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German Utility RWE to Sell Oil Unit Dea to Russian Billionaire Fridman Intends to Sell Oil and Gas Production Unit for More Than $7 Billion FRANKFURT—German utility RWE AG RWE.XE +1.33% said Sunday it intends to sell its oil and gas production unit to Russian billionaire Mikhail Fridman in a transaction valued at more than €5 billion ($7 billion).

Germany's second largest utility by market value said it had agreed in principle to sell its upstream oil and gas business RWE Dea for around €4.5 billion to Mr. Fridman's energy investment vehicle L1 Energy. L1 Energy will also take on around €600 million of RWE's liabilities, raising the deal's value to €5.1 billion.

RWE said it agreed to the "major contractual conditions" of the disposal, but details remained to be resolved. The company expects to finalize the transaction shortly, it added.

"This agreement is a major milestone in delivering our announced strategic realignment of the group," said RWE Chief Executive Peter Terium.

RWE put Dea up for sale about a year ago, in what was seen as a cornerstone of its effort to reduce debt and conserve cash. The company is struggling with falling profits from its power plants because subsidized renewable energies are eating into its business across Europe.

Mr. Fridman's bid for RWE Dea topped a rival offer from Germany's Wintershall AG, a unit of chemical giant BASF SE, BAS.XE +1.40% which had offered around €3.5 billion.

A third offer had been filed by a consortium of U.S. private-equity firm Kohlberg Kravis Roberts & Co. and state-owned Kuwait Petroleum Corp. But people familiar with the disposal talks said last week that KKR and Kuwait had dropped out of the tender process.

L1 Energy confirmed it had agreed on the acquisition of RWE Dea.

RWE said the deal would be subject to the approval of its supervisory board and regulators in several countries.

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BN 03/16 16:52 *RIA CITES CRIMEAN DEPUTY PREMIER TEMIRGALIEV BFW 03/16 16:52 *CRIMEA TO SWITCH TO RUSSIAN RUBLE APRIL 1: RIA NOVOSTI

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Crimea to Switch to Russian Ruble April 1: Ria Novosti 2014-03-16 16:57:20.447 GMT

By Daryna Krasnolutska March 16 (Bloomberg) -- Ria cites Crimean Deputy Prime Minister Rustam Temirgaliev on abandoning Ukraine’s hryvnia. * NOTE: Crimea Votes on Secession as Ukraine Says Russia Massing Troops {NSN N2JBNX6K50XX <go>}

For Related News and Information: First Word scrolling panel: {FIRST<GO>} First Word newswire: {NH BFW<GO>}

To contact the reporter on this story: Daryna Krasnolutska in Kiev at +380-44-490-1252 or dkrasnolutsk@bloomberg.net

To contact the editor responsible for this story: Andrew Langley at +44-20-7392-0582 or alangley1@bloomberg.net

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BN 03/15 04:00 *MALAYSIAN OFFICIAL SAYS MISSING JET WAS HIJACKED, AP REPORTS

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Malaysian Official Says Missing Jet Was Hijacked, AP Reports 2014-03-15 04:02:31.228 GMT

By Jim McDonald March 15 (Bloomberg) -- Official says investigators conclude one of missing plane’s pilots or someone else with flying experience hijacked the Malaysian Airlines jet, AP reports, without naming the official. * Hijacking scenario is “conclusive,” AP quotes official

For Related News and Information: First Word scrolling panel: {FIRST<GO>} First Word newswire: {NH BFW<GO>}

To contact the editor responsible for this story: Jim McDonald at +81-3-3201-3190 or jmcdonald8@bloomberg.net

Russian companies withdraw billions from west, say Moscow bankers

Russian companies are pulling billions out of western banks, fearful that any US sanctions over the Crimean crisis could lead to an asset freeze, according to bankers in Moscow. Sberbank and VTB, Russia’s giant partly state-owned banks, as well as industrial companies, such as energy group Lukoil, are among those repatriating cash from western lenders with operations in the US. VTB has also cancelled a planned US investor summit next month, according to bankers. The flight comes as last-ditch diplomatic talks between Russia’s foreign minister and the US secretary of state to resolve the tensions in Ukraine ended without an agreement.

Markets were nervous before Sunday’s Crimea referendum on secession from Ukraine. Traders and businesspeople fear this could spark western sanctions against Russia as early as Monday. Yields on Russia’s 10-year government bonds rose close to 9.7 per cent on Friday, compared with less than 8 per cent in January. The rouble hit 36.7 to the dollar, near to its weakest rate on record. It also emerged on Friday that Russia’s top 10 billionaires, led by Alisher Usmanov, had lost a combined $6.6bn of their net worth over the past week, according to research firm Wealth-X. Russian equities, which showed more weakness on Friday, have lost 20 per cent of their value since the start of the year. "You don’t need to have sanctions in place to cause economic turmoil," said Christopher Granville, managing director of Trusted Sources, an emerging markets research firm. "The expectation is enough." Strobe Talbott, president of the Brookings Institution, who served in the State Department under Bill Clinton, said: "The irony is that the Russian banking sector has made quite a lot of progress in plugging into the global system. That means it is vulnerable, and a good lever for applying pressure." Data published by the Federal Reserve Bank of New York sparked speculation that the Russian central bank was also reducing its vulnerability to potential sanctions. The data showed a drop of $105bn in Treasuries held by foreign institutions for the week ending March 12.

"We can only speculate about who might have decided to move their securities out of the Fed and into a third-party custodian, but one obvious candidate is Russia," said Lou Crandall at Wrightson Icap. Russia held $138.6bn in US government debt at the end of December, according to the US Treasury. One senior Moscow banker said 90 per cent of investors were already behaving as if sanctions were in place, adding that this was "prudent exposure management". These moves represent the flipside of the more obvious withdrawal of western money from Russian markets that has been evident over the past fortnight. Traders and bankers said US banks had been particularly heavy sellers of Russian bonds. According to data from the Bank for International Settlements, US banks and asset managers between them have about $75bn of exposure to Russia. Joseph Dayan, head of markets at BCS, one of Russia’s largest brokers said: "It’s been quite an ugly picture in Russian bonds the last few days and some of it has to do with international banks reducing exposure." Although foreign banks have not yet begun cutting credit to Russian companies en masse, bankers said half a dozen live deals to fund some of Russia’s biggest companies were in limbo as lenders waited to see how punitive western sanctions would be. Bankers said Barclays of the UK had withdrawn from a plan with Russia’s VTB jointly to fund an Essar Energy deal. Barclays declined to comment. Alexei Kudrin, a former Russian finance minister and a member of Vladimir Putin’s economic council, warned on Thursday that sanctions could drive an extra $50bn of capital outflows from the Russian economy per quarter. The New York Fed and Russia’s central bank declined to comment, as did Sberbank, VTB and Lukoil. Meanwhile, in a sign of the EU’s continuing economic ties to Russia, South Stream*, the gas pipeline project backed by Gazprom of Russia, Eni of Italy, EDF of France and BASF of Germany, announced that it had signed a contract worth about €2bn with Saipem of Italy to build the offshore stretch of the route under the Black Sea from Russia to Bulgaria. Construction is scheduled to start in June.

Weekly Market Update: Asia Slowdown & Ukraine Weaken Global Markets

- Soft Chinese economic data and the Ukraine crisis drove a sell-off in global markets this week. In Asia, the Hang Seng closed out the week down 4% and the Nikkei was down 6%, while global copper prices plummeted again this week on China growth fears. In Beijing, the National People's Congress closed with a speech in which Premier Li tempered expectations about 2014. Li said the government was looking to raise the "quality" of growth and was more concerned with employment and living standards than GDP, a veiled reference to the "elastic" nature of the 7.5% GDP target set for 2014 at the start of the conference. US data was not especially good either. February retail sales rose a bit more than expected, however the negative back-month revisions to the January and December data more than offset the front-month beat. The March University of Michigan consumer confidence survey unexpectedly dropped to a four-month low, stoking fears that spending may be slow to pick up from weather-related setbacks earlier this year. For the week, the DJIA lost -2.3%, the S&P500 fell -2%, and the Nasdaq dropped -2.1%.

- The situation in Ukraine and Crimea has steadily deteriorated this week, and as of Friday Russia's MICEX index was down 20.4% YTD. The world awaits Sunday's Crimea referendum, when voters will be asked if they want to become independent or join the Russian Federation. There is no option on the ballot to remain part of Ukraine and observers outside of Russia are nearly unanimous in calling the effort illegitimate. Moscow continued to reinforce troops on the Crimea peninsula and also moved a very large force of troops, armor and artillery to Ukraine's northeastern borders.

- USTs saw big gains this week, with ten-year yields dipping 15 basis points to 2.63%, the biggest one-week move down since June 2012. Yields on 10-year UK gilts also dropped 15 basis points to 2.64%, the largest one-week decline this year. Weekly Federal Reserve data showed that foreign central bank holdings of US Treasuries fell to $2.86T, their lowest levels since December 2012. Most of the big move down was ascribed to the Russian Central Bank, which trimmed its holdings by a record $104.5 billion on the week, 3x the prior record.

- Freddie Mac and Fannie Mae shares tanked on Tuesday upon the release of a bipartisan Senate plan to wind down the GSEs and replace them with a new government insurer. The new organization, the Federal Mortgage Insurance Corporation (FMIC), would operate in a manner similar to the FDIC and wrap covered loans with a government guarantee.

- The business of selling US teen apparel continues to frustrate investors. Urban Outfitters shares fell more than 6% after Q4 results missed expectations on the topline and management noted they remained very cautious regarding Q1 performance. American Eagle Outfitters lost 10% after meeting already-lowered Q4 expectations and warning that Q1 SSS would be down in the high single digits. But by far the worst was Aeropostale, whose shares lost 15% after missing expectations in its fourth quarter and offering very weak first quarter earnings guidance.

- Herbalife shares dropped about 10% this week after receiving a Civil Investigative Demand (CID) from the Federal Trade Commission. Reports suggested the announcement took Herbalife executives by surprise, and that it could create a cloud of uncertainty for the company for the next year as the FTC investigates its marketing practices.

- The euro stabbed higher midweek, moving out to 2.5-year highs from around 1.3860 to 1.3970 between Wednesday and Thursday, just ahead of a scheduled speech by ECB's Draghi and the Bundesbank's annual press conference. With the euro close to breaking 1.40, Draghi declared that FX rates were becoming more relevant in assessing price stability. Just hours before, ECB hawk Weidmann had reiterated standard policy lines that the ECB should not react to changes in the FX rate. EUR/USD dropped back below 1.3850 after these remarks, but then made another go above 1.3900 through the end of the week. Analysts suggest that while Draghi's comments are not as big as the "whatever it takes" line two and a half years ago, they represent a material change in the ECB's outlook on currency and its implications for dis-inflation.

- Dollar weakness also impacted USD/JPY. The pair peaked late last week in the 103 handle and has sustained a very steady reversal this week, testing as low as 101.20 on Friday. Outflows from China plus sustained low interest rates are not helping Abenomics. The BoJ's Kuroda said rock bottom interest rates continue to incentivize the yen carry trade.

- Japan revised its Q4 GDP growth figures in the final reading to 0.7% on annualized basis from 1.0% preliminary. The corporate capex component experienced the biggest change in the revision, slowing to +0.8% q/q from +1.3% initial, raising real doubts about the efficacy of Abenomics and underscoring the glaring need for the "Third Arrow" of structural reform. An HSBC economist interviewed after the release of the final Q4 GDP also expressed concern about Japan's rising trade deficits. Despite the revisions, the Bank of Japan did not announce or even hint it would consider expanding its quantitative easing program.

- Soft economic data from China was a big negative this week. The February terms of trade contracted for the first time in nearly a year and included the biggest deficit in two years as exports fell 18.1%. Shipments to the US, EU, and Japan were all down by double digits, although officials were quick to attribute the deficit to distortions caused by the timing around the Lunar New Year celebration. CPI hit a 13-month low of 2.0% on an annualized basis. Other economic data hit multi-year low rates of growth, including industrial production, retail sales, and fixed-asset investment.

- After China's first ever corporate default last week, another Chinese company - Haixin Iron and Steel, the second largest steel maker in Shanxi Province - formally defaulted on its debt this week. There was more focus on the firm link between plummeting copper prices and defaults in China: 60-80% of the nation's copper imports over the past three years have been used as collateral for loans, a situation which could drive an accelerating wave of bankruptcies now that Beijing has signaled it will not swoop in to bail out every firm that stumbles. China Premier Li promised that the central government will not allow systemic risks to arise from defaults even as he called them unavoidable in some cases.

- On Wednesday the Reserve Bank of New Zealand became the first central bank of a developed economy to embark on a tightening campaign this year. The RBNZ justified the hike by warning that inflationary pressures are expected to continue to rise over the next two years and domestic expansion is becoming more broadly based amid very high consumer and business confidence. RBNZ governor Wheeler indicated that rates would likely rise another 75 basis points later this year.

Closing Market Summary: Stocks End Down Week on Cautious Note Ahead of Crimean Referendum

The major averages ended the week on a lower note as participants continued reducing their risk exposure ahead of the weekend, which will feature a Sunday referendum in Crimea on potential annexation to Russia.

The stock market opened with modest losses, but made a quick recovery with help from most sectors; however, the S&P 500 (-0.3%) was unable to make a sustained move above the 1852 level, which marked the session high for the benchmark index.

After making an early jump to highs, the S&P 500 spent the next hour in a steady retreat towards its session lows as the three top weighted sectors—financials (-0.6%), technology (-0.7%), and health care (-0.5%)—refused to take part in the rally. The three groups remained among the laggards throughout the day, keeping the broader market from maintaining its gain after the major averages jumped back into the green in the late morning.

The return into positive territory occurred after comments from the press conference held by Russia's Foreign Minister Sergei Lavrov made the rounds. Specifically, Mr. Lavrov said Russia has no intentions of invading Eastern Ukraine. That remark gained the most traction, but Mr. Lavrov continued, saying U.S. and Russia remain at odds regarding Ukraine and that Russia does not need any international structure to mediate in Russia-Ukraine relations.

After the Russian Foreign Minister delivered his statement, U.S. Secretary of State John Kerry conducted a press conference of his own. Secretary Kerry said that despite prolonged discussions with his Russian counterpart, not much has changed and that the Sunday referendum remains on schedule.

Although stocks made their way back into the green after Mr. Lavrov's press conference, they spent the afternoon in a slow retreat as the largest sectors weighed. Interestingly, small caps outperformed with the Russell 2000 holding a modest gain throughout the session. The index ended higher by 0.4% while large caps were not as fortunate.

The technology sector (-0.7%) ended at the bottom of the leaderboard. The space was pressured by its largest members. Apple (AAPL 524.69, -5.96), Google (GOOG 1172.80, -16.26), and Qualcomm (QCOM 74.74, -0.89) lost between 1.1% and 1.3%.

Elsewhere, the financial sector (-0.6%) trimmed its month-to-date gain to 0.4%. Even though the sector maintained its gain for the month, it surrendered its year-to-date advance (-0.5%). Top sector components registered losses across the board with Bank of America (BAC 16.80, -0.36 leading the weakness with a 2.1% decline.

Even though stocks finished on their lows, Treasuries did not move mucduring afternoon action. The benchmark 10-yr yield ended little changed at 2.65% versus 2.72% registered last Friday.

While Treasuries did not signal additional safe-haven flows today, the foreign exchange market did. The Japanese yen continued its recent strength, sending the dollar/yen pair to the 101.30 area after startin the week around 103.30.

Volatility protection was in demand throughout the session, pushing the CBOE Volatility Index (VIX 17.77, +1.55) to levels last seen on February 6. Similar to yesterday, trading volume was on the light side with only 628 million shares changing hands at the NYSE.

Looking back at today's data:

* Producer prices declined 0.1% in February after increasing 0.2% in January while the Briefing.com consensus expected producer prices to increase 0.2%. The drop in producer prices was the result of a sharp drop in producer services costs. Final demand for goods rose 0.4% for a third consecutive month whereas final demand for services declined0.3% in February. Excluding food and energy, overall core prices declined 0.2% in February after increasing 0.2% in January. The consensus expected these prices to increase0.1%. 

* The University of Michigan Consumer Sentiment Index slipped to 79.9 in the March preliminary reading from 81.6 in February. The consensus expected the index to increase to 82.0. The Current Conditions Index increased to 96.1 from 95.4 in February. The Expectations Index fell to 69.4 in March from 72.7. 

On Monday, the Empire Manufacturing Survey for March will be announced at 8:30 ET while the January Net Long-Term TIC Flows report will cross the wires at 9:00 ET. The Industrial Production and Capacity Utilization report for February will be released at 9:15 ET while the day's data will be topped off with the 10:00 ET release of the NAHB Housing Market Index for March.

* Russell 2000 +1.9% YTD  * Nasdaq Composite +1.7% YTD  * S&P 500 -0.4% YTD  * Dow Jones Industrial Average -3.1% YTD