The Jim Bakker Show

U.S. gasoline futures spike on Colonial pipe explosion in Alabama

Flames shoot into the sky from a gas line explosion in western Shelby County, Alabama, U.S.,

Nov 1 (Reuters) – Colonial Pipeline Co said on Monday its two main gasoline and distillates pipelines remain shut after an explosion on the gasoline pipeline caused a fire in Shelby County, Alabama.

A contract crew working on the gasoline pipeline experienced an incident when the trackhoe it was using hit the line, gasoline was ignited and caused a fire, Colonial said in an
e-mailed statement.

The fire continues to burn and five individuals were transported to Birmingham-area hospitals for treatment, while one fatality was recorded at the scene, according to the company.

(Reporting by Apeksha Nair in Bengaluru; Editing by Christian
Schmollinger)

Wall St stumbles as FBI to review more Clinton emails

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York

By Chuck Mikolajczak

NEW YORK (Reuters) – U.S. stocks erased early gains and turned negative on Friday after the head of the FBI said it will review more emails related to Democratic presidential candidate Hillary Clinton’s private email use.

Each of the three major indexes on Wall Street fell to session lows after FBI Director James Comey said in a letter to several congressional Republicans that the agency had learned of the existence of emails that appeared to be pertinent to its investigation. The election is scheduled to take place in 11 days, on Nov. 8.

“The market turned south the minute the headline hit the tape that the FBI is all of a sudden looking at (Hillary Clinton’s) emails again,” said Ken Polcari, Director of the NYSE floor division at O’Neil Securities in New York.

“The fact they are looking again just raises the prospect that once again they might find something, so the market turned south because it is expecting a Clinton win.”

Wall Street had been higher for most of the session after economic data showed the U.S. economy grew 2.9 percent in the third quarter, its fastest pace in two years, and upbeat earnings from Google parent company Alphabet Inc.

Alphabet shares were up 0.6 percent at $821.85.

While the report supports the case for an interest rate hike, the Federal Reserve is unlikely to make a move at its meeting next week, as it falls just days ahead of the U.S. presidential election.

The market is largely expecting the central bank to hike rates in December, with the odds of a rate increase that month at 73.6 percent, according to the CME Group’s FedWatch tool.

Investors also digested the latest wave of earnings reports with the hope the latest quarter snaps a year-long earnings recession.

Nearly 73 percent of the S&P 500 companies that reported have topped Wall Street expectations, with growth for the quarter now expected to be 3 percent, according to Thomson Reuters I/B/E/S. The quarter had been expected to show a decline of 0.5 percent at the start of October.

On the negative side, Amazon.com was set for its worst day in nearly nine months, falling 4.8 percent to $778.74 after the online retailer warned that heavy investments in the crucial holiday quarter would hurt profits. The stock was the top drag on the S&P and the Nasdaq.

The Dow Jones industrial average <.DJI> fell 37.49 points, or 0.21 percent, to 18,132.19, the S&P 500 lost 9.81 points, or 0.46 percent, to 2,123.23 and the Nasdaq Composite dropped 29.05 points, or 0.56 percent, to 5,186.93.

Each of the major indexes were poised to post a decline for the week.

Amgen plunged 10.1 percent to $144.30 after the world’s largest biotechnology company’s sales for its flagship drug disappointed investors and analysts.

Declining issues outnumbered advancing ones on the NYSE by a 1.65-to-1 ratio; on Nasdaq, a 1.37-to-1 ratio favored decliners.

The S&P 500 posted 10 new 52-week highs and 9 new lows; the Nasdaq Composite recorded 42 new highs and 112 new lows.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)

At odds over Brexit, UK nations hold ‘frustrating’ talks on common stance

By Kylie MacLellan

LONDON (Reuters) – British Prime Minister Theresa May tried to persuade the leaders of Scotland, Wales and Northern Ireland on Monday to work with her government on a common Brexit negotiating position, but the Scottish leader dismissed the meeting as “deeply frustrating”.

May says that while the devolved governments of the UK’s three smaller nations should give their views on what the terms of Brexit should be, they must not undermine the UK’s strategy by seeking separate settlements with the EU.

“I don’t know what the UK’s negotiating position is because they can’t tell us,” Scotland’s First Minister Nicola Sturgeon said after talks at May’s Downing Street office.

“I can’t undermine something that doesn’t exist, it doesn’t appear to me at the moment that there is a UK negotiating strategy,” she told Sky News television.

While England and Wales voted for Brexit in a June referendum, Scotland and Northern Ireland voted to remain in the EU, setting the devolved governments in Edinburgh and Belfast on a collision course with the UK’s central government in London.

This could lead to a constitutional crisis, and potentially to Scottish independence and renewed political tensions in Northern Ireland.

At the meeting with Sturgeon and the Welsh and Northern Irish leaders, May proposed setting up a new body to give the three devolved governments, which have varying degrees of autonomy from London, a formal avenue to express their views.

“Working together, the nations of the United Kingdom will make a success of leaving the European Union — and we will further strengthen our unique and enduring union as we do so,” May said in a statement after the talks.

But Sturgeon struck a very different tone as she emerged.

“What I’m not prepared to do … is stand back and watch Scotland driven off a hard Brexit cliff edge because the consequences in lost jobs, lost investment and lower living standards are too serious,” she said.

CONFLICTING PRIORITIES

The British government, which has promised to kick off formal divorce talks with the EU before the end of March, has said it will negotiate a bespoke deal on behalf of the whole United Kingdom with the bloc’s other 27 members.

Sturgeon said she would make specific proposals over the next few weeks to keep Scotland in the single market even if the rest of the UK left, and that May had said she was prepared to listen to options.

“So far those words are not matched by substance or actions and that is what has got to change,” Sturgeon said.

Sturgeon, head of the Scottish National Party, has said her government is preparing for all possibilities, including independence from the UK, after Britain leaves the EU. She wants each of the UK’s four assemblies to get a vote on the proposed negotiating package.

In Northern Ireland, there are fears that Brexit could undermine a 1998 peace deal and lead to the reintroduction of unpopular and cumbersome controls on the border with the Republic of Ireland, an EU member.

Northern Ireland’s First Minister Arlene Foster said the devolved nations had to be at “the heart of the process” so that issues relevant to them could be tackled as they arose.

Welsh First Minister Carwyn Jones said it was difficult for the devolved administrations to influence the process when there was so much uncertainty over what the government was seeking.

Jones said he had argued very strongly for “full and unfettered access” to the EU’s single market, which is in doubt because EU leaders say it would require Britain to continue to accept EU freedom of movement rules.

One of the central planks of the pro-Brexit campaign was that exiting the EU would give Britain greater control over immigration and help reduce the numbers arriving in the country.

(Additional reporting by Elisabeth O’Leary, William James and Kate Holton; Editing by Estelle Shirbon and Robin Pomeroy)

Rising gasoline, rents push U.S. inflation higher in September

A Shell gas station is shown in Encinitas, California

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices recorded their biggest gain in five months in September as the cost of gasoline and rents surged, pointing to a steady pickup of inflation that could keep the Federal Reserve on track to raise interest rates in December.

The Labor Department said on Tuesday its Consumer Price Index increased 0.3 percent last month after rising 0.2 percent in August. In the 12 months through September, the CPI accelerated 1.5 percent, the biggest year-on-year increase since October 2014. The CPI rose 1.1 percent in the year to August.

“The upward creep of prices weakens any argument against a rate increase in December,” said Anthony Karydakis, chief economic strategist at Miller Tabak in New York. “The economy is close to full employment and prices are starting to respond to that reality.”

Last month’s increase in the CPI was in line with economists’ expectations. However, underlying inflation moderated amid a slowdown in the pace of increases in healthcare costs after recent robust gains.

The so-called core CPI, which strips out food and energy costs, gained 0.1 percent last month after climbing 0.3 percent in August. That slowed the year-on-year increase in the core CPI to 2.2 percent following a 2.3 percent rise in August.

But with rents, which account for a larger share of the core CPI, recording their biggest increase in nearly 10 years, and wages pushing higher, economists cautioned against putting too much emphasis on last month’s weak reading.

The U.S. central bank has a 2 percent inflation target and tracks an inflation measure which is at 1.7 percent. Fed Vice Chair Stanley Fischer said on Monday that the U.S. central bank was “very close” to its inflation and employment targets.

“As inflation approaches 2 percent, the argument that the economy has more room to run becomes harder to make and we believe the Fed remains on track for a rate hike in December,” said John Ryding, chief economist at RDQ Economics in New York.

The Fed lifted its short-term interest rate last December and has held it steady since because of persistently low inflation.

The dollar was little changed against a basket of currencies, while prices for longer-dated U.S. Treasuries rose slightly. U.S. stocks rallied, cheered by better-than-expected quarterly earnings from UnitedHealth, Netflix and Goldman Sachs.

FIRMING DEMAND

While the jump in overall inflation was also the result of last year’s lower energy prices dropping out of the calculation, it suggested firming domestic demand.

A 5.8 percent jump in gasoline prices accounted for more than half of the increase in the CPI last month. Americans also paid more for electricity, with prices posting their biggest gain since December 2014.

The price increases are bad news for retirees, with social security recipients only due to get a 0.3 percent cost of living adjustment increase next year. Households, however, got some relief from food prices in September, which were unchanged for a third straight month. The cost of food consumed at home declined for a fifth straight month.

Within the core CPI basket, housing costs rose further in September. Owners’ equivalent rent of primary residence increased 0.4 percent, the largest gain since October 2006, after rising 0.3 percent in August. Rents tend to be sticky and should keep core inflation supported.

Medical care costs rose 0.2 percent last month, the smallest increase since March, after surging 1.0 percent in August. The cost of hospital services was unchanged, while prices for prescription medicine rose 0.8 percent.

The government revised prices for prescription drugs from May through August this year as incorrect data had been used to calculate price changes. Prescription medicine accounts for about 1.4 percent of the CPI basket.

Consumers also paid more for grooming, motor vehicle insurance, tobacco and airline fares. However, prices for communication recorded their largest decline in two years, while heavy discounting by retailers pushed apparel prices down 0.7 percent. Prices for motor vehicles also fell.

“Inflation is moving up, showing this is not an economy that is undergoing serious demand-based weakness,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

British banks keep cyber attacks under wraps to protect image

By Lawrence White

LONDON (Reuters) – Britain’s banks are not reporting the full extent of cyber attacks to regulators for fear of punishment or bad publicity, bank executives and providers of security systems say.

Reported attacks on financial institutions in Britain have risen from just 5 in 2014 to 75 so far this year, data from Britain’s Financial Conduct Authority (FCA) show.

However, bankers and experts in cyber-security say many more attacks are taking place. In fact, banks are under almost constant attack, Shlomo Touboul, Chief Executive of Israeli-based cyber security firm Illusive Networks said.

Touboul cites the example of one large global financial institution he works with which experiences more than two billion such “events” a month, ranging from an employee receiving a malicious email to user or system-generated alerts of attacks or glitches.

Machine defenses filter those down to 200,000, before a human team cuts that to 200 “real” events a month, he added.

Banks are not obliged to reveal every such instance as cyber attacks fall under the FCA’s provision for companies to report any event that could have a material impact, unlike in the U.S. where forced disclosure makes reporting more consistent.

“There is a gray area…Banks are in general fulfilling their legal obligations but there is also a moral requirement to warn customers of potential losses and to share information with the industry,” Ryan Rubin, UK Managing Director, Security & Privacy at consultant Protiviti, said.

SWIFT ACTION

Banks are not alone in their reluctance to disclose every cyber attack. Of the five million fraud and 2.5 million cyber-related crimes occurring annually in the UK, only 250,000 are being reported, government data show.

But while saving them from bad publicity or worried customers, failure to report more serious incidents, even when they are unsuccessful, deprives regulators of information that could help prevent further attacks, the sources said.

A report published in May by Marsh and industry lobby group TheCityUK concluded that Britain’s financial sector should create a cyber forum comprising bank board members and risk officers to promote better information sharing.

Security experts said that while reporting all low level attacks such as email “phishing” attempts would overload authorities with unnecessary information, some banks are not sharing data on more harmful intrusions because of concerns about regulatory action or damage to their brand.

The most serious recent known attack was on the global SWIFT messaging network in February, but staff from five firms that provide cyber security products and advice to banks in Britain told Reuters they have seen first-hand examples of banks choosing not to report breaches, despite the FCA making public pleas for them to do so, the most recent in September.

“When I moved from law enforcement to banking and saw what banks knew, the amount of information at their disposal, I thought ‘wow’, I never had that before,” Troels Oerting, Group Chief Information Security Officer at Barclays and former head of Europol’s Cyber Crime Unit, said.

Oerting, who joined Barclays in February last year, said since then banks’ sharing of information with authorities has improved dramatically and Barclays shares all its relevant information on attacks with regulators.

Staff from five firms that provide cyber security products and advice to banks in Britain told Reuters they have seen first-hand examples of banks choosing not to report breaches.

“Banks are dramatically under-reporting attacks, they do what’s legally required but out of embarrassment or fear of punishment they aren’t giving the whole picture,” one of the sources, who declined to be named because he did not want to be identified criticizing his firm’s customers, said.

Apart from Barclays, the other major British banks all declined to comment on their disclosures.

The Bank of England declined to comment and the FCA did not respond to requests for comment.

KEEPING SECRETS

Companies that use external security systems also do not always inform them of attacks, the sources said.

“Our customers sometimes detect attacks but don’t tell us,” Touboul, whose firm helps protect banks’ SWIFT payment networks by luring attackers to decoy systems, said.

Hackers used the bank messaging system that helps transmit billions of dollars around the world every day to steal $81 million in one of the largest reported cyber-heists.

Targeted attacks, in which organized criminals penetrate bank systems and then lurk for months to identify and profile key executives and accounts, are becoming more common, David Ferbrache, technical director Cybersecurity at KPMG and former head of cyber and space at the UK Ministry of Defended, said.

“The lesson of the SWIFT attack is that the global banking system is heavily interconnected and dependent on the trust and security of component members, so more diligence in controls and more information sharing is vital,” Ferbrache said.

“Big banks are spending enormous amounts of money, $400-500 million a year, but there are still vulnerabilities in their supply chains and in executives’ home networks, and organized crime groups are shifting their focus accordingly,” Yuri Frayman, CEO of Los Angeles-based cyber security provider Zenedge, said.

BRAND DAMAGE

Banks are increasingly sensitive to the brand damage caused by IT failings, perceiving customers to care just as deeply about security and stable service as loan or deposit rates.

Former RBS Chief Executive Stephen Hester waived his bonus in 2012 over a failed software update which caused chaos for thousands of bank customers.

And HSBC issued multiple apologies to customers after its UK personal banking websites were shuttered by a distributed denial of service (DDoS) attack, following earlier unrelated IT glitches.

“People don’t care about a 0.1 percent interest rate change but ‘will this bank do the utmost to keep my money and information safe?'” Oerting said.

(Editing by Sinead Cruise and Alexander Smith)

Exclusive: Russia may borrow in yuan this year for first time

By Yelena Orekhova and Andrey Ostroukh

MOSCOW (Reuters) – Russia may borrow Chinese yuan for the first time ever by the end of 2016, a Russian finance ministry official said, a step towards Moscow’s ambition of using Asian credit markets to compensate for its limited access to Western funding.

Russia needs new sources of cash as low crude oil prices lead to widening shortfalls in the budget. Its access to Western capital markets is restricted by Western sanctions imposed on it over the conflict in Ukraine.

One option the finance ministry may choose is selling treasury bonds, known as OFZs, denominated in the Chinese currency, later this year, Konstantin Vyshkovsky, head of the state debt department at the finance ministry, told Reuters.

Moscow may raise the equivalent of $1 billion in yuan through the OFZs, money that the finance ministry would convert into rubles, Vyshkovsky said.

Russia has drawn closer to China, painting it as its close partner, after Moscow’s relations with the West were soured by its annexation of Crimea from Ukraine in 2014 and its support of the conflict in Eastern Ukraine.

But Moscow’s pivot towards Asia has not gone smoothly, in part because Asian credit markets are much shallower than the Western debt markets that Russia has turned to in the past when it needed to borrow.

Russia raised $3 billion through a dollar-denominated Eurobond this year, but the issue was complicated by the fact that many major financial institutions were wary of taking part because of sanctions risk.

Under a plan set by the finance ministry, Russia will not raise any more foreign debt this year, so the yuan-denominated OFZs, which are considered domestic borrowing, would be a timely supplement for the budget.

The money raised may help avoid a greater budget deficit, which this year will exceed the ceiling of three percent of gross domestic product that had been initially set by President Vladimir Putin.

Russia’s Reserve Fund is running out and low prices for crude oil, its key export, are putting pressure on the budget. The finance ministry had said it will respond by increasing borrowing and will also try to proceed with selling state stakes in major Russia companies.

The OFZ bonds would be issued as part of additional borrowing worth 200 billion rubles ($3.21 billion), Vyshkovsky said.

The extra borrowing program for the fourth quarter was approved in September after Russia had nearly reached its full-year borrowing limit of 300 billion rubles in the domestic market in the first three quarters.

Sovereign rouble bonds enjoyed strong demand this year thanks to high yields linked to the central bank interest rates . The central bank has been reluctant to cut rates quickly, given risks that inflation won’t slow to its ambitious target an all-time low of 4 percent in 2017.

($1 = 62.2255 rubles)

(Reporting by Yelena Orekhova, writing by Andrey Ostroukh, editing by Christian Lowe, Larry King)

Russia has ‘playbook’ for covert influence in Eastern Europe: study

Russian President Vladimir Putin (R) and Hungarian Prime Minister Viktor Orban shake hands during a joint news conference following their talks at the Novo-Ogaryovo state residence outside Moscow, Russia,

By John Walcott and Warren Strobel

WASHINGTON (Reuters) – Russia has mounted a campaign of covert economic and political measures to manipulate five countries in central and eastern Europe, discredit the West’s liberal democratic model, and undermine trans-Atlantic ties, a report by a private U.S. research group said.

The report released on Thursday said Moscow had co-opted sympathetic politicians, strived to dominate energy markets and other economic sectors, and undermined anti-corruption measures in an attempt to gain sway over governments in Bulgaria, Hungary, Latvia, Serbia, and Slovakia.

“In certain countries, Russian influence has become so pervasive and endemic that it has challenged national stability as well as a country’s Western orientation and Euro-Atlantic stability,” said the report of a 16-month study by the Center for Strategic and International Studies in Washington and the Sofia, Bulgaria-based Center for the Study of Democracy.

The publication of “The Kremlin Playbook: Understanding Russian Influence in Eastern and Central Europe” coincides with an unprecedented debate in the United States over whether Russia is attempting to interfere in the Nov. 8 presidential election with cyber attacks and the release of emails from the campaign of Democratic Party candidate Hillary Clinton.

The former U.S. Secretary of State’s campaign has said the Kremlin is trying to help Republican Donald Trump win the White House.

On Friday, the U.S. government for the first time formally accused Russia of hacking Democratic Party organizations. Russian President Vladimir Putin on Wednesday rejected allegations of meddling in the election.

The Russian Embassy in Washington did not immediately respond to an email seeking comment on the report. On Sunday, however, Russian Foreign Minister Sergei Lavrov told Russian state TV the United States was increasing its hostility toward Moscow.

Lavrov complained that NATO had been steadily moving military infrastructure closer to Russia’s borders with Eastern European countries and criticized sanctions imposed over Moscow’s role in the Ukraine crisis.

A former U.S. State Department official is the report’s lead author and U.S. officials said they concur with the findings on Russia’s involvement in Eastern Europe.

“The Russians have been engaged in a sustained campaign to recapture what Putin considers their rightful buffer in Eastern Europe, and to undermine not just NATO and the EU, but the entire democratic foundation of both institutions,” said a U.S. official who has studied Russian behavior since before the Soviet Union’s collapse in 1991.

The official requested anonymity because, he said, the White House has ordered officials not to publicly discuss hostile Russian activities.

Those activities, he said, include bribery, propaganda, disinformation, “the occasional” assassination of Kremlin critics at home or abroad, and now using the internet to undermine opponents and weaken Western institutions.

“The Kremlin Playbook” cites a series of Russian efforts to expand its writ in central and eastern Europe.

They range from “megadeal” projects such as the 12.2 billion euro contract to build two new nuclear reactors in Hungary, awarded to Russia under opaque terms, to the cultivation of pro-Russian businessmen who gain political office and then shield Moscow’s interests, it said.

In Bulgaria, Russia’s economic presence is so strong, averaging 22 percent of GDP between 2005 and 2014, “that the country is at high risk of Russian-influenced state capture,” the report said.

Heather Conley, the former U.S. official and lead author of the report, said in an interview that the study was intended to highlight a challenge that has received insufficient attention from American and European policymakers.

“The first step is to acknowledge that which is happening,” said Conley. “What is at stake here is how we view ourselves and the functioning of our democracy.”

The report proposes measures to curb what it calls an “unvirtuous cycle” of covert Russian influence. They include more focus on illicit financial flows and revamping U.S. assistance programs to stress strengthening governance and combating Russian influence.

It is not the only study this year to highlight Russia’s measures in the region.

“Russia has opened a new political front within Europe by supporting the far right against the liberal European Union,” the Centre for Historical Analysis and Conflict Research, a British Army research group, said in February.

Governments such as those in Hungary and Greece “openly sympathize” with Putin, it said. “The result is that there is a substantial ‘fifth column’ in western and central Europe which weakens our response to Russian aggression.”

(Editing by Grant McCool)

Feds can be ‘gentle’ in hiking rates, New York FED President says

William Dudley, President of the New York Federal Reserve Bank, speaks at Brooklyn College in the Brooklyn borough of New York,

By Jonathan Spicer

ALBANY, N.Y. (Reuters) – The Federal Reserve can be “gentle” in removing monetary stimulus since U.S. inflation remains low and the economic expansion could last five or more years, one of the most influential Fed policymakers said on Wednesday.

“We’re at a point where the economic expansion has plenty of room to run,” said New York Fed President William Dudley, echoing Fed Chair Janet Yellen’s message last month after the central bank decided to leave interest rates unchanged at near a record low of 0.25-0.5 percent.

“Inflation is a little below our target, rather than above our target, so I think we can be quite gentle as we go in terms of gradually removing monetary policy accommodation,” said Dudley, a close ally of Yellen and a permanent voter on policy.

The U.S. central bank lifted rates in December for the first time in nearly a decade and has stood pat since, as market volatility and overseas events were seen to threaten the U.S. economy, which slowed in the first half of the year. Still, most Fed officials still expect to raise rates again before year end.

“I think this economic expansion can last a good while longer,” Dudley told a business council gathering, adding one reason the Fed has been patient in mulling a rate hike this year is that “slack,” or underutilized workers, remain in the U.S. labor market.

The Fed, he said, is aiming for a best-case scenario in which the economy grows at a “moderate rate over the next five to 10 years” while unemployment remains around 5 percent or a bit lower “and just have a very long-lived economic expansion.”

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)

Drop in U.S. consumer spending clouds Fed rate hike outlook

By Jason Lange

WASHINGTON (Reuters) – U.S. consumer spending fell in August for the first time in seven months while inflation showed signs of accelerating, mixed signals that could keep the Federal Reserve cautious about raising interest rates.

The Commerce Department said on Friday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, fell 0.1 percent last month after accounting for inflation.

Analysts polled by Reuters had expected a 0.1 percent gain.

“Consumers took a breather in August,” said Chris Christopher of IHS Global Insight.

Fed Chair Janet Yellen said last week she expected the U.S. central bank would raise rates once later this year to keep the economy from eventually overheating.

Prices for fed funds futures suggest investors see almost no chance of a hike at the Fed’s next policy meeting in early November and roughly even odds of an increase at its mid-December meeting, according to CME Group.

The dollar <.DXY> was little changed against a basket of currencies while U.S. stock prices were trading higher.

Consumer spending, which has been robust in recent months, partially offset the drag from weak business investment and falling inventories in the second quarter when the economy expanded at a lackluster 1.4 percent annual rate.

Economists said overall economic growth could still accelerate in the current quarter even with August’s slight decline in consumer spending.

The Atlanta Fed said growth appeared on track to accelerate to a 2.4 percent annual rate in the third quarter, according to its closely watched GDPNow forecasting model. It had forecast growth of 2.8 percent for the period earlier this week.

A tightening labor market appears to be pushing up wages and could fuel higher levels of spending in the future. Personal income rose 0.2 percent in August, in line with expectations.

Consumer prices also rose about as much expected in August, with the price index excluding food and energy increasing 0.2 percent from the prior month. That left inflation excluding food and energy at 1.7 percent in the 12 months through August, up a tenth of a percentage point from the prior month and closer to the Fed’s 2 percent inflation target.

(Reporting by Jason Lange; Editing by Paul Simao)

Yahoo says hackers stole data from 500 million accounts

By Dustin Volz

(Reuters) – Yahoo Inc said on Thursday that at least 500 million of its accounts were hacked in 2014 by what it believed was a state-sponsored actor, a theft that appeared to be the world’s biggest known cyber breach by far.

Cyber thieves may have stolen names, email addresses, telephone numbers, dates of birth and encrypted passwords, the company said. But unprotected passwords, payment card data and bank account information did not appear to have been compromised, signaling that some of the most valuable user data was not taken.

The attack on Yahoo was unprecedented in size, more than triple other large attacks on sites such as eBay Inc, and it comes to light at a difficult time for Yahoo.

Chief Executive Officer Marissa Mayer is under pressure to shore up the flagging fortunes of the site founded in 1994, and the company in July agreed to a $4.83 billion cash sale of its internet business to Verizon Communications Inc.

“This is the biggest data breach ever,” said well-known cryptologist Bruce Schneier, adding that the impact on Yahoo and its users remained unclear because many questions remain, including the identity of the state-sponsored hackers behind it.

On its website on Thursday, Yahoo encouraged users to change their passwords but did not require it.

Although the attack happened in 2014, Yahoo only discovered the incursion after August reports of a separate breach. While that report turned out to be false, Yahoo’s investigation turned up the 2014 theft, according to a person familiar with the matter.

Analyst Robert Peck of SunTrust Robinson Humphrey said the breach probably was not enough to prompt Verizon to abandon its deal with Yahoo, but it could call for a price decrease of $100 million to $200 million, depending on how many users leave Yahoo.

Steven Caponi, an attorney at K&L Gates with a practice including merger litigation, said that Yahoo’s breach could fall under the “material adverse change” clause common in mergers allowing a buyer to walk away if its target’s value deteriorates.

“That would give Verizon the opportunity to renegotiate the terms or potentially walk away from the transaction if it is a material change. Whether it is a material change will depend in large part on what kind of information was compromised,” Caponi said.

Still, it is rare for mergers to fall apart over material changes. Verizon said in a statement it was made aware of the breach within the last two days and had limited information about the matter.

“We will evaluate as the investigation continues through the lens of overall Verizon interests,” the company said.

Shares of Yahoo stock closed a penny higher at $44.15, while shares of Verizon, were up about 1 percent.

RISING ATTACKS

The Yahoo breach follows a rising number of other large-scale data attacks and could make it a watershed event that prompts government and businesses to put more effort into bolstering defenses, said Dan Kaminsky, a well-known internet security expert.

Retailers and health insurers have been especially hard hit after high-profile breaches at Home Depot Inc, Target Corp, Anthem Inc and Premera Blue Cross.

“Five hundred of the Fortune 500 have been hacked,” he said. “If anything has changed, it’s that these attacks are getting publicly disclosed.”

Three U.S. intelligence officials, who declined to be identified by name, said they believed the attack was state-sponsored because of its resemblance to previous hacks traced to Russian intelligence agencies or hackers acting at their direction.

Yahoo said it was working with law enforcement on the matter, and the FBI said it was investigating.

“The investigation has found no evidence that the state-sponsored actor is currently in Yahoo’s network,” the company said.

While the breach comprised mostly low-value information, it did include security questions and answers created by users themselves. That data could make users vulnerable if they use the same answers on other sites.

A former Yahoo employee said the Q&A were deliberately left unencrypted, which allowed Yahoo to catch fake accounts more easily because fake accounts tended to reuse questions and answers.

News of the massive breach at one of the nation’s largest email providers may fan concern that U.S. companies and government agencies are not doing enough to improve cyber security.

Democratic Senator Mark Warner said in a statement he was “most troubled by news that this breach occurred in 2014, and yet the public is only learning details of it today.”

Technology website Recode first reported Tuesday that Yahoo planned to disclose details about a data breach affecting hundreds of millions of users.

(Reporting by Aishwarya Venugopal in Bengaluru and Dustin Volz in Washington; additional reporting by Jim Finkle in Boston, Lauren Hirsch in New York, and Joseph Menn and Deborah Todd in San Francisco, writing by Alwyn Scott; editing by Peter Henderson and Cynthia Osterman)

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