors bet on the
outcome they preferred. A1
Renault may raise prices
on cars it exports to Britain
as firms scramble to adjust
to the weaker pound that
followed the Brexit vote. B1
Credit Suisse is being
investigated over a deal to
finance sales of military
ships to Mozambique. B7
GE Capital won its bid to
shed its systemically important, label, which carries
stricter U.S. oversight. B1
Government bonds of advanced economies, which
have been strong all year, rallied after the Brexit vote. B7
Canadas Lucara tried to
auction the second-largest
diamond ever mined but
failed to find a buyer. B1
Monsanto said it has
been discussing deals with
Bayer and other parties. B1
Adidas said it is expanding its partnership with
rapper Kanye West. B1
World-Wide
BY RYAN TRACY
AND DONNA BORAK
GRIEF: Relatives consoled each other Wednesday at the funeral of a man killed in Tuesdays attack, in which at least 41 people died. A5
U.K. Taxes Might Offer Edge

Outside the EU, nation
would be liberated
from rules, which could
benefit companies
BY RICHARD RUBIN
AND NATALIA DROZDIAK
While some companies consider moving operations from
the United Kingdom after its
expected exit from the European Union, the U.K. could use
Wall Street is tallying up the

winners and losers after the severe market reaction to last
weeks Brexit vote. One theme
has emerged earlythe computers got it right and the humans got it wrong.
EU leaders declared
their determination to
stay united but ruled out
any change in treaties or
concessions to Britain. A3
Some EU expatriates living in the U.K. are rushing
to apply for British citizenship and residency, immigration lawyers say. A3
Scotlands first minister
met with EU leaders for talks
about protecting the countrys interest in the bloc. A3
Part of the reason: Too

many investors bet on the outcome they preferred, economists and analysts say, a powerful example of projection
bias in the markets.
Yves Balcer, co-founder of
Fort LP, a model-driven investment firm with about $2 billion
Biden announced partnerships aimed at bolstering a proposed $1 billion

U.S. fight against cancer. A7
Italy raised a migrant
vessel that sank off the Libyan coast last year with the
loss of about 700 lives. A3
CONTENTS
Arts & Ent............... A8
Business & Tech. B1-6
Capital Account.... A2
Crossword.............. A12
Heard on Street. B10
Markets Digest..... B8
Money & Inv... B7-10

Opinion.............. A10-11
Personal Journal A12
Technology............... B3
U.S. News.................. A7
Weather................... A12
World News........ A2-5
3.20; CHF5.50; 2.00;

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

Company. All Rights Reserved
its tax code to entice businesses.

The U.K. outside the EU
would be liberated of the
blocs coordinated tax rules,
giving the country an opportunity to cut taxes for companies, grant more financial aid
to ailing firms and dangle
breaks to attract corporations.
Big questions that likely
wont be answered until a new
government takes office include how much revenue Britain would be willing to forgo
and how it would deploy any
newfound fiscal freedom.

Despite the fact that I
think its a catastrophe overall,
for sure, in international tax
policy [Brexit] does provide
them more flexibility, said
Daniel Shaviro, a tax law professor at New York University.
The U.K. in recent years has
become an increasingly attractive place for companies to establish their European headquarters, largely because
Britain has been steadily reducing its corporate tax rate to
better compete with neighbors

such as Ireland. But its done so
within constraints imposed by
the EU that have attempted to
harmonize tax bases for income
and consumption levies. Outside the EU, the U.K. wouldnt
be bound by those rules.
Some major U.K. firms,
such as Vodafone Group PLC,
are weighing leaving the country, while others considering
the market may be getting
cold feet. Deutsche Brse AG
Please see TAX page A2
In Market Chaos, Machines Beat Man
The death toll rose to 41

from the suicide bombings
at Istanbul airport as Turkey
grappled with a suspected
Islamic State offensive. A5
The attack highlights the
vulnerability of land-side
spaces where people gather
before and after flights. A5
Putin offered his condolences to Erdogan and
pledged to boost ties between Russia and Turkey. A5
Trump pledged to withdraw the U.S. from global

trade alliances if he is
elected president, in a rejection of GOP orthodoxy. A7
Nafta leaders sought to
project an image of unity
at a summit in the wake of
the U.K. referendum. A4
DLR 102.65 g 0.10%
Deutsche,
Santander
Fall Short
In Tests
Turkey Mourns After Deadly Istanbul Airport Attack
Business & Finance
Britain could use its tax

code to entice businesses
in the wake of Brexit, since
it no longer would be
bound by EU tax rules. A1
EUROPE EDITION
By Carolyn Cui,
Bradley Hope
and Gregory
Zuckerman
of assets under management,

expected Britain to vote for remaining in the European
Union. But his trading model
focused on global economic
concerns. So the firm continued buying assets such as the
yen and government bonds,
which benefited from the postBrexit chaos.
We didnt change anything
ahead of Brexit, he said. Both
of the firms two portfolios
were up more than 3% on Friday, bringing this years gains
to 10.75% and 4%, respectively,
he said.
Ahead of the vote, nearly all
of the major public polls, many
top politicians and investors
such as George Soros publicly
said they thought the chance of
POPULATION
LOSS IMPERILS
PUERTO RICO
BY NICK TIMIRAOS
SAN JUAN, Puerto Rico
Puerto Rico has suffered a
population slide that is
steeper and more financially
disastrous than in any U.S.
state since the end of World
War II.
An exodus of workers, retirees and entire families has
shrunk Puerto Ricos population by more than 9% in the
past decade to less than 3.5
million, magnifying the territorys inability to repay its
$70 billion in debt.
Congress neared completion Wednesday on a bipartisan compromise to oversee a
Puerto Rico rescue plan that
would begin the largest municipal-debt workout in U.S.
history. That would be just
the beginning of a far more
grinding turnaround.
A decadelong recession
has left one in nine residents
out of work and roughly half
dependent on the cashstrapped government for
health care. Net migration to
the U.S., where Puerto Ricans can move with no restrictions, was 250,000 so
far this decade. The islands
labor force shrank 20% in
the past 10 years, compared
with 5% growth in the U.S.
Puerto Ricos population
slide is the worst since the
Census Bureau began its first
tally in 1920. Mario Marazzi,
who runs the Puerto Rico Institute of Statistics, says the
continuing decline might be
rivaled only by the extinction of the indigenous Tano
people after the arrival of
Please see CRISIS page A6
a vote to leave the EU was unlikely, largely because of the

potential economic destruction
such a move could have. Seeking more insight, some inves-
Votes Aftermath
Capital Account: Behind the
immigration backlash....... A2
Streetwise: Investors,
beware the FTSE............... B7
U.S., Europe stocks rally as
fears ease.............................. B9
tors turned to other intelligence, and some paid upward
of a half-million dollars to get
Harvard historian Niall Fergusons private views.
Steven A. Cohen, who for-
Troops Plead
For Right
To Bare Arms
i
Long sleeves
granted leave from
U.S.s Fort Hood
merly ran hedge fund SAC Capital Advisors, told his traders at
his $11 billion firm to avoid
making any kind of wager related to the vote, said people
close to the matter, because
the vote was too close to call.
Equity hedge funds fell
2.1% on Friday alone, according
to data from Chicagobased Hedge Fund Research.
The losers generally appear to
have been hedge funds too
heavily weighted toward cyclical stocks such as airlines or financial stocks that were hard
hit in the selloff.
Yet for one set of computers
that form strategies about the
markets, such sentiment wasnt
even considered.
Please see MARKET page A2
WASHINGTONThe largest
U.S. banks got permission
from regulators to return profits to investors, but the U.S.
banking units of Deutsche
Bank AG and Banco Santander
SA were held back again as
the Federal Reserve released
the final results of its 2016
stress tests.
Big firms such as Bank of
America Corp. and Citigroup
Inc., which have struggled on
the tests in past years, passed
this year, as the Fed issued a
broadly positive verdict on the
U.S. banking sector. The prospects of greater dividends and
share buybacks is good news
for bank investors, who have
seen financial shares battered
by crimped profits and last
weeks Brexit vote.
This is the second set of
results released by the Fed in
the past two weeks, assessing
whether officials believe the
biggest banks could continue
to lend even during a deep recession. Last week, the largest U.S. banks breezed
through the first round of
tests with capital ratios well
in excess of the amount the
regulator views as a minimum, even when put through
Please see STRESS page A2
GE Capital escapes oversight
by Fed............................................. B1
Credit Suisse deals take sour
turn.................................................. B7
Expats in Britain
Worry About Future
JEFF J MITCHELL/GETTY IMAGES
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ISTOCK
Working While
Working Out
NEXT STEPS: Some expats in

the U.K. are hurriedly seeking
residency. Above, an anti-Brexit
rally in London on Tuesday. A3
Oracle #1
Cloud ERP
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Texas for his assignment
at Fort Hood and learned the
meaning of hot.
Spc. Mitchell and his fellow petroleum-supply specialists labor in summer temperatures that can hover around
100 degrees Fahrenheit. Humidity can reach 90%.
Maybe it was the heat.
Maybe it was the humidity.
But the transplanted New
Yorker and his colleagues had
a vision: If they could only
roll up their sleeves.
It has always been a conPlease see ARMS page A6
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Aneel Bhusri, Workday CEO
Midsize and large scale Enterprise Fusion ERP Cloud customers.

cloud.oracle.com/erp or call 1.800.ORACLE.1
Copyright 2016, Oracle and/or its affiliates. All rights reserved.
A2 | Thursday, June 30, 2016
THE WALL STREET JOURNAL.
* *
WORLD NEWS
What Really Drives Anti-Immigrant Feelings

H
ow did immigration
become rocket fuel for
populism? To many,
the answer is obvious: The
last decade has been cruel to
many workers, who in turn
blame immigrants.
Thats how Hillary Clinton
explains support for the antiimmigrant rhetoric of her Republican rival, Donald Trump:
These are hard times that
folks are going through.
Yet the link between economic circumstances and acceptance of immigrants is surprisingly weak. In fact, the
current backlash against immigration has less
to do with jobs
and wages and
more with concerns about national identity
CAPITAL
and control of
ACCOUNT
borders, reGREG IP
search suggests.
This is an
important distinction. Immigration is different from other facets of
globalization. Foreign-born
people affect the makeup of
society in a way that a foreign-made car or a foreignowned factory doesnt.
By yoking those issues together, populists have leveraged anxiety about immigration into a broader attack on
globalization and elites, as advocates of Britains departure
from the European Union did
so successfully in last weeks
referendum. Britons would
have no doubt stayed in the
EUs single market for goods,
services and capital if they
could opt out of the single

market in labor. But that option wasnt available, and as a
result the EU is about to lose
one of its biggest members.
Countering the backlash
against immigration and globalization will require not just
correcting misinformation
sown by opponents, but controlling the number and composition of immigrant inflows
so that citizens believe immigration policy is in the countrys best interests, not the
immigrants. Thats how Canada and Australia sustain
strong public support for high
levels of newcomers.
TAX
MARKET
Continued from Page One

shareholders called on the
company to trash its planned
$30 billion merger with London Stock Exchange Group PLC,
or rework plans so the merged
companies new headquarters
wouldnt be in London.
Many U.S. companies also
base their European operations in the U.K., enabled by
the ease of moving profits
around the EU without significant tax consequences.
As a tax adviser, youre going to be very loath to pick the
U.K. as a holding company if
its going to have any other
European companies involved,
because you just dont know
what youre going to get, said
Daniel Dunn, a partner at the
law firm Dechert LLP in New
York who advises companies
and private-equity firms on international tax planning.

This fund category, sometimes called commodity trading
advisers, or CTAs, uses customized trading algorithms to spot
market trends and place bets
on futures and other derivatives. Most of the models didnt
factor in British election polls,
bookmakers odds or the political-tea-leaf
reading
that
swayed other investors looking
for an edge.
In the weeks leading up to
the Brexit vote, the trading
models at many of these firms
adopted a defensive pose.
They favored high-quality
government bonds, gold and
safer currencies such as the
yen, while mostly avoiding
riskier bets like oil and emerging markets.
That positioning paid off after Brexit caused the pound
and more volatile assets to
plunge as Thursdays results
came in. Socit Gnrales CTA
Index gained 1.5% on Friday.
AQR Capital Management LLC,
Fort and Welton Investments
The U.K. could still negotiate a relationship with the EU

in which it continues to enjoy
free trade and other benefits,
including tax advantages. But
Britain would still have to
agree to a significant proportion of the blocs rulessomething it may be resistant to do
after holding a referendum
that focused on sovereignty
and migration concerns.
As a non-EU member, Britain
would have to jump through
additional bureaucratic hoops
to maintain privileges such as
granting tax-free status for certain mergers with EU-based
companies or allowing tax-free
movement of royalties, dividends and interest among corporate subsidiaries between
the EU and the U.K. On the flip
side, without EU oversight, the
U.K. would have more freedom
to design its own tax policies in
a bid to lure companies.
Many U.K. officials, however, are likely to be reluctant
to water down EU antitax
avoidance rules it signed onto
after being one of the strongest advocates for tougher
legislation. And it may not
have much room to cut corporate tax rates below their current rate of 20%, which the
government recently said it
would lower to 17% by 2020.
But Britain may try to take
advantage of its axed EU ties to
provide companies with more
state support and sweetheart
tax deals in efforts to keep them
competitive. The EUs antitrust
agency has been cracking down
on member states for allegedly
breaching state-aid rules by
handing out special tax deals to
multinational companies.
Canada and Australia have both large foreign-born populations and strong public support for immigration.
In Britain, the situation is reversed.
Foreign-born share of population*
Net support for immigration
Australia
Australia
27.6%
Canada
U.S.
13.1
U.S.
Germany
12.8
Germany
U.K.
12.3
U.K.
France
11.7
France
Japan
37
Canada
20.0
Italy
45%
Italy
8.9
16
29
40
2
36
49
Japan
1.0
*All data 2013 except France, Italy, 2010, Japan 2000

Percent who want to increase or maintain the current level of immigration minus percent who want it to decrease
Sources: OECD (foreign born); Gallup, 201214 data (support for immigration)
STRESS
a hypothetical recession.
In the second round, released Wednesday, all but two
of the 33 large U.S. banks taking the tests won the Feds endorsement of their risk-management chops and its goahead to increase dividends or
share buybacks.
The central bank rejected
outright the capital plans of the
U.S. banks owned by Germanys
Deutsche Bank and Spains Santander, as it did last year. The
Fed cited improvements but
said there was still insufficient
progress by the firms in correcting flaws and meeting supervisors expectations.
Both firms have been under
significant regulatory scrutiny
after being faulted for their
shortcomings in predicting
risk on the stress tests, as well
as in other areas. Santanders
hile economic circumstances are

widely thought to
drive attitudes about immigrants, theres actually little
hard evidence of such a link.
Jens Hainmueller of Stanford
University and Daniel Hopkins at the University of
Pennsylvania call it a zombie theory. Reviewing numerous studies, they conclude that attitudes about
immigration are motivated
much less by what people
think it means for them personally and more by what
they think it means for their
country.
They also find resistance

to immigration isnt correlated with the size of the immigrant population, but how
fast it grows. Anti-immigrant
sentiment in the United
Kingdom hardened from
2012 on as the influx of the
foreign-born began growing,
drawn by a far-healthier job
market than continental Europe offered. The news in
May that net immigration hit
a full-year record 333,000,
when the government has
sought to hold it below
100,000, dealt a blow to the
Remain camp.
Similarly, immigration in
Partners LLC were among the

big gainers.
The HFRX Global Hedge
Fund index, meanwhile, was
down 1.1% on that day. About
15% of all hedge funds use the
model-driven strategies of
CTAs, according to Agecroft
Partners, which consults the
hedge funds and hedge-fund
investors.
A key to CTAs success, their
managers say, is that their
models can tune out noise
around
market-moving
eventslike an election or crucial economic datathat are
important to investors but can
be hard to accurately forecast.
Our models arent going to
be affected by the same sentiments a human would be, said
Lara Magnusen, portfolio strategist for Altegriss main fund,
which gained 4% on Friday and
appreciated Monday as well.
Her firm stuck with gold and
yen bets.
A different set of decisions
enter the picture for human
market pickers. James Hanbury, who graduated from
Scotlands Edinburgh University in 2003, was less sure that
the Remain camp would tri-
umph, according to people

close to the matter. Mr. Hanbury, who runs a $1.5 billion
hedge fund while managing
$500 million of additional capital, decided to make a big bet
against the British pound.
In the days before the vote,
his hedge fund commissioned
its own voter poll. It suggested
the vote would be close, though
it still pointed to defeat for the
Leave camp. But the pound was
rallying, as if the chances of an
exit were minimal. If Britain
voted against Brexit, the pound
was unlikely to rise much
more, but if the vote was for an
exit, the currency could plunge,
Mr. Hanbury concluded, according to the people.
Sensing an asymmetrical
trade, or one that had little
downside but big potential upside, Mr. Hanbury decided to
act, the people say, hoping to
turn around a year that at that
point had resulted in losses of
more than 5% for his fund.
Over several days, Mr. Hanbury purchased investments
serving as wagers against the
pound. His fund scored profits
of about $150 million over Friday and Monday, the people
U.S. bank is the first to fail the

test three years in a row, and
Deutsche Banks subsidiary has
now failed two years running.
For Deutsche Bank and Santander, the Feds rejection of
those firms capital plans effectively locks up some U.S.
profits, which cant be sent
home at a higher rate until
they pass the tests.
Those firms dont currently
have publicly announced plans
to return capital home that
would be affected by that restriction, a Fed official said.
Santander executives have
said during the past couple of
years that the regulatory troubles in the U.S. are partially
the result of growing pains as
the lender builds up from
scratch a holding company to
oversee its banking unit and
consumer-lending subsidiary.
But U.S. regulators have also
faulted Santander for riskmanagement
problems
broadly, and investors and analysts say they are growing
impatient with Santanders

mess in the U.S.
The Deutsche Bank unit in
question, Deutsche Bank Trust
Corp., represents about 3% of
the German lenders total
global assets. A bigger test for
Deutsche Bank will come in
two years when its bigger,
newly consolidated U.S. businessset up as whats known
as an intermediate holding
companycomes fully under
stress-test review.
Morgan Stanley was among
the banks that won approval
for its capital returns, but it
also received a rebuke: The
Feds approval is conditional,
based on weaknesses the regulator found in the banks internal process. The bank must
submit a revised plan addressing its shortcomings by Dec.
29. If the Fed isnt satisfied
with the banks progress, it can
freeze the capital distributions.
M&T Bank Corp. gained the
Feds approval, but the Buffalo, N.Y.-based firm passed
only after scaling back its proposal to distribute funds to
shareholders, in order to ensure its capital buffers stayed
above the minimums required
by the Fed.
It was the only bank to take
the so-called mulligan allowing banks to adjust their payout plans. Had the bank not
done so, it would have failed
the test by falling below two
of the four required capital ratios in a hypothetical recession, the Fed said.
Overall, the Fed results
should cheer bank investors
after a rough few months.
Shares in financial firms were
hit hard by last weeks vote by
Britain to exit the European
Union and as long-term inter-
MICHAEL PROBST/ASSOCIATED PRESS
The U.K. may try to

take advantage of
Brexit to lure firms
with sweetheart deals.
Immigration Attitudes: Its Complicated
A cash point sign near Deutsche Banks headquarters in Frankfurt.
the U.S. became politically

charged a decade ago when
the illegal-immigrant population was growing. Since 2007,
though, it has shrunk and opposition to immigration has
actually softened, polls show.
Certain attitudes are consistent across time, and
countries: People are more
supportive of skilled than
unskilled immigrants and of
legal than illegal immigrants,
according to Mr. Hainmueller
and Mr. Hopkins. Race is a
factor, but not a dominant
one, whereas culture and assimilation matter a lot. One
study found that Canadians
care more about the language immigrants speak
than their skin color or national origin.
In the U.S., Mr. Hainmueller and Mr. Hopkins conducted a nationwide survey
and found remarkable consensus across party lines of
the ideal immigration policy.
It would focus on immigrants
with more education, in
sought-after professions such
as nursing and science, who
speak English, who plan to
work and who have previously visited America.
This is what Australia and
Canada do. They award points
based on ability to speak English (and, in Canada, French),
education, job skills and family sponsorship. This is one
reason more than half of Canadas immigrants are selected
for economic reasons and just
a quarter for family reasons;
in the U.S., the opposite is
true. Australia and Canada
Whipsawed
After surging in the days after
the Brexit vote, the fear gauge
has eased back.
CBOE Volatility Index
30
EU
referendum
20
10
Note: Through Thursday

10:45 a.m. EST
June 20
23
27
29
Source: WSJ Market Data Group
say, among the biggest gains

that have emerged for investors over the period. As
of Tuesday, Mr. Hanbury retained his bearish positions on
the pound and was sitting on
small gains for the year.
A group of large hedge
funds turned to Mr. Ferguson
of Harvard before the vote. On
est rates have plummeted,
threatening bank profitability.
While Brexit didnt play a direct role in the tests, the exams
had included the prospect of severe recessions in the U.K., the
European Union and the U.S.
Banks that received approval
for their capital plans will be
able to pay out as much as
around two-thirds of projected
net income for the coming four
quarters, a senior Fed official
said. That also means, though,
that banks will continue to retain capital, which could also
reassure investors worried
about their ability to withstand
any continuing Brexit-related
market tumult.
In the six years since the
tests were first put in place,
the participating firms have
strengthened their capital positions and improved their
risk-management capacities,
Fed governor Daniel Tarullo,
the official overseeing the
tests, said in a statement.
Continued progress in both
areas will further enhance the
resiliency of the nations largest banks.
The stress tests, which test
capital levels by putting banks
through a hypothetical shock,
were created during the financial crisis and helped end the
CORRECTIONS
AMPLIFICATIONS
The shoe brand SeaVees
was incorrectly referred to as
Seavee in a Page One article
Monday about white sneakers.
Readers can alert The Wall Street
Journal to any errors in news articles
by emailing wsjcontact@wsj.com.
have both extremely high foreign-born population shares

and lofty levels of public support for immigration.
That support isnt unconditional. Australians are as opposed to illegal immigrants as
Americans and, thanks to being surrounded by water, are
better at keeping them out. In
recent years Australia has
barred asylum seekers who
arrive by boat from settling
permanently on the mainland.
n Canada, the honor killing of four women of Afghan descent by their

family in 2009 led the government to prohibit immigrants
who practiced barbaric cultural practices such as polygamy and forced marriage.
How might Britain and the
U.S. learn from such policies?
Britain, post Brexit, could cap
in some way the number of
immigrants from the EU. For
the U.S., it would introduce a
point system to screen people
who seek to come to the
country, a series of steps to
legalize and assimilate the
current illegal population and
stricter prevention of illegal
immigration. Thus far, grassroots Republicans have largely
stymied such compromises.
This is a step back from
the ideal of open borders
that globalization advocates
and the European Union have
long dreamed of. But by
turning back the tide of populist-fueled grievance, such
measures could actually cement support for open borders in the long run.
June 9, Mr. Ferguson predicted
there was a 65% chance voters
would elect to remain in the
union. On June 14, Mr. Ferguson lowered the chances to
55%, and it was 50% immediately just before voting began.
Mr. Ferguson, who has been
consulting hedge funds and
other investors on political
projections since at least 2007,
said over time, he has a reasonably high success rate. The
predictions he shares with
hedge-fund clients are private.
Almost nobody got this one
[the Brexit vote] right, Mr.
Ferguson said in an interview on Tuesday. Anybody
who called it right was more
lucky than prescient.
For a lot of people involved
in financial markets, voting for
Brexit just seemed like insanity,
like mass suicide, said George
Loewenstein, one of the founders of the field of behavioral
economics and a professor at
Carnegie Mellon University.
They simply couldnt or were
unable to take the perspective
of the people who supported
Brexit.
Ira Iosebashvili
contributed to this article.
panic in 2009 by showing investors big banks were stable.
Congress made them mandatory in 2010, and the Fed in
2011 tied passing the test to
approval to pay shareholder
dividends.
Two new entrants to this
years testBancWest Corp., a
subsidiary of Frances BNP
Paribas SA, and TD Group U.S.
Holdings LLC, which is owned
by Toronto-Dominion Bank
passed the Feds exercise.
Jenny Strasburg and
Jeannette Neumann

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WORLD NEWS
EU Says No to Giving U.K. a Break on Exit

PHIL NOBLE/REUTERS (LEFT); STEPHANE DE SAKUTIN/AGENCE FRANCE-PRESSE/GETTY IMAGES
Leaders say Britain

cant cap migration
and expect unfettered
access to single market
BRUSSELSEuropean
Union leaders met for the first
time without the U.K. in more
than four decades on Wednesday, declaring afterward their
determination to stay united
but showing no appetite for a
grand gesture to tie the remaining 27 nations closer together.
By Gabriele
Steinhauser,
Zeke Turner
and Matthew Dalton
The leaders, faced with
growing discontent in many
countries throughout the bloc,
said they stand ready to
tackle any difficulty that may
arise from British voters decision in a referendum last
week to leave the EU.
But, according to people in
the meeting, leaders ruled out
any change soon in the EU
treatiesa fraught process
that would require ratification
in all 27 statesto bind the
bloc closer together legally.
The leaders did coalesce
firmly around one theme: that
the U.K. couldnt cap migration, a key issue in the referendum, and expect unrestricted free access to the
blocs single market of 440
million people. The EU bakes
Germanys Angela Merkel arrived at the Brussels summit Wednesday. President Franois Hollande, shown with French officials, is pushing a hard line in U.K. exit talks.
into its rules four freedoms,
allowing movement of labor
and capital, and free trade in
goods and services.
Access to the single market requires acceptance of all
four freedoms, the leaders
said, laying a marker down for
their future negotiations with
the U.K. That portion of their
joint statement was added late
in the meeting on Wednesday
afternoon, officials said.
Those who want to have
free access to our internal

market; they have first to implement the four freedoms
without exception and, I have
to add, without nuances, European Commission President
Jean-Claude Juncker said.
French President Franois
Hollande, who has pushed the
hardest line over the terms of
a British exit, said the leaders
would focus on proposals to
bolster European defense and
security, encourage more stu-
dents to study in other European nations, bolster privatesector investment and create
more democratic accountability for EU nations.
Mr. Hollande faces strong
opposition ahead of next
years presidential election
from the right-wing National
Front.
The populists, the extremists no longer want merely to
change this or that part of Europe, Mr. Hollande said.
They want to put an end to

Europe.
He repeated that, once the
U.K. was outside the EU, the
City of London could expect to
lose a lucrative business clearing and processing financial
instruments denominated in
euros.
German Chancellor Angela
Merkel said the withdrawal of
the U.K.the fifth-biggest
economy in the worldfrom
the single market would be
clearly a difficult situation

for trade relationships.
Of course we cant yet
make forecasts about how this
will affect the economy, Ms.
Merkel said. But all signs
point to a negative economic
fallout from the divorce, she
continued. We have an interest to be increasingly oriented...around growth and efficiency to compensate for
what were losing now, Ms.
Merkel said.
Underdog Joins Contest to Succeed Cameron

the wake of his failed bid to
persuade Britons to stay in the
European Union triggered the
contest. Nominations are due
by noon Thursday. The Conservative Party has said it intends to announce the new
prime minister Sept. 9.
In announcing his candidacy Wednesday, Stephen
Crabb, the 43-year-old work
and pensions secretary, said
he wants to lead a government
LONDONThe contest for

leadership of the U.K.s governing Conservative Party,
which will also decide Britains
next prime minister, intensified Wednesday as the first
lawmaker officially declared
his intention to stand.
Prime Minister David Camerons announcement Friday
that he would step down in
that delivers on the expectations of the 17 million Britons

who chose to leave the EU,
even though he voted to remain a member. Business Secretary Sajid Javid said he is
running on a joint ticket with
Mr. Crabb as treasury chief.
We had a clear result from
the referendum. And the result
was for the U.K. to leave the
European Union, he said.
There can be no stepping
back from that clear instruction to the government; there

can be no attempt to dilute it
or sidestep it. And there will
be no second referendum.
Mr. Crabb is less wellknown to the British public
than his expected rivals in the
leadership race. The front-runners are widely seen as Boris
Johnson, a former London
mayor and a figurehead in the
Brexit campaign, and Theresa
Amid Uncertainty, European Expatriates Seek Permanent Residency

LONDONUncertain about
their post-Brexit future, some
European expatriates living in
the U.K. are rushing to apply
for British citizenship and residency, immigration lawyers
say.
About three million citizens
of non-British European Union
countries currently reside in
the U.K. under the EUs openborder rules. It could take
months to figure out how the
Brexit vote will affect their
right to live in the country.

Some arent chancing it.
They have applied for British
passports or permanent residency.
Mireia Borrell-Porta, an Oxford University family-policy researcher from Spains Catalonia
region, said she is worried she
and her Catalonian boyfriend
might not be able to stay. No
one is saying anything and Im
not sure what will happen,
said Ms. Borrell-Porta, who has
lived in the U.K. since 2009.

She is planning to meet with
immigration lawyers to discuss
becoming a British citizen.
EU citizens and their families generally have the right to
move freely and reside within
the unions territory, which includes the U.K. and 27 other
countries. EU citizens can also
acquire the right to permanent
residency in another EU country after legally residing there
for five consecutive years.
Leaders of the U.K.s major

leave-the-EU campaign said before the June 23 vote they
wouldnt alter those rights.
There will be no change for
EU citizens already lawfully
resident in the U.K., the campaign said in a June 1 statement. But they haven't detailed a process for how nonBritish EU citizens can continue
to reside in the country.
Giles Turner, Anais Voski
and Benoit Faucon
May, home secretary, who are

expected to officially join the
race soon. Nicky Morgan, education secretary, and Jeremy
Hunt, health secretary, have
said they are considering running as well.
Potential candidates need
to be nominated by Conservative lawmakers, who will then
hold a series of ballots to
whittle the list down to two
candidates. The contest is then
opened up to the partys membership of some 150,000 people. Only those who have been
members for at least three
months can vote.
Mr. Crabb acknowledged his
underdog status but said he
isnt deterred, saying that no
other contender provides a
compelling answer to the
challenges the country faces.
He portrayed himself as a
compassionate conservative,
eager to improve the lot of the
poor and disenfranchised,
many of whom, he said, voted
to leave the EU.
The main opposition Labour
PAUL HACKETT/REUTERS
BY JASON DOUGLAS
Stephen Crabb voted Remain

in last weeks referendum.
Party also faces turmoil in the
wake of the referendum after
the majority of its lawmakers
Tuesday said they had no confidence in their leader, Jeremy
Corbyn. Mr. Corbyn said following the vote that he
wouldnt resign.
In Parliament on Wednesday, Mr. Cameron said the opposition leader should resign
for the good of the country.
For heavens sake man, go!
he said.
Scottish Leader Makes

Case for Staying in Bloc
Italy Raises Migrant Disaster Wreck
BY NICHOLAS WINNING
AND JEANNETTE NEUMANN
MILANAn Italian naval

operation has recovered a vessel that sank last year off the
Libyan coast with the loss of
around 700 lives in the single
deadliest accident in the longrunning Mediterranean migrant crisis.
Naval engineers attached
salvage equipment to bring the
sunken boat to the surface two
days ago, with the aim of taking it to a refrigerated facility
in the Sicilian town of Augusta, the Italian navy said
Wednesday.
Searchers found only 169
bodies at sea after the April 18,
2015, disaster, but officials believe hundreds of people
locked inside by smugglers
Nicola Sturgeon in Brussels

A majority of voters in
Scotland, Northern Ireland
and Gibraltar favored staying
in the EU in last weeks referendum while the U.K. overall
voted to leave the bloc by a
narrow margin. While there
are signs of sympathy among
some European leaders, it is
unclear whether places like
Scotland will be able to carve
out separate deals as the U.K.
government negotiates its exit.
Scottish First Minister Nicola Sturgeon, who met with
European Parliament Presi-
were trapped below deck as it

sank, according to a report by
one of the survivors.
The shipwreck is just one of
many accidents involving migrants trying to reach Italy by
boat from northern Africa in
recent years.
About 2,500 people have
died this year attempting to
cross the Mediterranean Sea,
mostly from Libya, according
to the International Organization for Migration. Nearly
62,800 migrants have reached
Italy this year.
The route from Libya to Italy was overshadowed last
summer by the surge in migrants trying to reach Europe
by crossing from Turkey to the
Greek islands, but more shipwrecks this year have refo-
cused attention on the southern Mediterranean route, which

is deadlier due to the greater
distance and bigger boats.
The Italian Navy found the
wreck of the 25-meter (82foot) boat a month after it
sank about 85 miles northeast
of Libya, at a depth of about
1,200 feet.
The Italian government
promised to recover the bodies
and give them a proper burial.
The aim of the recovery
mission is also to identify as
many victims as possible and
create a Europe-wide database
of those who remain unknown,
the navy has said. That could
include taking DNA samples
from the victims to match with
family members.
But Cristina Cattaneo, one
ITALIAN NAVY PRESS OFFICE/EUROPEAN PRESSPHOTO AGENCY
ERIC VIDAL/REUTERS
The head of Scotlands government met with European

Union leaders in Brussels on
Wednesday for talks about
protecting the countrys interests in the bloc, as different
parts of the U.K. begin to jostle for new arrangements with
the bloc.
dent Martin Schulz and European Commission President

Jean-Claude Juncker, said she
wasnt in Brussels to reach
any conclusions but was determined to find a way to keep
Scotland in the EU.
I have received a lot of
sympathy and a lot of good
wishes today, Ms. Sturgeon
said. That of course doesnt
translate into an automatic
easy path for Scotland...but it
does mean I leave Brussels
tonight to travel back to Edinburgh in good heart and
optimistic.
Mr. Juncker said Scotland
had won the right to be heard
in Brussels, but added the EU
wouldnt interfere on the Scottish independence question.
After the vote, Ms. Sturgeon
said a second Scottish referendum was back on the table.
In an early setback to Ms.
Sturgeons lobbying effort,
though, European Council
President Donald Tusk declined a meeting. A spokesman
said Mr. Tusk doesnt think
this is an appropriate moment
to meet.
Spanish acting Prime Minister Mariano Rajoy said
Wednesday
that
there
shouldnt be separate negotiations between Scotland and
the EU. Mr. Rajoy wants Scotland to move in lockstep with
the U.K. because his conservative party is worried that any
flexibility for Edinburgh would
indirectly boost a simmering
secessionist movement in
Spains Catalonia region.
BY MANUELA MESCO
A photo released Wednesday shows the wreck of the fishing boat that sank on April 18, 2015.
of the forensic experts involved in the operation, said

earlier that she and her team
had to see the condition of the
bodies before being able to assess what they can do in terms
of DNA or other ways to identify the victims.
Tracing family members
could still be difficult, aid
workers said. Some may have
given up hope of finding lost
relatives or might not even
have been aware that they
were making the voyage.
The Netherlands-based International Commission of
Missing Persons, for example,
has been working for 15 years
on a database of people who
have disappeared and has now
made it possible for anyone to
add information online.
But director-general Kathryne Bomberger recently said
that it remains challenging to
weed out false information and
to convince people to come
forward if a relatives whereabouts is unknown.
What we are seeing now is
an enormous amount of unidentified bodies in the Mediterranean, she said Wednesday. This is an international
problem.
The ICMPs database isnt
going to be used on the April
18, 2015, shipwreck victims,
Ms. Bomberger said, because
the agency and the Italian authorities havent reached an
agreement on funding or procedures.
The Italian commissioner
for missing people didnt respond to a request to comment.
HK JP
KO ML
SI
IN UK
FR
MN PR
WORLD NEWS
Vigilantes Rise in Dutertes Philippines

Surge in suspects
deaths offers glimpse
of what may come as
president takes office
MANILAJimmy Vosotros
was found dead along a highway on the Philippine island of
Cebu in May, his hogtied body
wrapped like a mummy in garbage bags and packing tape,
with a rope around his neck.
A message left at the scene
invoked this countrys man of
the moment: President-elect
Rodrigo Duterte. Im a bandit,
Du30, it said, using common
shorthand for the man driving
a law-and-order push.
The killing, and others recently, have offered a glimpse
of what may be to come in this
fast-growing country.
Mr. Duterte, the long-serving mayor of Davao City, becomes president on Thursday,
having won elections in early
May after pledging to wipe out
criminals. He advocates the
killing of suspected lawbreakers and has publicly backed
vigilante death squads estimated to have killed over
1,000 people in Davao.
Kill them all, Mr. Duterte
told a rally in March, referring
to criminals and suspects.
When I become president Ill
order the police and the military to find these people and
kill them. During the campaign, Mr. Duterte said
100,000 Filipinos would die
during the coming purge.
Mr. Duterte has tapped a
DONDI TAWATAO/GETTY IMAGES
BY TREFOR MOSS
A drug suspect was killed in a shootout in Manila on June 25. President-elect Rodrigo Duterte has declared a war on drugs and crime.
loyal lieutenant from Davao, a
former city police chief, Ronald Dela Rosa, to head the national force starting Thursday.
Mr. Dela Rosa recently told reporters the president-elects
target of stamping out crime
in six months is achievable, as
long as drug suspects are relentlessly pursued.
They will be given the
right to remain silentforever, he said.
Police shot dead 54 suspected drug dealers in the six
weeks after the election, ac-
cording to police officialsa

sharp increase from earlier periods. Police killed 39 suspected drug dealers from Jan.
1 to May 9 during the campaign season.
Guidelines legitimizing the
use of deadly force only as a
last resort were observed in
all cases, said national police
spokesman Wilben Mayor,
adding that Mr. Dutertes election had reinvigorated police
efforts to tackle drug dealers.
At least 13 more people, like
Mr. Vosotros in Cebu, were
killed in what police say they

believe were vigilante attacks
of the kind encouraged by Mr.
Duterte, though full investigations havent concluded. Local
police said they were still investigating the case of Mr. Vosotros, and havent determined if he was involved in
crime, or why he was targeted.
While seven of those killings occurred in Davao, and
followed a well-established
pattern there, the other six
happened on islands where the
apparent targeting of crimi-
nals by vigilantes is rare, according to local police.

United Nations SecretaryGeneral Ban Ki-moon said on
June 8 that he was extremely
disturbed by Mr. Dutertes
apparent endorsement of extrajudicial killing.
Mr. Dutertes spokesman,
Salvador Panelo, said Mr. Ban
had been misled by incorrect
news reports, and that Mr.
Duterte has not endorsed,
cannot, and never will endorse
extrajudicial killings. In an interview with the Journal dur-
ing the campaign, Mr. Duterte

said he advocated shooting
criminals who resist arrest,
but not summary executions.
The election of Mr. Duterte
is already having a chilling effect, said Jose Luis Gascon,
chairman of the Philippines
human-rights
commission,
with would-be vigilantes emboldened, and critics of the
president afraid to speak out.
Mr. Duterte meets with departing President Benigno
Aquino III Thursday, before
being sworn in for six years.
Opponents of his purge of
criminals have pointed out he
must swear to uphold the constitution, which includes provisions about human rights.
Residents of Davao City,
where Mr. Duterte has been
mayor since 1988, say he improved law and order. But
crime rates remain high. Vigilante death squads there have
killed over 1,400 alleged criminals, some of them children,
over the past two decades, according to the Tambayan Center, a local nongovernmental
organization, while Davao police have shot hundreds more
suspects they said were resisting arrest.
Human Rights Watch in
2009 determined that police
were directly involved in
death-squad killings, according
to Phelim Kine, deputy director of the groups Asia division. Davao police have denied
the existence of any death
squad, attributing the killings
to gang violence. A Department of Justice probe into the
killings was abandoned in May
after Mr. Dutertes election.
North American Leaders Stress Unity China Picks an Internet

Leaders of the three main
countries of North America
sought to project an image of
unity in a summit on Wednesday in the wake of last weeks
U.K. referendum that disrupted
markets and shook the global
political order.
World
Watch
SRI LANKA
U.N. Urges Speedier

War Reconciliation
Sri Lanka must accelerate a

judicial process to assess allegations of war crimes following its
27-year civil war, the United Nations Human Rights Commissioner Zeid Raad Al Hussein
said.
Speaking at the United Nations Human Rights Council in
Geneva on Wednesday, Mr. Hussein said the government has
made encouraging progress on
reconciliation but needs to develop a witness-protection program and seek the involvement
of foreign judges and other international expertise in the judicial process.
Ahead of Wednesdays Human Rights Council session,
President Maithripala Sirisena
ruled out the participation of
foreign judges in the inquiry but
said it would be impartial.
Mr. Hussein urged Sri Lanka
to move faster processing people detained during and after
the war and to limit military
power and help people displaced
by the conflict to return home.
Sri Lankas civil war against
Mexicos Mr. Pea Nieto, left, Canadas Mr. Trudeau and Mr. Obama
of the U.S. at the Three Amigos summit Wednesday in Ottawa.
the U.S. from Nafta unless the
deal could be renegotiated on
more-favorable terms.
The agenda in Ottawa focused on the fallout of the U.K.
decision and ways to coordinate efforts to insulate North
America from the sudden uncertainty in global markets.
There are opportunities to
highlight the significance of
North America, said Mark
Feierstein, senior director for
Western Hemisphere affairs at
the White Houses National Security Council.
separatist group the Liberation
Tigers of Tamil Eelam ended in
2009. In the last and most violent phase of the conflict,
40,000 civilians were estimated
to have died. A U.N. report last
year said there were indications
that war crimes were committed
by both sides.
This month the government
for the first time acknowledged
that at least 65,000 people
were missing from the war.
Uditha Jayasinghe
Leaders sought to show the

three Nafta countries are unified on the goal of maintaining
economic and political ties.
North America is a compelling example we want to showcase at a time unfortunately
people are prone to turning inwardwhich will be at the
cost of economic growth, Mr.
Trudeau said at a presummit
news conference with Mr. Pea
Nieto on Tuesday.
The three leaders were expected to discuss such issues
as energy, trade, immigration,
INDIA
Terror Attack Plot

Suspects Detained
Indian authorities detained 11

men they suspect were building
bombs and planning a terror attack on instructions from an Islamic State fighter abroad.
The men, who live in the
southern Indian tech hub of Hyderabad, had an Islamic State
BEIJINGAn internet regulator who helped Chinese President Xi Jinping dramatically

tighten controls online is stepping aside for a rising political
star believed to be just as
strict.
Lu Wei leaves the reins of
the two-year-old Cyberspace
Administration of China to Xu
Lin, a former propaganda chief
in Shanghai and the youngest
of Mr. Lus four deputies, according to a short report
Wednesday by Chinas official
Xinhua News Agency.
The report didnt say what
Mr. Lu, who also serves as vice
minister of propaganda, will do
next. An aggressive former reporter and editor at Xinhua, the
56-year-old Mr. Lu has been a
high-profile pitchman for President Xis vision of the internet.
In meetings with global tech
CEOs and at press conferences,
he has argued forcefully that
national borders should extend
into cyberspace and governments should be able to control
the internet as they see fit. He
has overseen a major expansion
of censorship and pushed mea-
handler who was passing on

instructions, a senior official of
Indias National Investigation
Agency said.
Authorities recovered chemicals that could be used to make
explosives, two pistols and
$22,000 in Indian rupees from
them, the official said on
Wednesday.
India is home to one of the
worlds largest Muslim popula-
tions. Authorities say they believe a small number of Indian

citizens have traveled to Syria
and Iraq to fight with Islamic
State. At least one has been arrested after returning to India,
authorities say.
Indian Islam has long been
considered moderate and, despite friction between the countrys Hindus and Muslims, the
country hasnt seen the kind of
BY JOSH CHIN
AND JAMES T. AREDDY
sures to better track individual

internet users.
Little is known about his
successor, Mr. Xu, who has kept
a low profile since being named
vice minister in 2015. Media
scholars said, however, that he
is unlikely to reverse the direction pursued under Mr. Lu.
We have every indication
that Xu is Xi Jinpings man
and Xi has made it crystal clear
that his top priority is tighter
party control of the internet,
said David Bandurski, a researcher at Hong Kong-based
China Media Project.
Outside a three-year stint in
Tibet, Mr. Xu spent almost his
entire pre-Beijing career in
Shanghai, where he was among
a handful of officials promoted
to top positions in 2007, during
President Xis short tenure as
the citys Communist Party
chief. Local media reports at
the time noted that Mr. Xu was
the youngest among those promoted and described him as
the biggest political star.
Chinese authorities have devoted increasing attention to
cyberspace under President Xi,
who has declared a goal of
making China an internet
power.
radicalization that has happened
elsewhere.
In a video posted online in
May, Islamic State fighters said
they were preparing to avenge
atrocities against Muslims in
India, specifically naming religious riots in Gujarat in 2002,
when Prime Minister Narendra
Modi was in charge of the
states government, as well as a
long-simmering conflict over the
Muslim-majority state of Jammu
and Kashmir.
Niharika Mandhana
CHINA
BRAZIL
Island Dispute Ruling

Set for July 12
A long-expected verdict on an
international arbitration case
filed by the Philippines against
Chinas claims in the South
China Sea will be issued July 12.
The Hague-based Permanent
Court of Arbitration said its verdict will be issued in writing to
the parties in the case.
The Philippines in 2013 filed a
challenge against Beijings claims
in the South China Sea, where
Chinese assertions of territorial
sovereignty overlap with claims
from five other governments.
Chinese officials have boycotted the proceedings and called
them illegitimate.
In recent months, Chinese officials have reiterated their refusal to recognize the tribunals
authority while trying to rally
public and diplomatic support for
their position.
Gabriele Steinhauser
Debt Is on the Rise

As Deficit Widens
ADRIANO MACHADO/REUTERS
Canadian Prime Minister

Justin Trudeau played host to
U.S. President Barack Obama
and Mexican President Enrique
Pea Nieto in Ottawa for an recurring event often dubbed the
Three Amigos summit.
Mr. Obama said policies
that would pull the U.S. out of
trading blocs, such as the
North American Free Trade
Agreement, risk making Americans poorer.
The prescription of withdrawing from trade deals and
focusing solely on the local
market is wrong medicine,
Mr. Obama said. Its not feasible.
Republican presidential candidate Donald Trump said
Tuesday that, if elected, he
would take steps to withdraw
NOTIMEX/NEWSCOM/ZUMA
By Byron Tau
in Washington,
Paul Vieira in Ottawa
and Dudley Althaus
in Mexico City
Regulator Seen as Strict
and regional and global cooperation.

The White House said early
Wednesday the three countries
have set a goal that clean
power should account for 50%
of continental energy output
by 2025. Meanwhile, Mexico is
also expected to join a U.S.Canada pact to reduce methane emissions by up to 45% in
less than a decade, according
to U.S. officials.
The three leaders came into
the summit in very different
political positions.
For Mr. Obama, who has
less than a year left in office,
the summit presents an opportunity to solidify his administrations legacy and relations
with two of the most important U.S. trading partners.
Mr. Trudeau, on the other
hand, is in the first year of his
term and has made closer ties
with Washington and Mexico
City a key plank of his Liberal
governments foreign policy.
Mr. Trudeaus predecessor,
Stephen Harper, canceled last
years scheduled summit in
Canada thanks in part to
White House stalling on the
Keystone XL pipeline. Mr.
Obama eventually rejected the
pipeline after Mr. Trudeau
came to power.
Acting President Michel Temer at an event focused on Brazils social-welfare program on Wednesday.
Brazils fiscal picture worsened in May, as the countrys

debt load rose and the primary
budget deficit widened, the central bank said Wednesday.
The primary deficit, or the
budget balance before interest
payments, widened to 2.5% of
gross domestic product, from
2.33% as of April.
As of May, Brazils gross debt
stood at 68.6% of GDP, up from
a revised 67.6% of GDP a month
before, the bank said.
The bank revised some fiscal
data released last month based
on new GDP figures. As a result,
the debt-to-GDP ratio as of April
was revised upward from 67.5%.
The revision also saw the
nominal budget deficit, which includes interest payments, grow
to 10.11% from 10.08%, both as
of April.
Paulo Trevisani
WORLD NEWS
Islamic State Suspected in Istanbul Blast

Attack, deadliest ever
at an airport, raises
new questions about
Turkeys security risks
SEDAT SUNA/EUROPEAN PRESSPHOTO AGENCY (TOP); OZAN KOSE/AGENCE FRANCE-PRESSE/GETTY IMAGES
Attack Points to
Security Shortfall
BY AYLA ALBAYRAK
AND NED LEVIN
ISTANBULThe death toll
wrought by three suicide
bombers at Turkeys busiest
airport rose Wednesday to 41
as the country grappled with
what its leaders called a suspected Islamic State offensive
that has pulled it deeper into
the turmoil of the Middle East.
Tuesday nights attack was
believed to be the deadliest
ever at an airport, surpassing
a 2011 suicide bombing that
killed 37 people at Moscows
Domodedovo Airport. The Istanbul governors office said
13 foreign nationals were
among the dead here, and 239
people were wounded.
As Turkish investigators
worked to reconstruct the
gruesome sequence of events,
surveillance video footage
posted on social media
showed the security breach at
Istanbul Atatrk Airport was
more serious than the authorities had first reported.
The video showed that a
black-clad attacker wielding a
pistol got past a metal detector at the international terminals ground-floor arrivals entrance and raced upstairs to
the departure area before being shot by the police and
then detonating a suicide vest.
Hasan Ebubekir, a 20-year-old
student who was traveling
home to Somalia, said he saw
four policemen chasing the
gunman through the departure
lobby before he died.
Turkish officials had said
late Tuesday that all three
bombers blew themselves up
at or outside the airports security perimeterone near
the ground-floor metal detector, one just outside the airport and one in a parking lot
across the street.
Prime Minister Binali Yildirim acknowledged Wednesday,
that the attackers forced their
way into the airport after first
failing to pass undetected
through security. He said they
retreated and returned with
long-range weapons pulled
from their suitcases.
It is not enough to have
physical check and X-rays at
the airport, the minister said
Relatives of Umut Sakaroglu, a customs officer at Atatrk International Airport who was killed in Tuesdays attacks, mourn at his
funeral in Istanbul on Wednesday. Below, a Turkish police officer joined a private security employee in vetting passengers.
at a news conference. We will
increase the presence of special security.
Officials said they were trying, through witness accounts,
to reconstruct the attack and
identify the assailants.
Mr. Yildirim said there was
no indication any attackers
were on the loose. But many
Turks voiced apprehension
that the governments policiesfirst tolerating the
movement of militants across
Turkey to join Islamic State in
Syria and Iraq, then cracking
down against the grouphad
made the country a target its
leaders cant protect.
Damn this! said Ferhat
Kabakci as he stood outside Istanbuls forensic hospital to
collect the body of his
brother-in-law, Ferhat Akkaya,
a 42-year-old father of three,
who had gone to the airport to
see a friend off on a trip. The
government should hear our
voice and take precautions.
Even as the airport reopened Wednesday morning
and flights resumed, social
media erupted in derisive
comments against the government. They proliferated on
Twitter with the hashtag #Guvendedegliliz, which means
We are not safe.
In Brussels, Turkish officials briefing North Atlantic

Treaty Organization allies on
the attack said their investigation focused on Islamic State
militants as the likely perpetrators, Western officials said.
U.S. and German officials said
they shared that assessment,
cautioning there is still no definitive evidence.
Neither Islamic State nor
any other group had claimed
responsibility by late Wednesday. Islamic State, which repeatedly makes threats against
Turkey, rarely claims attacks
there. Leaving attacks un-
claimed, said Soner Cagaptay,

director of the Turkish Research Program at the Washington Institute for Near East
Policy, fits with the groups
desire to exploit rifts in Turkish society between the government and its domestic opponents, including armed
Kurdish rebels.
Turkey is besieged by an
array of security threats, from
ultraleft radicals, Islamic State
militants, and Kurdish rebels
demanding autonomy in Turkeys restive southeast. It
shares long, porous borders
with Syria and Iraq, where Is-
lamic State controls large

pockets of territory.
Some recent attacks have
been attributed to Kurdish
militants, including a car
bombing in Ankara. Turkish
authorities have blamed Islamic State for two attacks in
Istanbul this year aloneone
that claimed the lives of a
dozen German tourists and
one that rocked the citys main
pedestrian street, killing four.
If Islamic State is indeed
behind the airport attack,
this would represent a significant escalation by the group,
and one directed against the
heart of Turkey, Mr. Cagaptay
said. The airport is the hub of
Turkish Airlines and a tourism
industry that earns around
$30 billion a year.
Turkeys Western allies
once blamed the country for
being too open to extremist
groups. As Syrias chaos
spilled over into its territory,
Turkey came under pressure
from the U.S. and in 2015 began restricting the movement
of Islamic State militants and
deporting thousands of foreign fighters.
Yeliz Candemir, Emre
Peker, Julian Barnes and
Margaret Coker contributed
to this article.
The deadly terrorist attack

on Istanbul Atatrk Airport
highlights the struggle faced
by those trying to secure
against one of commercial aviations greatest vulnerabilitiesthe so-called land-side
spaces where people gather
before and after flights.
Two of the three suicide
bombers in Tuesdays attack
detonated their devices before
passing through security. The
blasts, which briefly closed the
hub, are believed to constitute
the deadliest airport attack in
history after the death toll
rose to at least 41 people, including 13 foreigners.
Turkish Prime Minister Binali Yildirim on Wednesday
said the suspected Islamic
State attackers were unable to
initially pass security checkpoints and only breached the
terminal once they returned
armed with guns.
So it is not enough to have
physical checks and X-rays at
the airport, he said, adding
Turkey would increase the
presence of special security.
After the Sept. 11, 2001, terrorist attacks on flights in the
U.S., and several subsequent
attempts to smuggle bombs
onto jetliners, airports have invested heavily in security measures to prevent attackers
from bringing explosives and
weapons aboard planes. Yet
this has turned the land-side of
airports, where passengers
gather before passing through
screening or after arriving, into
attractive targets for attack,
safety experts suggest.
The assault in Istanbul
came little more than four
months after Islamic State
suicide bombers killed 16 people at the Brussels airport.
The attackers there struck the
departure hall near check-in
counters, devastating the facility.
This tragedy in Istanbul
and the one in Brussels earlier
this year show that there is a
growing challenge for governments to keep people safe in
the land-side parts of the airport, Tony Tyler, director general of the International Air
Transport Association, said
Wednesday. Moving people
air-side more quickly can help
to mitigate risk.
Robert Wall
Putin Extends Militants Had Big Stake in Iraqi City

A Hand to Turkey
Russian President Vladimir
Putin offered condolences to
Turkish President Recep
Tayyip Erdogan following a
terrorist attack at Istanbuls
Atatrk Airport, building on a
rapprochement between Moscow and Ankara.
The president of Russia
expressed his deep condolences over the terror attack
at the Istanbul airport, the
Kremlin said Wednesday.
The attack, which killed at
least 41 people, occurred
hours before the first publicly
acknowledged telephone conversation between the two
leaders since a Turkish F-16
jet fighter downed a Russian
warplane last year. Mr. Putin
had requested the phone call
with the Turkish leader earlier
this week following a letter
Mr. Erdogan sent to Moscow
expressing regret over the
downing of the plane.
During the call, Mr. Putin
promised to roll back some of
the sanctions Russia had
placed on Turkey after the November incident, which seriously strained relations.
Vladimir Putin said the letter
received from the president of
Turkey was a reason to turn
the page on a crisis in bilateral
relations and start the process
of renewing joint work on international and regional problems, the Kremlin said.
Mr. Putin said he would order government officials to
start talks with their Turkish
counterparts to renew trade
and economic ties. Likewise,
he said restrictions on Russian
tourists visiting Turkey would
be lifted, the statement said.
The two leaders, who havent met since a Group of 20
summit in Antalya in November, also promised to meet in
ALEXANDER ZEMLIANICHENKO/ASSOCIATED PRESS
BY THOMAS GROVE
Russian leader Vladimir Putin

person. The Turkish presidential office said they were expected to meet at some point
before, and during, the G-20
summit in China in September.
Russian media have touted
Mr. Erdogans letter as a foreign-policy coup for Mr. Putin;
Turkey, however, has maintained the position that the
letter didnt apologize for the
downing of the plane.
Turkeys shootdown of the
Russian warplane killed the pilot and harmed cooperation on
energy, trade and nuclear
deals. Mr. Putin called the
shooting a stab in the back,
and Russia quickly imposed
economic sanctions on Turkey.
Both countries for months
traded accusations over the
incident. Russia said the plane
was shot down above Syrian
territory. Turkey said the
plane had repeatedly violated
Turkish airspace and was shot
down after being warned several times.
An about-face in RussianTurkish relations could hold
implications for Syria, where
the two countries have been at
odds over the fate of Syrian
President Bashar al-Assad.
Ayla Albayrak
FALLUJAH, IraqFor Islamic State, this city was unlike any other: the birthplace
of its movement and the first
urban center it seized in a
blitz that began the occupation
of a third of Iraq.
But it took Iraqi forces less
than five weeks to defeat the
extremist group here, much
faster than Iraqi and American
officials had expected. One
reason, these officials and
Iraqi commanders say, was
how invested Islamic State was
in Fallujah, which made them
loath to blow it up.
Fallujah was a commandand-control center, said a senior Iraqi counterterrorism officer. They were comfortable
there. Their leadership lived
there and so did their families.
They could not destroy the
city in the process of defending it.
Commanders said the militants had bet on repelling Iraqi
forces on the outskirts of Fallujah, but struggled to adapt to
the overwhelming force. The
center of the city was still inhabitedone reason it wasnt
booby-trapped, as Islamic
State had done in other,
largely deserted urban areas
they lost.
As Iraqi forces took central
Fallujah in a quick three-day
push, they discovered just how
entrenched Islamic State was.
There were administrative offices and courts, jails concealed behind the facades of
opulent homes, huge bombmaking factories and documents detailing 266 suicidebombing
operations
in
Baghdad.
There were also functioning
medical clinics, supermarkets
and restaurants.
The difference was visible
on recent visits. The southern
outskirts bore the evidence of
intense firefights, airstrikes
and shelling with whole build-
ings reduced to rubble and

others leaning precariously.
Some roads were caved in,
lined by deep trenches and littered with burned-out vehicles.
Deeper into the city, many
buildings appeared untouched
or with only a few bullet holes,
indicating fighting had been
light. Iraqi security forces
gathered in well-appointed
homes complete with flatscreen TVs as well as fundamentalist books on female
chastity and other topics.
Lt. Gen. Raed Shakir Jawdat, the commander of the federal police force that sent
6,000 troops into Fallujah, said
his officers recovered paperwork and ledgers that meticulously documented the nationalities and living arrangements
of Islamic States foreign recruits and their families.
They were living a normal
life with their families, he
said.
Col. Mohannad al-Tamimi, a
front-line commander with the
elite counterterrorism forces
that led the advance into the
city, said Islamic State called

Fallujah their Green Zone, a
reference to the fortified government and diplomatic center
of Iraqs capital, just 40 miles
to the east.
The fight for Fallujah began
in late May, supported by the
U.S.-led coalition against Islamic State. Residents mostly
remained in place, but when
the Iraqi forces broke through
the defensive lines and began
moving into the center, some
85,000 civilians fled to nearby
camps.
Iraqi officials said dozens of
Islamic State families blended
in among the fleeing residents.
At the same time, Islamic
States top religious and political leaders were also beating
a hasty retreat into the desert
and to northern banks of the
Euphrates River, ordering the
rank-and-file to stay behind
and fight, according to seven
Iraqi and American officials
who cited radio communications that were monitored as
well as intelligence gleaned
from people inside the city.
As the leadership crumbled,
officials said dozens fled the

battle, leaving behind battlehardened but vastly outnumbered Fallujah natives.
The senior commanders of
the Daesh forces fled, a U.S.
official said, using the Arabic
acronym for Islamic State.
And they basically left the
rest of the guys and said: OK,
you fight to the death.
But the remaining fighters
had none of the tools they had
used to devastating effect in
previous battles. Their homes
werent booby-trapped, the
roads werent mined because
they ran out of time and were
still operating in the city.
And they didnt have foreign volunteers to act as suicide bombers against the Iraqi
forces. Iraqis usually don't
carry out suicide bombingsa
job usually reserved for outsiders, Col. Tamimi said.
Those suicide vehicle attacks were exhausted early in
the battle outside Fallujah,
military commanders said.
Ali A. Nabhan
and Ghassan Adnan
KARIM KADIM/ASSOCIATED PRESS
BY TAMER EL-GHOBASHY
Iraqi security forces patrolling Fallujah Tuesday, two days after declaring victory over Islamic State.

Spanish settlers in the 16th
century.
Puerto Ricos economic
distress makes New York City
in the 1970s or Texas during
the 1980s oil-price decline
look like a walk in the park,
says Harvard University economist Lawrence Summers.
The islands hospitals show
painful consequences of the
diaspora and the potential for
a vicious cycle if Puerto Ricos
government
cant
spark
enough economic growth to
stem the outflow.
If the population slide continues, it will likely get even
harder for Puerto Rico to create attractive job opportunities, preserve the islands
quality of life and pay its bills.
In his small office in downtown San Juan, Domingo Cruz
Vivaldi still keeps the golden
shovel from the ceremonial
groundbreaking in 2010 on a
new cancer center, emergency
room and intensive-care unit
at San Jorge Childrens Hospital, where he is chief executive.
Because so many people are
leaving, he closed the hospitals top floor over the past
year to save money. He scans
newspaper ads to monitor efforts by Florida hospitals to
lure away his doctors. Four
have left in the past year, and
one more gave his notice this
month.
It is a horror movie, says
Mr. Cruz Vivaldi.
The burden is growing for
doctors who stay, including
Fernando Ysern, a 60-year-old
pediatrician who takes one
day off every three weeks. On
a recent Friday, he began the
day checking on patients at his
pediatric practice in the
mountainside town of Caguas,
south of San Juan. At 5 p.m.,
he started an emergency-room
shift at San Jorge because the
hospital had no one to work
overnight. He worked until 7
a.m. the next day.
Between the workload and
the poor pay, its no surprise
that we have an exodus of
physicians, says Dr. Ysern.
The Subway sandwich shop
inside San Juans Centr Medico, the main public hospital,
used to be a bastion of stability, says Jos Vzquez Barquet, the owner of 18 Subway
locations and the master franchisee for all 225 on the is-
Population Slide
Among major Caribbean islands, Puerto Rico suffered the largest
percentage drop in population from 2005 to 2015...
Puerto Rico
9.1%
1.1
Cuba
3.3
Jamaica
4.9
Trinidad and Tobago
14.0
Dominican Republic
15.6
Haiti
...and one of the worst in history, even compared with war-torn or

nancially beleaguered countries.
Cuba (1960-70)
21.6%
Vietnam (1965-75)
29.0
Albania (1997-2007) 7.2

Argentina (2000-10)
10.7
Iraq (2003-13)
Ukraine (2005-15)
35.0
5.5
Greece (2005-15)
1.0
Sources: World Bank (Caribbean islands); Census Bureau
ARMS
versation amongst me and my
buddies, Spc. Mitchell said.
How nice it would be.
When top Army officials
visited Fort Hood this
month, Spc. Mitchell saw his
chance. He raised his hand at
a question-and-answer session and suggested a summer
uniform.
What do you want,
shorts? Spc. Mitchell recalled the official saying.
No, he said, but what
about rolling up sleeves?
Army Chief of Staff Gen. Mark
Milley met with Spc. Mitchell
and agreed. The service declared Fort Hood would begin
a 10-day trial to evaluate the
practicality of sleeve-rolling
across the Army.
Spc. Mitchell rolled up and
rejoiced.
On Tuesday night, the
Army authorized soldiers to
roll up their sleeves on the
combat uniforms across the
force, stipulating the camouflage should be exposed on
the sleeves when rolled.
Ive been getting a lot of
calls from my friends, Spc.
Mitchell said. They just say,
Thank you, and stuff.

For years, members of the
Air Force, Navy and Coast
Guard have enjoyed the privilege of rolled sleeves in accordance, of course, with uniform
protocols and permission from
commanders.
The Air Force, for example,
allows airmen in battle-dress
uniform to roll sleeves only
when authorized by commanders. The rolled sleeve
must rest at, or within 1 inch
of, the forearm when the arm
is bent at a 90-degree angle.
Sailors have their own regimen. Sleeves may be worn
rolled up as directed by appropriate authority, the
guide to the Navy working
uniform reads, dictating a 3inch-wide sleeve band. The
termination point of the roll
is approximately 2 inches
above the elbow. This manner
of sleeve roll presents a short
sleeve appearance and facilitates expeditious de-rolling
and fastening during emergent situations.
The Coast Guard, meanwhile, rolls its sleeves in accordion fashion. In 2014,
the
Marines
permitted
sleeve-rolling after a yearslong prohibition of the practice, prompting widespread
elation.
grounds of a closed naval

base. At night, the polished
glass exterior reflects an illuminated promenade of fountains synchronized to merengue music.
The convention center cost
$415 million but has struggled
to turn a profit. One reason: It
took another four years to
open an on-site hotel.
Puerto Rico has been woefully slow overall to develop
its tourist sector, with just
one-fifth as many hotel rooms
as the Dominican Republic and
one-fourth as many as Cuba.
Opening up Cuba to the U.S.
could leave Puerto Rico even
further behind.
For years, Wall Street
largely looked past these woes
because Puerto Rico offered
above-market investment returns. The islands debt is exempt from federal, state and
local taxes. With plenty of takers, Puerto Rico doubled its
total debt in 10 years.
Some investors believed
they had added protection because public corporations in
federal territories cant file for
bankruptcy. Whenever there
is a perception that a kind of
debt is default-proof, you get
massive excesses, says Mr.
Summers, the Harvard economist and a former Treasury
secretary.
The slow disintegration of
Puerto Ricos health-care infrastructure is perhaps the
starkest example of the consequences of the debt crisis and
population flight.
What business will want to
stay in a country that doesnt
have a working health-care
system? says Mr. Cruz Vivaldi, the pediatric-hospital
executive. If the heath-care
system collapses, the economy will go with it.
In addition to the loss of
patients, the islands public
health-care system is chronically underfunded. Puerto Rico
receives less in federal funds
than what it would as a state,
even though doctors must provide the same level of care and
residents pay the same Medicare tax as mainland residents.
The Army, though, kept a
ban on sleeve-rolling that accompanied the introduction
of a new uniform in the
mid-2000s. At the time, the
war in Iraq had begun, and
troops kept sleeves down
anyway for protection in
combat.
We said that since were
in the field, and were training all the time and well be
in conflict, we just made a
conscious decision not to roll
Some soldiers have

shown off their bare
arms on social media,
prompting envy.
sleeves for that period, Sergeant Major of the Army Daniel Dailey said.
The 10-day sleeves-up trial
at Fort Hood has drawn some
attention. Some soldiers at
the base have shown off their
bare arms on social media,
prompting envy among soldiers elsewhere.
I personally havent rolled
my sleeves up, so I cant tell
you personally how it feels,
Capt. Matthew Castiglione
said. He nonetheless approves
of the idea. The soldiers un-
Top, the mostly empty Paseo de Diego in San Juan. Above, pediatrician Fernando Ysern at his office in
the town of Caguas. Because of an exodus of doctors, he takes only one day off every three weeks.
You pay the same [tax],
but you receive less, says
Puerto Rico Gov. Alejandro
Garca Padilla. If you move to
Florida, you will pay the same
and receive more. What would
you do?
The Obama administration
has pushed unsuccessfully for
Congress to overhaul the
health-care funding disparities. The immediate priority,
though, is to pass the bipartisan compromise between
Treasury Secretary Jacob Lew
and House Speaker Paul Ryan
that would allow a federal
oversight board to authorize
court-supervised debt restructuring for the territory.
Majorities in both parties
approved the bill in the House
this month, and the bill
cleared a key procedural hurdle in the Senate on Wednesday. The Senate is expected to
pass the bill before Friday,
when Puerto Ricos government has said it will default
on its most senior debt payments for the first time.
Puerto Ricos health-care
funding problems are expected
to worsen next year when federal grants that shored up the
Medicaid
program
run
out. Puerto Rico will have to
come up with more than $1.6
billion or scale back services.

Banks stopped lending to
Puerto Ricos Health Insurance
Administration two years ago.
It also has lost access to loans
from Puerto Ricos Government Development Bank,
which defaulted in May on
bond payments.
That has forced administrators to operate the health-care
system on a pay-as-you-go basis and led to frequent payment delays to hospitals and
doctors.
In March, Robexi Angeli had
just completed colon surgery
on a cancer patient at the
Santa Rosa Hospital in the
southern coastal town of
Guayama and was still in the
operating room when the
state-run power authority
switched off the electricity.
We were very lucky that
we had finished before they
cut it offall the lights, all the
machines, says Dr. Angeli.
The hospital owed millions of
dollars in unpaid bills to the
utility, which had just completed its own renegotiation
on some $9 billion in debt
with creditors. A court ordered the power restored to
the hospital, and it came on
the following afternoon.
Joaqun Rodrguez Sr., chief
der his command at Fort

Hood have taken advantage of
the change, he said, and as
mechanics working outdoors,
they are thankful.
There also are holdouts.
My personal opinion is that
it looks very tacky in this new
uniform, Sgt. First Class Jye
Green said.
The unit looks unprofessional when some soldiers
have their sleeves rolled up
and others dont, Sgt. Green
said. I think everyone is
kind of shocked, he said,
adding that he wont roll up
his own sleeves unless Im
forced to.
About 10% of the thousands of soldiers who responded to a poll by the
Army Times disapproved of
rolled sleeves, said Sgt. Maj.
Dailey.
Everybody has their personal biases, he said. We
expect that of soldiers.
Theyre humans.
Ahead of the decision, Spc.
Mitchell was confident the
Army will roll out the change
for all soldiers.
The victory may be harder
to savor in his next assignment. He is heading to Fort
Drum in upstate New York,
where soldiers train for arctic
warfare.
Specialist Cortne K. Mitchell, center, and Army Chief of Staff Gen.

Mark Milley, right, show off the sleeve-up, sleeve-down options.
executive of HIMA San Pablo,

which owns five hospitals on
the island, blamed payment
reimbursement delays for his
decision to terminate 9% of his
workforce, or 470 employees,
in April.
If I dont get paid, I have
no other choice, he says.
The island has just 90 obstetricians and 800 pediatricians, down from 1,400 pediatricians a decade ago, says
Victor Ramos, a pediatrician
who heads the Puerto Rico
College of Surgeons. Pediatricians who earn as much as
$27 for a patient visit in
Puerto Rico can earn $200 on
the mainland, he says.
Dr. Angeli, 40, and her husband, a 42-year-old surgeon,
are among those thinking
about leaving. The couple
dipped into their savings last
year to keep their medical
practice afloat.
Now they are filling out applications for staffing agencies
that supply doctors on a fill-in
basis to hospitals in Texas and
Virginia.
Her biggest worry is what
would happen to her patients
if she moves to the mainland.
We want to fight to keep offering the best service, but its
very difficult, she says.
STAFF SGT. JOHNATHAN HOOVER
CRISIS
land. Sales fell about 15% in

each of the past two years.
Mr. Vzquez Barquet has
fewer customers for the same
reason Mr. Cruz Vivaldi is filling fewer hospital beds.
Puerto Ricos population was
3.47 million as of July 1, 2015,
which is 9.1% lower than a decade earlier. Such a steep decline hasnt been seen in a U.S.
state since the great migrations from Oklahoma and
other farm states that began
in the 1930s.
The population of Puerto
Rican children under the age
of 5 has declined 37% since
2000. About one in five residents is at least 60, a higher
percentage than any U.S. state.
At
the
University
of Puerto Rico, the government is still paying for new
buildings completed in 2000
when the islands college-age
population peaked.
Maria Alvarez, 19, plans to
study law in Indiana after finishing up her undergraduate
studies in San Juan. The
chances of getting a good paying job here just arent that
good, she says.
As more people leave, the
government faces greater
pressure to cut jobs. The number of students in public
schools is 40% lower than it
was a decade ago, while the
number of teachers has grown.
Puerto Rico operates as many
correctional facilities as it did
in 2004, despite a 26% drop in
inmates.
Puerto Rico ended up in its
current situation because of a
string of haphazard policies by
federal officials going back decades. On top of that, local
leaders have struggled to cut
spending and boost tax collections. Instead, they borrowed
to make up for recurring revenue shortfalls.
Federal tax credits long cultivated a robust manufacturing sector, steering the island
away from agriculture after
World War II and into a major
hub for pharmaceutical and
medical-device makers. Then
Congress ended those incentives. When the last expired in
2006,
many
high-paying drugmakers packed up
for Singapore and Ireland.
Tax breaks masked other
economic fumbles. Two miles
west of the San Jorge hospital
stands
the
gleaming Puerto Rico Convention
Center, the largest such complex in the Caribbean. It
opened in 2005 on the
MICHAEL RUBENSTEIN FOR THE WALL STREET JOURNAL (2)
FROM PAGE ONE
U.S. NEWS
Trump Pledges to Undo Trade Agreements

GOP candidate says
he would kill Asian
pact and label China as
a currency manipulator
CLEVELAND
Convention-Security
Compromise Adopted
Cleveland has reached a compromise on security restrictions

around the site of the Republican National Convention after a
federal judge last week ruled the
citys rules were unconstitutional.
The city and the American Civil
Liberties Union reached a tentative settlement last week. The
agreement was completed over
the weekend, and the city officially
adopted new rules Wednesday.
According to the new rules,
Cleveland will shrink the event
zone around the Quicken Loans
Arena, where most of the convention will be held next month;
extend the hours when marches
will be allowed; and change the
designated parade route so that
it comes closer to where delegates will be.
The ACLUwhich had sued
on behalf of three groups who
alleged the citys restrictions on
protests were draconian
hailed the new plan as a victory
for free speech.
Byron Tau
HEALTH
Heart-Disease Battle
Appears to Stagnate
After four decades of dramatic progress, the public-health

battle in the U.S. against heart
disease may have hit a wall.
Since 2011, the annual decline
in heart-disease death rates
among Americans has essentially remained flat at less than
1%, researchers said Wednesday,
a contrast to some 40 years of
continuous and generally much
steeper annual reductions. In the
decade ended in 2010, the average annual decline in heart-disease mortality was 3.7%.
The likely culprits, researchers
said, are the epidemic of obesity
and the resulting increase in Type 2
diabetes. The rise in obesity first
emerged across all ages in the U.S.
in about 1985, and researchers believe the consequences are now beginning to turn up in mortality data.
This is a startling observation,
Jamal S. Rana, a cardiologist and
researcher at Kaiser Permanente
in Oakland, Calif. Things are slowing down. We need to redouble
our efforts on innovative prevention strategies, he said. Dr. Rana is
senior author of the study, which
was published online Wednesday
in JAMA Cardiology, a journal of
the American Medical Association.
Ron Winslow
Americans, she said in Denver.

Mr. Trumps speech drew
condemnation from both Democrats allied with Mrs. Clinton
and Republicans who have long
sought to boost U.S. trade. The
U.S. Chamber of Commerce
spent much of Mr. Trumps
speech arguing against his
views on its Twitter account,
saying his approach would cost
3.5 million U.S. jobs and result
in higher prices and a
weaker economy.
Little of what Mr. Trump
proposed came as a surprise to

observers of the 2016 presidential campaign. From the
beginning, the New Yorker has
articulated nationalist policies
on the economy, trade and immigration that have driven his
appeal, particularly among
working-class voters who have
seen jobs disappear in an increasingly global economy.
Some of his most specific
criticism was aimed at China. I
am going to instruct my Treasury secretary to label China a
currency manipulator. Any

country that devalues their currency in order to take advantage of the United States will
be met with sharply, he said.
Chinese officials regularly
say they are letting markets
play a bigger role in setting
the yuans value against the
dollar. The International Monetary Fund has argued that the
yuan no longer is undervalued.
Mr. Trump also vowed to instruct the U.S. trade representative to bring trade cases against
China, both in this country and

at the WTO. Chinas unfair-subsidy behavior is prohibited by
the terms of its entrance to the
WTO, and I intend to enforce
those rules, he said of the
World Trade Organization.
Mr. Trump didnt mention
the most aggressive trade policies he touted during his primary campaign: a tariff of as
much as 45% on Chinese-made
goods and stiff financial penalties on U.S. companies that
move factory work to Mexico.
Partnerships Aim to Bolster Cancer Plan

BY THOMAS M. BURTON
WASHINGTONVice President Joe Biden on Wednesday

announced a series of partnerships involving government,
industry and academia that are
aimed at bolstering the White
Houses proposed $1 billion
cancer moonshot to speed up
the fight against the disease.
The alliances were disclosed at the outset of more
than 270 events around the
U.S. to kick off the cancer effort, including a meeting at
Howard University in Washington billed as the Cancer
Moonshot summit.
Among the new ventures
described by Mr. Biden and the
White House are a partnership
between the National Cancer
Institute and at least 20 drug
and biotechnology companies
to expedite researchers access
to drugs, both investigational
and approved.
The moonshot has been
greeted in the medical community with considerable enthusiasm for the new research
funding and collaboration, but
also with skepticism that
these steps alone would expedite research and treatment.
At Wednesdays session, Mr.
Biden said he had no illusions
that his effort could end cancer quickly but told researchers and patients in the audience he believed we can make
exponential progress and
Vice President Joe Biden, center, speaking at a cancer meeting this month in Washington.
make 10 years of progress in
five years.
Saying scientists, industry
and patient groups need to
share more information, the
vice president called for a new
sense of urgency in cancer research and therapy development.
Time matters, days matter,
minutes matter, he said. We
need to be sure that research
results are available to all researchers immediately. He
criticized many in science for
failing to publish results immediately and thereby slowing
the progress of drug discovery. Maybe theres an explanation for that, he said. I havent heard it yet.
Most of the $1 billion in
funding requested by the
White House is being considered in Congress. The House
last year passed legislation
that would significantly boost
research money, including the
cancer moonshot, while also
speeding drug and device approvals at the Food and Drug
Administration.
Companion legislation in
the Senate was approved by
the health committee, but lawmakers are still negotiating

over how to pay for the research part of it. There has
also been some concern about
tying the research money to
the FDA regulatory provisions,
which some groups see as lowering the agencys safety standards.
The moonshot task force
said cancer-treatment-related
patents under the program
would be reviewed more
quickly than other patent applications. Also, the FDA
would consolidate the review
of drugs, devices and biological products in a single Oncology Center of Excellence. The
new centers acting director
will be Dr. Richard Pazdur,
chief of the FDAs office of oncology-drug review.
As part of the national effort, medical groups such as
the American Cancer Society
would commit to ambitious
new goals, with some agreeing
to try to double their research
budgets over the next five
years. International Business
Machines Corp. and the Department of Veterans Affairs
launched a public-private venture to speed access to cancer
therapy for 10,000 veterans
over the next two years.
Several of the events work
sessions were to be closed to
the press because they are
aimed at facilitating candid
conversations and the creation
of new collaborations, the
vice presidents office said.
Mr. Biden and President Barack Obama announced plans
earlier this year for the venture, termed a moonshot after
the expedited effort under
President John F. Kennedy to
put a man on the moon a halfcentury ago.
Mr. Biden became committed to the cancer effort following the death last year of his
son Joseph R. Beau Biden III
from brain cancer. Beau Biden
was a former attorney general
of Delaware.
Consumer Spending Increases

BY JEFFREY SPARSHOTT
The U.S. economy is bouncing back from a lackluster
start to the year, driven by a
resurgence in consumer spending despite warning signals
from American businesses and
uncertainty in global markets.
Household spending accounts for more than two-thirds
of economic output in the U.S.
and has been a mainstay of the
expansion for more than five
years. But consumers pulled
back in the opening months of
the year, one factor behind paltry first-quarter growth.
That appears to have reversedat least for now.
At a time when the global
economy is doubting itself in
the face of Brexit, the U.S.
consumer is emerging with a
smile on his face, said Gregory Daco, head of U.S. macroeconomics at Oxford Economics, referencing the U.K.s vote
to leave the European Union.
Personal spending, which

measures how much Americans paid for everything from
autos to airfare, increased 0.4%
in May from a month earlier,
the Commerce Department
said Wednesday. That followed
a 1.1% jump in April, the sharpest rise in nearly seven years.
The rebound in spending
led to upgraded estimates of
economic output in the quarter ending Thursday. Forecasters at Macroeconomic Advisers raised their estimate of
gross domestic product by
two-tenths of a percentage
point to 2.8%, Barclays raised
its estimate to 2.8% from 2.5%,
Amherst Pierpont Securities
upgraded its forecast to 3.1%
from 2.7% and the Federal Reserve Bank of Atlantas GDPNow tracker moved to 2.7%
from 2.6%. First-quarter
growth was 1.1% at a seasonally adjusted annual rate.
To be sure, the outlook has
clouded since the U.K. vote last
week to leave the EU, a move

that roiled global markets and
introduced another dose of uncertainty into the global economy. U.S. businesses, meanwhile, have been cutting back
on investment and slowed
their pace of hiring in May.
Pressure on corporate profit
margins will result in increasingly aggressive cost-cutting
measures which will impinge on
the pace of job growth, and
thus the consumer is unlikely to
be able to sustain a significant
engine of growth role for very
much longer, said Joshua Shapiro, chief U.S. economist at the
consultancy MFR Inc.
But for now, American consumers appear to be looking
past potential economic speed
bumps such as Brexit. Gallups
U.S. economic-confidence index, for example, was unchanged in the days immediately before and after the vote.
Households also have been
buoyed by slowly rising incomes.
JOE RAEDLE/GETTY IMAGES
U.S.
Watch
Donald Trump, shown Tuesday, said as president he would instruct the U.S. trade representative to bring cases against China.
SUSAN WALSH/ASSOCIATED PRESS
Donald Trump has pledged to

withdraw the U.S. from global
trade alliances, saying he would
exit the North American Free
Trade Agreement if it isnt renegotiated, would label China a
currency manipulator and would
kill the Trans-Pacific Partnership, a Pacific Rim trade deal.
The presumptive Republican
presidential nominees trade
proposals amount to a rejection
of longstanding Republican orthodoxy and leave the party
with a candidate arguing against
the very policies that most GOP
leaders have enacted and supported. He spoke Tuesday about
18th-century economic policy
that funded the federal government largely on tariffs.
Our original Constitution
did not even have an income
tax. Instead, it had tariffs
emphasizing taxation of foreign, not domestic, production, Mr. Trump said. Yet
today, 240 years after the Revolution, we have turned things
completely upside down.
Within hours of Mr. Trumps
remarks in Pennsylvania, presumptive Democratic nominee
Hillary Clinton offered a strikingly different economic view in
an address on technology, saying she would aim to connect
every U.S. home to high-speed
internet and calling for expanding free Wi-Fi networks in public spaces. We need to get back
into the future business, because thats who we are as
JEFF SWENSEN/GETTY IMAGES
BY REID J. EPSTEIN
AND COLLEEN MCCAIN NELSON
But he did seek to tie his own

brand of economic nationalism
with the U.K.s vote last week
to leave the European Union.
Our friends in Britain recently voted to take back control of their economy, politics
and borders, Mr. Trump
said. I was on the right side of
that issue as you knowwith
the people. I said it was going to
happen, I felt it, while Hillary, as
always, stood with the elites.
Mr. Trumps protectionist
trade proposals put him closer
ideologically to recent Democratic presidential candidates
than to Republicans, who in
2012 placed enacting the
Trans-Pacific Partnership in
the official GOP platform. Both
Barack Obama and Mrs. Clinton in 2008 said they would
seek to renegotiate Nafta,
though Mr. Obama didnt follow through while in office.
Vermont Sen. Bernie Sanders, in his primary challenge of
Mrs. Clinton, boasted that he
had voted against Nafta and
said he wasnt comfortable with
any recent U.S. trade agreement. Mr. Sanders said he would
reject the TPP, and Mrs. Clinton
eventually agreed with him.
Mr. Trump had previously
lambasted Nafta, which was
signed by Democratic President
Bill Clinton but largely negotiated by his predecessor, Republican President George H.W. Bush.
Im going tell our Nafta
partners that I intend to immediately renegotiate the terms of
that agreement to get a better
deal for our workers, Mr.
Trump said Tuesday, for the
first time citing specific presidential authority to end the
pact. If they do not agree to a
renegotiation, then I will submit
noticethat America intends to
withdraw from the deal.
A shopper looking at merchandise at a Miami store in May.

Personal income, which includes
wages, government benefits and
other sources, climbed 0.2% in
May. The wages and salaries
component advanced 0.2% last
month, suggesting the labor
market remains stable despite
disappointing employment figures this month.
And in another sign of
stronger confidence, the personal-saving rate in May was
5.3%, the lowest level of the
year and down from a near-
term peak of 6% in March.

Inflation, meanwhile, remains tame. The personal-consumption-expenditures price
index, the Federal Reserves
preferred inflation measure,
rose 0.2% in May from the
prior month. From a year earlier, the index climbed 0.9%.
Core prices, which exclude the volatile categories of
food and energy, climbed 0.2%
from the prior month and 1.6%
from a year earlier.
ARTS & ENTERTAINMENT

FILM
The BFG.
A Dynamic
Film Duo
MARK RYLANCE and Steven Spielberg
have a pretty good thing going. The actor-director duo, who worked together
on the Oscar-winning Bridge of Spies,
have a string of films coming soon, including an adaptation of Roald Dahls
The BFG, sci-fi film Ready Player
One and historical drama The Kidnapping of Edgardo Mortara.
As The BFG hits cinema screens,
Mr. Rylance, 56, talks about their
friendship. Edited from an interview.
Riz Ahmed plays a young

man driving a cab who is
accused of murder in HBOs
The Night Of, created by
Steve Zaillian, below, and
Richard Price.
A Gritty Tale of Justice

BY CARYN JAMES
HBOs The Night Of, about a young man
accused of murder, is based on the BBCs 2008
series Criminal Justice. But Steven Zaillian
and Richard Price, the new versions creators,
did more than transplant the mystery to New
York. To make the miniseries more realistically American, they changed the central character from a white man to the son
of Pakistani immigrants.
In both versions, the central
character borrows his fathers taxi
and picks up an attractive woman.
After a night of sex and drugs, he
wakes shocked to find her stabbed
to death in her bed.
In the British series hes a
white kid because most of the cabdrivers are white. Most of the cabdrivers in New York City are not,
Mr. Zaillian says, crediting Mr. Price
with suggesting the switch. That
one decision affected the whole
show.
The miniseries, which premieres
on HBO July 10, follows the accused
killer, a college student called Naz
(Riz Ahmed of Nightcrawler) through his arrest, imprisonment and trial. In the British
version he was played by Ben Whishaw.
Mr. Zaillian, who is 63, is best known as
the writer of Schindlers List and many
other films. He has directed three movies, including the legal thriller A Civil Action
(1998) and the 2006 remake of All the Kings
Men. Actor James Gandolfini was in both
films.
When Mr. Zaillian began readying to direct
The Night Of, from a pilot script by novelist
and screenwriter Richard Price (The Wire),
it was with Mr. Gandolfini in the major role of

Nazs down-on-his luck lawyer, Jack Stone.
Mr. Gandolfini died in 2013, but it would have
been the actors first series since The Sopranos, and a return to HBO.
The miniseries is important for HBO, which
has been promoting it during its hit show
Game of Thrones. The network has canceled
the series Vinyl and seen its True Detective
series stumble in its second season. Program-
ming president Michael Lombardo is leaving

his post.
Mr. Gandolfini did appear in the original
pilot of The Night Of. But because the episode covers the night of the murder, Stone is
introduced near the end, so Mr. Gandolfini
shot only one scene, in one day. After his
death, the project stalled. Robert De Niro was
briefly set to take on the role, now played by
John Turturro.
The character was not rewritten. Stone
was always a rumpled, cynical attorney hanging around the police precinct looking for
ERIC JOHNSON
Sound Familiar?
New Album, Old Name
Maxwell, now 43 years

old, styles himself as a
restless, soul-searching
romantic.
business. When Stone first sees Naz in his

cell, he says casually, Whats with Gunga
Din?
Mr. Zaillian reshot Mr. Gandolfinis scene
substituting Mr. Turturro. At the end of the
episode, Stone starts walking out of the precinct, then turns back to go in and take Nazs
case. The director says both actors asked him
the same question: Why does he go back? He
told them, Youre just thinking about all the
disappointments in your life, thats all.
Its more about you [than him].
Mr. Zaillian moved on to direct
seven of the eight episodes. Mr. Price
wrote four, and the two men share
writing credit for the rest. The series
creates a dark view of the judicial and
penal systems, fraught with delays, inequities and prison violence. But Mr.
Zaillian and Mr. Price say they did not
have a crusading agenda. They wanted
to convey a realistic texture, and the
nuts-and-bolts process behind the
story, which comes to include prosecutors, Nazs family, and their workingclass Queens neighborhood.
Mr. Price has written about race,
ethnicity and crime in New York from
his first two novels, The Wanderers
and Bloodbrothers, to the more recent
Lush Life.
In The Night Of, the protagonist did not
have to be specifically Pakistani. But Mr. Price
had visited Lahore many times when his wife,
the novelist Lorraine Adams, was researching
a book there, and he knew more about Pakistanis than about other ethnic groups Naz
might have belonged to. He also wanted to
convey the treatment of Arabs, or people who
look like Arabs, after the 2001 terror attacks.
I wanted to show the knee-jerk hatred
that came out, he said.
BY JOHN JURGENSEN
ON JULY 1, the R&B singer Maxwell
releases his first album in seven
years, blackSUMMERSnight. His
previous album, which came out in
2009 after an eight-year hiatus,
was called BLACKsummersnight.
The titlesidentical except for
the capital lettersmight confuse
fans and pose a marketing challenge. A third album, blacksummersNIGHT, is still to come. For
Maxwell, at his careers 20-year
mark, the trilogy is a way to lay
out a musical story and keep fans
engaged. It also lets him explore
different musical styles at a time
when other acts of the 90s have
already settled into nostalgia mode.
Along with peers such as DAngelo and Erykah Badu, Maxwell
defined the neo soul movement of
the mid-1990s with live instrumentation and earthy artistry
evocative of the 60s and 70s. Albums such as his 1996 debut,
Maxwells Urban Hang Suite,
served as a sexy counterpoint to
the bohemian strain of hip-hop
that produced albums such as the
Fugees The Score, released earlier that year.
Now in their forties, the stars
of neo soul have evolved differently. Erykah Badu injects funky
mysticism into her music and experiments with young collaborators, as she did on But You Caint
Use My Phone, a free mixtape released last year. DAngelo went 14
years between albums, re-emerging in 2014 with the Grammy-winning Black Messiah. Despite its
long gestation, the album cap-
tured a restive period that also

spawned the Black Lives Matter
movement.
Maxwell styled himself as a
restless, soul-searching romantic.
His trilogy is loosely based on the
concept of a night out for a
woman named Black Summers, he
says. The first installment, steeped
in horns, keyboards and kickdrums, followed the push and pull
of a relationship. The second album is largely upbeat and influenced by electronic music. At the
same time, his voice assumes a
rougher edge, departing from his
clean falsetto.
A former waiter from Brooklyn, Maxwell has been with the
same label since 1994, when he
signed with Columbia Records. He
has built a careerand survived
the collapse of the old music industrywith the same manager,
the same two co-writers and coproducers, and many of the same
musicians.
For the never-married 43-yearold, who often sings about the
Why have you and Steven hit it off

so well? Youre his new Tom Hanks.
Oh, I dont know about that. We have
hit it off. Hes a great, great friend. We
just share a lot of interests.... We both
like talking about different things, all
kinds of things, particularly like old films.
I dont really know why. Who knows? I
wouldnt want to define it, actually.
How does that translate on the set?
Steven has a very family-oriented environment, more than any other filmmaker, maybe more than any theater
companies Ive been in. He really values
a sense of community and family feeling between all the different departments. I share a love for that. He enjoys having control of things and
making decisions, and Im actually
someone who quite likes chaos.... I like
mistakes and playing around, and finding things in play rather than in my
head. I think maybe he enjoys that.
How do you compare acting on stage
and screen to acting for a CGI role?
Performance capture is much more like
the final days of a rehearsal period for
a theater play, when youll be in a
room that has nothing to do with the
set that youre going to eventually play
on.... What youre contributing to the final thing is, hopefully, the true emotion
and the physical movements and the
connection with the other character.
What did you feel the first time you
saw your face rendered as the BFG?
Its always a surprise, even when I see
my face in a film like Bridge of
Spies.... One has an imagination of
what you look like inside your head,
and rarely is it the same as how you
look in the mirror.... I imagined BFG a
little bit older and maybe a little more
frightening. Stevens made him a little
more friendly, which is the title of the
film, so thats a good thing.
search for compatibility, the music

world has provided surprisingly
stable relationships. The loyalty of
his fans, especially women, has
helped all four of his studio albums go platinum, despite the
muted response to many releases
these days. No one really cares
about music anymore, he says.
The final album in the trilogy
has a political slant and is almost done, Maxwell says. It also is
the last album he owes Columbia
Records on his contract. The
singer says he is considering renegotiating the deal.
Maxwell was raised in Brooklyns East New York neighborhood
and was influenced by Sam Cooke,
Chaka Khan and others. (A representative for the performer declined to confirm Maxwells original full name.) His mother is
Haitian and his father, who died
when Maxwell was a boy, was
Puerto Rican. His Caribbean and
Latin ancestry made him feel like
something of an outsider in the
world of black R&B and soul,
where many acts were rooted in
the Southern gospel tradition and
marketed as such. Its something
that I never discussed before,
Maxwell says. But now, being 43,
Im old enough to admit the insecurities that I had.
In an attempt to make music
that is timeless, he avoids trendy
production techniques or guest vocalists who might make a song
sound dated a few years after its
release. Describing his litmus test
for new songs, Maxwell says,
When Im 50 will I be able to belt
this record out? Or would I sound
like a fool singing it?
DISNEY
HBO (2)
BY MICHAEL CALIA
ALIMAH IS RELYING
ON US TO WORK
TOGETHER TO TRY TO
END WORLD HUNGER.
WE CALL THIS
The leaders of the six biggest global

communications companies, John Wren,
Maurice Lvy, Yannick Bollor,
Michael Roth, Tadashi Ishii and Martin Sorrell,
have all put their differences aside to try to
end hunger, achieve food security and promote
sustainable agriculture.
Common Ground is an initiative being launched
by these leaders, in support of the UNs 17
Sustainable Development Goals, designed
to help transform our world.
The premise is that even erce rivals can join
together and help solve the universal issues
affecting the planet. To nd out more, or to see
how you can nd your own Common Ground
for the benet of humanity,
visit www.un.org/sustainabledevelopment
OPINION
REVIEW & OUTLOOK
Jihad in Istanbul
urkey suffered its 10th terrorist attack in ness to allow Syria to descend into chaos.
less than a year on Tuesday when a coorThe Turkish government of Recep Tayyip Erdinated suicide assault on Istanbuls dogan also bears responsibility for allowing IsAtaturk Airport killed 41 peolamic State to gain strength.
Turkey pays a price
ple and injured more than 200.
Much like Pakistani strongman
The choice of target is noteul-Haq, who made a barfor the slow campaign Zia
worthy. Ataturk airport is one
gain with jihadists in the 1980s
against Islamic State. so long as they attacked his enof the worlds busiest, processing some 42 million passenemies in Afghanistan and Ingers and 314,000 commercial
dia, the Turkish government
flights last year. Among the dead were citizens largely looked the other way as Syria-bound jiof China, Iran, Iraq, Jordan, Saudi Arabia, Tuni- hadists used Turkey as a staging ground and ensia, Ukraine and Uzbekistan, in addition to Turk- try point for waging war against the Assad reish nationals. As terrorist atrocities go, its hard gime. Turkey has also been friendly with the
to get more global than that.
Palestinian terrorist group Hamas, in the fatal
All of this suggests the attack was the work of conceit that terrorism is legitimate so long as it
Islamic State, though the group hasnt taken is targeting someone other than you.
credit at this writing. It fits a template of recent
This weeks agreement between Ankara and
Islamic State attacks on the Brussels airport in Jerusalem to resume normal diplomatic relaMarch, on tourists near Istanbuls Blue Mosque tions after a six-year hiatus is a sign that Mr. Erin January, the downing of the Russian airliner dogan may have begun to appreciate the conseover the Sinai peninsula in October, and the Bardo quences of that conceit, as well as the need for
National Museum in Tunis in March 2015.
capable regional allies. Mr. Erdogan also seems
These terrorist spectaculars achieve multiple to have understood that Turkeys most dangeraims at once: They inflict casualties on multiple ous enemies are Islamic State jihadists, not the
nationalities, shake confidence in government Kurdish separatists on whom he has trained
security forces, harm local economies and dem- most of his fire. One reason to doubt Kurdish reonstrate the reach of Islamic State.
sponsibility for Tuesdays attack is that the
That should temper hopes that Islamic States Kurdistan Workers Party, or PKK, generally tarrecent military setbacks in Iraq will offer relief gets Turkish police and military personnel, not
from these sorts of attacks. The opposite might be civilians and foreigners.
true. Islamic State has now been territorially enComing after the terrorist atrocity in Orlando,
trenched for years in Iraq and Syria, during which Fla., the Istanbul attack is a reminder that the fuit has been able to radicalize and train thousands ries of the Arab world wont stay confined if we
of recruits, including many with foreign passports. merely leave Syria and Iraq alone. It may be too
These jihadists will be paying lethal calls on late for President Obama to understand that the
crowded civilian targets for many more years, a power vacuums he created in the Middle East are
deadly price for the Obama Administrations grad- the source of todays global terror, but the next
ualist policy against Islamic State and its willing- U.S. President cannot afford to be as naive.
The Zika Democrats
ollsters regularly show that Congress is overlap with their campaign themes, Democrats
less popular among the public than in- blocked the Zika money, 48-42.
fectious diseases, and Senate Democrats
Since microcephaly is a natal condition and
on Tuesday helped explain
Zika can be transmitted sexuHarry Reid blocks
why. After spending months
ally, Democrats naturally condemanding more funding to money to fight the virus scripted womens health as
combat the Zika virus, they
a wedge. The bill makes block
as an election ploy.
voted down their own priority
grants to hospitals, local
to foment the chaos they behealth departments and public
lieve will work to their politiinsurance programs like Medcal benefit in the fall.
icaid. Democrats objected because the bill does
The White House asked Congress for $1.9 bil- not specifically identify Planned Parenthood as
lion by July 4 to address mosquito-borne Zika, a candidate for grants.
which can cause a birth defect called microThe most effective way to stop the spread of
cephaly. A bipartisan compromise stripped out Zika is to kill mosquitos, so the bill temporarily
spending unrelated to Zika but otherwise waives the Environmental Protection Agencys
granted the $1.1 billion request in full for pre- permitting process for certain pesticides for
vention, research, education, health services, 180 days for emergency mosquito control. Deminternational aid and vaccine development.
ocrats claimed this will weaken clean water
The measure passed the Senate 89-8 in May, and air protections in a letter Tuesday despite
with 44 Democrats in favor and none opposed. never before raising the issue.
But Senate Minority Leader Harry Reid emerged
Even amid a public-health crisis, Democrats
on Tuesday to ambush the House-Senate confer- think voters wont care about the details and
ence report compromise, which the House has instead will punish the GOP for dysfunction
already passed and cant be amended.
in Washington. Well leave you with Mr. Reids
Mr. Reid called the bill the most irresponsi- remarks from a Zika press conference in May:
ble legislation I have ever seen in my 34 years Every day we wait is a bad day for America
in Congress, and as a specialist in that field he and the countryIm sorryfor America and
would know. Inventing pretexts that happen to the world.
Climate Denial
Finally Pays Off
Clintons Benghazi Cover Story
emocrats have succeeded in persuad- items from the notes of that meeting, five reing the Washington press corps that ferred to the video.
what happened when four Americans
Mrs. Clinton referred to the video more than
died at Benghazi, Libya, on
once in her public statements.
She wonders why
Sept. 11, 2012 isnt a story. But
At 10:08 p.m. on the night of
the House report released
the attack, she issued a public
shes
so
distrusted.
Monday about that night and
statement on Benghazi: Some
Heres the reason.
its aftermath contains details
have sought to justify this vithat ought to concern Americious behavior as a response
cans who care about political
to inflammatory material
accountability.
posted on the Internet. The United States deAmbassador Chris Stevens and three other plores any intentional effort to denigrate the reAmericans died in that attack that is dissected ligious beliefs of others. She repeated the point
in 800-plus pages released by Republicans on the next day at the State Department.
a House Select Committee chaired by South
Thats not what she was saying in private. On
Carolinas Trey Gowdy. The reports most dis- the night of the attack, at 6:49 p.m. Washington
turbing facts concern the way the Obama Ad- time, Mrs. Clinton called Libyas president to
ministration and then-Secretary of State Hillary say the attack on the diplomatic compound in
Clinton spun an alternative narrative that is Benghazi was planned and that an Islamist tercontradicted by their private statements and ror group had claimed responsibility. A few
the intelligence from the scene.
hours later, she emailed her daughter that an
We learn from the report that the day after Al Qaeda-like group was responsible.
Mr. Stevens became the first American ambasThe next afternoon Mrs. Clinton was even
sador killed in the line of duty since 1979, Presi- more categorical. In a phone call with the
dent Obama decided to skip his daily intelli- Egyptian Prime Minister, she said the Benghazi
gence briefing.
attack had nothing to do with the film. It was
We also learn that on the day of the attack, a planned attacknot a protest. She added
in a 5 p.m. meeting that included Defense Secre- that the Benghazi attackers were believed aftary Leon Panetta, Mr. Obama said the U.S. filiated with al Qaeda.
should use all available resources. After that
On Monday this week on the campaign trail,
meeting, Mr. Panetta returned to the Pentagon Mrs. Clinton admitted that lots of Americans
to discuss what military resources were avail- dont trust her. I personally know I have work
able. The Defense Secretary then issued an or- to do on this front, she told her audience. This
der to deploy military assets to Libya.
report shows she has earned that mistrust.
But nothing was sent to Benghazi, and nothAs have her fellow Democrats on the Select
ing was even in route when the last two Ameri- Committee. From the start they treated the
cans were killed almost eight hours after the at- House investigation the way Mrs. Clintons
tacks began. The holdup seems to have been State Department treated Benghazias a politicaused in part by something else we learn from cal issue. They refused to participate in the inthis report: a 7:30 p.m. teleconference of Defense vestigation and spent most of their time deand State officials, including Mrs. Clinton.
nouncing it as partisan. Their minority report
Ostensibly they were sharing intelligence on Benghazi contains no fewer than 23 menand coordinating responses. But they debated tions of Donald Trump.
whether they needed Libyas permission to deThe tragedy of Benghazi is that four brave
ploy American troops to defend endangered Americans in a dangerous part of the world lost
Americans, whether Marines should wear uni- their lives to a determined and deadly enemy.
forms or civilian clothes, and so on.
The scandal of Benghazi is that instead of levelEven more telling: Though there was no evi- ing with the American people, Mrs. Clinton and
dence linking the Benghazi attacks to a You- others who knew better opted for a more conveTube video mocking Islam, of the 10 action nientand corrosivespin.
No contributor has
written more frequently
on the subject of climate change on these
pages45 times over
the past 20 years according to the study
BUSINESS
behind a recent series
WORLD
of ads (at $27,309 a
By Holman W.
pop) assailing the JourJenkins, Jr.
nals editorial page for
its climate coverage.
Yet how ploddingly conventional my
views have been: Ive written that evidence of climate change is not evidence
of what causes climate change. The Intergovernmental Panel on Climate
Change agrees, in its latest report estimating with less than 100% confidence
that a human role accounts for half the
warming between 1951 and 2010.
Ive written that it would be astonishing if human activity had no impact, but
the important questions are how and
how much. The IPCC agrees, estimating
that a doubling of atmospheric CO2 from
preindustrial times would hike temperatures between 1.5 degrees and 4.5 degrees (Celsius), an increase in the range
of uncertainty since its last report.
Ive said science has been unable to
discern signal from noise in the hunt for
man-made warming. Yup, thats why the
IPCC relies on computer simulations. A
question in its latest report is telling:
Are climate models getting better, and
how would we know?
Ive said its difficult to justify action
on cost-benefit grounds. The Obama administration agrees, acknowledging that
its coal plans will cost many billions but
have no meaningful impact on climate.
So how many columns out of 45 win
approval from the Partnership for Responsible Growth, the group behind the
Journal-baiting ad? Only two, describing
the superiority of a carbon tax, the option
the Partnership exists to plump for, compared to other climate nostrums.
Many advocates of climate policy are
ignoramuses on climate science, and nothing about the Partnership for Economic
Progressfounded by former Democratic
congressman Walt Minnick plus a couple
of big donorsbreaks with this tradition.
Only a nincompoop would treat a complex set of issues like human impact on
climate as a binary yes/no questionas
the Partnership and many climate policy
promoters do. Only an idiot would ask an
alleged expert what he knows without
showing curiosity about how he knows
ita practice routine among climate-advocating journalists.
So Tom Gjelten, host of a recent NPR
discussion of the Journal ad controversy,
is completely satisfied when Matt Nisbet, a professor of communications
studies at Northeastern University, ex-
plains, On the fundamentals of climate

science, there is absolutely no debates.
The overwhelming majority of scientists
. . . strongly agree that climate change is
happening, that its human-caused and
that its an urgent problem.
Notice that he doesnt cite any science but an (undocumented) agreement
of people, while conflating three very
different questions.
Prof. Nisbet then promptly covers his
derrire and takes it all back, saying: In
the field, there is some disagreement on
the pace of climate change, the severity,
its specific impacts.
By then the damage is done. The discussion proceeds on the basis that anybody who takes part in this disagreement about pace, severity and specific
impacts is a denier of science.
A series of Journal editorial

page-bashing ads shows the
climate cause in mid-crackup.
Heres what you also wont learn from
most climate reporting: Climate models
that predict significant warming presume natural feedbacks that magnify the
impact of human-released carbon dioxide by 100% to 400%. Models that presume no dominant feedbacks see warming of only about one degree Celsius
from a doubling of atmospheric CO2.
Who knows what future scientific advances will reveal, but models that assume minimal feedback are more consistent with the warming seen so farand
remember, weve been burning coal for
200 years and accumulating temperature
records for longer than that.
The U.S. political system gets a bad rap
but has rationally concluded that it cant
sell large costs on this evidence. Never
has it been the case that major legislation
or policy departures are adopted only
when all dissent is silenced. The premise
of the assault on Exxon, the Journal,
other campaigns against deniers, is
worse than foolish. The climate crowd
has turned to persecuting critics as a substitute for meaningful climate action because, as President Obama has acutely
observed, voters wont support their efforts to jack up energy prices.
Whatever advocates tell themselves,
these attacks churn the waters and propagandize for those niggling little things
that actually can be enacted, having no
impact on climate but lining the pockets
of organized interests who return the favor with campaign donations.
Thats how our political system behaves, on climate and most other subjectswhich is why voters are so tired
of those who man our political system.
An Iniquitous Raid
On Private Equity
By Norm Champ
firm and their funds. Broker-dealers typically make themselves available to effect
securities transactions for the public.
Forcing managers of private-equity
funds to become broker-dealers provides
no meaningful additional protection for
investors. Broker-dealer provisions like a
net capital requirement have no relationship to an investment adviser that is
hired to buy and sell companies for its
funds. Private-equity managers are already subject to a fiduciary-duty standard that is more stringent than the
suitability standard for broker-dealers.
Investors in private-equity funds are
also some of the most sophisticated and
well-advised in the world. Large pension
plans, institutions and high-net-worth individuals do not need another registration requirement for managers of the
funds they invest in.
Can the SEC really contend that years
of transaction fees collected by managersbillions of dollars in totalare now
subject to repayment in the context of an
SEC exam or enforcement action? Many
of these managers share a significant
portion of these fees with their investors
through a mechanism known as an offset.
Does the SEC want major pension plans
invested in private-equity funds to repay
these fees? It would have been nice to receive answers to these questions during
a public-comment period.
This policy change didnt come up a
few days later when SEC Chairman Mary
Jo White testified at a Senate Banking
Committee oversight hearing. Unfortunately, no senators asked why the policy
had been implemented through an enforcement action rather than by a rulemaking subject to public comment.
If the SEC simply wants to eliminate
these fees, which are fully disclosed to investors before they commit to privateequity funds, then it ought hold a hearing
and let that issue be decided in an open
forum. Doing so by virtue of one enforcement case that involved a number of violations other than the broker-dealer
charge, such as improper expenses, is unfortunate. It is surprising that a regulator
that ordinarily subjects any major proposal to the benefit of notice and public
comment did not do so in this case.
he U.S. Securities and Exchange

Commission on June 1 settled an
enforcement action with a privateequity fund manager called Blackstreet.
The agency asserted that transaction fees
collected by the manager in connection
with buying and selling portfolio companies for its funds were brokerage fees,
which can only be collected by a brokerdealer registered with the SEC. Because
Blackstreet was only registered as an investment adviser, it had to disgorge the
fees it collected from portfolio companies
and pay interest and penalties for a total
settlement of $3.1 million.
This enforcement action is a significant yet flawed policy change. If the
SEC wants to assert such a dramatic
shift, it should be pursued through a
proposed rule or guidance allowing the
public to comment.
The move seems particularly egregious after studying recent history at the
agency. When SEC official David Blass
first raised this issue in 2013, the industry and bar strongly objected. I was serving as director of the Division of Investment Management at the time, and other
SEC officials reassured me and others
that any such change would be enacted
with an opportunity for the public to
comment. Over the next few years, SEC
examiners again raised the issue with private-equity managers but it went nowhere. These transaction fees were
transparently collected in the ordinary
course of business, and managers believed there was no issue.
As a result of Dodd-Frank, more than
1,000 private-equity fund managers are
already registered as investment advisers
with the SEC. After this latest case, it appears that firms that want to continue to
charge transaction fees may now also
need to register as broker-dealers. The
agency asserted that Blackstreet clearly
acted as a broker without fulfilling its
registration obligations, but didnt clarify if its situation was unique among private-equity firms.
But private-equity fund managers are
not broker-dealers as that term is commonly understood. These managers are
charged with buying and selling companies for their funds. Its part of what they
Mr. Champ, former director of the Divido as registered investment advisers, sion of Investment Management at the Secuwhich already requires them to regularly rities and Exchange Commission (2012-15),
file information with the SEC about their is a partner at Kirkland & Ellis LLP.
OPINION
By Henry A. Kissinger
he cascade of commentary on Britains decision

to leave institutional Europe has described the
epochal event primarily
in the vocabulary of calamity. However, the coin of the realm for
statesmen is not anguish or recrimination; it should be to transform
setback into opportunity.
The impact of the British vote is so
profound because the emotions it
reflects are not confined to Britain or
even Europe. The popular reaction to
European Union institutions (as reflected in public-opinion polls) is
comparable in most major countries,
Europe should not treat

Britain as a prison
escapee but as a potential
compatriot. And the U.S.
has a vital role to play.
especially France and Spain. The
multilateral approach based on open
borders for trade and the movement
of peoples is increasingly being challenged, and now an act of direct democracy intended to reaffirm the status quo has rendered a damning
verdict. However challenging this expression of popular sentiment, ignoring the concerns it manifests is a path
to greater disillusionment.
Brexit is a classic illustration of the
law of unintended consequences. The
British government sought a Remain
vote to end, once and for all, domestic
disputes about Europe in a minority
of the Conservative Party and among
fringe populist groups. Many backers
of the Leave campaign were surprised
by their success, having understood
their political mission initially in
much less sweeping terms.
All these elements have been
overwhelmed because the European
vision elaborated over decades has
been developing a sclerotic character.
Internal debates of Europe have

increasingly concentrated on structural contradictions. In the process,
the vision that motivates sacrifice is
weakening.
The founders of European unity
understood the ultimate scope of
their project. It was, on one level, a
rejection of the worst consequences
of European divisions, especially the
traumatic wars that had killed tens
of millions of Europeans in the 20th
century alone. But it was also an affirmation of the values by which Europe had become great.
The Europe of the founders youth
had thrived by the elaboration of the
nation-state, which on one hand competed for pre-eminence, but at the
same time evolved a common culture.
Its principles of democracy and constitutionalism were spread around
the world, even while respect for the
dignity of the individual had been violated under colonialism. The European vision sought to maintain the
dynamism reflected in Europes historical achievements while tempering
the competition which had, by 1945,
nearly led to their destruction.
Too much of the Europe of today
is absorbed in management of structural problems rather than the elaboration of its purposes. From globalization to migration, the willingness
to sacrifice is weakening. But a
better future cannot be reached without some sacrifice of the present. A
society reluctant to accept this verity
stagnates and, over the decades,
consumes its substance.
Inevitably a gap arises between
the institutions and their responsibilities, which accounts for increasing
populist pressures. The deepest challenge to the EU is not its management but its ultimate goals. In a
world in which upheavals based on
conflicting values span the continents, a common act of imagination
by Europe and its Atlantic partners is
badly needed.
Instead, European leadership is
now faced with an unexpected challenge. Under the terms of its charter,
the EU is obliged to negotiate with a
GETTY IMAGES/ISTOCKPHOTO
Out of the Brexit Turmoil: Opportunity
principal member over the terms of

withdrawal. Britain will want to
maintain extensive ties with Europe
while lifting or easing the constraints
of its many legislative and bureaucratic requirements. The EU leadership has almost the opposite incentive. It will not wish to reward
Britains Leave majority by granting
Britain better terms than it enjoyed
as a full member. Hence a punitive element is likely to be inherent in the
EU bargaining position.
Many of us who have grown up
with and admired the vision of European unity hope that the EU will
transcend itself, by seeking its vocation not in penalizing the recalcitrant but by negotiating in a manner
that restores the prospects of unity.
The EU should not treat Britain as
an escapee from prison but as a potential compatriot.
Punishing the U.K. will not solve
the question of how to operate a
common currency in the absence of a
common fiscal policy among countries with disparate economic capacities, or of how to define a union
whose ability to achieve common
political strategies lags fundamentally behind its economic and administrative capacities.
By the same token, Britain needs
to put forward the concept of auton-
omy for which its people voted in a

manner that embraces ultimate cooperation. Britain and Europe together
must consider how they might return, at least partially, to their
historical role as shapers of international order.
In recent decades, Europe has
retreated to the conduct of soft
power. But besieged as it is on
almost all frontiers by upheavals and
migration, Europe, including Britain,
can avoid turning into a victim of
circumstance only by assuming a
more active role. These vistas cannot
yet be discussed at a geopolitical
level, but the EUs leaders should be
able to form discrete and discreet
panels for exploring them. In this
manner, the Leave vote can serve as
a catharsis.
The U.S. has encouraged the EU
from its beginning but has had difficulty adjusting to the achievement
that followed. When the EU idea was
first put forward by Jean Monnet at
the end of World War II and advanced by the Marshall Plan, the U.S.
was the indispensable contributor for
international security and economic
progress. Given the recovery of contemporary Europe, the American role
needs to be redefined to a new kind
of leadership, moving from dominance to persuasion.
The manner in which the U.S. administration and other advocates of

Remain sought to influence the Brexit
vote illustrates the point. The threat
that without the support of Europe, a
solitary Britain would move to the
end of the line in negotiations with
Washington reversed the historical
sequence of that relationship. The
special relationship is founded in
the origins of America, in a common
language and in a comparable system
of political values reinforced by fighting together in common wars. The
idea of the special relationship was
enunciated by Winston Churchill not
as a refutation of a multilateral
world, but as the guarantor of its values in the hard times sure to follow
World War II.
That special relationship is
needed for the Atlantic world to
traverse the present crisis. A disintegrating Europe could subside into
an impotent passivity that will
shrivel the entire Atlantic partnership, which represents one of the
greatest achievements of the past
century. Britain, in whatever mutually respectful legal status it arranges with Europe, is an essential
element in this design. Its history
and emotion are Atlantic; its current necessity requires as well a
link to Europe. Todays established
international order was founded
upon conceptions that emerged
from the British Isles, were carried
by Europe around the world, and ultimately took deep root in North
America. American leadership in reinvigorating the contemporary order is imperative.
The Brexit vote has unleashed the
anxieties of two continents and of all
those who rely upon the stability
that their union of purpose provides.
The needed restoration of faith will
not come through recriminations. To
inspire the confidence of the world,
Europe and America must demonstrate confidence in themselves.
Mr. Kissinger served as nationalsecurity adviser and secretary of state
under Presidents Nixon and Ford.
Britains Leave Vote Is an Opening for Putin

By Keir Giles
mong the many assessments

of the fallout from last weeks
Brexit
referendum,
one
strong theme is the notion that
without Britain, the Continent and
its alliances would be left weaker
and less able to face down an assertive Russia. The worst of these
predictions assume that nonmembership in the European Union precludes any security cooperation
with it at all, which is unlikely even
in the messiest of divorces. But the
referendum has revealed another
very real vulnerability, one that lies
within the heart of the United Kingdom, and one that Russian President Vladimir Putin would only be
too happy to exploit.
London may still take a

firm stand on Russia after
an EU exit. But Moscow
can exploit divisions
exposed by the vote.
Without the U.K.s direct input, as
a security institution the EU would
be marginally less effective. A powerful voice in Brussels backing action against Russia over its aggression in Ukraine would be lost. There
would be one fewer member to oppose the EUs vanity project of a
parallel armed force, whose tasks
would overlap with the North Atlantic Treaty Organization.
But Brexit would also open up
the U.K. to taking firmer action
alone. As an EU member, the U.K.
has been prevented from unilaterally imposing tougher sanctions on
Moscow in line with the U.S. and
Canada. And should it need allies
beyond NATO, there are always coalitions of the willing, such as its
alliance of common interests project with the Nordic and Baltic countries, all of which share a common
challenge from Russia.
As for NATO, the adverse consequences of Brexit wont be immediate. When its members meet next
week in Warsaw, the biggest threat
Brexit will pose is overshadowing the
debate and distracting from the essential focus on Russia. But as Adm.
Jim Stavridis, NATOs former supreme allied commander for Europe,
has suggested, one welcome consequence could be a greater long-term
British focus on the alliance, without
the distraction of the EU.
Domestically, an unexpected benefit of the referendum has been the
spectacular implosion of the Labour
Party. Opposition leader Jeremy Corbyn and his former shadow defence
secretary, Emily Thornberry, may
not have been explicitly pro-Putin,
but their pro-welfare and antidefense policies would certainly have
been to the Russian presidents
taste. Mr. Corbyns departure would
leave the U.K. a safer place.
The more insidious threat from
Brexit would come from within the
U.K. itself. The deep internal divisions that have been revealed by the
voteof income, education, England
against Scotland, town against countrysidearent new. Theyve simply
been brought into greater relief by
the unusual opportunity for a truly
democratic poll, where all votes
have equal weight.
And the prospect of another independence vote for Scotland raises all
the same defense and security problems as it did in 2014, from distribution of defense spending, widely predicted to shrink after Brexit, to
where Britains nuclear submarines
should be based. Common-sense solutions could be hoped for but are
by no means guaranteed.
The comments and reportage of
London-based politicians and media
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since the vote have only highlighted

further the division between them
and the rest of England. Their incomprehension of how this could
have happened demonstrates the
width of that gap.
Commentary in mainstream and
social media now is saturated with
disdain for anyone who doesnt embrace the EU as an engine for globalization, immigration and transformation. This fails to recognize the
perception of the EU among broad
sections of England as an outside
force that makes life worse, not better. And it will only deepen the realization among rural voters of the extent to which they have been ignored
and marginalized by increasingly distant urban elites.
In blaming the arrogance of the
U.K.s leadership as a root cause for
the Brexit vote, Mr. Putin appears
more in tune with the sentiments of
many rural English voters than the
countrys own elites. Thats an
alarming prospect for those who

have so far seen Russian influence in
terms of growing links with disaffected voters only on the far left and
the far right.
Exploiting divisions in target societies to undermine them is a key
part of what some in the West now
call Russias hybrid warfare. The
challenge from Moscow is back in
the spotlight following Russias return to military action abroad in
Ukraine and Syria, and its direct and
indirect threats to its European
neighbors. But the methods of subverting and destabilizing its adversaries from withineither before or
instead of more overt and aggressive
actiondate back to Soviet times,
and have just been enhanced and updated in the age of the internet and
social media.
During the referendum campaign,
other than a bias toward pro-Leave
spokesmen, Russias propaganda
machine was relatively quiescent.
But after the vote, the U.K.s social

and national schisms are now exposed to view and ready to be leveraged to weaken British opposition
to Moscow.
Russia has demonstrated time
and again that it prefers to tackle
countries on a bilateral basis rather
than through blocs. Following Brexit, at least the U.K. that Mr. Putin
would face could be firmer in defense than the EU it will have left.
But any further fragmentation of
the U.K., politically or socially,
would only make Mr. Putins divideand-conquer task easier. As the
postreferendum arguments and recriminations continue, the integrity
of the U.K. itself presents at least as
big an opportunity for Moscow as
the possibility of British departure
from the EU.
Mr. Giles is an associate fellow
of Chatham House, a think tank in
London.
The Presidential Stakes Keep Climbing

The Hague
After listening to a
day of passionate
debate about the future of Europe at the
annual meeting of
POLITICS the European Council on Foreign Rela& IDEAS
tions on Monday, I
By William
realized that the
A. Galston
stakes in the U.S.
presidential election
are even higher than I had thought.
The fate of the entire postwar order
hangs in the balance. Without vigorous American leadership, the prospects are not bright.
Americans are turning inward,
preoccupied with economic and social divisions. The next president will
have to address these concerns
boldly. Effective international leadership depends on a solid foundation
of domestic support.
But the next president cant set
foreign concerns aside until the
economy is fixed. Europe is in crisis.
Liberal internationalism is back on
its heels; ethno-nationalist populism
is on the march.
The French are no less hostile to
the European Union than are the
British, and Marine Le Pens National Front is calling for a referendum to end Frances membership.
Germany is the obvious candidate for
continental leadership but for historical reasons resists that role.
Russias President Vladimir Putin
senses a historic opportunity to exploit Europes divisions for his own
purposesto weaken the sanctions
imposed against Russia in the wake
of its invasion of eastern Ukraine
and annexation of Crimea, and eventually to undermine what remains of
Europes economic and military
unity. It is no accident that Mr. Putin

has openly extended financial support to the National Front. The gains
for democracy and free markets
since the fall of the Berlin Wall and
the collapse of the Soviet Union may
well be rolled back.
Now is the worst time for the U.S.
to pull back and, as Donald Trump
would have it, to reframe Americas
relations with Europe as a transaction to be terminated if the sums
With the entire postwar

order in danger, vigorous
U.S. leadership is essential.
dont come up right. Franklin Roosevelt understood that a democratic
Europe was a vital national interest.
So did Ronald Reagan and every
other postwar president.
This means that the next president must abandon the rhetoric of a
pivot to Asia, which Europeans inevitably interpret as diminished
American concern for their fate. The
next administration can give Europe
its due without abandoning East Asia
to an increasingly aggressive China.
U.S. complaints about insufficient
European military and diplomatic
burden-sharing are a hardy perennial
of transatlantic relations. The complaints have proved ineffectual in the
past, and now is the very worst time
to press them again.
On the economic front, both Hillary Clinton and Donald Trump have
rejected the proposed Trans-Pacific
Partnership (TPP), a comprehensive
trade and investment agreement
among 12 nations of Asia and the
Americas. Neither candidate can eas-
ily reverse this opposition, at least

to the agreements current terms.
The Transatlantic Trade and Investment Partnership (TTIP) now being negotiated between the U.S. and
the EU is another matter altogether.
The European standard of living is
comparable to Americas, and its labor and environmental standards are
in some ways tougher. Whatever the
merits of the accusation that the TPP
would accelerate the outsourcing of
American jobs to low-wage countries,
no such charge can be leveled plausibly against TTIP. If negotiations
arent completed during the current
administration, the next president
should accelerate the talks.
At the same time, America should
help the U.K. in its hour of need.
President Obamas unsuccessful effort to influence the Brexit vote included the threat that if Britain left
the EU, it would be relegated to the
back of the queue for future trade
talks. The next president should
abandon this ill-judged threat and
work in parallel with the TTIP talks
to conclude a similar bilateral accord
with the U.K.
But none of this can succeed unless Americans are persuaded that
outward-facing military, diplomatic
and economic arrangements are
consistent with their own well-being. Increased defense spending,
which also enhances job-creation,
may well be needed. New measures
to cushion vulnerable Americans
against the shocks created by trade
are essential.
Robust internationalism is inconsistent with the fiscal austerity imposed by budget sequestration.
Whatever its proponents may say, a
smaller government at home means
retreat abroad.
PERSONAL JOURNAL.
My Gym Is My Office: More Gyms Add Facilities

Working from a laptop at
your health clubs
workspace can make
exercise easier, too
Power Yoga
in 10 minutes gotta
nish this email!
Chantelle Hartshornes ideal office space is a lounge area at the

Equinox gym in San Franciscos
SoMa neighborhood.
Ms. Hartshorne, who works for
a company called StyleBee that
dispatches hair and makeup services via smartphone app, can hop
on an elliptical machine for a
quick workout. She can step off to
take a phone call. Spending more
time at the gym also has helped
her make connections for her
makeup business.
Ive gotten some high-profile
weddings out of the deal, Ms.
Hartshorne says. At the end of
the day, its very strategic to
place yourself where your users
are.
More health-club members are
doing work where they work out.
Sensing a surge of demand,
gyms are responding by building
or expanding workspaces for members to set up laptops, charge
phones and conduct business
sometimes for the entire day. The
idea is to keep gym-goers lingering
longer and accommodate the rising number of people who work
remotely.
The lounge/workspace at Equinoxs SoMa location is about 1,150
square feet. If it continues to gain
popularity, Equinox will expand it
to as large as 6,000 square feet,
says Aaron Richter, Equinoxs vice
president of design.
At the Equinox in Londons
Kensington neighborhood, Ive
seen people do full-on job interviews in the lounge, he says.
Equinox, which has 81 locations
in the U.S., U.K. and Canada, is
creating or enlarging lounge/work
areas at several other clubs. Its
also building the spaces into almost all new clubs.
Health-club operators say providing workspaces gives members
another reason to keep paying
dues. It also increases members
spending on discretionary items
like smoothies, yoga pants and
JASON RAISH FOR THE WALL STREET JOURNAL
BY RACHEL BACHMAN
area of the Colorado Athletic Club

in Denvers LoDo neighborhood.
She usually sits at a table near the
gyms weightlifting area.
The workspace has strong WiFi, plenty of outlets and USB ports.
Theres free coffee from a local
company in the mornings. For
massages.
About 2.8% of U.S. employees
consider home their primary place
of work, according to 2014 census
data. But 20% to 30% of employees
work outside the office at least
once a month, and that share is
rising, says Kate Lister, president
of San Diego-based Global Workplace Analytics.
In the 1980s, some high-end
health clubs built conference
rooms for members, but they
never caught on, says Steve Datte,
a health-club industry veteran and
a regional manager of national
health-club chain Wellbridge. More
recently, employers have become
more open to letting people work
remotely, and technology has made
it easier.
Brittany Frain, a 31-year-old account manager for a job-search
company, spends as many as 25
hours a week working in a lounge
Separating work and

play just doesnt make
sense, says one tech
executive.
quitting time, the clubs cafe sells
eight craft beers. Sometimes when
Ms. Frain is there videoconferencing, the caller will ask, Whats
going on in the background? and
theyll see someone lifting, Ms.
Frain says.
Its actually kind of a nice lit-
Weather
The WSJ Daily Crossword | Edited by Mike Shenk

Shown are todays noon positions of weather systems and precipitation. Temperature bands are highs for the day.
-15
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-5
0
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Riga
w
Glasgow
osco
Moscow
C
p h g
Copenhagen
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b
Dublin
Berlin
Amsterdam
A
d
London
Lond
Brussels
Frankfurt
k
Paris
P
i
arsaw
Warsaw
Prague
P
e
Kiev
Munich
i h
Vienna
V
Warm
Budapest
Geneva
Milan
Cold
h
Bucharest
Stationary
t b
Istanbul
Rain
Madrid
d id
11
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25
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T-storms
Al
i
Algiers
Athens
Ath
T i
Tunis
Snow
Global Forecasts
s...sunny; pc... partly cloudy; c...cloudy; sh...showers;
t...tstorms; r...rain; sf...snow flurries; sn...snow; i...ice
59
60
61
62
Tomorrow
Hi Lo W
19 14 c
16 11 r
33 24 s
33 23 s
44 29 s
31 20 t
31 25 t
31 21 c
26 17 pc
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35 18 pc
27 19 pc
20 12 c
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35 24 s
24 13 t
31 25 pc
32 22 pc
24 13 pc
36 26 pc
24 14 t
27 13 t
41 33 s
16 9 r
15 8 r
24 16 sh
City
Geneva
Hanoi
Havana
Hong Kong
Honolulu
Houston
Istanbul
Jakarta
Johannesburg
Kansas City
Las Vegas
Lima
London
Los Angeles
Madrid
Manila
Melbourne
Mexico City
Miami
Milan
Minneapolis
Monterrey
Montreal
Moscow
Mumbai
Nashville
New Delhi
New Orleans
New York City
Omaha
Orlando
Hi
24
34
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34
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31
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29
42
22
20
30
35
34
11
22
31
30
25
36
27
26
30
30
39
32
29
30
33
Today
Lo W
15 pc
27 t
22 pc
26 t
24 pc
24 pc
23 t
25 c
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17 t
30 s
16 pc
14 pc
17 pc
18 s
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26 t
19 t
13 t
21 pc
16 s
14 pc
27 r
18 s
29 pc
25 c
21 s
16 t
24 t
Tomorrow
Hi Lo W
27 14 s
35 27 t
33 23 pc
33 28 sh
30 24 c
33 24 s
30 23 s
32 24 t
20 5 s
28 17 pc
38 29 pc
22 16 pc
19 11 sh
26 16 pc
36 18 s
34 26 t
12 9 c
22 14 t
32 26 pc
31 20 t
24 14 s
37 21 pc
27 16 t
27 17 pc
30 27 r
31 21 s
39 26 pc
33 26 s
29 21 t
27 16 pc
33 24 t
City
Ottawa
Paris
Philadelphia
Phoenix
Pittsburgh
Port-au-Prince
Portland, Ore.
Rio de Janeiro
Riyadh
Rome
Salt Lake City
San Diego
San Francisco
San Juan
Santiago
Santo Domingo
Sao Paulo
Seattle
Seoul
Shanghai
Singapore
Stockholm
Sydney
Taipei
Tehran
Tel Aviv
Tokyo
Toronto
Vancouver
Washington, D.C.
Zurich
Hi
30
21
31
39
27
34
26
25
45
29
33
23
23
31
16
32
24
24
28
33
31
22
16
31
40
31
27
27
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23
Today
Lo W
14 s
15 pc
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28 t
15 s
21 pc
14 s
19 pc
34 pc
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13 s
26 s
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14 s
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26 pc
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26 pc
27 s
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Ice
Tomorrow
Hi Lo W
27 13 pc
22 14 c
30 22 pc
34 27 t
28 15 pc
35 22 s
26 16 pc
25 19 pc
45 31 s
30 19 s
34 21 t
22 18 pc
23 13 s
31 26 pc
17 2 s
32 22 pc
24 14 s
24 16 pc
27 22 t
32 25 c
32 26 pc
21 14 pc
16 8 s
32 26 pc
40 28 s
30 23 s
30 22 pc
24 13 t
22 14 pc
31 23 t
26 15 pc
DUETS | By Colin Gale

Across
1 On-screen
brother of
Pacino, Cazale
and Shire
5 Bearings
10 It may be mined
14 City founded
by Harald
Hardraade
15 Key
16 Donald Trumps
third child
17 Frank Sinatra/
Beatles duet?
20 Largest of the
Five Nations
21 Party spinners
22 Balance part
23 Vegetable soup
tidbit
24 Aerosmith/
Bobby Boris
Pickett duet?
46 Frequent
partner of
37-Across
33 Orange refuse
47 Supplement
32 How some
issues are
contested
37 Reasons for
nose-holding
38 Gallant phrase
8 Call
40 Parker and Penn
9 Makes climbing
harder
41 Be unsatisfied
with what one
has
10 Early label for

LL Cool J and
the Beastie Boys
43 Double doings
11 Recital piece
44 Ready to put
in the oven,
perhaps
12 Like
hummingbirds
47 Home city of
the Cyclones
13 They may give

you the upper
hand
48 Knucklehead
50 Protection for a
diamond
49 Yoke, say
34 Welcomes
customers
51 Macchiato
maker
18 Phishing
expeditions
35 Cattle call
55 Cat Stevens/
Petula Clark
duet?
19 Wolfish looks
51 Portend
24 Curtain mover
52 Go stratospheric
57 Polish
language
25 Xerox
competitor
54 365 giorni
58 Undermine
26 Between, in
Bordeaux
56 Female in a
forest
36 Macbeth
quintet
37 Frequent
partner of
46-Across
38 Fresh
59 Chief
39 Backing
60 Sequel to
The Good
Earth
40 Kick off
41 1983 role for
Barbra
42 Guess Who/
Beatles duet?
45 Camels cousin
61 Risk a ticket
62 Hence
Down
1 Evacuation
center array
Solve this puzzle online and discuss it at WSJ.com/Puzzles.
If these dots dont

pique your interest
29 Battery parts
7 Rivendell
resident
Today
Lo W
14 sh
11 sh
24 s
22 t
30 s
19 s
25 t
22 c
15 c
10 r
18 pc
19 s
14 sh
10 r
24 s
12 s
25 pc
21 t
17 pc
25 s
14 t
17 s
33 s
10 sh
10 sh
14 pc
58
Flurries
Rabat
b
Hi
19
17
32
31
47
30
32
35
24
17
36
27
19
16
36
27
32
31
27
36
24
28
42
16
16
22
57
28 Cathedral feature
31 More or less,
informally
4 Phone table
conveniences
6 Mother of Horus
41
27 That cant be
true!
30 Modify formally
5 Teatro alla Scala

setting
38
40
42
31
35
37
39
2 Recipient of
a tennis
scholarship from
UCLA in 1963
3 Branch of the
New England
Patriots
21
22
47
10
16
18
20
24
15
17
55
Lisbon
Lisbb
2016 Dow Jones & Co. Inc. All rights reserved. 6DJ3282
14
Showers
Rome
City
Amsterdam
Anchorage
Athens
Atlanta
Baghdad
Baltimore
Bangkok
Beijing
Berlin
Bogota
Boise
Boston
Brussels
Buenos Aires
Cairo
Calgary
Caracas
Charlotte
Chicago
Dallas
Denver
Detroit
Dubai
Dublin
Edinburgh
Frankfurt
tle icebreaker. They kind of get a

kick out of seeing someone deadlifting behind me when Im talking
to them.
She says she likes the ambient
noise and energy of working at the
gym, as opposed to at a coffee
shop where she feels shes disturbing people when she makes phone
calls.
Since starting her work routine
a few months ago, shes gone from
taking group-fitness classes about
three days a week to five days.
Getting to the gym is 90% of
the battle, Ms. Frain says.
Tom Horne, the clubs general
manager, says the lounge and cafe
areas are part of the clubs strategy to lure people away from specialty fitness studios. I almost
start all my tours in the cafe, because it gets peoples minds thinking, This place is different, Mr.
Horne says.
Life Time Fitness, a 121-club

chain based in Chanhassen, Minn.,
has a location in downtown Minneapolis with two conference
rooms for members. Its gym in
Tampa, Fla., has a business center.
In other locations, such as the recently opened one on New York
Citys West Side, Life Time is installing or adding high-top tables
to accommodate people who want
to do work.
Life Times 300,000-square-foot
location in the Minneapolis suburb
of St. Louis Park has seen a recent
surge in members using its cafe
and a nearby seating area for
work, says Kerry Sutherland, the
clubs senior general manager.
Coffee shops and health clubs
have long aspired to be the third
place people go after home and
work. Now, people are taking that
third place and turning it into
their second place, he says.
Joe Lemay, already a member
of a rock-climbing and fitness facility called Brooklyn Boulders in
Somerville, Mass., began spending
his days at a dedicated workspace
inside the gym. Dressed in athletic
gear, he would tap out computer
code at a stand-up desk, then take
a break and scramble up the
climbing wall.
After one climbing session in
December 2014, a product idea
came to him in a eureka moment:
a reusable pen-and-paper notebook thats digitally interactive.
His new company, called Rocketbook, shipped its first notebooks
late in 2015.
Having that separation between work and play just doesnt
make as much sense in todays creative economy, Mr. Lemay says.
Mr. Lemays company now has
eight employees and operates out
of a conventional co-working space
while he looks for a permanent office. He says he misses working at
the climbing gym, where he didnt
feel odd doing a quick leg stretch
at his desk.
He noted that traditional coworking companies can charge
$500 a month for an office space
and a few other amenities, while
Brooklyn Boulders gave him workspace and gym facilities for about
$100.
You just couldnt beat the
value, he says.
2.5
2
53 Nest piece
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MIKE BLAKE/REUTERS
BUSINESS & TECH.
INSIDE:
MONEY &
INVESTING
Videogames Boost Sony
Credit Suisse
Deals Turn Sour
Slower iPhone sales hurt image-sensor sales TECHNOLOGY | B3
FINANCE | B7
2016 Dow Jones & Company. All Rights Reserved.
Thursday, June 30, 2016 | B1
Firms Fear Loss of Single Market

PARISAt a closed-door
meeting with top union representatives on Tuesday, Renault
SA Chief Financial Officer Clotilde Delbos said the French car
maker may raise prices on cars
it exports to Britain, as rival
Peugeot SA and other exporters, importers and retailers
scramble to adjust to the weakening of the pound since last
weeks vote to exit the European Union.
Meanwhile, British car makers and other industries
stepped up their appeal to the
U.K. government to retain key
tenets of EU membership.
Clearly we want to retain
tariff-free access to the [EUs]
single market, said Mike
Hawes, the head of the Society

of Motor Manufacturers and
Traders, which represents the
U.K. auto industry. Mr. Hawes
wouldnt speculate on the industry impact if the U.K. loses
access to the single market.
Ms. Delboss comments, according to a person familiar
with the situation, were made
during a presentation to
worker representatives about
tough choices facing the car
makers top management,
which is due to meet in the
coming days to discuss several
scenarios in response to the
economic fallout in the wake of
the U.K.s vote to leave the European Union.
As an exporter with no production facilities in the U.K.,
Renault is particularly vulnerable to swings in the currency or
SIMON DAWSON/BLOOMBERG NEWS
BY WILLIAM BOSTON
AND NICK KOSTOV
Workers assembled a Land Rover in Solihull, U.K., last year.

possible tariffs. But the scene
at Renaults headquarters in
Paris is being played out across
Europe as manufacturers, retailers and service providers
exposed to Britains markets

and currency are beginning to
formulate a defense against a
weaker British pound and to
aggressively lobby European
governments to ensure no
trade barriers are erected between Britain and the EU.
Renaults consideration of
raising prices also shows that
the damage from Brexit isn't
just a threat in the future, but
is already causing damage to
businesses.
One downside from the
weaker pound is how it already
is hurting importers of medicine. Middlemen, so called parallel importers, are able to buy
medicine at lower prices some
EU countries than charged in
the U.K. They then sell the
medicine to pharmacy wholesalers in Britain, allowing pharmacies to pass on savings of up
to 10% on the price of medicine
to customers in the NHS. With
the steep fall in the pound,
Please see PLANS page B2
Tiny Company
Hits King-Size
Diamond Jackpot
Gem the size of a tennis ball, the second-largest
ever mined, fails to sell at auction in London
GE Capital
Escapes
Oversight
By the Fed
BY RYAN TRACY
AND TED MANN
WASHINGTONGeneral
Electric Co.s finance arm, GE
Capital, won its bid to shed its
designation as systemically
important, a label that carries
stricter government oversight.
Regulators said the company made changes that significantly reduce its potential
to threaten U.S. financial stability. The U.S. Financial Stability Oversight Council said it
had voted this week to remove
the tag, and Treasury Secretary Jacob Lew said the
change shows that designation
is a two-way process.
GE said in April 2015 that
it would pivot away from financial services and sell
most of GE Capital, which at
the time was a $500 billion
lending business and one of
the largest banking operations in the U.S.
GE Chief Executive Jeff Immelt said changed market conditions and new regulations
had caused GE Capitals returns to fall below its cost of
capital. Investors had long
urged Mr. Immelt to get out of
the lending business, which
nearly sunk GE during the financial crisis.
DYLAN MARTINEZ/REUTERS
The company no
longer will be listed
as systemically
important.
BY ALEX MACDONALD
LONDONWhen a tiny Canadian company bought a majority stake in an unloved Botswana diamond mine in 2009,
almost no one noticed.
Seven years later, the
Karowe mine is the worlds
biggest producer of large diamonds, and the company, Lucara Diamond Corp., is the
dominant player in the market
for supersize gems.
Lucara, a company run by
five people out of a small Vancouver office, tried to auction
the second-largest diamond
ever mined on Wednesday
night in London. But the gem
didnt find a buyer willing to
pay the minimum price.
The diamond, known as the
Lesedi la Rona, was expected
to fetch at least $70 million,
according to Sothebys auction
house, which was responsible
The Lesedi la Rona is the biggest of

112 gems larger than 100 carats that Lucaras
Karowe mine in Botswana has coughed up.
for the sale. The bidding

started at $50 million and
ended at $61 million after
strained pauses.
The 1,109-carat stone the
size of a tennis ball is second
in size only to the 3,106-carat
Cullinan diamond, which was
discovered over a century ago
and was cut into several polished stones housed in the
British Crown Jewels. It is the
biggest of 112 gems larger
than 100 carats that Lucaras
Karowe mine in Botswana has
coughed up over the past
three years.
William Lamb, Lucaras
chief executive, estimates that
his company accounts for less
than 0.5% of the worlds global
annual diamond production
but 60% of the worlds 100carat-plus diamond production. Analysts said it is difficult to accurately verify that
claim given how little public
information is available about

the diamond market, but they
agree Karowe is a once-in-alifetime mine.
Mr. Lamb said his company
controls so many of the
worlds biggest diamonds that
it has begun holding back
stock partly because of concerns it could inundate traditional diamond buyers in Antwerp, Israel and New York.
If Lucara produces too
many large stones, the standard set of buyers who we sell
to is eventually going to be
flooded with these stones,
Mr. Lamb said. So we need to
develop an alternative route,
he said, like an auction.
By trying to auction the
Lesedi diamond in public, Mr.
Lamb said he was hoping to
attract a new breed of wealthy
clients from Russia, the Middle East and China who would
pay top dollar for the prestige
of owning a rare diamond that

could serve as an alternative
to gold investment.
If a buyer does decide in
the future to acquire the
Lesedi, it could set the record
for the most expensive rough
diamond ever sold following
Lucaras sale of an 813-carat
rough diamond, the worlds
sixth largest, for $63 million
in May.
The three-billion-year-old
Lesedi could also yield the biggest polished diamond in the
worldbigger even than the
famous Great Star of Africa, or
Cullinan I, on display in the
Tower of London.
Mr. Lamb, a former De
Beers executive, left in 2008
to join Lucara with a mission
to find an attractive diamond
deposit that was in advanced
stages of exploration. In October 2009, he received a text
message from a friends wife
asking if he had $42 million to

spare.
De Beers, the worlds largest diamond producer by
value, was selling its majority
stake in the Karowe deposit,
then named AK6, in the aftermath of the financial crisis of
2008. Mr. Lamb and his partner, African Diamonds PLC,
bought a 70% stake in December 2009 and a year later, Lucara owned the whole mine for
a total of $79 million.
Since then, Lucara has
earned $762 million in revenue
from Karowe. De Beers said it
sold the mine to focus on assets with better returns.
The chance of finding another Karowe is very slim,
said John Meyer, a veteran
mining analyst at brokerage
firm SP Angel. The mine was
known for many years but the
geostatisticians had missed
how good it really was.
Since deciding to wind

down the finance arm, GE
Capital has signed agreements
for the sale of about $180 billion of businesses and has
completed about $156 billion
of those transactions. The
head of GE Capital, Keith
Sherin, said the decision by
regulators is a result of the
transformation of GE Capital
into a smaller, safer financial
services company.
The case marks the first
time the oversight council has
removed the systemically important tag since it was created under the 2010 DoddFrank financial overhaul law.
The company has reduced the
size of the finance business by
more than half and cut reliance on volatile forms of
short-term funding.
For the oversight council,
the change is a significant response to critics who have
said its process for tagging
systemic firms is opaque
and doesnt give firms a clear
road map on how to reduce
risk.
The Council follows the
facts: When it identifies a
company that could threaten
financial stability, it acts;
when those risks change, the
Council also acts, Mr. Lew
said.
Adidas Expands Its Kanye Partnership MonsantoWeighs Deals
LUCAS JACKSON/REUTERS
BY SARA GERMANO
Rap artist Kanye West, who has designed sneakers for Adidas.
A collaboration with Kanye

West has brought some buzz
back to Adidas AG in fashion
circles. Now, the sportswear
company is betting the rapper
can also drive sales of clothes
and shoes for the basketball
court or football field.
Adidas announced Wednesday that it is expanding its
partnership with Mr. West to
include performance gear and
a new line of co-branded retail
stores. The German company
is trying to boost sales, particularly in the U.S., where it has
lagged behind far behind rival
Nike Inc., by bringing the
Grammy winners designs to
the mass market. Last year,
Adidas introduced apparel and
high-end sneakers designed by
Mr. West in limited quantities,

notably $350 gray suede hightops called the Yeezy Boost
750 that have been selling for
thousands of dollars on the
secondary market.
The company declined to
provide sales figures for the
Yeezys, though Adidass share
of the more than $1 billion secondary market jumped from
1% to 30% since the shoes were
introduced in February 2015,
according to market tracker
StockX, formerly known as
Campless.
It is unclear how well Mr.
Wests fashion brand will
translate to athletes looking
for performance footwear. In
an interview, Mr. West said he
hopes to get his sneakers on
the feet of players for the NaPlease see KANYE page B2
With Bayer and Others

BY JACOB BUNGE
Monsanto Co. said it has
been discussing deals with
Bayer AG and other parties,
adding that there is value in
finding the right combination, as the crop-seed giant
navigates the challenges facing
agriculture.
Monsanto Chief Executive
Hugh Grant gave no details
Wednesday on the continuing
discussions about Bayers $62
billion takeover proposal, but
reiterated that the U.S. companys deep portfolio of seeds
and biotechnology expertise
put it in a prime position to
entertain options in the rapidly consolidating industry.
His comments came during a
conference call on Monsantos

third-quarter results, which
came in weaker than expected.
Mr. Grant said the companys growth prospects with
or without a deal remain
strong, despite a low point
in agriculture that has pressured profits for the worlds
top sellers of seeds, pesticides,
tractors and fertilizer.
With crop prices low and
farm income under pressure,
Monsanto said Wednesday
that fiscal third-quarter earnings fell more than Wall Street
analysts anticipated, and projected that full-year profit
would come in at the lower
end of the range the company
cited in the spring.
Please see DEAL page B2
B2 | Thursday, June 30, 2016
INDEX TO BUSINESSES
BUSINESS NEWS
These indexes cite notable references to most parent companies and businesspeople
in todays edition. Articles on regional page inserts arent cited in these indexes.
General Electric .......... B1

General Motors...........B6
Goldman Sachs Group B7
Royal Bank of Scotland

Group.........................B9
Sony.............................B3
S&P 500 Index............B7
B
Baosteel Group.........B10
Barclays.......................B7
Bayer......................B1,B2
C
Charles Schwab .......... B7
Credit Suisse...............B7
D
Deutsche Boerse ........ A2
Dow Chemical.............B2
F
Facebook......................B3
Fiat Chrysler
Automobiles ............. B6
Fidelity Investments..B7
Ford Motor..................B6
FTSE 100 Index GBP .. B7
HSBC ........................... B9
Privinvest..................B10
Interport......................B2
Takata..........................B6
Tencent Holdings........B3
Toyota Motor..............B6
L
Lloyds Banking Group B9
Lucara Diamond..........B1
Lyft..............................B6
M
Monsanto...............B1,B2
N
Navistar InternationalB6
Nike........................B1,B3
P
Palomar Capital
Advisors..................B10
Peugeot-Citroen..........B1
U
Uber Technologies ...... B3
Under Armour.............B3
V
Vanguard Group..........B7
Volkswagen...............B10
VTB Group...................B7
W
Weibo..........................B3
West China Cement . B10
Wuhan Iron and Steel
Group.......................B10
INDEX TO PEOPLE
B
Hirai, Kazuo ................ B3
Berninger, Matthias...B2
Boissard, Gal de......B10
K
Kuenssberg, Joanna . B10
Kwas, Rick...................B6
Patel, H ....................... B2
Pearse, Andrew ........ B10
Pittman, Dean...........B10
Lamb, William.............B1
Liedtke, Eric................B1
Lowell, Jim..................B7
Safa, Iskandar.............B7
Sherwood, Michael.....B7
Soares, Maria Ivone.B10
Staley, Jes...................B9
Stapleton, John .......... B6
D
Delbos, Clotilde...........B1
Dickerson, Joseph.......B9
Do Rosrio, Antnio.B10
Frhauf, Anne...........B10
G-H
Grant, Hugh ................ B1
Hawes, Mike...............B1
Meyer, John ................ B1

Moore, Thomas...........B9
Mosseri, Adam............B3
W
West, Kanye ............... B1
Brexit Could Boost U.K. Drug Costs

BY DENISE ROLAND
LONDONA funding boost
for Britains National Health
Service was one of the campaign promises that carried
the Vote Leave campaign to
victory in last weeks historic
referendum.
But in at least one way, the
Brexit vote is likely to hurt
the cash-strapped health system. The sharp fall in the
pound is hurting traders that
sell cut-price drugs to the
NHS after importing them
from other parts of Europe.
Drugs can be freely traded
across European Union borders but, unlike with most
goods, individual governments set their prices. Socalled parallel importers take
advantage of this arrangement by purchasing prescription drugs in member states
where the price is lower than
in the U.K. and selling them to
pharmacy wholesalers at a
discount.
Parallel
imports
are
thought to shave as much as
7% to 10% off the cost of innovative medicines in the U.K.,
though it is difficult to determine the precise savings, according to Joan Costa-i-Font,
an associate professor at the
London School of Economics
and Political Science. Thats
because the government pays
wholesalers a fixed tariff for
LUCAS JACKSON/REUTERS
PLANS
The Adidas Yeezy Boost 750 sneaker designed by Kanye West.
KANYE
Continued from the prior page
tional Basketball Association
and the National Football
League, though Adidas added
no such plans are in place yet.
Our industry is so ready
for disruption, the same signature lines have X player, Y
player, Z player, so of course
were going to have Kanye
work with our guys to challenge that as well, said Eric
Liedtke, chief marketing officer for Adidas. Mr. West said
he played football, basketball,
tennis and volleyball in high
school, but that singing and
performing are also athletic.
Im not just a musician
singing in front of a mic, we
are running, jumping, were
getting hurt, he said. Were
in the same arenas that the
ballplayers play in.
Adidas said it would separate the Adidas + Kanye West
line into its own business unit.
It will have dedicated staff
based at the companys U.S.
headquarters in Portland, Ore.,
similar to Nikes line for basketball star Michael Jordan. Financial terms of the partnership werent disclosed.
Locations and opening
dates of Adidas + Kanye West
retail stores have yet to be determined, the company said.
Mr. Wests sportswear products are also expected to be
sold at some existing retail
partners, such as Foot Locker
Inc., though specific plans
were also not yet available.
Until recently, offering a
performance line to a nonathlete was almost unheard of in
the sportswear industry, but
the rise of athleisure has upended tradition. Dicks Sport-
ing Goods Inc. launched a collection of activewear with

singer Carrie Underwood, and
actress Kate Hudson started
her own Spandex collection,
Fabletics.
Traditional
sportswear
makers have done limited collaborations with entertainers,
including Nike with actor
Kevin Hart and Puma with
singer Rihanna. On recent
earnings conference calls, Foot
Locker has pointed to the success of the Rihanna line and
other casual gear, while sales
of signature basketball shoes
for star athletes like LeBron
James have slumped.
Adidas sales rose 5% in
North America last year, bringing in about $3 billion, while
Nike sold about $15 billion in
the region for the fiscal year
ended May 31. The German
company has ramped up
spending on U.S. sports endorsements, but most of its
success has been in sales of
retro-casual shoes like Stan
Smith and Superstar sneakers.
Mr. West said part of his rationale for working with Adidas is to reshape its retail
presence. We have masterminds... working on e-com [ecommerce], pop-up stores,
whatever is the next frontier,
whether thats app purchasing
or something else, he said.
Im really happy to be in the
middle of those conversations.
I think I do have some ability
to count cards on where things
end up.
Mr. West and Mr. Liedtke
both said they were inspired
by the performance of Mr.
James, the NBA Finals MVP
who brought the Cleveland
Cavaliers their first championship. Even though hes a Nike
guy, Mr. Liedtke said, I gotta
say its still a great story.
ADVERTISEMENT
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those middlemen are now
caught in old contracts and are
losing money due to the change
in exchange rates. Anything
we bought last week, we are
paying those invoices working
on the new exchange rate, one
trader told The Wall Street
Journal. The effect longer-term
will be more expensive pharmacy prices for British consumers, the trader said.
Any trade deal between the
U.K. and the EU could end up
inflicting businesses with the
pain of death by a thousand
razor cuts of new regulation
that could move the U.K. to a
place that looks different to the
rest of the EU, said Matthias
Berninger, vice president for
public affairs at Mars Inc.
The U.K. division of the U.S.
candy maker is calling on politicians to ensure harmoniza-
LUKE MACGREGOR/BLOOMBERG NEWS
FTSE 250 Index GBP .. B7
Last weeks vote poses a risk for Britains National Health Service.
their drugs but then claws
back some of that payment,
based on a range of factors
including the estimated savings from parallel imports.
The U.K. is the second-largest parallel importer in the
EU, after Germany, according
to a recent report by healthcare data company IMS. A
spokesman for the U.K. Department of Health declined
to comment.
Britains vote to leave the
EU has already taken a toll on
parallel trade, according to
importers.
The percentage difference
between 1.20 and 1.30
[$1.33 and $1.44] is our working margin, said one importer, referring to the weakening of the pound following
last weeks vote. As a result,
he said he is already losing
money on drugs that havent
yet arrived in his warehouse.
Anything we bought last
week, we are paying those invoices working on the new exchange rate, he said.
He said he cannot pass the
tion of regulations on packaging, storage and labeling,

saying differences would raise
complexity and cost.
Makers of Scotch whisky,
one of the U.K.s biggest exports, vehemently opposed
leaving the EU.
Although they benefit from
the weak pound, which makes
their exported whisky cheaper
in foreign markets, they are
worried about potential trade
tariffs that could hurt exports
to Europe and are calling on
the government to work out a
trade deal, according to David
Frost, head of the Scotch
Whisky Association, a trade
group. With the pound swooning, some consumers in Londons high street shops, are
starting their holiday-gift buying now, before prices on iPads,
mobile phones and haute couture begin to rise.
Retailers in London, from local shops to luxury stores, are
beginning to weigh the effect
of their currencys fall on
prices and face a choice between taking weaker profits or

hiking prices and passing the
pain along to consumers.
Those that source a large
share of their products from
Asia, where suppliers are paid
in dollars, face higher costs because of the weaker pound, another reason prices for some
Retailers in London
face a choice: taking
weaker profits or
hiking prices.
clothing retailers are expected
to rise in the next 12 to 24
months, according to researchers at Bernstein.
Access to the EUs single
market is a high priority for almost every U.K. manufacturing
and services business, but how
exactly Britain would keep that
access is unclear.
Norway, for example, is part
added cost on to the wholesalers that buy the drugs because the new price would no
longer represent a discount to
what those customers could
get if they bought the drugs
directly from the manufacturer. Instead, he said he
would exclude the drugs that
are no longer profitable from
future orders.
Those who hedged their
currency in advance of the
referendum have fared better.
H. Patel, chairman at Interport Ltd., a pharmaceutical
wholesaler based in the London suburb of Croydon, said
he bought enough euros to
last him until December.
The effect of the Brexit
vote could extend beyond the
currency impact, should it
lead to the erection of trade
barriers between the U.K. and
the rest of the bloc.
Parallel importers rely on a
provision of the single market
known as exhaustion of
rights, which prevents drugmakers from suing them for
reselling their medicines, according to intellectual-property lawyer Rowan Freeland.
If we stay in the single market, parallel trade will remain, Mr. Freeland said. If
we do notthe position of
parallel imports will depend
on legislation by government
to preserve the exhaustion of
rights within Europe.
of the European Economic Area
but has to accept free movement of EU citizens and contribute to the blocs budget
two things many pro-Brexit
voters in the U.K. firmly oppose. For now, European leaders are playing tough, saying
Britain cant have access to the
EUs single market unless it
guarantees freedom of movement of workers to and from
the EU. Some analysts are saying European leaders may have
to get creative in finding a solution that works for both Britain and the EU. Some analysts
point out that other European
countries have held dramatic
referendums to oppose EU policies. What we need to do is
secure the best possible deal
for Britain to make sure that
we have that full access to the
single-market, Prime Minister
David Cameron told Parliament
on Wednesday.
Robert Wall and
Saabira Chaudhuri in London
EU to Vet Any Bayer-Monsanto Deal

BY NATALIA DROZDIAK
AND EYK HENNING
BRUSSELSThe European
Unions antitrust agency signaled it would conduct a strict
review of Bayer AGs plans to
buy rival Monsanto Co. for
$62 billion, even though the
two companies havent entered
formal negotiations to merge.
The comments by EU
Antitrust Chief Margrethe Vestager come unusually early as
the two companies havent
agreed to a deal, let alone
given formal notice of their
plans to the European Commission, the blocs antitrust
regulator.
Our final decision [on the
Bayer-Monsanto deal] must
strictly and impartially apply
European merger control
rules, said Ms. Vestager in a
letter dated June 20 to two
members of the European Parliament.
The letter was posted on
DEAL
In late-afternoon trading
Wednesday, Monsanto shares
were up 2.3% at $103.46. after
analysts speculated that the
poorer results and broader
range of potential partners
could bode well for a deal.
In late May, Monsanto rejected Bayers $122-a-share offer as too low, but it made
clear it was open to further
talks, and that it saw logic in
combining Bayers broad range
of pesticides with Monsantos
seed, biotech and data-science
operations. Monsanto sought
to build a similarly comprehensive range of businesses
through its unsuccessful bid
for Syngenta AG last year. Mr.
Grant said Wednesday that he
believes Monsanto remains
best-positioned to make this
strategy a reality.
the Green Partys website.

Bayer declined to comment.
Monsanto couldnt be reached
for comment.
Monsanto twice rejected
Bayers informal $122 a share
takeover offer, leading to an
impasse in the negotiations
earlier this month.
Bayer Chief Executive Werner Baumann signaled to U.S.
investors on a roadshow last
Bayers bid was twice rejected.
week that both companies are

back in talks over the potential
deal, according to two people
present at those meetings.
The Green Party lawmakers,
Martin Haeusling and Sven
Giegold, had called on Ms. Vestager to reject the merger on
both competition and political
grounds in a letter dated from
late May.
Its clear that [Bayers]
takeover of Monsanto, the
market leader in seeds, would
lead to further market concentration, displacement of other
producers and less competition, not only in the EU, but
world-wide, the lawmakers
wrote.
Ms. Vestager said she would
heed their warnings.
In our investigation, we
will take into account your
concerns about the effects of
the Bayer-Monsanto merger on
prices, the variety of available
seed products as well as research and innovation, Ms.
Vestager said.
Bayers bid comes as other
rivals in the industry, including Dow Chemical Co., DuPont Co. and Syngenta AG,
have also made plans to
merge.
That could mean that some
markets may already be more
concentrated by the time
Bayer formally notifies any
deal with the EU regulators.
But in the letter, Ms. Vestager suggested the EU would
consider the context that several mergers in the sector
would be taking place at the
same time.
I can assure you that my
case teams will examine the
three announced mergers in
the seeds and agrochemicals
sector very carefully, she said.
The commission has the
power to block the deals or demand the parties submit remedies, such as divesting assets,
to assuage any competition
concerns.
Bayer CEO Werner Baumann has spent weeks pitching its Monsanto bid to investors after Bayers share price
fell in response to the offer. In
a recent interview he said that
buying Monsanto was the
most attractive proposition
for Bayer, despite skepticism
from some investors and potential regulatory hurdles.
In an unusual move, European Union Antitrust Chief
Margrethe Vestager told members of the European Parliament in a June 20 letter that
the EU would closely scrutinize any deal between Bayer
and Monsanto.
Monsanto, the worlds largest seed company in terms of
sales, is grappling with a multiyear slide in major crop
prices that has slashed farmers revenue and forced farmsupply companies to tighten
their belts. Monsanto faces additional challenges that the
company said hurt its third-
quarter profits. Among them

are the sliding price of the
herbicide glyphosate, new Indian curbs on cottonseed
prices, and a continuing wait
for EU approval of a new soybean variety that Monsanto
has touted as a blockbuster.
For the quarter ended May
31, Monsanto reported a profit
of $717 million, or $1.63 a
share, down sharply from
$1.14 billion, or $2.39 a share,
a year earlier. Excluding items,
such as restructuring charges
and Argentina-related tax matters, earnings per share fell to
$2.17. Total sales declined 8.5%
to $4.19 billion.
Analysts, on average, projected $2.40 in adjusted earnings per share and $4.49 billion in sales, according to
Thomson Reuters. Monsanto
now sees adjusted per-share
profit this year at the low end
of its $4.40 to $5.10 range.
While the company awaits
EU approval for its new soy-
bean technology, the EU on

Wednesday extended its authorization for glyphosate, the
weed killer Monsanto markets
under the Roundup brand, for
18 months, just days before
the existing authorization was
set to expire on Thursday.
Reapproval of the herbicide
sparked controversy after an
arm of the World Health Organization last year determined glyphosate likely had
the potential to cause cancer
in humans, a finding Monsanto
and others in the agriculture
industry protested, citing decades of research by other
government agencies that
found no such link.
While the EUs move will allow Monsanto and competitors
to continue selling glyphosate
to EU farmers, Monsanto and
other pesticide industry officials criticized the European
Commission, the blocs executive arm, for failing to grant a
longer extension.
MARCO BELLO/REUTERS
A
Adidas....................B1,B3
Alibaba Group.............B3
Anhui Conch CementB10
Apple...........................B3
Autoliv.........................B6
TECHNOLOGY
@wsjd | wsjd.com
Facebook
Recalibrates
News Feed
BY DEEPA SEETHARAMAN
Facebook Inc. shed new
light on how it determines
what its 1.65 billion users see
each time they sign on, in its
latest effort to demystify its
inner workings.
The social network also
said it would prioritize posts
from friends and family in users news feed over content
from publishers and public figures, in hopes of persuading
users to spend more time on
the site.
The news-feed changes
could mean some publishers
will see readership on Facebook decline a small amount
but a noticeable amount, said
Adam Mosseri, the product
manager who runs Facebooks
news feed.
Some publishers may go
up, some publishers may go
down, some publishers may go
down more.
Even a small change in the
news-feed algorithm will have
significant implications for
news outlets. Facebook drives
more than 40% of traffic to
digital publishers, more than
any other site, according to
social-media-analytics company Parse.ly. Given Facebooks sway, many publishers
are expanding their presence
on the network, despite concerns about ceding even more
power to Facebook.
The broader explanation
about how the news feed
works was outlined in a twopage document the company
posted on its website. Its release comes amid growing
scrutiny of Facebook following
a report last month that contractors suppressed conservative viewpoints from the sites
trending topics feature.
Facebook denied bias, but
revealed that humans were involved in the selection of
headlines to a greater extent
than it previously disclosed.
The controversy also exposed broader confusion
among users about what appears in their news feeds.
Facebook relies largely on
an algorithm, or computer
program, that combs through
roughly 100,000 signals and
creates a relevancy score for
each post for a specific user.
No two users have the same
news feed.
On Wednesday, Facebook
made clearer than it has in the
past that people also are involved in selecting and prioritizing items in the news feed.
Its important for people
to understand that theres a
group of people who work on
news feed, not just sort of like
a third-party agent that acts
autonomously, Mr. Mosseri
said.
A PlayStation VR headset is given a look at the Sony showroom in Tokyo earlier this month.
would achieve sales of 1.3
trillion to 1.5 trillion in the
year ending March 2018, but it
now expects the figure to be
around 1 trillion or slightly
more.
Management takes this issue very seriously as we have
heavily invested in the imagesensor business, Mr. Hirai
said.
He said in the short term
Sony hopes to shore up the
units profitability by selling
more to handset makers in
South Korea and China. In
coming years, demand should
increase for uses such as surveillance cameras, drones,
smart factories and automobiles, he said.

Videogames are a brighter
story. Sonys flagship PlayStation 4 videogame console has
sold more than 40 million
units since its introduction in
November 2013, making it the
fastest-selling game machine
for Sony and surpassing rivals
such as Xbox One from Microsoft Corp. and Wii U from Nintendo Co.
Membership in its feebased subscription service,
called PlayStation Plus, increased to 20.8 million in
March from 10.9 million in
January 2015.
Sony said the division,

which also handles internetbased services such as the online TV-streaming service
PlayStation Vue, would generate revenue between 1.8 trillion and 1.9 trillion in the
year ending March 2018, up
from a previous forecast of
1.4 trillion to 1.6 trillion.
In Tokyo trading on
Wednesday, Sony shares rose
4.8% to 2,962 after taking a
hit last week from the U.K.s
vote to leave the European
Union.
Mr. Hirai said he expects to
reach the profit target regardless of global economic condi-
tions including possible effects

of the U.K. referendum.
The British vote could help
Sony because it has triggered
a strengthening of the yen
against the U.S. dollar. That
adds to Sonys profit because
the company has expanded
outsourcing of manufacturing
outside of Japan, where the
costs are now lower in yen
terms.
Sonys projection for the
year ending March 2018 assumes that the dollar would
trade at 113, but it is currently at around 102.
Sony plans to ship 20 million units of the PlayStation 4
during the current fiscal year,
with momentum likely to be
fueled by releases of game titles and a high-end version of
the console.
Macquarie Securities analyst Damian Thong said Sony
might also introduce a slimmer version of the PlayStation.
Sony declined to comment on
that possibility. The new variations of the console might be
released at a game show in
September, Mr. Thong said.
Mr. Hirai was especially optimistic about PlayStation VR,
a virtual-reality headset system that it plans to start selling in October. While the device is designed for videogame
players, Mr. Hirai said Sony
was looking at a variety of virtual-reality applications, taking advantage of its existing
businesses in cameras, movies
and other areas.
States Grip Squeezes Out Journalists

W
hen former senior

Chinese official Bo
Xilai was expelled
from the Communist Party in
2012 amid a corruption scandal involving him and his
wife, journalist and artist
Wang Guopei seized the moment with a satirical commentary.
Defying official limits on
discussing the
CHINA
matter publicly,
CIRCUIT
Mr. Wang
LI YUAN
posted a calligraphy drawing
on a Twitterlike social-media platform
called Sina Weibo. The post
used the character for orphan, gu, to refer to the couples adult son, Bo Guagua,
whose given name uses a
similar character that means
melon.
That and similar posts attempting to circumvent state
censors drew hundreds of
thousands of followers for
Mr. Wang on Weibo. He persisted even as censors deleted
some posts and his account
on another social platform
was suspended for a politically sensitive post in late
2013.
These days, though, Mr.
Wang is one of many Chinese
journalists leaving the trade
as the state tightens media
control while a technology
boom opens new opportunities. He now writes a weekly
infomercial on Tencent Holdings WeChat social-media
platform, charging in the low
six figures in yuan for each
ad about products such as Illuma baby formula and the
Huawei Honor smartphone.
Mr. Wang doesnt touch
politics[I] cant take the
risks, he saysand questions
his former career. He wanted
to expose human-rights
abuses and help move China
toward a democracy. I felt I
was like a warrior, and my
pen was my weapon, he
wrote in a WeChat post last
month. But he now says his
efforts were utterly pointless.
Business
Watch
NIKE
Sales Turn Flat

In North America
Nike Inc.s long streak of

strong growth on its home turf
stalled in the latest quarter.
The sportswear and sneaker
giants profit fell 2% and sales
were flat in North America, as
Even the top journalists

are leaving. Qin Shuo quit a
year ago as editor in chief of
Chinas biggest business publication, China Business News,
to start a WeChat public account that focuses on research about entrepreneurs
and entrepreneurship. The
situation for news is dismal
when compared with flourishing entertainment and lifestyle content, he says.
China has long been a hostile place for journalists, but
the growing pressure from
censors under President Xi
Jinping and the allure of lessrisky, better-paying jobs at
Internet companies such as
Tencent and Alibaba Group
Holding is squeezing the profession even more. A widely
circulated online quip sums
up the mood: Chinese lawyers are either in jail or on
their way to jail, and Chinese
years and she was granted a

medical release, allowing Ms.
Gao to serve the rest of her
term outside prison.
While there is no independent media in China as in the
Western senseall media
outlets are required to have a
government sponsorthere
was a boom of more marketoriented media between the
mid-1990s and early 2010s.
Some publications managed
to do investigative reporting
and lured graduates from top
universities.
But many observers say
China has turned more hostile
toward media since President
Xi took over in 2012, with
even formerly enterprising
publications compelled to toe
the party line more strictly.
It has been made clear that
the role of the media is to
support the partys unilateral
rule, and nothing less, the
GREG BAKER/AGENCE FRANCE-PRESSE/GETTY IMAGES
TOKYOSony Corp. on
Wednesday warned of a further decline in image-sensor
sales as demand wanes from
high-end smartphone makers
including Apple Inc., but the
company said it would hit its
profit target thanks to growth
in videogames.
Sony said it was on track
for operating profit of more
than 500 billion, or over $4.9
billion, in its fiscal year ending
March 2018, which would be
higher than the 300 billion
yen it has projected for the
current fiscal year.
In an update on the companys midterm business plan,
Chief Executive Kazuo Hirai
mixed a bullish forecast on the
games business and a virtualreality headset to be sold in
October with the disappointing news on the sensor business. He had previously said
sensors would become a leading profit generator for the
electronics and entertainment
conglomerate.
A revitalized Sony-branded
consumer electronics business
is expected to provide the
foundation for the companys
fiscal 2017 targets, Mr. Hirai
said.
The slowdown in sales of
Apples iPhone has hit Sony by
curbing demand for Sony sensors, which are used in the
phones camera. Initially, Sony
projected the sensor unit
AFLO/ZUMA PRESS
BY TAKASHI MOCHIZUKI
AND YUKA KOSHINO
Journalist Gao Yu was sentenced to prison in China last year.

journalists are either working
for Alibaba or on their way to
working for Alibaba.
The risks are no joke. The
Committee to Protect Journalists says China imprisoned
44 journalists in 2014 and 49
in 2015, more than any other
country, and both more than
any year since the New Yorkbased group started tracking
jailed journalists in 1990. Gao
Yu, a 72-year-old journalist,
was sentenced to seven years
in prison last year for leaking
state secrets. Her sentence
was later reduced to five
Committee to Protect Journalists said in a 2014 report.

Journalists jumping ship
isnt unique to China, and not
all the departures are driven
by censorship. As in many
parts of the world, print media in China are in broad decline, and the startup craze
has captured the imaginations
of many Chinese, including
journalists. Tech companies,
big and small, have huge demand for public-relations
managers. Platforms such as
WeChat make it easier for
writers like Mr. Wang to con-
the company continued to clear

excess inventory and battled increased competition from Under
Armour Inc. and Adidas AG.
Overall revenue rose 6% in
the quarter ended May 31,
driven by gains overseas, but
the results disappointed
analysts.
For the quarter ended May
31, Nike reported a profit of
$846 million, down from $865
million a year earlier.
Revenue was $8.24 billion, up
from $7.78 billion a year earlier.
In North America, revenue edged
up 0.1% to $3.74 billion.
Sara Germano
and Tess Stynes
AIRBNB
Dual Stock Sales

Planned to Delay IPO
Airbnb Inc. has lined up investors for a new funding round

and an employee stock sale that
will value the room-rental website at up to $30 billion and help
put off an initial public offering,
according to people familiar with
the matter.
The San Francisco company
plans to raise between $500
million and $1 billion from more
than a half-dozen large, strategic
investors in the coming weeks,
the people said. That deal is expected to value Airbnb at about
nect with advertisers directly.

Still, the trend is especially worrying in a huge
country with such limited
public power to scrutinize the
government and big companies. Many journalists believe
serious journalism is a lost
cause in China. While online
content appears to be flourishing, there is less coverage
of hot-button issues. Online
media outlets dont have the
leeway to cover news so they
focus on safer content such
as sports, entertainment, lifestyle and occasionally business news.
After Mr. Qins job change,
one of his college classmates,
business writer Wu Xiaobo,
wrote in a widely circulated
blog: The last watchdog is
gone. In the future, well pay
price for this.
Some of those who have
made the jump from news to
tech are unapologetic.
I never regret my decision to leave journalism, Mr.
Wang says. The 32-year-old,
who lives with his wife and 4year-old son, says that his income multiplied from his last
journalism job as a newsroom-operations manager at
a digital news venture.
Journalists arent leaving
only for tech jobs. Li Haipeng,
former editor-in-chief of Esquire China, quit last week to
join a new film studio as its
chief content officer.
He says journalism was
more attractive when he
started out in 1995. Now 99%
of it is dead, he says.
As a newspaper reporter,
Mr. Li wrote movingly of the
2008 Sichuan earthquake and
the plight of underdogs. At
Esquire China, his teams
memorable long-form pieces
included one about a mutiny
on a Chinese fishing ship in
the Pacific, in which 11 crew
members killed 22 others
over eight months.
Leaving journalism, he
adds, was a very easy
choice.
Follow Li Yuan on Twitter
@LiYuan6 or write to
li.yuan@wsj.com.
$30 billion.
In a separate deal, investors
are planning to buy about $200
million in stock from Airbnb employees, a person said.
Rolfe Winkler
VIVENDI
Roussel Appointed
New Gameloft CEO
Vivendi SA on Wednesday
named one of its top executives
as chief executive of Gameloft
SE, weeks after prevailing in its
efforts to gain control of the
French videogame publisher.
Vivendi Chief Operating Officer Stephane Roussel, who will
CENTRE DAILY TIMES/ASSOCIATED PRESS
Sony Pins Hopes on Videogames

As of Friday, Uber will monitor
drivers in several U.S. cities.
Uber App
Will Track
Drivers
Actions
BY DOUGLAS MACMILLAN
Uber Technologies Inc. has

developed new technology to
track when drivers of the ridehailing app speed, cut corners or
brake harshly by monitoring the
sensors in their smartphones.
The software, part of an updated version of Ubers app for
drivers that is rolling out to dozens of cities during a test phase
this week, could help the companys more than one million
drivers by giving them more
feedback when a customer rates
them poorly.
But the use of such technology could raise new concerns
about driver privacy and questions about how far Uber can legally reach into the lives of
workers it classifies as independent contractors, rather than
employees.
Starting Friday, drivers in at
least nine U.S. cities including
New York, Los Angeles and Chicago will be shown a summary
of how smooth their driving was
for each trip, including separate
scores for acceleration and braking and a map highlighting the
Driver-monitoring
technology has
existed for decades
in commercial fleets.
physical location of each incident. When drivers exceed the
speed limit, Uber will alert them
within its app in real time.
In different groups of test cities Uber also will use the gyroscope inside drivers phones to
detect when they move or touch
the device to, for example, compose a text while driving.
The main purpose for collecting this data is to help drivers
become better at their jobs and
give them feedback that is more
detailed than the five-star ratings customers leave for each
driver, Uber said.
During its tests, drivers wont
be penalized for low scores on
the new safety measures, but
that is an option the company
may explore in the future, Uber
noted.
In November, the company
began monitoring driver behavior in limited tests in Houston.
Mikeal Gibson, an Uber
driver in San Francisco, said he
thinks the safety reports could
help him understand whether a
bad rating was related to his
driving or something else.
The data also may create an
objective record that could help
protect drivers from being penalized for unfounded customer
complaints. In California, Massachusetts and Seattle, Uber recently began testing a new peerreview appeal process to let
drivers judge other drivers who
say they have been deactivated
unfairly.
Technology to track the
safety of drivers in commercial
fleets has existed for decades,
primarily in the trucking industry. A box that records
movements such as braking and
speeding are installed in
vehicles.
also be chairman, is among five
members named by Vivendi to
the board of Gameloft, a company known for making games
for mobile phones.
Vivendi, run by billionaire
businessman Vincent Bollor, is
seeking to transform itself from
a holding company with interests in a variety of sectors to an
integrated media company with
a focus on Southern Europe.
It has made videogames a
key focus of the transformation,
also building a more than 20%
stake in Gamelofts larger sister
company Ubisoft Entertainment
SA.
Nick Kostov
Special Advertising Feature
FOCUS ON EGYPT
ILLUSTRATION BY ADAM SIMPSON
REFORM PROGRAM SUPPORTS

NATIONS RETURN TO RECOVERY
FOLLOWING SEVERAL YEARS OF LOW GROWTH, INVESTMENT IS ON THE RISE AGAIN
By Catherine Bolgar
gypt is attracting more foreign

investment because its diverse
economy has fared better
than some of its neighbors,
most of whom depend heavily
on oil revenues.
Foreign direct investment (FDI)
inflows rose to $3.1 billion in the first
half of fiscal 2015/2016, up 19% from $2.6
billion in the year-earlier period, according to the Central Bank of Egypt.
The notable, diverse efforts led by the
current government, focusing on Egypts
economic progress, [and one cannot
help but] be optimistic about the countrys outlook, says Hisham Ezz Al-Arab,
chairman and managing director of
Commercial International Bank-Egypt
(CIB) in Cairo.
Several positive factors are converging
to brighten the picture for Egypt:
improved stability, consumer spending
and government investment.
Egypts economy is on a clear recovery path after the last few years of low
growth and an overall weak macroeconomic environment, according to a
political and economic assessment by
the European Bank for Reconstruction
and Development. The government
started serious reforms last year to
address longstanding economic and
structural problems. Combined with the
progress that has been made in the
countrys democratic roadmap, this has
led to improvements in investor and
consumer confidence, and growth
accelerated to 5.5% from 1.2% in the first
half of fiscal year 2014/15.
In 2014, Egypt began its overhaul of
energy subsidies, which protected weak
GDP
Annual % change by country, 2016*
3.4%
Algeria
Egypt
3.3%
Jordan
3.2%
2.8%
Israel
2.4%
Kuwait
2.2%
Bahrain
1.2%
Saudi
-2.0%
Libya
-3
*estimates
-2
-1
Source: IMF
industries without helping the poor,

while imposing the largest burden on
the countrys budget, according to a
report, Subsidy Reform in the Middle
East and North Africa, by the
International Monetary Fund. The move
shrank the budget deficita muchneeded measure.
With a large budget deficit, it has
been critical for the government to
gradually phase out the subsidy programs while ensuring social justice by
targeting subsidies to those in need. As
the largest burden on the budget, easing
of fuel subsidies has a significant
impact, Mr. Al-Arab says.
LOCAL BUSINESSES ARE

INVESTING AGAINA
STRONG, POSITIVE SIGNAL
OF CONFIDENCE TO THE
INTERNATIONAL INVESTOR
COMMUNITY.
The energy subsidy reform contributed positively to the budget and the
government seems to be committed to
complete the reform program, especially with oil prices being historically
low today, says Ahmed Shams, head
of research at EFG Hermes investment
bank in Cairo. The net impact on the
overall deficit was more than offset by
the increase in government borrowing
and interest rates to aid the reduction
of inflation and reduce currency
pressures.
BOOSTING TAX REVENUES

Other reforms include liberalization
of the electricity sector and streamlining of the tax code.
I think the government is taking tax
reform positively, the newly announced
VAT [value-added tax] should help boost
tax revenues in the medium term,
Mr. Shams says.
In addition, a new investment law
gives investors more protections and
creates a one-stop shop, run by the
General Authority for Investment and
Free Zones, for permits to start a
Continued on following page
The Wall Street Journal news organization was not involved in the creation of this content
Special Advertising Feature

FOCUS ON EGYPT
business. Before this law was created,
foreign investors starting a company
in Egypt had to get permission from 78
government agencies, which could take
as long as five years.
Legislative reforms have included an
investment law to prevent third parties
from challenging contracts between the
Government and investors, a microfinance law, and conflicts-of-interest
law, Mr. Al-Arab says. As a result
of these reformsand otherslocal
businesses are investing again, which
sends a strong and positive signal of
confidence to the international
investor community.
The government aims to prime the
pump with its five-billion Egyptian
pound ($563 million/495 million)
Amlak sovereign property fund. By
investing in various projects, the fund
is expected to attract 50 billion pounds
of private-sector investments.
Egypts investment rate remains very
low, compared to its real potential, says
Mr. Shams. The strategy of the current
regime seems to be encouraging statedriven investments in mega projects to
stimulate growth and reduce unemployment. If integrated with market-based
reform, the strategy will attract FDI and
boost private-sector growth.
STABLE AND SUSTAINABLE

The sovereign wealth fund is part of
the Sustainable Development Strategy:
Egypt Vision 2030 that the government
laid out last fall, with the aim of achieving sustainable, inclusive growth, a
stable macroeconomic environment
and a diversified economy and joining
the ranks of high-middle income
countries as measured by per-capita
gross domestic product (GDP).
Egypt has been making progress.
Per-capita GDP nearly tripled to $3,365
last year, from $1,196 a decade earlier.
Per-capita GDP continued to rise right
through the unrest of the Arab Spring in
2011. Although more than a quarter of
the population continues to live in
povertyup from a fifth a decade
agothe proportion facing extreme
poverty has dropped significantly,
according to the United Nations
Development Program. School enrollment and literacy rates have soared. The
proportion of households using the
Internet in the past year soared to 100%
in 2014, from 38% in 2013.
Egypt moved up three places to No.
116 out of 140 economies in the World
Economic Forums Global
Competitiveness Rankings for
2015-2016.
Egypts central bank has moved
recently toward a more flexible
exchange-rate regime, which sent the
stock market up. A further devalued
pound will help competitiveness, while
the central bank raised interest rates to
curb inflation.
Of course Egypt needs a flexible
exchange-rate mechanism as a part of
the market-based reform that investors
are looking to see, Mr. Shams says.
However, the foreign-exchange issue in
Egypt stems from the structural balance
of payment problems that need to be
addressed in order to restore economic
stability.
The current account deficit widened
to 3.7% of GDP last year, as remittances
from Egyptian workers, especially those
in Gulf states, fell with the price of oil,
and exports and tourism revenues
also shrank.
The governments economic program
has three pillars: restoring fiscal sustainability by cutting spending and
raising tax revenue; undertaking
reforms to stimulate economic growth;
and getting external financing to meet
needs until the other two pillars
bear fruit.
In December 2015, the World Bank
approved a $3 billion three-year loan,
and Saudi Arabia pledged $8 billion
of investments and energy assistance,
adding $3 billion of loans and grants
in January 2016.
Egypt: Inward Investment and Finance

2015-2016
$8bn
Saudi Arabia $8 billion

Investments pledged from
Saudi Arabia, 2015
$3bn
Saudi Arabia $3 billion

Loans and grants from
Saudi Arabia, 2016
$3bn
World Bank $3 billion

World Bank approved
three-year loan, 2015
What Sectors To Invest in Next?

POWERING PROGRESS AND PROFITS: HOW TO PUT CAPITAL TO WORK
By Catherine Bolgar
gypt has ambitious goals to

improve the lives of its large
and growing population that
will require big investments in
many sectors.
The most populous Arab country in
the world, Egypt has a population of 90
million, growing at 2.2% annually. That
means huge demand for houses, schools,
hospitals, roads, electricity, food, information and communications
technologyyou name it.
Many sectors are performing well,
particularly the [fast-moving consumer
goods] FMCG sector, driven by a growing population, 80% of which is under
the age of 30, notes Hisham Ezz
Al-Arab, chairman and managing
director of Commercial International
Bank-Egypt (CIB) in Cairo.
Since becoming Egypts president in
2014, Abdel Fattah Al Sisi has announced
a series of mega projects to stimulate the
economy. The projects are estimated to
cost 1.3 trillion Egyptian pounds and
currently involve more than 1,000
companies and two million workers.
Economic recovery has been the
governments number-one priority,
evidenced in the number of national
mega projects, Mr. Al-Arab says.
Foreign investors know that the sooner
capital is put to work, the greater the
chances of success. Such investments
[have] an enormous impact on Egypt,
creating job opportunities, stimulating
[the economy] and supporting a sustained and steady growth.
Here are some of the most promising
sectors in Egypt for foreign investors:
TRANSPORTATION
Already, Egypt is benefiting from the
New Suez Canal channel, which was
completed on time and opened last
August. The channel widens and deepens the key trade route. It allows for
bigger vessels and more traffic and cuts
the transit time by more than a third for
southbound ships.
The canal expansion is the first step
toward creating a logistics and industrial
hub along the Suez shore. In addition, six
tunnels are being built under the canal,
three for roads at Port Said, plus two for
roads and one for a railway at Ismailia.
Meanwhile, the first phase of the
National Roads Project announced in
2014, for 39 roads stretching nearly 5,000
kilometers, has been completed.
CONSTRUCTION
The emphasis on mega projects is a
boon for the construction industry. The
growing population needs housing, and
cities are bursting at the seams. So the
governments mega projects include
creating several new cities.
The construction of a new administrative capital east of Cairo will cost an
estimated $45 billion over the next five
to seven years. It will spread over 700
square kilometers, with a population of
five million, plus retail malls, energy
farms, schools, a theme park, an airport,
and, of course, government buildings.
Egypt and China signed financial deals
valued at $15 billion for investment in
infrastructure in the new development.
Other new cities include East Port Said
for a million residents; New Ismailia,
MANY SECTORS ARE

PERFORMING WELL,
PARTICULARLY FAST-MOVING
CONSUMER GOODS (FMCG),
DRIVEN BY A GROWING
UNDER-30 POPULATION.
with a Technology Valley east of the Suez

Canal zone; New Alamain for three
million to four million residents on the
North Coast, along the Mediterranean
Sea; and Galala, on the high-altitude
Galala Plateau in the Red Sea area.
which is scheduled to begin in 2017,

will alleviate a great deal of that pressure on the government budget, says
Mr. Al-Arab of CIB.
FINANCIAL SERVICES
ENERGY AND POWER
Egypt has made big progress in the
past couple of years in improving its
energy balance. Egypt had a generating
capacity deficit of more than 3,000
megawatts three years ago and chronic
outages, but has added 3,600 MW of
capacity, according to a report by HSBC.
The country is expected to have generating capacity above peak load by the end
of the year.
Some existing power plants are being
refurbished, and three new combinedcycle power plants, an energy-efficient
design that uses both gas turbines and
steam turbines, are under construction
and expected online next summer. The
new plants will boost Egypts electricity
generation capacity by 50%. In addition,
a number of large-scale solar and wind
projects will increase the role of
renewables.
A new electricity law was passed last
year to liberalize the transmission
market, with consumer prices eventually
set by a competitive market.
Part of the pressure on the electricity
sector comes from the availability of
fuel. However, a large new discovery, the
Zohr field off the Mediterranean coast,
could hold 30 trillion cubic feet of
natural gas.
The development of the Zohr field,
The banking sector remains the

strongest in the Egyptian economy,
Mr. Al-Arab says. Capitalization levels
are not only adequate, but exceed Basel
III requirements.
Profitability is healthy, especially for
private sector banks, notes Ahmed
Shams, head of research at EFG Hermes
investment bank in Cairo. Balance
sheets have been strengthened, credit
quality metrics have significantly
improved, and non-performing loans
have been fairly contained despite
the weak macro-economic backdrop,
he adds.
Led by the Central Bank of Egypt
(CBE), the banking sector has withstood
the crippling repercussions from
essentially two revolutions, four leaders
and three constitutions in three years,
not to mention the global financial
crisis of 2008, Mr. Al-Arab says. In
short, the banking sector saved the
country from a possible downfall amid
all the social, political and economic
turbulences, thanks to the CBEs foresight over 10 years ago, when it led the
reformation, consolidation and recapitalization movement at the same time
as it encouraged foreign ownership in it.
Catherine Bolgar is a freelance
journalist specializing in international
business matters and economics.
BUSINESS NEWS
GM Slips in U.S. as Market Shifts

Auto makers supply
of pickups and SUVs
fails to meet demand
as buyers shun cars
BY MEGUMI FUJIKAWA
BY GAUTHAM NAGESH
TOKYOToyota
Motor
Corp. said Wednesday it was
recalling about 1.4 million vehicles globally because of a
possible air-bag defect.
The latest recall by the
worlds largest auto maker
isnt related to inflaters made
by Japanese air-bag maker
Takata Corp., which have been
at the center of the largest automotive safety recall campaign to date.
Indeed, Autoliv Inc. of Sweden disclosed Wednesday that
its airbags were behind the
recall.
Seven incidents involving
the Toyota Prius have been reported where a side curtain
airbag has partially inflated
without a deployment signal
being given by the airbag controller, Autoliv said. In each
of those incidents, the vehicles
were parked and unoccupied,
and there have been no reported injuries.
Toyoto said it is recalling
its Prius, Prius PHV and Lexus
CT200h models produced between October 2008 and April
2012. Of the total, 743,000
units are being recalled in
Japan, 495,000 in North
America, 141,000 in Europe
and 9,000 in China.
Toyota said some of the airbag inflaters in those vehicles
could have a small crack in a
weld that could grow over
time and lead to separation of
the inflater chambers.
Toyota said that, in conjunction with regulatory bodies, it has concluded that an
additional retention bracket
will remedy the problem. Toyota said that as of June 20 it
wasnt aware of any injuries or
fatalities associated with the
problem.
Autoliv said it was still investigating the root cause of
the defect.
For years, the thousands of

U.S. dealers selling General
Motors Co. vehicles were saddled with large cars and trucks
when customers were looking
for small vehicles. Now, as U.S.
auto sales climb to a record
pace, many of these same
dealers say they are begging
for pickup trucks and sportutility vehicles.
We absolutely have more
customers that want trucks
than trucks to sell, Bill Fox,
co-owner of Sharon Chevrolet
in upstate New York, said recently. Rich Walicki, vice president of Jim Winter Buick-Cadillac-GMC in Jackson, Mich.,
said: We could have sold
more trucks earlier in the year
if we had more.
The mismatch is again costing GM precious U.S. market
share. Its current 16.7% chunk
of the domestic market is a
more-than-three-decade low
for the nations largest auto
maker. In contrast, No. 2 U.S.
auto maker Ford Motor Co.
has crept up to 15.3% and
should edge closer in June, say
analysts.
While GM executives have
pinned the decline on a decision to sell fewer low-margin
fleet vehicles, the companys
inability to keep up with sizzling demand for pickup
trucks and SUVs also plays a
significant role in the decline.
It has been several years
since domestic auto makers
battled one another in marketshare wars. More recently,
they have focused on boosting
margins by operating fewer
factories and running leaner.
GM argues the tack allows it
to spend less money discounting its cars and more on making them better.
Still, with retail demand recently showing signs of a
peak, GMs rapidly weakening
DANIEL ACKER/BLOOMBERG NEWS
Toyota
Recalls
Cars Over
Air Bags
GMs U.S. market share stands at 16.7%, the auto makers lowest level in more than three decades.
market position raises questions about its ability to keep
pace with already-low investor
expectations. GM shares were
trading at $28.15 on Wednesday afternoon, below the 2010
initial-public-offering price of
$33 a share despite delivering
record first-quarter operating
profit this year.
The market-share slump
isnt just an inventory problem. While Mr. Foxs lack of
Chevy trucks reflects production constraints from the companys aggressive downsizing
before it emerged from bankruptcy protection in 2009,
critical product launches
such as a new Cadillac crossover wagonalso have been
delayed, and GM has stale
products in areas such as midsize crossovers and SUVs.
GM also is underrepresented in the profitable commercial-van and truck market,
where GM lags behind rival
Ford. GM is developing new
commercial-truck products in
a move to catch up.
Among the top 10 companies selling vehicles in the
U.S., GM is the only one to
have sold fewer light trucks
the segment that includes
crossover wagons, SUVs and

pickup trucksthrough May
than a year earlier. As gasoline
prices hover around $2 a gallon nationwide, auto sales in
the U.S. were up 9.6% through
the years five months. But
GMs once-dominant share of
the light-trucks segment has
slipped to 19.7%; Fiat Chryslers is 18.8% and Fords is
18.3%, according to data provider WardsAuto.com.
Product launches
such as a new
Cadillac crossover
have been delayed.
After 15 years as Americas
truck king, GM risks falling behind Fiat Chrysler Automobiles NV and Ford if it cant
rush more Chevrolet and GMC
pickups, Cadillac crossovers
and similar products to dealer
lots. Ford is riding momentum
provided by fresh products,
while Chryslers less-expensive
Ram lineup and popular Jeep
portfolio are fueling gains.
Auto makers report June
auto sales on Friday, and in-
vestors will be watching

closely to determine whether
GMs disappointing 18% yearover-year May volume declineincluding a 14% slide in
truck saleswas an anomaly
or the start of a trend.
John Stapleton, GMs North
America chief financial officer,
said this month the company
was adding weekend shifts at
truck plants and taking other
measures to better meet demand, but it is avoiding investing new capital ahead of a
potential market cool-down.
GM is placing bets on a
rapid transition in urban areas
to ride-sharing from new-car
ownership while funding stock
buybacks and international expansion. The company has invested over $1.5 billion in Lyft
Inc., a ride-sharing company,
and purchased a small autonomous vehicle developer based
in San Francisco.
It costs about as much as
those investments to build a
new plant, but that is a venture GM is reluctant to embark
on after years spent trying to
whittle down its manufacturing footprint. They know the
down cycle will come [and] ultimately sales will decline,
said Rick Kwas, a Wells Fargo

Securities equity analyst.
Still, GMs recent release of
more new passenger cars indicates the company was unprepared for the rapid growth in
sales of light trucks. Nearly
58% of its sales this year
through May were to lighttruck buyers, up nearly 10 percentage points from the same
period in 2012.
GM is launching several sedans, small cars and new electric cars as those segments
sag. In contrast, some rivals
including Fiat Chrysler are
working to lower their reliance on those types of vehicles. Mr. Stapleton, speaking
earlier this month, said the
company has lost market
share in smaller and midsizeSUVs because the companys
offerings there are in some
cases six to eight years old.
Mr. Stapleton indicated
fresh products for these lines
were on the way.
Mr. Fox, the Chevy dealer in
Auburn, N.Y., said the company
could help itself by churning
out more of the products that
people want to buy. The Chevrolet Colorado, a midsize
pickup, is in short supply because the product is built
alongside vans in a jampacked Missouri factory.
GM is making moves to
boost Missouris outputincluding boosting line speed
and contracting some of the
van production to Navistar International Corp.but it
doesnt want to spend on additional brick and mortar.
Other crucial product
launches have experienced hiccups. The Cadillac XT5 crossover, a successor to the GM
luxury divisions best-selling
SRX, was delayed by a partssupplier problem. GM didnt
have enough SRX inventory to
bridge the gap.
As a result, Cadillacs sales
of crossovers declined 15%
through May compared with
the same period a year earlier,
according to Autodata Corp.,
compared with the markets
9.8% increase in crossovers
during that period.
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Credit Suisse Deals Take Sour Turn
When a Lebanese defense

contractor asked Credit Suisse Group AG to finance sales
of military ships to MozamBy Matt Wirz and Julie
Wernau in New York
and Matina Stevis in
Maputo, Mozambique
bique, it looked like an opportunity to turn a relationship
with a wealthy businessman
into a lucrative deal.
Instead, it has embroiled
the bank in a scandal that has
spread from the capital city of
Maputo to financial centers
around the world.

Credit Suisse and a partner, Russian bank VTB Group,
arranged $2 billion in debt
for three state-owned companies fully or partly owned by
Mozambiques intelligence
service. The deals helped
boost fees earned by Credit
Suisses investment bank and
funded important contracts
for its client, Iskandar Safa,
whose France-based militaryshipbuilding company was
struggling.
But the deals also ballooned
Mozambiques national debt
by about 35% and financed
military spending by the country as a decades-old civil conflict flared back up. Much of
the debt was kept secret for
more than a year, leading to a
backlash from investors, international donors and the countrys Parliament after it was
reported by The Wall Street
Journal in April.
This account, based on interviews with people involved
in the deals and offering documents, lays out the client relationships and financial incentives that led Credit Suisse to
take on deals that have become an albatross for the
GETTY IMAGES
Volkswagen Goes From

Dieselgate to Brexit
Travel Stocks in Flux

After Istanbul Attack
bank. The transactions also

cast a rare spotlight on the
ties between banks, defense
contractors and the countries
they supply.
Mozambique now is struggling to repay the money it
borrowed as it contends with
drought-related food shortages and intensifying violence,
as well as a sharp decline in
its currency, the metical.
The U.K.s Financial Conduct Authority has begun
looking into whether Credit
Suisse and VTB misled investors when some of the debt
was raised and subsequently
restructured, people familiar

with the matter said. Credit
Suisse is also the subject of an
inquiry by Switzerlands financial regulator, another person
familiar with the matter said.
Both banks used their U.K. operations to handle the bonds.
We have been open and
transparent with the regulator
on the Mozambique transaction and are not aware of any
investigations, a spokeswoman for VTB said. Credit
Suisse declined to comment.
Privately, Credit Suisses
top executives have recently
Please see DEBT page B10
Race to the Bottom

Money managers have been
cutting the prices of their
products over the past decade
Asset-weighted expense ratio
0.85
0.80
0.75
0.70
0.65
0.60
0.55
2006
10
16
Note: Family data includes U.S. open-end

index mutual funds and exchange-traded
funds. All data excludes fund of funds. Data
as of May 31, 2016.
Source: Morningstar Inc.
Strategies
In Turmoil
For U.K.s
Big Banks
Fidelity
Gives In to
Cheap-Fee
Pressures
BY MAX COLCHESTER
BY SARAH KROUSE
PA WIRE//ZUMA PRESS
LONDONBarclays PLC executives spent a couple of

days holed up in a situation
room ahead of last weeks Brexit vote to ensure the bank
could handle anything from
panicked customers to wild algorithmic trading.
When they emerged, investors raised a different concern:
Does Barclays need to rethink
its strategy?
British banks, loaded with
cash, rode out the wild market
swings in the immediate aftermath of the U.K. referendum,
which went in favor of the
U.K. leaving the European
Union. But now analysts are
concerned about how they will
deal with the longer-term
problemsnamely, an economic slowdown, a potential
cut in interest rates and a fall
in U.K. house prices.
Moodys Investors Service
changed its outlook on the
U.K. banking system late Tuesday from stable to negative. On Wednesday, Bernstein Research said that huge
uncertainty surrounding the
exit made several lenders almost uninvestible.
Already, pressure is rising
on executive teams to accelerate cost-cutting, and investors
are bracing for dividend cuts.
Bankers arent the only
ones flummoxed. Investors,
who before the vote were
scrutinizing the minutiae of
bank regulatory rule changes,
are now trying to predict how
British politicians will handle
negotiations with the EU. Its
Please see BANKS page B9
The closure of BHS has sparked a controversy that has drawn in politicians, high-profile retail moguls and bankers.
Goldman in Hot Seat Over BHS
LONDONGoldman Sachs
Group Inc.s reputation wasnt
helped by its involvement in
the sale of a major British retailer that subsequently colBy Simon Clark,
Philip Georgiadis
and Lucy Barton
lapsed, a senior executive at

the bank told a U.K. parliamentary inquiry.
Goldman vice chairman Michael Sherwood and two colleagues were questioned by
Government Bonds
Are Years Big Winner
BY MIKE BIRD
AND CHRISTOPHER WHITTALL
A corner of the market once
sought after for steady returns
has been this years jackpot investment: the government debt
of advanced economies.
Sovereign debt rallied in the
market turmoil that followed
Britains vote to exit the European Union on Thursday, amid a
rush for havens and expectations
that central banks will ramp up
stimulus measures.
Prices of Japanese, German,
U.K. and other sovereign bonds
have been surging for most of
the year as interest rates turned
negative and global economic
uncertainty pushed investors to
buy haven assets.
Then came Brexit, which
roiled markets and added
roughly an extra $1 trillion to the
global stock of negative-yielding
debt, taking the total to nearly
$11 trillion, according to strategists at Bank of America Merrill
Lynch.
As yields fall, prices move
higher, boosting returns.
For an investor in sterling,

Japanese 40-year government
bonds soared in price by 24.7%
in the three trading days after
Britains referendum vote, giving
these securities a gain of 95.8%
since the beginning of this year.
In dollar terms, the price of
these bonds has increased 77%
this year. After the U.K vote, the
yen soared against the pound
and moved higher against the
dollar, increasing the return in
those currencies.
In the same period, the S&P
500 has barely notched a gain of
1% and Europes Stoxx 600 is
down 10.75%. Gold, one of the
other main haven assets, is up a
less impressive 25%.
Last December, Jim Leaviss
bought long-dated Japanese
government debt in what became a very lucrative investment.
Mr. Leaviss, head of retail
fixed income at U.K. fund manager M&G Investments, said he
should have invested the whole
fund in 30-year JGBs, with the
benefit of hindsightI didnt
Please see BONDS page B9
British lawmakers on Wednesday over the advice they gave

billionaire Philip Green before
he sold BHS last year for 1
($1.11) to Dominic Chappell, a
former racing driver without a
successful record in retail. Mr.
Green told lawmakers this
month that he had relied on
Goldman as a gatekeeper to
assess Mr. Chappells credibility and wouldnt have sold BHS
to him if the bank objected.
Mr. Green said it was a mistake to sell to Mr. Chappell.
BHS fell into the equivalent
of bankruptcy this year. The

closure jeopardizes 11,000 jobs
and the pensions of thousands
more former employees. The
collapse has sparked a controversy that has drawn in politicians, high-profile retail moguls and a cast of City
advisers.
Asked whether he thought
Goldmans reputation has been
enhanced by its involvement
in the BHS deal, Mr. Sherwood
replied No. He said the bank
doesnt accept blame for the
collapse of the retailer, but in
future it will review relationships with clients more frequently. Mr. Sherwood told
lawmakers that the bank declined to advise officially on
the BHS sale because of the
small size of the deal. It did,
however, agree to offer informal advice to a longstanding
client, he said.
I wish that we had documented more clearly our role
in writing so that we could not
have the subsequent confusion
that we are going through toPlease see BHS page B10
Investors, Beware the FTSE

Dont be fooled by the
Footsie. The U.K.s FTSE 100
index is back above last
Thursdays close, just before
Britons voted to leave the
European Union, and those in
favor of Brexit are crowing
that everythings fine.
It isnt.
The FTSE
100 is a very
poor repreSTREETWISE sentation of
JAMES
the U.K. In
MACKINTOSH fact, its
probably a
better representation of the rest of the
world than it is of Britain:
Only 22% of its companies
sales come from the U.K., according to Goldman Sachs.
Many of the companies dont
even operate in sterling, with
more than a third of dividends declared in dollars.
These foreign earnings
explain why the FTSE is the
first of the major global indexes to recover to its level
before the Brexit shock. The
plummeting value of the
Telling Gap
The FTSE 100 has recovered its
post-vote loss. The FTSE 250
hasn't.
Index performance,
minute-by-minute data
5%
FTSE 100
FTSE 250
5
10
15
20
24
June
27
28
29
pound makes foreign income

a lot more valuable in sterling terms, and so it plumps
up sterling-denominated
shares. Adjust for the fall in
the currency, however, and
the shares look grim indeed.
A simpler way to see this
is to look at the FTSE 250
index of midsize companies,

which is more closely linked
to the British economy. It is
still down almost 8% from
Thursdays close, even after
a big bounce in the past two
days. Add in the 10% fall in
the pound, and the markets
message to Britain is that the
future isnt bright.
There are bright spots for
global investors, though.
Shares elsewhere are a lot
less rattled than they were.
The S&P 500 has made back
slightly over half of what it
lost at its worst on Monday,
and eurozone shares have
made back slightly under
half of their losses. Crude-oil
prices and the dollars value
against the yen have also
made back about half of
what they lost. Even better
has been the performance of
the CBOE Volatility Index, or
VIX, often known as Wall
Streets fear gauge, which is
back to where it started last
week. The VIX measures the
cost of using options to protect an equity portfolio, sugPlease see STREET page B9
Money manager Fidelity Investments plans to cut prices

on more than two dozen funds
that track stock and bond indexes, a big concession to an
industry shift toward cheap
products.
The fees after the changes
will be below or on par with
those of low-cost pioneer Vanguard Group and Charles
Schwab Corp., another firm
that offers ultralow customer
expenses.
The discounts are part of a
broader reduction in the price
of investing as firms duel for
increasingly cost-sensitive clients and undercut one another
on price.
Fidelitys cuts mark a moreaggressive approach from a
privately held company long
known for pricier investment
products run by star stock
pickers. In recent years, the
Boston giant has lost some
business to rivals emphasizing
so-called passive investments
that mimic indexes for a fraction of the cost of a typical
mutual fund.
Its hugely significant,
said Jim Lowell, editor of Fidelity Investor, an independent
newsletter about Fidelity and
its funds. It reflects the fact
that Fidelity is becoming increasingly more aggressive
both in promoting its own
product line up and seeking
market share from its No. 1
competitor in the low-cost
space: Vanguard.
Fidelity oversees retirement
products for millions of Americans. Its discounts affect $216
billion in assets, a small portion of $2.1 trillion under management as of the end of May.
But the cuts apply to all 27
of the firms stock- and bondindex mutual funds and exchange-traded funds.
Fees on the Fidelity 500 Index Fund, which mirrors the
S&P 500, will drop to 0.09%
from 0.095%. That is the same
as a comparable product at
Charles Schwab and lower
than the Vanguard 500 Index
Fund Investor Shares fund,
which costs 0.16%. Fidelitys
price reductions are effective
this Friday.
Investors pulled more than
$300 billion from U.S. actively
managed funds in the 12
months through the end of
May, according to fund research firm Morningstar Inc.,
while investing upward of
$375 billion in passive funds.
The movement of money
has boosted the fortunes of
Vanguard, which last year attracted an industry record
$236 billion from clients.
Fidelity, in its most recent
annual report published earlier
this year, said investors withdrew a net $18.8 billion from
its actively managed stock
funds in 2015. It didnt disclose
similar information for its passive funds.
MARKETS DIGEST
Nikkei 225 Index
STOXX 600 Index
S&P 500 Index
Year-to-date
15566.83 s 243.69, or 1.59%
t 18.21%
52-wk high/low20841.97 14952.02
High, low, open and close for each
trading day of the past three months. All-time high 38915.87 12/29/89
326.49 s 9.79, or 3.09%

trading day of the past three months.
DOWN
Session open
Close
Last
2070.77 s 34.68, or 1.70%

trading day of the past three months.
Year-to-date
t 10.75%
52-wk high/low 406.80 303.58
All-time high
414.06 4/15/15
Year ago
Trailing P/E ratio * 24.22 21.52

P/E estimate *
17.93 17.81
Dividend yield
2.17
2.00
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 4 p.m. New York time
17500
UP
Close
360
2160
Open 17000
350
2120
340
2080
330
2040
Session low
16500
16000
15500
320
15000
310
2000
1960
Bars measure the point change from session's open

14500
Mar.
Apr.
May
300
June
Apr.
International Stock Indexes

Region/Country Index
World
The Global Dow

MSCI EAFE
MSCI EM USD
Close
Latest
NetChg
2284.62
1590.88
822.84
52.99
44.15
17.60
2.37
2.85
2.19
2033.03
1471.88
691.21
% chg
Low
DJ Americas
Sao Paulo Bovespa
S&P/TSX Comp
IPC All-Share
Santiago IPSA
498.51
8.99
51053.70 1047.14
14036.62 193.93
45464.94 750.40
3094.24 26.65
1.84
2.09
1.40
1.68
0.87
433.38
37046.07
11531.22
39256.58
2730.24
U.S.
DJIA
Nasdaq Composite
S&P 500
CBOE Volatility
17694.68 284.96
4779.25 87.38
2070.77 34.68
17.12 1.63 8.69
1.64
1.86
1.70
15370.33
4209.76
1810.10
10.88
Stoxx Europe 600

Stoxx Europe 50
Austria
ATX
Belgium
Bel-20
France
CAC 40
Germany
DAX
Greece
ATG
Hungary
BUX
Israel
Tel Aviv
Italy
FTSE MIB
Netherlands AEX
Poland
WIG
Russia
RTS Index
Spain
IBEX 35
Sweden
SX All Share
Switzerland Swiss Market
South Africa Johannesburg All Share
Turkey
BIST 100
U.K.
FTSE 100
326.49
9.79
2783.71 83.53
2076.96 49.01
3297.76 88.27
4195.32 106.47
9612.27 164.99
541.88
3.23
26383.32 156.48
1399.53
7.28
15946.93 345.31
430.08 12.57
44807.16 193.57
931.35 25.99
8105.30 270.30
465.73 10.77
7978.96 205.16
51890.42 749.28
76711.97 217.37
6360.06 219.67
3.09
3.09
2.42
2.75
2.60
1.75
0.60
0.60
0.52
2.21
3.01
0.43
2.87
3.45
2.37
2.64
1.47
303.58
2556.96
1929.73
3117.61
3892.46
8699.29
420.82
20452.90
1378.80
15017.42
378.53
41747.01
607.14
7579.80
432.78
7425.05
45975.78
68230.47
5499.51
Asia-Pacific
Australia
China
Hong Kong
India
Japan
Singapore
South Korea
Taiwan
1352.88 22.70
5142.40 39.10
2931.59 19.03
20436.12 263.66
26740.39 215.84
15566.83 243.69
2792.73 36.20
1956.36 20.14
8586.56 81.05
DJ Asia-Pacific TSM
S&P/ASX 200
Shanghai Composite
Hang Seng
S&P BSE Sensex
Nikkei Stock Avg
Straits Times
Kospi
Weighted
0.28
3.58
1188.42
4765.30
2655.66
18319.58
22951.83
14952.02
2532.70
1829.81
7410.34
1.71
0.77
0.65
1.31
0.81
1.59
1.31
1.04
0.95
52-Week Range
Close
Coupon
519.17 2.3
54977.70 17.8
14748.00 7.9
46545.32 5.8
3243.62 5.1
18167.63 1.5
5231.94 4.6
2132.82 1.3
53.29 6.0
406.80 10.7
3541.18 10.2
2567.85 13.3
3867.21 10.9
5217.80 9.5
11802.37 10.5
797.52 14.2
27477.51 10.3
1728.89 8.5
24157.39 25.5
506.05 2.7
53694.88 3.6
968.03 23.0
11612.60 15.1
543.12 7.8
9537.90 9.5
54760.91 2.4
86931.34 6.9
6813.41 1.9
Commodities
WSJ Dollar index

s
sYen
0
s
Euro
10
2015
2016
Country/currency
US$vs,
YTDchg
Wed
in US$ per US$ (%)
Americas
Argentina peso-a
0.0669 14.9420 15.5
Brazil real
0.3088 3.2381 18.2
Canada dollar
0.7702 1.2984 6.2
Chile peso
0.001512 661.30 6.7
Colombia peso
0.0003436 2910.67 8.3
Ecuador US dollar-f
1
1 unch
Mexico peso-a
0.0539 18.5458 7.8
Peru sol
0.3034 3.2960 3.5
Uruguay peso-e
0.0322 31.100 4.0
Venezuela bolivar 0.100100
9.99 58.4
Asia-Pacific
Australia dollar
China yuan
0.7440 1.3441 2.1

0.1507 6.6366 2.2
Key Rates
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
0.46655%
0.64610
0.91365
1.21625
0.18500%
0.28360
0.44835
0.77775
Euro Libor
One month
Three month
Six month
One year
-0.35886%
-0.29357
-0.18629
-0.05943
-0.08000%
-0.01286
0.05786
0.16929
Eurodollars
One month
Three month
Six month
One year
Prime rates
U.S.
Canada
Japan
Hong Kong
Policy rates
ECB
Britain
Switzerland
Australia
U.S. discount
Fed-funds target
Call money
7.7591 0.1
67.4440 1.9
13142 5.0
102.65 14.7
339.12 0.1
7.9893 0.2
4.0064 6.9
1.4045 4.0
104.750 0.1
46.947 0.2
1.3475 5.0
1154.60 1.8
146.60 1.6
32.264 2.0
35.170 2.4
52 wks ago
Libor
One month
Three month
Six month
One year
Yen Libor
One month
Three month
Six month
One year
0.1289
0.0148
0.0000761
0.009741
0.002949
0.1252
0.2496
0.7120
0.0095
0.0213
0.7421
0.0008661
0.0068213
0.03099
0.02843
Bulgaria lev
0.5680 1.7605 2.2
Croatia kuna
0.1476 6.776 3.3
Euro zone euro
1.1113 0.8999 2.3
Czech Rep. koruna-b 0.0410 24.403 1.9
Denmark krone
0.1494 6.6936 2.6
Hungary forint
0.003503 285.43 1.7
Iceland krona
0.008095 123.53 5.1
Norway krone
0.1193 8.3837 5.2
Poland zloty
0.2515 3.9764 1.3
Russia ruble-d
0.01569 63.716 11.4
Sweden krona
0.1181 8.4689 0.3
Switzerland franc
1.0205 0.9799 2.2
Turkey lira
0.3456 2.8934 0.8
Ukraine hryvnia
0.0401 24.9210 3.9
U.K. pound
1.3497 0.7409 9.2
2.6504
0.1126
0.2596
3.3112
2.5977
0.2746
0.2666
0.0674
96.8
53.4
-119.7
-136.6
-115.7
-126.7
-127.7
-160.2
-69.3
-17.9
-93.5
-171.6
-122.3
-149.3
-25.2
159.0
-75.5
-21.7
-127.8
-116.5
-42.8
-52.9
...
...
Spread Over Treasurys, in basis points

Previous
Month Ago
Year ago
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
...
...
95.6
53.3
-118.3
-132.8
-112.2
-122.2
-126.6
-157.5
-66.6
-13.8
-91.2
-169.3
-122.2
-146.9
-12.4
168.5
-71.0
-13.3
-127.4
-110.6
-43.0
-50.2
...
...
Previous
Yield
Month ago
1.573
1.998
-0.566
0.138
-0.505
0.243
-0.649
-0.109
-0.049
1.327
-0.295
-0.228
-0.605
-0.004
0.493
3.151
-0.093
1.333
-0.657
0.360
0.187
0.963
0.617
1.466
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
136.3
63.7
-79.2
-107.3
-79.0
-108.6
-84.4
-152.7
-19.9
5.4
-64.2
-188.3
-82.6
-125.7
-57.2
73.1
-20.9
-0.4
-90.3
-132.6
13.8
-24.1
...
...
-0.36400%
-0.28200
-0.17800
-0.05100
-0.06400%
-0.01400
0.04900
0.16400
-0.05400%
-0.02679
-0.01850
0.07221
Offer
0.05786%
0.10071
0.13929
0.24257
Bid
0.5000%
0.6500
1.0000
1.3000
Latest
0.4000%
0.5500
0.9000
1.2000
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.
0.53%
Euro zone
n.a.
0.18%
n.a.
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
44.90
1615.00
23.60
18.30
3.03
82.85
9.35
2906.00
18145
5.03
16.44
87.70
73.46
9468.00
16300
426.30
82.50
2567.00
139000
4.24
4133.00
3095.00
1786.50
458.50
1222.00
149.20
2795.00
24.74
1979.50
4838.00
930.10
361.10
882.20
5.18
33.60
28.45
44.83
1396000
4341.00
5808.00
2915.00
90.70
159.00
1.01
0.31
1.33
1.50
2.02
1.04
1.96
1.57
0.69
1.62
0.98
2.57
0.49
1.66
2.42
3.85
...
1.72
...
2.54
-0.34
0.68
3.39
2.18
3.17
1.84
1.91
0.45
6.37
1.13
2.28
2.50
3.40
2.37
0.75
0.35
1.43
-0.21
-0.91
2.47
1.59
3.01
1.27
2.004
2.964
-0.151
1.253
-0.149
1.240
-0.203
0.799
0.442
2.380
-0.001
0.443
-0.185
1.070
0.069
3.057
0.431
2.323
-0.263
1.000
0.779
2.085
0.641
2.326
3:30 p.m. New York time
CBOT
CBOT
CBOT
CME
ICE-US
ICE-US
ICE-US
ICE-US
ICE-EU
COMEX
COMEX
COMEX
LME
LME
LME
LME
LME
LME
TCE
377.75
1113.50
444.25
113.900
3,034
144.20
21.15
65.91
1724.00
-11.00
-6.75
-13.00
0.850
28
3.60
1.21
0.05
23.00
2.1925
1324.10
18.395
1,613.00
17,075.00
4,785.00
1,718.00
2,047.00
9,190.00
152.50
0.0170
6.20
0.506
10.00
95.00
80.00
13.00
42.50
150.00
0.50
2321.00
49.42
1.5337
1.5329
2.853
50.85
452.75
-57.00
1.57
0.0497
0.0130
-0.037
1.59
20.25
444.00
1,186.25
533.75
125.475
3,241
146.85
21.20
66.64
1,748.00
355.75
868.00
443.75
109.875
2,745
117.15
12.92
54.19
1,400.00
2.3295
1,362.60
18.580
1,675.00
17,500.00
5,070.50
1,888.00
2,082.00
9,575.00
165.00
1.9690
1,065.70
13.930
1,451.50
13,225.00
4,320.50
1,598.00
1,467.00
7,750.00
147.20
2,707.00
52.28
1.5876
1.6591
2.9740
53.30
472.50
2,317.00
32.22
0.9643
1.1366
1.9900
31.33
285.50
-2.83%
-0.60
-2.84
0.75%
0.93
2.56
6.07
0.08
1.35
0.78
0.47
2.83
0.62
0.56
1.70
0.76
2.12
1.66
0.33
Year
low
-2.40
3.28
3.35
0.86
-1.28
3.23
4.68
Cross rates
0.3773 0.05
8.8792 13.4
3.8517 1.0
0.3020 0.5
0.3850 unch
3.641 0.04
3.7505 0.1
14.8289 4.2
Australia
USD
1.3441
GBP
1.8143
CHF
1.3721
JPY
0.0131
HKD
0.1732
EUR
1.4938
Canada
1.2984
1.7521
1.3254
0.0126
0.1673
Euro
0.8999
1.2147
0.9185
0.0088
0.1160
Hong Kong
7.7591
10.4716
7.9190
0.0756
CDN
1.0355
AUD
...
1.4426
...
0.9655
...
0.6931
0.6695
...
8.6215
5.9761
5.7726
76.3600
102.6540
138.5400
104.7700
...
13.2310
114.0600
79.0700
Switzerland
0.9799
1.3224
...
0.0095
0.1263
1.0888
0.7545
0.7288
U.K.
0.7409
...
0.7562
0.0072
0.0955
0.8233
0.5707
0.5512
U.S.
...
1.3497
1.0205
0.0097
0.1289
1.1113
0.7702
0.7440
Japan
86.68 0.47 0.54 3.88
London close on Jun 29
Source: Tullett Prebon
Sources: Tullett Prebon, WSJ Market Data Group
4 p.m. New York time
% YTD%
Chg Chg
Asia Titans
HK$
AU$
AU$
HK$
HK$
HK$
HK$
HK$
HK$
AU$
TW$
KRW
HK$
AU$
HK$
HK$
$
AU$
KRW
HK$
TW$
Year ago
Sources: SIX Financial Information; WSJ Market Data Group
Close Net Chg % Chg YTD % Chg
WSJ Dollar Index
1.601
2.013
-0.564
0.113
-0.524
0.212
-0.644
-0.123
-0.060
1.300
-0.302
-0.237
-0.590
-0.014
0.381
3.069
-0.122
1.262
-0.645
0.314
0.205
0.950
0.633
1.479
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)
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
Euribor
One month
Three month
Six month
One year
US$vs,
YTDchg
Wed
in US$ per US$ (%)
June
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 ($/mt)*
Rubber (Y.01/ton)
Europe
10
Yield
Corn (cents/bu.)
Soybeans (cents/bu.)
Wheat (cents/bu.)
Live cattle (cents/lb.)
Cocoa ($/ton)
Coffee (cents/lb.)
Sugar (cents/lb.)
Cotton (cents/lb.)
Robusta coffee ($/ton)
US$vs,
YTDchg
Wed
in US$ per US$ (%)
Country/currency
15%
May
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 6/28/2016
Year
One-Day Change
Commodity
Exchange Last price
Net
Percentage
high
London close on June 29
Yen, euro vs. dollar; dollar vs. major U.S. trading partners
Country/
Maturity, in years
3.250
Australia 2
4.250
10
3.500
Belgium 2
0.800
10
1.000
France 2
0.500
10
0.000
Germany 2
0.500
10
4.500
Italy 2
2.000
10
0.100
Japan 2
0.100
10
0.500 Netherlands 2
0.250
10
4.350
Portugal 2
2.875
10
4.500
Spain 2
1.950
10
4.250
Sweden 2
1.000
10
1.250
U.K. 2
2.000
10
0.625
U.S. 2
1.625
10
Source: SIX Financial Information;WSJ Market Data Group
Currencies
Apr.
Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year
and 10-year government bonds around the world. Data as of 3 p.m. ET
YTD
% chg
1532.30 2.7
5706.70 2.9
4123.92 17.2
26282.32 6.7
28504.93 2.4
20841.97 18.2
3373.48 3.1
2107.33 0.3
9379.24 3.0
Mar.
Global government bonds
2567.62 2.2
1956.39 7.3
1044.05 3.6
High
1920
June
Data as of 4 p.m. New York time
Americas
Brazil
Canada
Mexico
Chile
EMEA
May
-3.65
-6.73
-15.50
2.46
-12.43
-20.64
15.86
-20.93
-16.00
-5.27
-34.50
0.23
-14.11
-17.31
-22.68
-38.35
2.10
-34.35
-6.71
-9.40
-7.56
-1.87
-11.91
-39.44
-15.46
-38.73
12.52
-18.08
-18.07
0.04
-27.31
-46.83
-28.88
1.77
-21.68
-7.03
0.27
10.79
-21.78
-5.39
-36.71
-3.25
11.19
Cur Stock
Sym
Last
HK$
AU$
AU$
AU$
TakedaPharm
TencentHoldings
TokioMarineHldg
ToyotaMtr
Wesfarmers
WestpacBanking
Woolworths
4502
0700
8766
7203
WES
WBC
WOW
4440.00
172.40
3355.00
5119.00
39.64
28.80
20.72
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
% YTD%
Chg Chg Cur Stock
2.23
1.11
6.37
2.89
0.71
0.98
0.44
-26.79
12.90
-28.80
-31.64
-4.73
-14.18
-15.43
1.22
3.72
3.27
2.42
3.76
2.50
2.61
3.02
5.13
3.42
3.51
4.90
-0.03
5.03
3.04
1.25
0.98
0.09
0.12
4.27
3.13
4.69
3.01
2.06
2.29
3.45
1.48
0.82
1.04
2.81
3.56
1.77
2.97
2.19
5.50
3.03
6.07
-29.29
-10.25
-22.35
...
-5.11
-4.51
-24.35
-12.75
-24.81
-23.74
-36.98
-23.05
20.00
24.48
-21.57
-52.04
-30.74
-43.80
-9.14
7.49
3.62
13.58
-15.56
-27.61
8.96
-46.63
-6.31
-24.02
9.47
13.17
0.27
-8.12
-11.20
-17.96
15.84
Stoxx 50
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.
19.05
17.84
93.03
127.00
114.40
4380.50
67.53
39.51
411.55
5.02
3.48
137.95
89.11
424.80
4694.00
56.55
10.30
53.73
12.66
15.02
1995.50
14.30
1559.50
452.75
9.01
3908.00
1.65
135.75
55.52
170.00
1061.00
74.75
79.75
355.10
1256.00
7276.00
CHF
CHF
CHF
RioTinto
RocheHldgctf
RoyDtchShell A
SAP
Sanofi
SchneiderElectric
Siemens
Telefonica
Total
UBSGroup
Unilever
Unilever
VodafoneGroup
ZurichInsurance
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
AmericanExpress
Apple
Boeing
Caterpillar
Chevron
CiscoSystems
CocaCola
Disney
DuPont
ExxonMobil
GenElec
GoldmanSachs
HomeDepot
Intel
IBM
JPMorganChase
JohnsJohns
McDonalds
Merck
Microsoft
NikeClB
Pfizer
Procter&Gamble
3M
TravelersCos
UnitedTech
UnitedHealthGroup
VISAClA
Verizon
WalMart
% YTD%
Chg Chg
Sym
Last
RIO
ROG
RDSA
SAP
SAN
SU
SIE
TEF
FP
UBSG
UNA
ULVR
VOD
ZURN
2216.50
254.20
2000.00
67.72
74.30
51.82
90.77
8.33
42.95
12.70
41.01
3449.50
222.60
237.80
3.94 11.97
3.25 -8.03
4.11 31.06
1.99 -7.71
2.03 -5.47
1.87 -1.41
1.77
0.99
6.26 -18.62
3.77
6.18
3.67 -34.94
2.87
2.26
2.45 17.87
2.06
0.72
4.94 -7.97
59.64
94.40
126.97
74.23
103.34
28.26
44.41
96.94
63.93
92.46
30.54
145.50
127.39
31.93
148.44
61.20
119.30
119.45
57.01
50.54
55.13
35.01
83.88
171.47
116.80
100.44
140.46
76.73
55.06
72.44
3.52
0.87
2.49
2.36
1.68
1.69
0.52
0.93
1.88
1.70
2.00
2.17
-0.11
2.37
1.88
2.82
0.91
0.80
2.57
2.22
3.84
1.66
1.72
1.11
2.34
1.42
1.26
2.09
0.44
1.30
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
-14.25
-10.32
-12.19
9.23
14.87
4.07
3.38
-7.75
-4.01
18.61
-1.96
-19.27
-3.67
-7.31
7.86
-7.31
16.14
1.11
7.93
-8.90
-11.79
8.46
5.63
13.83
3.49
4.55
19.40
-1.06
19.13
18.17
Asia Titans 50
Last: 127.30 s 2.10, or 1.68%
High
Close
Low
1
8
Apr.
YTD t 6.6%
140
135
130
125
120
115
50day
moving average
t
15
22
29
6
May
13
20
27
3
10
June
17
24
Stoxx 50
Last: 2783.71 s 83.53, or 3.09%
YTD t 10.2%
3000
2900
2800
2700
2600
2500
1
8
Apr.
15
22
29
6
May
13
20
27
3
10
June
17
24
Dow Jones Industrial Average
P/E: 19
Last: 17694.68 s 284.96, or 1.64%
YTD s 1.5%
18200
17700
17200
16700
16200
1
8
Apr.
15
22
29
6
May
13
20
Note: Price-to-earnings ratios are for trailing 12 months

Sources: WSJ Market Data Group; Birinyi Associates
27
3
10
June
17
24
MONEY & INVESTING
Shares of Thomas Cook rose 4.3% in London as some travel stocks recovered earlier losses.
U.S., Europe Stocks

Rally as Fears Ease
BY GEORGI KANTCHEV
U.S. stocks rallied, rising in

tandem with markets in Europe and Asia, as fears receded that the U.K.s referendum vote last week to leave
the European Union would
disrupt the global economy.
The Dow
WEDNESDAYS Jones InMARKETS
dustrial Average rose
2 8 4 . 9 6
points, or 1.6%, to 17694.68.
The S&P 500 gained 1.7%, and
the Nasdaq Composite rose
1.9%. The gains brought both
the S&P and the Dow back into
positive territory for the year.
In Europe, shares rose
across the board, with the
Stoxx Europe 600 advancing
3.1% and Frances CAC 40 rising 2.6%. Londons FTSE 100,
made up of companies that
earn three-quarters of their
revenues outside the U.K.,
gained 3.6%, erasing all its
post-Brexit losses. The more
U.K.-focused FTSE 250 also
rallied, climbing 3.2%.
Traders described a sense
BONDS
Continued from page B7
have enough of them.
In December, the 30-year securities offered a yield of about
1.25%. But that had fallen to
roughly 0.3% by the time Mr.
Leaviss sold the bonds last
month.
The average yield on global
10-year government debt has
nearly halved this year to 0.58%,
pushing returns higher, according to the Barclays Global Treasury bond index.
Over the last two weeks,
those returns have accelerated,
with government bonds breaking records across the worlds
advanced economies. For the
first time ever, yields on the
U.Ks 10-year gilts fell below 1%,
Germanys 10-year bund yields
dropped into negative territory
and the yields on Swiss government bonds are negative all the
way out to 30 years. Typically,
the longer the maturity, the
more an issuer must pay an investor for taking a bigger risk.
Much of the recent fall in
yields came after the U.K. referendum. Investors fear that Britains departure from the EU not
only removes Europes secondlargest economy from the bloc,
but that the precedent could
lead to further fragmentation
and a period of investment-sapping uncertainty around the
Finance
Watch
DEUTSCHE BRSE
Exchange Holds Firm

On Merger With LSE
Deutsche Brse AG remains

committed to its planned merger
with London Stock Exchange
Group PLC despite the U.K.s
vote to leave the European
Union.
We will continue to put all
our strength behind realizing
Advertisement
of equilibrium returning to the

market. While gains in the
previous session appeared to
be driven predominantly by
short-covering, Wednesdays
rally, which lifted all 10 S&P
sectors, appeared to have been
lent some momentum by new
buyers entering the fray, said
Michael Antonelli, equity sales
trader at Robert W. Baird.
Global shares and sterling
initially plunged after Thursdays Brexit vote, as investors
feared the U.K.s departure
from the EU would slow global
economic growth and extend
the period of low interest
rates. But now, markets are
showing signs of stemming
those losses.
U.S. crude oil soared 4.2%
to $49.88 a barrel in response
to a weakening dollar and
tightening U.S. stockpiles.
Financial stocks in the S&P
500, which fell almost 10% in
the two sessions after the U.K.
referendum results were released, rose 2.2% by late afternoon.
Investors are now gauging
the risks from Brexit to be
lower than during the Lehman

Brothers bankruptcy that unleashed the financial crisis in
2008, and the height of the
European debt crisis, said Andrew Sheets, chief cross-asset
strategist at Morgan Stanley.
American Express gained
the most in the Dow industrials by late afternoon, climbing
3.5%, while Nike rose 3.4% and
J.P. Morgan Chase rose 2.6%.
In Europe, Thomas Cook
Group rose 4.3% and International Consolidated Airlines
Group gained 2.8%, after falling earlier following a terrorist attack at Istanbul Atatrk
Airport in Turkey.
The yield on the 10-year
U.S. Treasury note rose to
1.477%. The pound, which had
fallen to a 31-year low against
the dollar Monday, was up
0.6% at $1.3431. The euro
edged up 0.3% against the dollar to $1.1107.
Asian markets rallied, with
Japans Nikkei Stock Average
rising 1.6% and Hong Kongs
Hang Seng Index adding 1.3%.
Akane Otani
world.
So investors are moving into
these securities for safety and as
they anticipate further centralbank action, in the form of interest-rate cuts and asset purchases, or quantitative easing.
Interest-rate cuts will typically
boost the price of outstanding
securities because it means future issuance will likely offer a
lower yield.
The economy is likely to go
through a slowdown, said Mitul
Patel, head of rates at Henderson
Global Investors. The potential
for rate cuts and QE is likely to
keep government bonds well
supported, Mr. Patel bought
gilts on Friday after being
wrong-footed by the Brexit vote.
With yields now so low, some
investors are looking beyond the
most popular haven government
bonds like Japans to the debt of
other countries.
In most of our portfolios we
were overweight Japan, for a
long time, we liked Japanese 20year, said Bob Michele, head of
global fixed income at J.P Morgan Asset Management.
Like their 40-year peers,
yields on 20-year bonds have
fallen to practically nothing,
moving from 1% at the end of
2015 to as low as 0.04% this
week.
Now, J.P. Morgan Asset Management has rotated into higheryielding sovereigns, like Australias 10-year notes.
But some investors believe
that not only has the rally in

government bonds run its
course, there are reasons to be
cautious about holding them.
Today, with global interest
rates so low and borrowers issuing ultralong debt, duration risk
is shooting up. This means investors must wait longer until
they get back the money they
initially invested, and a small
rise in interest rates could easily
wipe out years of returns.
The potential returns against
the mark-to-market risk are not
favorable, said Andrew Bosomworth, managing director at Pacific Investment Management
Co., one of the worlds biggest
bond-fund managers.
Still, last weeks Brexit vote
has other investors betting that
yields in this market may continue to fall.
Potential fallout from Britains exit from the EU adds to a
long list of concerns that had already hobbled returns in other
markets, from corporate profitability to worries over Chinese
economic growth.
Lower bond yields are a logical response to the structural
imbalances in the global economy, said Steven Major, global
head of fixed-income research at
HSBC Holdings PLC, highlighting
various factors including demographics, the distribution of
wealth and debt overhang. In a
way, the Brexit vote is a symptom of all of the above, Mr. Major added.
this project, supervisory board

Chairman Joachim Faber said
Wednesday.
Mr. Faber didnt address the
question of where the merged
company would be based. Tuesday, Germanys top financial regulator, BaFin, said the headquarters of a combined exchange
would have to be moved away
from London, the city that until
now has been designated as the
future base.
German politicians and investors have also called on
Deutsche Brses management
to rework the plans to ensure
the merged companies new
headquarters wouldnt be outside the EU.
Friedrich Geiger

outside of most peoples comfort zone, said Thomas
Moore, investment director at
Standard Life Investments.
Barclays, whose share price
has slumped 30% since last
Thursday, finds itself in the
eye of the storm. Chief Executive Jes Staley, after his arrival last year, pledged that
Barclays would remain diversified with a sizable investment
bank and that his team could
boil down a mountain of unwanted assets by 2017.
Analysts say the uncertainty around Brexit could
hamper the banks plan to cut
costs, because it may have to
relocate certain investmentbanking operations outside the
U.K. It could also dull interest
in some of its unwanted assets.
It puts a spanner in the
works, said Joseph Dickerson,
a banking analyst at Jefferies.
Barclays has no plan to alter its strategy, according to
one senior executive. Around
60% of Barclayss investmentbanking revenue comes from
the U.S., and a fall in sterling
makes dollar-generated revenue more valuable. Higher volumes of foreign-currency trading have offset declines in
other products across Europe,
Lloyds Banking Group PLC,

the poster child of postcrisis
restructuring, made a point of
ditching its global operations
to focus on the U.K. Today 95%
of its exposure is to the British
economy, according to Bernstein Research. Even before
the vote, it was speeding up
its cost cutting. On Wednesday
it announced 525 job cuts.
HSBC Holdings PLC, with
roughly two-thirds of its $1.1
trillion risk-adjusted assets
outside of the U.K. and Europe, has fared the best with
stock investors. Its shares
were trading Wednesday
around the same price as before the vote.
But analysts caution that
the bank, one of the worlds
largest, still faces pressures in
its U.K. mortgage and unsecured lending. Flush with customer deposits in the U.K. and
Asia, HSBC is also set to feel
the continuing drag from low
interest rates cutting into its
net interest margin, or the difference between what it pays
to borrow and what it charges
to lend.
HSBC just days before the
referendum started offering
U.K. home buyers the lowest
rate ever from a major lender,
at 0.99%. Some analysts say it
is inevitable that HSBC will
have to hold steady or even
cut its dividend.
Margot Patrick
SIMON DAWSON/BLOOMBERG NEWS
TIM GOODE/PA WIRE/ZUMA PRESS
BANKS
and the banks plans to sell

down its noncore unit are on
track, the executive said.
However Barclayss creditcard unit, which is its profit
engine, could be hit if card
holders cut spending amid an
economic slowdown. The bank
is also exposed to corporate
lending in the U.K., which
could see a pickup in bad
loans if investment slows.
The picture isnt much
brighter for other British
banks. Royal Bank of Scotland Group PLC was struggling to make a profit even before Brexit happened. The
state-owned lender is still
spending billions on restructuring following a bailout in
2008. And to make matters
worse, it will likely be hit by a
large fine from U.S. regulators
over toxic subprime mortgages
during the crisis.
Against that backdrop, Brexit doesnt make life easier.
Scotland could again push for
independence, raising the
question of where the Edinburgh-based bank will be located. Moving its headquarters
alone could cost around 1 billion ($1.33 billion), according
to analysts at Jeffries. The
governments plans to privatize the bank have been
scrapped for now, according to
one person familiar with the
matter. Analysts expect the
bank to accelerate cost reductions later this year.
Analysts caution that HSBC Holdings, one of the worlds largest banks, faces pressures in its U.K.
mortgage and unsecured lending, after voters approved a referendum to exit the European Union.
STREET
gesting investors are confident
enough to unwind the (expensive) insurance against losses
they bought before and just after the U.K. referendum.
Investors havent completely abandoned their security blankets, though. Fear still
dominates greed in the havens
of government bonds and gold,
and the biggest beneficiaries
of the flight to safety have
given back only a small part of
their gains. The German 10year bund yield, which moves
inversely to price, stands at
minus-0.12%, British gilts still
yield less than 1% and the 10year Treasury offers 1.477%.
All signal a bit less fear than at

their worstthe Treasury
yield approached 1.4% in the
hours after the Brexit vote
but are far from where they
stood on Thursday.
One reason is that investors
expect central banks to rescue
them once again. The Bank of
England is widely expected to
cut interest rates, and perhaps
to restart bond buying. Its
base rate isnt expected to rise
back to todays levels for five
years, swaps prices suggest. In
the U.S., futures put only a 14%
chance on a rate increase by
the end of the year, down from
56% on Thursday, according to
CME Group calculations.
Theres a sense of comfort
that the central banks will underwrite the negotiations [between the U.K. and EU], partic-
ularly by providing liquidity,

said Bob Michele, global head
of fixed income at J.P. Morgan
Asset Management. He worries
that investors are complacent
about the global recession he
predicts.
Recession or not, the market message is a lot less positive than the FTSE 100 suggests. Investors believe central
banks will prevent a meltdown. But a weaker economy
and lower rates hurt banks and
make shares appealing only
because everything else is so
expensive.
With years of British and
European political uncertainty
to come, investors should be
demanding a discount to cover
the risk that Brexit creates a
wound that even central banks
will struggle to heal.
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FINANCIAL ANALYSIS & COMMENTARY
Exit Vote Aids Emerging Markets

What Brexit?
Performance of J.P. Morgan
EMBI Global Diversied index
10%
8
6
4
2
0
2
4
J
ZUMA PRESS
Amid the many uncertainties of Brexit, there is one

clear lesson: Investors underestimate political risk at
their peril. That is a point in
favor of emerging markets.
In the immediate aftermath of the U.K.s vote to
leave the European Union,
supposedly risky emerging
markets have been relatively
calm. The pound dropped
12.6% peak to trough against
the dollar in just two days,
an extraordinary move for a
developed-market currency,
and has clawed back only a
little ground. Meanwhile, the
Brazilian real has reached a
new high for the year
against the dollar, the Russian ruble is only a little below its highs and the Turkish
lira hasnt budged much.
Emerging-market stocks
have outperformed their developed-market peers, according to MSCI. And investors in emerging-market
dollar-denominated sovereign bonds are up 9.2% in
the year to date, J.P. Morgans EMBI Global Diversified index shows.
Some of this is down to
the absence so far of direct
Pro-EU campaigners
demonstrate in London
financial contagion from Brexit. There could still be

spillovers of course, perhaps
most directly for Eastern Europe if political turmoil
spreads across the continent.
The yens strength may lead
to new efforts to weaken
it, causing problems for
China.
In the meantime, though,
U.S. interest rates look likely
to remain lower for longer,
easing global financial conditions. That could help to
support the return to favor
of emerging-market assets
after a bumpy few years.
They are one of the few
places left offering any income. Since the U.K. vote,
yields on another $1 trillion
of global fixed-income instruments have moved into
negative territory, according
to Bank of America Merrill
Lynch, taking the total to
just under $11 trillion.
More broadly, investors
could benefit from the asymmetry of political risk in
emerging and developed
Source: J.P. Morgan
OVERHEARD
markets. For countries like

the U.K., the risk is nearly all
to the downside.
But emerging-market investors are used to discounting the failings of institutions, whether related to
corruption, lack of independence for the judiciary, concerns over property rights
and so on. These are more
fundamental failings, but investors get paid for taking
that risk: The yield on the
EMBI is 4 percentage points
above that on Treasurys.
Moreover, if such problems
are addressed, then political
risk can diminish.
The global financial crisis
involved an assumption that
there couldnt be a housingmarket downturn in the U.S.
It rolled into Europe with
the faulty assumption that
eurozone government bonds
were risk-free. Now, the idea
that economic self-interest
would scotch Brexit has been
found wanting.
Emerging markets are
risky, but the bigger question investors should ask is
whether developed markets
are all that much safer.
Richard Barley
Corporate law firms generally dont work on contingency fees like their ambulance-chasing brethren.
If they did, the law firm
that worked for Energy
Transfer Equity would have
been paid handsomely for its
failure.
The company said it unilaterally terminated its now
onerous agreement to purchase fellow pipeline operator
Williams.
The termination announcement came after a Delaware
judge said it could back out
of the deal because its law
firm couldnt deliver an opinion on the deals tax treatment.
Energy Transfer may think
it can move on with its life,
but Williams is seeking
among other remedies, monetary damages in what was
originally a $33 billion deal
with a cash component of $6
billion.
While this marriage may
never have been consummated, a good lawyer working on a contingency basis
could extract some hefty alimony from Energy Transfer.
Nothing Is Cemented in Chinas Overcapacity Campaign

Betting on China to deal
with overcapacity in its
bloated industries is a nobrainer, right? Not so, as
shareholders of one cement
maker painfully found out.
Shares of Hong Konglisted West China Cement
Ltd. plunged as much as 46%
in the last hour of trading
Tuesday. Yields on its dollar
bonds jumped to 6.1% from
4.8%. It is a stark turn for
the company, in the process
of issuing new shares to buy
plants from the countrys
biggest cement producer, Anhui Conch Cement Co.a
deal that would make Conch
the largest shareholder in
West China Cement. State-
Cracked Pavement
West China Cement share price
HK$1.80
1.60
1.40
1.20
1.00
J
owned Conch would then offer to buy the rest of the

company at 1.69 Hong Kong
dollars (22 U.S. cents) a
share, 58% above Tuesdays
closing price.
A reason for the plunge is

hard to pinpoint. West China
Cements shares have traded
near the deal price for
months, so investors were
betting it would go through.
Shareholders have already
voted their approval, and
while the deal still needs the
nod from Chinas Ministry of
Commerce, most thought
that was a mere formality,
given that pushing mergers
in glutted sectors is Beijing
policy. Two companies in another oversupplied industryBaosteel Group Corp.
and Wuhan Iron and Steel
Groupjust announced a
joint restructuring plan.
The cement deal, however,
has dragged on longer than

expected. It will fall through
if it doesnt win regulatory
approval by Thursday, unless
both parties agree on an extension. Some investors may
have sold ahead of the deadline, starting the snowball
running down the hill. PostBrexit volatility may have
added to the mix.
A ministerial delay may
not signal a ministerial denial. Consider the case of
hot-pot restaurant chain Little Sheep, waiting to be
bought by Yum! Brands Inc.
in 2011. The ministry announced that its final decision would be postponed for
two months, only to approve
the deal two weeks later. But

in between, the stock
crashed nearly 20%.
Whether the cement
transaction comes out fine or
is scuttled for unexpected
reasons, the debacle highlights the risk of piggybacking investment on government policy. Similarly,
overseas-listed Chinese
stocks that have received
take-private proposals have
taken a beating in recent
months over fears the deals
could fall victim to a policy
shift.
Those who try to profit by
predicting Beijings decisions
can lose big.
Jacky Wong
WSJ.com/Heard
VW: From
Dieselgate
To Brexit
Spare a little pity for
Volkswagen if you can. Just
as the German car maker has
reached a settlement with
U.S. authorities and plaintiffs
over the emissions scandal, a
new crisis has hit its other
major English-speaking market.
Having failed to find an
engineering fix to cut the
emissions of the 475,000 VW
and Audi cars fitted with
defeat devices in the U.S.,
the company has agreed to
buy them back for just over
$10 billion, or about $21,000
each. The other big cost is
$2.7 billion for damages to
the U.S. environment.
Still, VWs maximum liability of $15.3 billion under
the agreement looks broadly
in line with the 16.2 billion
($17.9 billion) in provisions
already announced. Adjusting for a $2 billion investment in green cars not covered by the write-offs, it
leaves roughly 4 billion to
deal with remaining issues.
But just as this U.S. deal
has restored much-needed
clarity to the Volkswagen investment case, Brexit has
thrown the European car
market into disarray.
Sterling has fallen 5%
against the euro. The big unknown is to what extent nervous consumers will hold off
buying cars in the U.K. As in
the U.S., sales were already
running at a record high.
Deutsche Bank estimates
that a plunge in U.K. sales
and the pound would knock
7% off Volkswagens profit
next year. That compares favorably with a 13% fall in the
share price since the referendum result. But such forecasts involve much more
guesswork than usual.
Investors waiting for clarity to buy into VWs recovery
story must wait a while longer.
Stephen Wilmot
MONEY & INVESTING

expressed concerns about the
deals, calling them the wrong
type of business for the bank.
Youre talking about a
country with extreme health
and poverty needs, said Anne
Frhauf, head of southern Africa research at political risk
consultant Teneo Intelligence.
If there had been a proper
prioritization of public-investment needs, neither of these
projects would have seen the
light of day.
The deals included $622
million in loans to buy military
equipment and $850 million in
bonds for tuna-boat purchases
arranged by both banks in
2013. Some bond proceeds
later went to military purchases. In early 2014, VTB arranged a $535 million loan to
build a shipyard to service
military and fishing fleets.
International
pressure
mounted this month for Mozambique to clarify how the
money was spent.
The International Monetary
Fund, U.K. High Commissioner
to Mozambique Joanna Kuenssberg and U.S. Ambassador
Dean Pittman both called on
Mozambiques ruling party,
Frelimo, to allow an independent forensic audit of the governments accounts.
The IMF and a dozen donors have cut off about $320
million in aid since the loans
came to light.
The roots of the debt offerings go back to 2010 and the
discovery of large offshore
natural-gas fields in Mozambique, one of the worlds poorest countries with 27 million
people and a gross domestic
product of about $16 billion.
The prospect of new wealth
fanned tensions between Frelimo and the opposition party,
Renamo, which had fought a
civil war until a 1992 truce.
Antnio do Rosrio, chief executive officer of the three
state-owned companies that
borrowed the money, said the
government wanted to protect
the gas fields and invest in related businesses.
Our country has massive
resources, Mr. do Rosrio
said. In parallel to these re-
MICHEL EULER/ASSOCIATED PRESS
DEBT
Iskandar Safa, head of French shipbuilder CMN, holds a metal cutout of a boat at an event in 2013
with Mozambique President Armando Guebuza and French President Francois Hollande.
sources, we have threats.
The government picked Mr.
Safas company, Privinvest, to
supply ships, including patrol
and surveillance vessels, and
asked its help getting financing. The company disputes the
characterization of the ships
as military, saying they
werent outfitted with weapons. Privinvest approached
Credit Suisse about a loan for
Mozambique, and a committee
of senior executives, including
then-CEO Gal de Boissard,
approved the deal.
Credit Suisses top brass
signed off in part because the
bank had pioneered a way to
lend in developing countries without taking on much
risk.
The bank found it could
purchase sovereign-debt insurance through the Lloyds of
London insurance market to
hedge as much as 90% of the
loans against default. Credit
Suisse charged higher interest
rates on the debt than its insurance premiums, pocketing
the difference mostly risk free.
The insurance policies
Credit Suisse used covered
only governments.
So when Mozambique
wanted to borrow the money
through state-owned companies instead, the bank came up
with a twist: Mozambique

would cosign.
Opposition politicians in
Mozambique allege the administration structured the borrowings to keep them secret
and illegally provided the government guarantee without
Parliaments approval.
Information
regarding
these deals was carefully concealed from the public and op-
The financings went

through all legal
procedures.
ANTNIO DO ROSRIO
position parties, said Maria
Ivone Soares, Renamos chairman in the Mozambican legislature, who is pushing for an
investigation.
Mr. do Rosrio, CEO of the
companies that borrowed the
debt, denies any wrongdoing.
The financings went through
all legal procedures, he said.
The specific nature of the
debt and its holder were classified for national security
purposes.
Initially, the deals paid big
dividends.
Credit Suisse collected fees
from Privinvest and from Mo-
zambique, interest payments

on the loans and bonds it kept,
and made trading profits on
debt it sold to investors. Its
revenue from issuing bonds
and loans around the globe
jumped 18% in 2013, the year
Credit Suisse raised $1 billion
of debt for Mozambique.
The increase was driven by
higher revenues in emerging
markets, particularly in structured lending, Credit Suisse
said in its annual report.
The deals also were a windfall for Constructions Mcaniques de Normandie, a struggling subsidiary of Mr. Safas
Privinvest that built some of
the ships for Mozambique.
CMN hadnt won a major contract since 2003, former employees said.
In 2014, CMNs revenue
jumped 186%, to 110 million
($124.3 million), well above
the annual average of 46 million for the five years before
Privinvest won the Mozambique contracts, according to
data from S&P Global Market
Intelligence.
CMN represents only 10%
of the Privinvest group, which
counts many shipyards and facilities world-wide, a Privinvest spokesman said.
Andrew Pearse, a former
Credit Suisse banker who
worked on some of the Mozambican loans, now runs an

investment firm majorityowned by Mr. Safas Privinvest. Mr. Pearse managed
Credit Suisses unit responsible for lending in Europe, the
Middle East and Africa until
June 2013, when he left to
found the new firm, called
Palomar Capital Advisors AG,
with startup capital from Privinvest. Palomar later helped
VTB arrange the shipyard
loan.
In 2015, things began to fall
apart for Mozambique and its
lenders.
The three state-owned companies had planned to repay
the debt by doing contract security work for international
natural-gas companies and by
catching tuna. But foreign energy companies have stopped
most operations in Mozambique for now because of low
gas prices, and the countrys
tuna fishing fleet has been a
bust.
The tuna enterprise, called
Ematum, restructured its
bonds this past April by converting them into sovereign
bonds that Mozambique must
eventually repay. Investors
sold the new bonds for 70
cents on the dollar this week,
reflecting fears of a default.
The shipyard company,
called MAM, missed a $178
million payment on its loans
in May and is negotiating a restructuring with VTB. We are
working on restructuring the
operations, and we are optimistic of the future outcome,
Mr. Do Rosrio said.
Meanwhile, conditions in
Mozambique are worsening.
Its foreign-currency reserves
fell to $1.8 billion in May from
$2 billion in January, and it is
seeking $180 million in food
aid. Intensified fighting has
sent more than 10,000 refugees to neighboring Malawi,
according to the U.N. High
Commission for Refugees.
We need to have clarity on
how the loans were made,
what the money was used for
and if theres a possibility to
recuperate any of those
funds, said Mr. Pittman, the
U.S. ambassador to Mozambique. These were bad decisions, they were made in secret and they will have
consequences.
BHS
day, Mr. Sherwood said. I
think the frequency with which
we review clients, we will look
at again.
Goldmans business relationship with Mr. Green
started around 2004, when the
bank advised on his unsuccessful bid for U.K. retailer Marks
& Spencer Group PLC, Mr.
Sherwood said. Mr. Green and
his family are clients of Goldmans asset-management services for wealthy individuals,
Mr. Sherwood said.
Lawmaker Richard Fuller
accused Goldman of a dereliction of duty for advising on
the deal without having full
knowledge of the finances and
term sheet. Anthony Gutman,
co-head of European investment banking at the bank, denied this charge.
Mr. Green has said that he
didnt want to meet Mr. Chappell until after he was
cleared by Goldman as a
suitable buyer. But Mr. Sherwood on Wednesday played
down the banks involvement.
We formally turned down
the assignment, Mr. Sherwood said. We, from time to
time, are willing to provide informal advice to our clients as
and when they ask for it, he
said.
Also on Wednesday it was
revealed for the first time that
Mr. Green approached Goldman about supporting a 40
million loan to help back the
sale of BHS. Goldman submitted a letter to the investigation
by the Treasury and Work and
Pensions Select Committees on
Monday detailing that request,
having previously failed to disclose it to lawmakers. Mr.
Sherwood apologized for failing to offer details of the loan
to lawmakers previously, blaming an oversight. He said it
was a request that went away
almost before it arrived.
How can clients trust
youwhen you failed to remember a potential 40 million transaction? lawmaker
Iain Wright asked.
The loan offer was available
for an incredibly short period and no terms were ever
provided, Mr. Sherwood said.

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Turkey Pays

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PERSONAL JOURNAL | A12

S&P 500 2070.77 1.70%

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OIL 49.88 4.24% GOLD 1323.90 0.68% EURO 1.1113 0.42%

eutsche Bank and

Computers fared better

U.K. Taxes Might Offer Edge

Wall Street is tallying up the

Part of the reason: Too

Biden announced partnerships aimed at bolstering a proposed $1 billion

Money & Inv... B7-10

3.20; CHF5.50; 2.00;

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its tax code to entice businesses.

newfound fiscal freedom.

better compete with neighbors

In Market Chaos, Machines Beat Man

The death toll rose to 41

Trump pledged to withdraw the U.S. from global

DLR 102.65 g 0.10%

Turkey Mourns After Deadly Istanbul Airport Attack

Business & Finance

Britain could use its tax

of assets under management,

a vote to leave the EU was unlikely, largely because of the

JEFF J MITCHELL/GETTY IMAGES

DJIA 17694.68 1.64%

THURSDAY, JUNE 30, 2016 ~ VOL. XXXIV NO. 105

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NEXT STEPS: Some expats in

Oracle has their act together better than SAP

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A2 | Thursday, June 30, 2016

THE WALL STREET JOURNAL.

What Really Drives Anti-Immigrant Feelings

could opt out of the single

Continued from Page One

Continued from Page One

The U.K. could still negotiate a relationship with the EU

Net support for immigration

*All data 2013 except France, Italy, 2010, Japan 2000

THE WALL STREET JOURNAL.

hile economic circumstances are

They also find resistance

Partners LLC were among the

umph, according to people

U.S. bank is the first to fail the

impatient with Santanders

MICHAEL PROBST/ASSOCIATED PRESS

The U.K. may try to

Immigration Attitudes: Its Complicated

A cash point sign near Deutsche Banks headquarters in Frankfurt.

the U.S. became politically

Note: Through Thursday

Source: WSJ Market Data Group

THE WALL STREET JOURNAL.

say, among the biggest gains

have both extremely high foreign-born population shares

n Canada, the honor killing of four women of Afghan descent by their

THE WALL STREET JOURNAL.

Thorold Barker, Editor, Europe