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Business Briefing Why would an alleged Russian spy want to know about ETFs?

These are stories Report on Business is following Tuesday, Jan. 27, 2015.

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The Spy Who Came In From ... Wall Street
U.S. authorities say they have busted a three-man Russian spy ring whose focus was economic intelligence.

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The allegations against the three read like a spy novel, complete with cloak-and-dagger meetings. With some funny moments.

And, in this modern era, there's even a LinkedIn profile.

One of the accused men, Evgeny Buryakov, allegedly posed as a New York banker. A LinkedIn profile under that name describes him as "deputy representative at Vnescheconombank."

(I couldn't read more because I didn't "connect" with him, and I didn't think it wise to send him a "friend" request.)

He was arrested yesterday in the Bronx, and Russia today rejected the allegations against the three.

The other two accused spies, Igor Sporyshev and Victor Podobnyy, have left the United States and "both of them were protected by diplomatic immunity from arrest and prosecution" while in the country, the FBI said in a statement.

According to the allegations filed in court, all three were operatives of Russia's foreign intelligence agency, SVR, in particular its Directorate ER, whose specialty is economic matters.

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"The directives from Moscow Center to Evgeny Buryakov, a/k/a 'Zhenya,' Igor Sporyshev, and Victory Podobnyy, the defendants, as well as to other covert SVR agents acting within the United States, included requests to gather intelligence on, among other subjects, potential United States sanctions against the Russian Federation and the United States' efforts to develop alternative energy resources," the complaint alleges.

They're accused of using "clandestine methods and coded messages," with Mr. Buryakov, for example, "passing a bag, magazine, or slip of paper" to Mr. Sporyshev, who identified himself as a Russian trade representative in New York.

This tale certainly has its humourous moments. Let's call it "The Spy Who Came In From Wall Street."

In what's said to be a recorded conversation, Mr. Podobnyy complained that his job wasn't what he thought, nothing close to James Bond.

Here's what FBI Special Agent Gregory Monaghan alleges in the court document:

"Based on my training, experience, and familiarity with this investigation, I believe that, in this conversation, Victor Podobnyy, the defendant, contrasted the mundane aspects of his work as an intelligence agent abroad with fictional concepts of an intelligence agent's work, and expressed surprise that he was not given a new identity by the SVR while operating as an intelligence agent ('not even close [U/I] movies about James Bond. Of course, I wouldn't fly helicopters, but pretend to be someone else at a minimum.') Igor Sporyshev, the defendant, agreed, stating that he thought he would at least get a different passport to hid his true identity."

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Mr. Monaghan alleges in the document that Mr. Sporyshev and Mr. Podobnyy discussed attempts to recruit Americans, including several employed by big companies "and several young women with ties to a major university located in New York."

Based on the document, the intelligence agency also wanted to know something about the New York Stock Exchange and ETFs, but the conversation is hard to follow.

In a recorded call, according to the court document, Mr. Sporyshev told Mr. Buryakov that an unidentified news organization wanted questions asked about the NYSE. The FBI alleged the organization is "sometimes used by Russian intelligence."

The transcript in the document goes like this:

Buryakov: "I don't know whether it will work for you but you can ask about ETF … E-T-F. E, exchange."

Sporyshev: "Yes, got it."

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Buryakov: "How they are used, the mechanisms of use for destabilization of the markets."

Sporyshev: "Mechanism – of – use – for – market –stabilization in modern conditions."

Buryakov: "For destabilization."

Sporyshev: "Aha."

Buryakov: "Then you can ask them what they think about limiting the use of trading robots … You can also ask about the potential interest of the participants of the exchange to the products tied to the Russian Federation."

Mr. Buryakov, 39 and a father of two, faces two charges,

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No allegations have been proved in court.

Russia denied the allegations today, and demanded Mr. Buryakov's release, saying there is "no evidence" to support the accusations.

"It seems as though the U.S. authorities are once again resorting to their favourite tactics of building up spy hysteria," foreign ministry spokesman Alexander Lukashevich said in a statement.

"Russian-U.S. relations have been going through quite a complex period due to Washington's antagonistic stance," he added

"Apparently, the U.S. has opted for the 'worse is better' approach by deciding to launch yet another round of anti-Russian campaigning. The actions to deteriorate our bilateral relations and undermine prospects for interaction between our countries will remain on the conscience of those who initiated them."

(It's true that Russia's economy needs all the help it can get. But I'm not sure what any alleged spies hoped to learn on Wall Street. How to bundle mortgages, perhaps?)

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Investors sour
It's an ugly day on global markets.

Tokyo's Nikkei gained 1.7 per cent, but Hong Kong's Hang slipped 0.4 per cent. European and North American stocks are tumbling, driven lower by disappointing corporate earnings reports and a weak showing on U.S. durable goods orders.

In Europe, London's FTSE 100, Germany's DAX and the Paris CAC 40 were down by between 0.6 per cent and 1.6 per cent.

The S&P 500 and Dow Jones industrial average also tumbled, while Toronto's S&P/TSX composite was up.

"Those looking for someone to blame for the selloff can find a number of possible targets this afternoon," said analyst Chris Beauchamp of IG in London.

"The picture had already been clouded by Microsoft's figures last night, but sentiment took a further knock as durable goods orders slumped, with grave ramifications for U.S. growth numbers for the final quarter," he added.

"Improvements in consumer confidence and new home sales were nothing compared to this unpleasant surprise. Meanwhile the distinctly underwhelming tone of earnings season got worse with a big miss on earnings from Caterpillar and a deterioration in Procter & Gamble's numbers as well."

Earnings flood in
Fourth-quarter earnings season is picking up, with more than 25 S&P 500 companies reporting today, setting the outlook for stock markets.

"It's a packed day of U.S. corporate reports today with Caterpillar, Pfizer, Apple, Yahoo, AT&T and Proctor & Gamble all posting quarterly figures," said market analyst Alastair McCaig of IG in London.

"Last night saw Microsoft join an illustrious list of U.S. companies that have missed [earnings-per-share] expectations, putting firm downward pressure on the shares," he added.

"The markets have come to expect 75 per cent of companies to beat projections, but this quarter is beginning to look like the exception to the rule."

Caterpillar Inc., for example, missed the estimates of analysts, sparking a drop in its stock price.

From loonie to 'swoonie'
The Canadian dollar is worth less then 81 cents U.S. today, and may well sink below the 80-cent mark soon.

The currency, which has suffered along with oil prices, dipped as low as 80.02 cents, having touched a high of 80.75 cents. It sat at around 80.7 cents by late in the day.

(Canada's dollar coin is known as the loonie. For the record, my colleague Scott Barlow, who writes that Goldman Sachs Group Inc. predicts it will slump to just 71 cents, has dubbed it the "swoonie.")

The loonie sank today amid more "discomfort," with oil trading near its lows, before perking up somewhat, said chief currency strategist Camilla Sutton of Bank of Nova Scotia.

And sometimes the markets can act like a "magnet," she added, with traders just wanting to see what might happen if a currency pushes through a certain level.

Currency markets have been volatile of late, to put it mildly, amid the collapse in oil prices, the surprise shifts from the likes of the Bank of Canada and the Swiss central bank, stimulus measures from the European Central Bank, and the ups and downs of the euro zone in general.

The loonie plunged last week after a surprise rate cut by the Bank of Canada, and some economists are speculating they central bank could trim its benchmark rate again.

Where Canada's concerned – like Norway and Russia, the currency is tied to crude – analysts have fast been revising their forecasts.

Besides the Goldman Sachs call for 71 cents in 2017, others are also forecasting a slump well below the 80-cent mark.

Just yesterday, for example, economists at Toronto-Dominion Bank said in a new forecast that they expect a low of 75 cents by early next year.

"Those who hoped to return to greater market calm after the holidays have been sorely disappointed," said TD chief economist Craig Alexander and economist Leslie Preston.

"So far in 2015, oil prices and bond yields have continued to fall, and many central banks have enacted further monetary stimulus to stave off the risk of deflation," they added.

"For Canada, the Bank of Canada's 25-basis-point rate cut takes the cake as the biggest economic surprise of 2015. And it's only January. While most economists, ourselves included, had been rapidly downgrading Canada's economic outlook in the wake of the collapse in oil prices, none predicted that the Bank of Canada would react so swiftly to oil's plunge."

Joseph Rotman dies at age 80
Toronto businessman and philanthropist Joseph Rotman has died at age 80, The Globe and Mail's Janet McFarland reports.

Mr. Rotman founded Clairvest Group Inc. in 1987 to provide merchant banking for new companies, and was involved throughout his career in numerous companies in sectors such as oil trading, petroleum distribution, oil and gas exploration, real estate and venture capital.

He served on boards of many major Canadian corporations – including Bank of Montreal, Barrick Gold Corp. and Trizec Hahn Corp. – and made large donations throughout his lifetime to support education, innovation and research, and the arts community. The University of Toronto's business school was named after Mr. Rotman in 1997 after he pledged more than $15-million in donations.

Mobilicity secures auction financing
Mobilicity says it has secured the financing necessary to register for an upcoming public auction for valuable cellular airwaves, The Globe and Mail's Christine Dobby reports.

Pending court approval, the move will at least put the company in a position to compete with fellow startup carrier Wind Mobile for a swath of spectrum the federal government has earmarked for operating new entrants.

Mobilicity, which has been under creditor protection since September, 2013, filed materials late Monday asking the Ontario Superior Court of Justice to approve a new financing arrangement that will allow it to place a deposit of approximately $62-million on Friday.

The funding is contingent on court approval, which the company is seeking at a motion in Toronto scheduled for Wednesday.

Blaming the U.S.
The Russians appear to have forgotten that S&P downgraded the United States, too.

Russia's Deputy Foreign Minister Vasily Nebenzia said today that Standard & Poor's Rating Services was acting on "direct orders" from the U.S. government when it downgraded the country to junk status yesterday.

Right. But I seem to remember the uproar when S&P took a swipe at Washington, as well.

"There is nothing surprising in the fact that this process has taken place at the moment: It strangely coincided with a new rise of anti-Russian hysteria," according to a translated version of what the official told the RIA Novosti news agency.

"I have no doubt that this decision was taken on direct orders from Washington."

S&P cut Russia's foreign currency ratings to double-B-plus from triple-B-minus, warning that "the downgrade reflects our view that Russia's monetary policy flexibility has become more limited and its economic growth prospects have weakened."

Russia faces a deep slump amid the plunge in oil prices, the extreme damage to the ruble and Western sanctions.

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