TheChek News Flow

Moscow launches probe of Uralkali chief

The "Potash War" between Russia and Belarus took an unexpected turn on Monday when Russian police launched a probe into the financial dealings of Vladislav Baumgertner, CEO of Russian fertiliser group Uralkali, in a move that could result in his extradition to Russia. Mr Baumgertner is under house arrest in Minsk, the Belarusian capital, following the collapse of a price-fixing cartel between Uralkali and Belaruskali, the two largest world players in potash. He was arrested in Minsk when he flew in on the invitation of Belarus’s prime minister in August. In July, Uralkali pulled out of the cartel, sending the price of potash plummeting – which threatened Belarus with a payments crisis, as it relies on Belaruskali for one-quarter of export revenues. With an eye to renegotiating the deal between Uralkali and Belaruskali, which was in effect from 2010 to 2013, Alexander Lukashenko, Belarus’s president, has attempted to pressure Suleiman Kerimov, Uralkali’s main shareholder, into selling his 22 per cent stake. Some Uralkali shareholders have insisted that Mr Baumgertner be freed as a precondition of any negotiations or a sale by Mr Kerimov, people familiar with the situation said. The people added that if Mr Baumgertner were to be extradited to Moscow, it might help to end the stand-off, which could presage a sale by Mr Kerimov and an attempt to reinstate the cartel. Analysts said that it was not clear whether the Russian investigative committee intended to press charges against Mr Baumgertner – or whether the investigation is a means to get him back to Russia and offer Mr Lukashenko a face-saving way out of the crisis. "This is the fastest track to get him [Baumgertner] back to Russia," argued Konstantin Yuminov, analyst at Raiffeisenbank in Moscow. He added that the Russian prosecutor’s announcement was "a positive development for the company".  Vladimir Markin, a spokesman for the Investigative Committee – Russia’s version of the FBI – said that the committee had launched a criminal investigation into Mr Baumgertner’s conduct as CEO, as well as that of his deputy Konstantin Solodovnikov and "other figures", based on materials provided by Belarusian police on Friday. But he explained that the committee had not decided whether to charge him. "The materials show that the above named official [Mr Baumgertner] . . . misused his powers . . . for the benefit and profit of other figures, causing significant harm and serious consequences for Belaruskali," Mr Markin said. Mr Kerimov is understood to be in talks with two groups over the sale – one group led by billionaire Mikhail Prokhorov that is interested in acquiring half of Mr Kerimov’s stake, while another group, led by banker Vladimir Kogan, is interested in the whole stake. Time is on Mr Kerimov’s side in the stand-off with Mr Lukashenko because Uralkali has more export options than Belaruskali, which labours under US and EU sanctions against Belarus. "Belarus needs the Russian channel in order to interface with the rest of the world," said a person close to Uralkali.

Icahn and Loeb cannot be shut out

If "staying active" is the key to a long life, Carl Icahn will probably live for years. At 77, the US investor is on a concerted activist campaign. He has tried (unsuccessfully) to disrupt Michael Dell’s buyout of the computer maker he founded, dined with Apple’s chief executive and pressed him to return cash to shareholders, and last week planted board members – including his son Brett – at Nuance, the Boston technology company that gives Apple’s Siri his/her voice. But despite proclaiming in Forbes magazine in June that "What I Do Is Good for America", Mr Icahn will struggle to lose his "corporate raider" label. When he revealed his activist stance at Nuance, analysts wrote: "Let the fireworks begin." Board members and senior managers’ first reaction to an approach from Mr Icahn – or any hedge fund – is to take cover. To say activism has a bad name among operating executives is not, however, true. It has many names. Mr Icahn’s is the quintessential American brand, marked by public fisticuffs and proxy battles. In the same style, Daniel Loeb of hedge fund Third Point did not write to Sotheby’s chief executive William Ruprecht this month to laud his management skills. But what if, instead of attacking Mr Ruprecht’s "extravagant" taste for "farm-to-table" organic delicacies, Mr Loeb was sitting at the table advising him to follow a different diet? Until earlier this year, Mr Loeb was doing something similar as a director of Yahoo , proving that putting an engaged investor on the board can yield a positive outcome. It is human nature that if a stranger comes up behind you and points out, however politely, that you could be doing a better job, you will bristle. Executives have enough to worry about without having to wrestle with back-seat drivers. But as Peter Hill, chairman of Alent, the UK-listed performance materials group, points out: "Second-guessing and questioning the executive is what boards should be doing: for me, it is one of the key dynamics." Mr Hill was a director of Cookson, now called Vesuvius, when two activist funds took stakes. One, Cevian Capital, with 20 per cent, later nominated a director to the board. When Alent spun off from Vesuvius last year, Cevian took a board seat there, too. Mr Hill thinks there is room for "responsible activists". Advocates see them as "anchor shareholders" – a concept common in northern Europe – who encourage long-range stewardship of companies. Even in the US, funds such as ValueAct, which has a seat on the Microsoft board, are carving out a different style of activism. The problem for companies deciding whether to let the barbarians into the boardroom is working out which sort is waiting at the gate. Dionysia Katelouzou of King’s College London has studied the battlefield outside the US and identified three categories of activism, from gentle to aggressive, and 13 subgroups of tactics, from "quiet persuasion" to full takeover. Seeking board representation counts as "aggressive". But her conclusion is similar to that of an earlier paper about the US: many assumptions about hedge fund activists are myths. They are not necessarily short-termists (39 per cent of her sample held on for more than three years), they do not generally seek control, and their aggressiveness is often overstated because journalists would rather write about a punch-up than a love-in. (Many dislike being called hedge funds, too, but that is another story.) All investors act from self-interest. The question for the board is whether an activist’s interests are aligned with those of other shareholders, ensuring its director will speak for all investors, as non-executives should. Boards need to ask how such a director would behave if the activist’s strategy conflicted with the board’s collective will – in a bid, say. Finally, they need to know if they share the same definition of "long term". Executives often complain their institutional investors are uninformed, disengaged and swift to sell when the going gets tough. They should not ignore a knock on the door from investors that are well informed and committed. Mr Icahn purrs about his altruistic and patriotic motives. Based on his record (which spans most categories of activism), it would obviously be rash for boards to assume he is now domesticated. But it would be equally odd for them to shut out all activists just because a few like to use their claws.

Asian Market Update: Equities in relief-rally mode on continued optimism over an impending US budget resolution; RBA meeting minutes maintaining neutral stance

***Observations/Insights*** - US equity markets reversed initial declines on renewed optimism that the setbacks experienced in both chambers of Congress over the weekend would be temporary. Press reports suggested Sen Majority leader Reid privately offered a deal to the GOP that would raise the debt ceiling for 6 to 9 months and also delay the medical device tax. Later in the day, White House statement that the 15:00ET<x-apple-data-detectors://2>meeting with Congressional leaders has been postponed so Senate leaders can continue "important progress" was also interpreted constructively. Finally, evening reports from the hill cited "tremendous progress" made in negotiations between Reid and McConnell, but no final funding deal was yet in place. US fixed income markets will reopen tomorrow after Monday holiday. - RBA meeting minutes remaining squarely neutral, reiterating the Board is keeping the possibility of further cuts but any additional easing is not seen as imminent. - Bond outflows in Australia sending 10-yr yield to 1-month high; S&P/ASX outperforms, rising to a 2-week high near 5,270. - China follows aggressive liquidity injections in the final week of Sept with a more modest operation; Note that China Sept lending data released overnight topped expectations with a 3-month high of CNY787.0B.

***Economic Data*** - (CN) CHINA SEPT NEW YUAN LOANS (CNY): 787.0B V 675.0BE (3-month high) - (CN) CHINA SEPT M2 MONEY SUPPLY Y/Y: 14.2% V 14.2%E; M1 MONEY SUPPLY YY: 8.9% V 9.7%E - (AU) AUSTRALIA SEPT NEW MOTOR VEHICLE SALES M/M: -0.1% V +0.7% PRIOR; Y/Y: -3.5% V +0.2% PRIOR - (SL) Sri Lanka Central Bank cuts Reverse Repo Rate by 50bps to 8.50% (not expected); First rate cut since May

***Fixed Income/Commodities/Currencies*** - (CN) PBoC to inject CNY10B in 7-day reverse repos - (CN) China Gold Association: China Aug gold output seen at 38.0T v 39.3T m/m - GLD: SPDR Gold Trust ETF daily holdings fall by 1.9 tonnes to 889.1 tonnes (lowest since Feb 2009) - SLV: iShares Silver Trust ETF daily holdings fall to 10,445 tonnes (lowest since 10,397 on Aug 13th) from 10,505 tonnes prior - (JP) Japan 10-yr govt bonds yields rise by 1.5bps to 0.67% (2-week high) - (AU) Yield on Australia 10-yr note rises over 7bps above 4.19%, 1-month high; 3-yr bond yield near 3.14, a 7-month high

- Investors are hedging the political uncertainty in Washington and the absence of a deal late on Monday with more USD selling, even as US equity futures are still modestly bid. AUD/USD and NZD/USD are up over 50pips respectively - AUD above $0.9530 (4-month high) and NZD above $0.84 (3-week high). USD/JPY is also under pressure, falling about 25pips from late US session highs below ¥98.50. EUR/USD and GBP/USD are up about 0.1% or some 15 pips from opening levels above $1.3560 and $1.5990 respectively.

***Speakers/Political/In the Papers*** - (CN) ANZ economist Zhou: China CPI likely to remain above 3% in Oct and Nov - Shanghai Daily - (CN) China may face greater inflation pressure in 2014 - Chinese press - (CN) German Chamber of Commerce in China: China wages growth may decelerate from 8.9% in 2013 to 8.2% in 2014 - Shanghai Daily - (NZ) New Zealand RBNZ Dep Gov Spencer: Domestic housing market requires supply boost, demand constraint; LVR restrictions may reduce extent of rate increases and reduce exchange rate pressure. - (PH) USGS: Magnitude 7.4 earthquake reported in southern Philippines

- (US) White House: 15:00ET<x-apple-data-detectors://11> meeting with Congressional leaders has been postponed so Senate leaders can continue "important progress" on deal - (US) US Senate leader Reid (D-NV): While tremendous progress has been made with Senate minority leader McConnell towards debt limit resolution and govt funding deal, we are not there yet - financial press

- (US) US Treasury Dept to delay the release of the Semi-Annual Currency report due to govt shutdown - (DE) German CDU/CSU party said to have agreed to hold a third round of discussions on forming a coalition with center-left SPD this Thursday; Still planning to hold 2nd round of talks with Greens on Tuesday. - press citing Merkel's party source

***Equities*** Market Snapshot (as of 03:30 GMT<x-apple-data-detectors://12>): - Nikkei225 +0.5%, S&P/ASX +1.0%, Kospi +0.8%, Shanghai Composite -0.3%, Hang Seng +0.6%, Dec S&P500 +0.1% at 1,706, Dec gold -0.3% at $1,272, Nov crude oil -0.2% at $102.22/brl

US markets: - CWTR: Lower Q3 guidance; to explore strategic alternatives; -28.6% afterhours - TDC: Guides Q3 EPS $0.69-0.70 v $0.81e, Rev around $665M v $700Me; Lowers 2013 guidance; Increases share repurchase authorization by $300M (3.5% of market cap); -11.6% afterhours - PKG: Reports Q3 $0.91 adj v $0.89e, R$845.4M v $831Me; +1.4% afterhours

Notable movers by sector: - Consumer discretionary: Huayi Brothers Media Corp 300027.CN +5.7% (provides Q3 guidance); Cochlear Ltd COH.AU -1.5% (provides FY14 outlook) - Industrials: Daewoo Shipbuilding & Marine 042660.KR +4.1% (awarded order); Fuji Heavy Industries 7270.JP +1.0% (may report1 profit, raise FY guidance) - Materials: Huaneng Renewable Corp 958.HK -1.0% (share placements); Perseus Mining Ltd PRU.AU +1.5% (provides production outlook); Sims Metal Management SGM.AU +1.3% (divests non-core assets); Inner Mongolia Baotou Steel Rare Earth 600111.CN +3.2%, China Minmetals Rare Earth Co Ltd 000831.CN +1.1% (China may start rare-earth stockpiling) - Technology: Mesoblast Ltd MSB.AU -1.6% (analyst action); Hiwin Technologies Corp 2049.TW +3.0% (to invest in China) - Energy: Linc Energy LNC.AU +8.3% (revalues oil fields); Yanzhou Coal Mining Co 1171.HK +2.7% (analyst action) - Financials: Ping An Insurance 2318.HK +1.4% (plans to enter elderly care industry); Zhejiang China Commodities City Group Co Ltd 600415.CN -2.6% (Q3 results) - Telecom: Telstra Corp TLS.AU +1.2% (provides guidance)

After Hours Summary: TDC -12.0%, PKG +1.3%, CWTR -27.8% on earnings/guidance

After Hours Gainers: Companies trading higher in after hours in reaction to earnings: - PKG +1.3%

After Hours Losers: Companies trading lower in after hours in reaction to earnings: - CWTR -27.8%, - TDC -12.0% Companies trading lower in after hours in reaction to news: - RSO -2.4% (announced ~100 mln offering)

Closing Market Summary: Stocks Climb With Hopes For Budget Deal Flying High

Once again, equity indices posted modest gains even as the agreement to end the partial government shutdown and extend the debt ceiling remained elusive. The S&P 500 added 0.4%, extending its year-to-date gain to 19.9%.

Stocks slumped at the open after the weekend ended without any concrete progress in Washington. Despite the opening weakness, dip-buyers were quick to step in, drawing encouragement from late-morning reports indicating a bipartisan meeting was scheduled to take place at the White House at 15:00 ET.

The rebound continued into the afternoon with upbeat quotes from lawmakers providing additional support. On that note, Senate Majority Leader Harry Reid said he is ‘very optimistic' that an agreement will be reached this week. Similar remarks were made by Minority Leader Mitch McConnell who said "I share Senator Reid's optimism." A brief slip ensued during the final 90 minutes of the session when the White House meeting was postponed in order to allow more time for talks. Strikingly, the market did not appear too concerned with the cancellation as the major averages ended the session on their highs. Eight of ten sectors posted gains while telecom services (-0.7%) and utilities (-0.6%) spent the day in negative territory. On the upside, the technology sector (+0.5%) fueled much of the session-long rebound as top components rallied. Apple (AAPL 496.04, +3.23), Google (GOOG 876.11, +4.12), and Microsoft (MSFT 34.45, +0.32) settled with gains between 0.5% and 0.9%. Netflix (NFLX 324.36, +23.51) also displayed strength, surging 7.8% after reports indicated the company is exploring making its service available through cable set-top boxes. In addition, the company said it entered into a production deal with Sony (SNE 19.93, -0.03).

The outperformance of tech shares helped the Nasdaq end ahead of the broader market. The index also drew strength from biotechnology as the iShares Nasdaq Biotechnology ETF (IBB 202.30, +1.52) ended higher by 0.8% after weighing on the tech-heavy index in early going. Elsewhere, the energy sector (+0.6%) displayed relative strength as crude oil added 0.2% to $102.22 per barrel. Meanwhile, other commodities also posted gains. Gold futures rose 0.3% to $1272.50 per troy ounce and copper futures climbed 0.9% to $3.30 per pound. The Treasury market was closed for Columbus Day, and the holiday had a visible impact on trading volume as only 575 million shares changed hands on the floor of the New York Stock Exchange. Tomorrow, the October Empire Manufacturing Survey will be released at 8:30 ET.

US SENATE LEADERS 'MAKING PROGRESS,' BUT STILL SEEK AGREEMENT ON TWO KEY POINTS - LENGTH OF BOTH DEBT CEILING HIKE AND GOV'T FUNDING BILL-SENIOR DEMOCRATIC AIDE - RTRS

Shutdown Likely to Prolong Fed's Stimulus

Economists Push Back Expectations for Reduction in Bond Buying

The government shutdown and debt-ceiling fight are clouding the outlook for the global economy and markets, but they are bringing clarity to one area: The Federal Reserve is now likely to keep its foot on the monetary gas pedal even longer to offset damage from the standoff.

Two weeks into the shutdown, some of the fallout is clear. Economic growth will be at least a little slower than it would have been otherwise. Businesses and consumers are less confident about the economy's near-term course than they were before the shutdown started. And the most closely watched official gauges of economic activity—the government reports suspended by the shutdown—will be unlikely to provide reliable readings for months.

That's a meaningful—though still manageable—hit to the beleaguered U.S. recovery. An uglier ending to the still-unresolved battle over raising the debt ceiling, or an even longer government shutdown, could wreak worse damage.

The latest events in Washington make Fed officials appear unusually clairvoyant in their decision last month to keep their $85 billion-a-month bond-buying program unchanged despite widespread market expectations of a pullback.

Many U.S. central bankers have tended to be too optimistic in recent years, expecting a stronger economic recovery than they ended up getting.

This time, they wouldn't allow themselves to be fooled. Fed officials cited "the considerable risks surrounding fiscal policy" as one reason to leave policy unchanged, according to minutes of the Federal Open Market Committee's September meeting, released last week.

The considerable uncertainty about the economy has led private-sector forecasters to push back their own expectations for a change in Fed policy.

In the latest Wall Street Journal survey of economists none of the 46 respondents expected the Fed to announce a change to its bond purchases at its Oct. 29-30 meeting. In the survey a month earlier, two-thirds had expected at least some reduction in September or October.

The latest survey, conducted this month after the shutdown started, showed 37 out of 46 economists now expecting a Fed pullback on the bond-buying program to begin in December or January.

But many economists acknowledged it is more of a guess than usual with the shutdown and debt-ceiling fight unresolved. "Not even the FOMC knows when its tapering will begin," said Credit Suisse chief economist Neal Soss , who penciled in a January reduction.

The realities of the calendar make the possibility of an even later pullback by the Fed plausible.

Whenever the government finally reopens, it isn't clear whether it will be able to produce economic data covering the month of October. Even if it does, the economic volatility from the shutdown will cause reports covering October, November and possibly December to be head-scratchers given the one-time hits over that period.

In its late-January meeting, the Fed could conceivably be in the position of deciding whether to pull back just days before a new leader would be sworn in on Feb. 1. President Barack Obama nominated Fed Vice Chairwoman Janet Yellen last week to succeed current Chairman Ben Bernanke.

"March to me seemed like the first high-probability date" for the Fed to start reducing its bond purchases, said Pierpont Securities chief economist Stephen Stanley. "All the shenanigans we're seeing on the political side may very well push it out further," he said.

Whether the recovery is strong enough to make the Fed comfortable pulling back five or six months from now is another matter. Mr. Bernanke has warned repeatedly that the Fed can't protect the economy from the full consequences of the fiscal follies.

The economy appeared to be holding up through September before the lights went off Oct. 1 at parts of the Labor and Commerce departments, which issue many of the government's most closely followed economic statistics.

But some private-sector signals are already flashing red.

Gallup's daily measure of consumer confidence on Sunday dropped to a new low for the shutdown. The recent decline is on the cusp of eclipsing the monthlong tumble during the September 2008 financial crisis.

Business executives also have said they are less likely to hire and invest as lawmakers debate whether defaulting on U.S. bills would be merely bad or disastrous for the U.S. economy.

Economists tend to be an optimistic bunch, expecting for years that a stronger recovery would be just around the corner. But the Journal's latest survey showed many more throwing in the towel, shifting their hopes to 2014.

"The thing that's been hard to time—and makes people in my line of work look silly—is the psychological turn that leads businesses to start hiring, leads consumers to feel comfortable to spend a bit more freely, or gotten investors more confident to make slightly more aggressive investments," said Carl Tannenbaum, chief economist at Northern Trust.

"All of those things eventually kick in," he said. "But boy, it has taken a frustratingly long time."

With political battles again diminishing the benefits of monetary policy, the wait may be even longer.

{http://www.flightradar24.com/AIB1GG} have a look

The Nobel Prize for economics has been awarded to Americans Eugene F. Fama, Lars Peter Hansen and Robert J. Shiller for their work on the empirical analysis of asset prices.

The prize, awarded by the Swedish Riksbank in memory of Alfred Nobel, went to the scholars for their work on how the value of assets, such as stocks and bonds, vary over time.

The decision by the Nobel committee goes at the heart of the current macroeconomic debate over the crisis.

Eugene Fama, from the University of Chicago, showed that stock picks are extremely hard to predict in the short run and that new information is quickly incorporated into their prices. He is considered the father of the so-called “efficient market hypothesis”, a theory which has come under intense criticism following the huge swings observed in the stock market before and after 2008.

Robert Shiller, from Yale University, has found that stock prices fluctuate more than corporate dividends. The ratio of prices to dividends tends to fall when it is high and to increase when it is low.

Lars Peter Hansen, also from the University of Chicago, developed statistical methods that are suited to testing rational theories of asset prices.

Gapping down

In reaction to disappointing earnings/guidance: SPN -4.3% (ticking lower).

Select solar stocks trading lower: SOL -4.3%, STP -4.1% (provides updates on GSF assets in Brindisi, Italy), SPWR -3.4%, YGE -2.7%, TSL -2.6%, CY -2.5%, GLNG -2.3%, FSLR -0.9%, .

SelectChina internet related names showing early weakness: RENN -3.7%, QIHU -2.2%, BIDU -1.9%, YOKU -1.9%, SINA -1.2%, .

Other news: TSLA -2.1% (still checking), TTM -1.6% (reports out indicate Sept sales decline), TEVA -1.6% ( trading lower on reports of Union strike), PBPB -1.5% (Potbelly modestly lower on cautious Barron's mention), SAP -1.2% (still checking), FB -0.9% (plans to acquire mobile analytics startup Onavo, according to reports), AIG -0.9% (still checking), AAPL -0.6% (Apple and Samsung may be developing 12 inch size tablets, according to reports).

Analyst comments: ERIC -3.2% (downgraded to Underweight from Equal Weight at Barclays ), EXPE -2.8% (downgraded to Hold from Buy at Deutsche Bank), RBS -2% (Royal Bank of Scotland downgraded to Underperform from Neutral at BofA/Merrill ), DEO -1.2% (downgraded to Sell from Hold at Investec), COH -0.7% (downgraded to Hold at Canaccord Genuity), DEG -0.6% (downgraded to Underperform from Hold at Jefferies )