TheChek News Flow

* Aug gold rose for the first time in four sessions despite strength in the dollar index.

* The yellow metal came off its session low of $1295.80 per ounce set in early morning pit action and traded as high as $1304.20 per ounce. It settled at $1299.90 per ounce, booking a gain of 0.2%.

* Sep silver, on the other hand, spent its entire session in the red. It touched a session low of $20.63 per ounce in early morning action and eventually settled with a 0.6% loss at $20.77 per ounce.

* Aug crude oil traded higher on bullish inventory data released earlier today.

* The EIA reported that for the week ending July 11, inventories fell by 7.5 mln barrels when a smaller draw of 2.1-2.8 mln barrels was expected.

* The energy component advanced to a session high of $101.46 per barrel and eventually settled with a 1.3% gain at $101.18 per barrel.

* Aug natural gas also rose today, climbing as high as $4.15 per MMBtu in morning action. It settled 0.5% higher at $4.12 per MMBtu.

- Peltz says he has met with over 100 shareholders of PEP in the last six months. The stock is moving higher not because of management performance but because shareholders like our activist stance. 

- Have not spoken with Pepsi CEO since Feb. 

- Not satisfied with FDO performance. Believe Icahn's activism will be effective. 

- Having what I hope will be constructive conversations with BK board. Will not discuss details of his proposal, wants the board to digest his ideas before making them public. 

**NOTE: on 7/17/13, Holder Trian (Peltz) outlined scenarios on why stakes were taken in Pepsi and Mondelez; Sees possible combination of the two whereby Pepsi acquires MDLZ for $35-38/shr. 

- 02/20/14: PEP: Trian Partners ($1.2B stake holder) delivers letter and white paper to board on splitting company into beverages and snacks - US financial press

Any army watching its foes girding for battle might have the same reaction: Time to arm up as well.

In the war between media networks and pay-TV providers, 21st Century Fox appears to be the first to attempt to put those thoughts into action. In June, the company offered to buy rival Time Warner TWX +17.22% for $80 billion, or $85 a share--an unsolicited offer that was rejected. Until last year, 21st Century Fox and The Wall Street Journal owner News Corp. NWSA -0.16% were part of the same company.

The bid comes against a backdrop of pending mergers by pay-TV distributors, including the combinations of Comcast CMCSA +0.20% with Time Warner Cable TWC +0.02% and AT&T T +0.36% with DirecTV. DTV +0.08% As that side of the affiliate-fee negotiating table gains heft, it follows that media networks might want to bolster their own. Plenty of hurdles remain for a Fox-Time Warner tie-up. Time Warner says it is worth more as a stand-alone company than Fox can pay.

But if a deal does happen, it would likely be just the tip of the iceberg for media consolidation.

The U.S. market isn't adding pay-TV subscribers, and the growing number of low-cost online video alternatives, such as Netflix, NFLX -0.99% means distributors are loath to raise prices. For media companies, garnering higher affiliate fees—paid to them by pay-TV providers—in this environment means offering must-have content. Like tools in a kit, having a full array of assets therefore becomes increasingly important. Among the most valuable are sports rights and a broadcast network with exposure to rapidly growing retransmission fees.

Of course, the rationale for many deals would go beyond negotiations with pay-TV providers. Gaining a deep library of content, which can be syndicated or licensed to Netflix and its ilk, also could prompt consolidation. Perhaps even more important is having exposure to international markets where pay-TV penetration is still growing.

Shares of all major media companies, apart from Fox and Walt Disney DIS -0.96% —also seen as a potential acquirer—rose Wednesday alongside those of Time Warner. But it is worth remembering that some would bring a more attractive combination of tools to the ultimate media kit than others.

Time Warner offers rights to pro and college basketball, as well as Major League Baseball, and a deep content library. AMC Networks, AMCX +4.39% by contrast, lacks sports and has a content library that is relatively shallow, albeit highly rated.

In another example, Discovery Communications DISCA +6.34% got 45% of revenue from its international segment in 2013. That could make it more attractive than fellow stand-alone cable network Scripps Networks Interactive, SNI +4.93% whose segment primarily consisting of international operations represented only 2% of revenue.

Broadcast-focused CBS CBS +2.14% and cable-focused Viacom, VIAB +3.30% once part of the same company, each have elements the other lacks. That has led to recent speculation that they will ultimately reunite. Helpfully, they also share a controlling shareholder in Sumner Redstone's National Amusements.

For media investors, it is worth considering which potential targets have the best ammunition when called into battle.

- There are not many other possible bidders for Time Warner 

Potential for crisis aftershocks at eastern European banks

Recent events suggest greater dangers than further west

Does the danger of a new banking crisis lurk in central and eastern Europe? Investors are certainly skittish after several recent incidents.

First, Bulgaria’s central bank had to stabilise its banking system with a €1.7bn emergency credit line after runs on two of the country’s biggest lenders. Then, days later, Hungary’s government passed a law forcing banks to compensate borrowers for “unfair” conditions on foreign-currency loans issued before the 2008 financial crisis (loans in euros or Swiss francs had offered apparently lower interest rates than forint loans but, when Hungary’s currency unexpectedly plunged due to the crisis, borrowers faced hikes in repayment costs).

As a result of the Hungarian measures, plus regulatory pressure in Romania to reduce non-performing loans, Austria’s Erste Group warned it would plunge to a net loss of €1.6bn. OTP, Hungary’s biggest bank, said its second-quarter profit would be cut by Ft25bn (€81m). Austria’s Raiffeisen Bank has estimated its Hungarian costs at up to €160m.

Shares in all three banks – and in others with Hungarian and eastern European exposure, such Italy’s UniCredit and Belgium’s KBC – have suffered.

Even if these developments do not signal any new systemic risks in eastern Europe, or greater contagion dangers, they still suggest greater political and regulatory dangers than exist further west. In particular, they highlight the problem of lingering bad loans.

Capital Economics notes that Bulgaria, Hungary and Romania were among the European countries that saw the largest pre-2008 expansion of credit – much of it in foreign currencies – and so suffered the biggest hangovers. Non-performing loans in all three countries are still above 15 per cent of total loans.

In Bulgaria, regulators say the banking sector is well capitalised, with plenty of liquidity. But confidence is fragile, with the recent crisis highlighting ties between business and politicians.

The run on Bulgaria’s fourth-largest lender, Corporate Commercial Bank, was sparked by media reports of a quarrel between its main shareholder and its biggest borrower, a politician. Last weekend, CCB was put into bankruptcy after the discovery that documents relating to its loan book were missing and cash had vanished from its vaults.

Meanwhile, First Investment Bank – Bulgaria’s number three lender – became the target of an apparently co-ordinated attempt to undermine it through false text messages and emails suggesting it was about to collapse.

Bulgaria’s president said on Monday that the country would now seek to join the EU’s single supervisory mechanism for banks and submit to a peer review from the European Banking Authority.

“Getting the right macro-financial stability picture [in eastern Europe] remains exceptionally difficult,” says Peter Attard Montalto, an analyst at Nomura. “Even central banks themselves, as we saw in Bulgaria, don’t seem to have entirely full confidence in their ability – hence the need to turn to outside forces.”

In seeking to join the SSM, Bulgaria is following Romania – whose desire to become the first non-euro member of the supervisory regime led to pressure on NPL provisions and inflated Erste’s writedown.

But Hungary, whose government has feuded with banks since it was elected in 2010, prompts larger concerns. Its forex loan measures are the latest of several moves to ease the burden on borrowers, and the broader economy.

Prime minister Viktor Orbán’s Fidesz government insists that the foreign currency loans were essentially mis-sold, with risks not adequately spelt out. Banks, however, complain that they have shouldered not only the costs of the forex loan measures, but also a hefty banking levy and a financial transaction tax.

Some suspect political motives, after Mr Orbán said last year he favoured lifting Hungarian ownership of the banking sector – heavily dominated by foreign banks – to more than 50 per cent. The government’s latest measures could force some foreign banks to sell out or merge.

For now, the foreign banks insist they will stay, judging that these steps will be the last before stability and profit growth return. But Budapest is preparing in the autumn to make banks convert their remaining €12bn of forex loans back into forints. It has not said if this will be at market rates, or a discount.

“[Foreign banks] are still not fully realising quite the whack the government in Hungary is going to give them,” says Mr Attard Montalto. In central and eastern Europe, the crisis may be over, but the potential for nasty surprises remains.

Neil Buckley is the Financial Times’s eastern Europe editor

America Movil’s plans to sell assets to reduce its market share to below 50% will not result in terminating antitrust measures imposed on the company until the expiration of a year-long compliance period, according to a Spanish-language report in El Universal.

The report cited Maria Elena Estavillo, a commissioner with Mexico’s telecommunications regulator (Ifetel), who noted applicable law requires America Movil to comply with the antitrust measures for one year following a period of up to 120 days provided for Ifetel to evaluate and rule on the asset sale proposal. Ifetel’s analysis of the proposal will focus on both market share reduction and fomenting market competition.

America Movil controlling shareholder Carlos Slim was cited last week in a press report as suggesting the asset sale could be completed in six months. America Movil announced the sale plans on 8 July as an effort to remedy Ifetel’s March determination of the company as economically preponderant in Mexico’s telecommunications sector, based on the company’s market share in excess of 50%. Ifetel’s preponderance ruling imposed antitrust measures forcing the company to share infrastructure with third parties and accept price controls and bans on exclusive media rights to events such as soccer games, as reported.

The asset sale has prompted expressions of interest from Mexico-based peers Axtel and Alestra, press reports of negotiations with AT&T and speculation regarding a variety of additional potential suitors including large European and Chinese telecommunications companies.

Source El Universal

There is still “a lot left” to be negotiated about a firm offer for Shire [LON:SHP] from AbbVie [NYSE:ABBV] ahead of the expiration of the latter’s put-up-or-shut-up period under the UK takeover code, said a source close to the situation.

Shire has said that it is willing to recommend AbbVie’s new offer valued at GBP 53.20, subject to successful negotiation of other terms of the offer. These will include break fees and management positions, said a second source close to the deal.

AbbVie has until 5:00 pm on 18 July to make a firm offer for Shire before it has to walk away for six months. The deadline can be extended upon a request by Shire.

Shire could easily ask for an extension if it needs to, a sector banker said. There could be contentious issues to be worked out, such as whether AbbVie can walk away from the deal in the event of changes in tax inversion rules, the banker said.

A second sector banker said Shire has managed to get AbbVie to a good price from its initial offer to engage in merger negotiations. “We are already at a highly recommendable offer for shareholders, though,” he added.

“Shire may be absolutely giving them no way out. It will want this to be ironclad,” said the first sector banker.

US Treasury Secretary Jack Lew wrote a letter to the congressional tax-writing committees on 15 July, asking them to enact changes to tax law that allow companies to invert, including backdating inversions from May 2014. The same banker dismissed the letter but acknowledged that potential changes in tax inversion law could be an issue for AbbVie. A third sector banker said that based on his conversations with his clients and tax experts in the space, a change in tax rules is not expected this year, but Shire may want to have a safeguard against it in the merger agreement.

Other issues could include board composition, any potential break fees, and the timing of the offer, said the first banker. Oftentimes, it is “softer issues” such as the position of the senior management, employees, and research facilities that could undermine deals more than value, he said.

The new proposal comprises GBP 24.44 in cash and 0.8960 AbbVie shares per Shire share. Shire shareholders would end up owning approximately 25% of the combined company.

AbbVie declined to comment. Shire did not immediately respond to a request for comment.

Militants push anti-Assad rebels close to collapse in Syria

A Free Syrian Army fighter tries to fix a machine gun past sandbags in the southern Idlib countryside July 14, 2014. Picture taken July 14, 2014. REUTERS/Khalil Ashawi (SYRIA - Tags: POLITICS CIVIL UNREST CONFLICT MILITARY)©Reuters

A Free Syrian Army fighter posted in the southern Idlib countryside

A multi-pronged offensive in Syria by the Islamic State of Iraq and the Levant (known as Isis) is threatening to bring down what is left of the country’s original rebellion against President Bashar al-Assad’s regime.

Opposition forces fighting to end four decades of Assad family rule are watching territory they seized being over-run not only by the army and Isis, but even their longtime ally Jabhat al-Nusra. The Syrian al-Qaeda branch, once keen to partner with rebels, appears to be planning its own Islamic enclave as the country’s opposition looks close to collapse.

“The regime is beating them in Aleppo in the north. Isis has taken Deir Ezzor in the east. And Nusra is gaining strength in Deraa to the south,” says Syrian commentator Hassan Hassan. “There is more need than ever to get together – they feel an existential threat from Isis and Nusra.”

Disparate rebel units that once resisted unification efforts now see a merger as their last chance to survive. The Islamic Front, Syria’s largest Islamist rebel alliance, once sought to lead opposition forces. Now, it is calling for any initiative that could organise the rebels.

Isis is attacking both Syria’s north and east, each with different enemies. In some areas, they are confronting the rebels fighting Assad. In others, they are pushing against Syria’s Kurdish region, which is fighting back hard with the help of Kurdish volunteers now flowing in from neighbouring Turkey, Iraq and even Iran.

Amid the chaos, many disillusioned fighters and activists are leaving Syria. After years of championing the cause, they say months of stalemate between the opposition and Mr Assad have left too many groups clawing for territory for their revolution to be revived.

“I passed through four countries to escape to Turkey: the Islamic State, Bashar al-Assad’s state, the Kurdish state, and the state of Syrian rebel gangs,” says Amir, a fighter who recently fled the Isis takeover of Deir Ezzor and asked not to be identified by his full name.

Now branding itself the Islamic State, Isis says it is re-establishing a caliphate in the region and has moved quickly to seize control of both sides of the Iraqi-Syrian border since a surprise June offensive in Iraq seized swaths of territory and military sites.

Isis’s progress in Iraq has stalled, but its forces are still advancing in Syria, as they bring newly captured US-made weapons back over the border.

Syria map

The only force Isis is not actively engaged with is the Assad army – which is advancing in Aleppo in an effort to encircle and blockade the northern city.

In a speech inaugurating his third seven-year term, Mr Assad on Wednesday offered his “condolences” over the Arab uprising and its “backwards” foreign backers, and vowed to return to the territory his army had lost, especially Aleppo.

“Our minds will not be calmed until Aleppo is returned safe and secure,” he told a crowd of supporters in a large white room at the presidential palace, vowing that Raqqa would be “rescued from terrorism”.

Seizing Aleppo would wrest the last major city in Syria out of rebel control. The rebels lost two other cities to Isis. Raqqa, the first provincial capital in Syria to fall out of state control, has long been Isis-controlled. Now 90 per cent of oil-rich Deir Ezzor province, on the eastern border with Iraq, is held by Isis – only an air base and part of the provincial capital remain, and they are controlled by Assad forces. Activists believe the army will soon abandon these areas to Isis as well.

Interactive map

Isis advances through Iraq and Syria

Isis' map

Chart the progress of the jihadi militants as they attempt to gain more ground

Isis advances say as much about its fighters’ capabilities as the disarray among Syria’s rebels. Plagued by infighting, the rebels have been drained of foreign funding as they have confronted better-armed, hardline Islamists. The US and Gulf countries have focused on a few moderate, “vetted” rebel groups, hoping to weaken Islamist popularity.

“The policy of the US, Saudi and other countries of draining resources from other Islamist [rebel] groups is working out – it’s just not working out for Syria or the opposition,” Mr Hassan says.

Dozens of weakened rebel groups have pledged loyalty to Isis as it advances – some fearing for their lives, others attracted by the resources Isis now has. Either way, Isis is accruing more manpower as it pushes on.

As the rebels struggle to remain relevant, Nusra forces are moving south towards the Jordanian border and cementing control of a pocket of northwestern Syria in Idlib province.

“They are fortifying those areas so they can avoid the same fate as Aleppo,” says Tareq Abdelhaq, an Idlib activist with ties to Nusra. “They will create a region appropriate for making an emirate.”

Activists say foreign powers must act now to keep the opposition movement alive.

“This is all about the weapons,” says one activist in Deir Ezzor. “If moderate forces offered as much funding and support as Isis, you’d see a lot of so-called Islamist fighters drinking whisky and saying they are secularists.”