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World

Russia Says It Will Rejoin Ukraine Grain-Export Deal

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Russia said it would rejoin a deal allowing for the safe passage of Ukrainian grain, ending days of uncertainty over future shipments and feeding some criticism at home that Moscow had capitulated in the standoff.

Over the weekend, Russia suspended its involvement in an agreement with the United Nations and Turkey that was struck in July and allowed for the safe passage of grain exports from war-torn Ukrainian ports through the Black Sea to world markets. Russian authorities had said a maritime corridor used to facilitate the grain shipments had been used in an attack on Russia-occupied Crimea. Moscow threatened to board ships that left without its permission.

Russia’s Defense Ministry said early Wednesday it had received written guarantees from Kyiv that Ukraine wouldn’t use the corridor to attack Russian forces and that those were sufficient to rejoin the deal. President

Vladimir Putin

later Wednesday said that Russia reserved the right to pull out of the deal, but that it wouldn’t interfere in any future grain shipments from Ukraine directly to Turkey.

The justification provided by the Defense Ministry triggered derision in Moscow, where commentators have openly criticized Russia’s execution of the war in Ukraine. Senior military officials have at times drawn fire from pro-Kremlin military bloggers for losing ground to Ukraine’s army in recent months and for other moves these critics have called tactical or strategic mistakes. Russian officials have also had to defend themselves against criticism they have bungled a recent mobilization of reinforcements across the country.

“We trust Kyiv that the grain deal will not be used for military purposes. Brilliant,” wrote political commentator

Pavel Danilin,

director of the Center for Political Analysis, a pro-Kremlin Moscow-based think tank, questioning the logic of trusting Ukraine.

After Russia said over the weekend that it was suspending its participation in the deal, ships continued to pull in and out of Ukraine, navigating through a maritime corridor established to safeguard the trade. Moscow then threatened it would intercept ships that disembarked without permission, but Russia’s navy didn’t stop any vessels.

The relatively smooth operation, despite Russia’s suspension, was taken by some critics as a sign Moscow was powerless to upset the trade, even if it wanted to.

“The Kremlin itself simply fell into a trap from which it did not know how to get out,”

Tatiana Stanovaya,

founder of R.Politik, an independent political-analysis firm founded in Moscow, wrote on Telegram.

An oil refinery in Sicily, owned by Russia’s second largest oil and gas giant Lukoil, acts as a pass-through for Russian crude, which ultimately makes its way to the U.S. as gasoline and other refined oil products. Photo Illustration: Laura Kammermann

Among shipping and insurance executives, though, Russia’s suspension was threatening to dry up underwriting for voyages. Insurers were pulling policies and refusing to write new ones without Russia’s participation in the deal.

“You can’t get insurance with Russia out of the agreement,” said

Nikolas Tsakos,

president and chief executive of U.S.-listed, Greece-based Tsakos Energy Navigation Ltd. Shipowners said insurers have resumed offering cover.

The grain standoff came as Russia faces setbacks on the battlefield and far from it. Ukrainian forces have taken back swaths of terrain that Russian forces had occupied in the early days of the invasion. Meanwhile, Russia’s economic leverage over Europe, in the form of its once-prodigious sales of natural gas, has recently waned—at least temporarily. European buyers have pivoted from Russian supplies, while Moscow cut back sharply on its sales to Europe.

Still, the continent has managed in recent months to sock away enough gas in storage that analysts believe will help it avoid the sort of shortages and rationings many Western officials just a few months ago had been bracing to endure. That new comfort could be short-lived, analysts say, if there is a colder-than-expected winter or infrastructure problems that further disrupt supplies.

Russia’s grain-deal suspension threatened to increase economic pressure on Ukraine, which relied on agriculture for about 10% of its gross domestic product before the war, Western and Ukrainian officials said. The Russian shutdown also imperiled food supplies for millions of people in poorer countries that import Ukrainian wheat.

Russia’s invasion of Ukraine had bottled up those grain exports, sending global prices soaring. The U.N.-brokered deal moderated those prices, but also appeared to give Moscow outsize leverage on markets. As Mr. Putin threatened in recent weeks to leave the deal, Western officials accused him of using food as a weapon.

A U.N. official prepares to inspect in Istanbul a ship from Ukraine loaded with grain.



Photo:

yasin akgul/Agence France-Presse/Getty Images

Ismini Palla,

a spokeswoman for the U.N. at a coordination center in Istanbul that is charged with overseeing the deal, said Wednesday’s pause in shipping, which had been anticipated before Russia’s decision to rejoin the deal, was intended “to provide time for planning and discussions for the next movement of vessels.”

Ukraine shipped nearly 10 million tons of corn, wheat, sunflower oil and other products through the deal’s maritime corridor between August and October, helping to return the country’s exports to prewar levels. More than 100 large bulk ships are involved in the trade.

Russia stopped cooperating with the agreement after it accused Ukraine of using the corridor to attack Russian forces over the weekend. The U.N. said no military vessels are allowed to approach the corridor, which is closely monitored using satellite data.

In threatening to abandon the deal in recent months, Russia had complained that not enough of Ukraine’s grain was going to poor countries and said Western sanctions had slowed Russian food and fertilizer exports. U.S. and European Union officials say the sanctions don’t apply to food products. The U.N. said the measures have created obstacles to financing, insuring, shipping and paying for Russian products.

Russian shipping executives said vessel arrivals at Russian export ports had fallen by 20% over the past two months, with the majority of ships shifting to move Ukrainian cargoes.

U.N. Secretary-General

António Guterres

praised Russia’s renewed participation in the deal. Mr. Guterres “continues his engagement with all actors towards the renewal and full implementation of the Initiative, and he also remains committed to removing the remaining obstacles to the exports of Russian food and fertilizer,” his spokesman,

Stéphane Dujarric,

said.

Russia’s Defense Ministry said Wednesday that thanks to the U.N. and Turkey, “it was possible to obtain the necessary written guarantees from Ukraine” that it wouldn’t use the maritime corridor and Ukrainian ports for combat operations against Russia. Russia “considers that the guarantees received at the moment appear to be sufficient and resumes the implementation of the agreement,” it said.

Write to Jared Malsin at jared.malsin@wsj.com, Ann M. Simmons at ann.simmons@wsj.com and Costas Paris at costas.paris@wsj.com

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World

Russia Moves to Pull Out of Ukraine Grain Deal After Blasts Hit Crimean Port

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Russia said Saturday that it would suspend participation in the export of agricultural products from Ukrainian ports, in response to an attack on the occupied Black Sea port of Sevastopol that it blamed on the government of Ukraine.

The Defense Ministry said in a statement published on Telegram that ships of the Black Sea Fleet and civilian ships involved in ensuring the security of the so-called grain corridor had come under attack. As a result, “the Russian side suspends participation in the implementation of agreements on the export of agricultural products from Ukrainian ports,” the statement said.

The move threatens to derail the United Nations brokered deal that unblocks Ukraine’s vital grain exports through the Black Sea, which is critical to addressing a global hunger crisis and comes a day after U.N. chief

António Guterres

urged Russia and Ukraine to renew the agreement, which is officially set to expire on Nov. 19.

Officials from Russia, Turkey, Ukraine and the U.N. signed the grain agreement in July, freeing millions of tons of food products that had been bottled up in the country since the Russian invasion began in February.

The agreement is one of the few diplomatic breakthroughs of the war and helped to bring the global price of wheat down to prewar levels, helping to ease a global hunger crisis that resulted in part from the conflict. Ukraine provided about 10% of the world’s wheat before Russia invaded.

If shipments of Ukrainian grain are halted, the suspension will likely drive up the global price of wheat, corn and other vital food products.

But Russia’s Foreign Ministry said that Ukraine’s armed forces used “the cover of a humanitarian corridor” to launch massive air and sea strikes and as a result Moscow “cannot guarantee the safety of civilian dry cargo ships participating in the Black Sea Initiative and suspends its implementation from today for an indefinite period.” It said appropriate instructions have been given to Russian representatives at the Joint Coordination Center in Istanbul, which controls the transportation of Ukrainian food.

A Turkish official said Turkey hasn’t been officially notified of Russia’s decision to suspend its participation in the deal. Turkish President Recep

Tayyip Erdogan

helped broker the deal.

Oleksandr Kubrakov,

Ukraine’s minister of infrastructure, said his country will continue supplying grains around the world. “The world should not be held hostage to Russia’s whims, hunger cannot be a weapon,” he said in a Tweet.

Russia’s decision to suspend it is also a major blow to Ukraine’s globally important agriculture industry, which returned to a nearly prewar level of grain exports earlier this month, largely due to the deal. Since the agreement was signed, Ukraine exported 9.2 million tons of food products through a safe corridor in the Black Sea, according to the United Nations.

Russian President

Vladimir Putin

has threatened to abandon the deal in recent months, arguing that not enough of Ukraine’s wheat was going to poorer nations and that not enough Russian food and fertilizers were being exported due to sanctions. Around one-quarter of the food shipped through the deal went to low-income countries, according to the U.N. Ukraine also has shipped wheat to crisis-stricken nations including Somalia, Afghanistan and Yemen under the agreement.

Stéphane Dujarric,

a spokesman for the U.N. secretary-general, on Saturday said, “We’ve seen the reports from the Russian Federation regarding the suspension of their participation in the Black Sea Grain Initiative following an attack on the Russian Black Sea Fleet. We are in touch with the Russian authorities on this matter.”

“It is vital that all parties refrain from any action that would imperil the Black Sea Grain Initiative which is a critical humanitarian effort that is clearly having a positive impact on access to food for millions of people around the world,” said Mr. Dujarric.

In Luch, a village near the Kherson front line, a resident plays with her dog in the basement where she has been living during the war.



Photo:

Virginie NGUYEN HOANG for the Wa

Volunteers distribute humanitarian aid in the village.



Photo:

Virginie NGUYEN HOANG for the Wa

When asked about how Russia’s decision would affect the operation of the grain corridor, a representative of the Joint Coordination Center referred to Mr. Dujarric’s statement.

Ukraine’s foreign minister said in a tweet, “We have warned of Russia’s plans to ruin the Black Sea Grain Initiative. Now Moscow uses a false pretext to block the grain corridor which ensures food security for millions of people. I call on all states to demand Russia to stop its hunger games and recommit to its obligations.”

A worker at a Ukrainian power plant repairs equipment damaged in a missile strike.



Photo:

sergei supinsky/Agence France-Presse/Getty Images

The remains of a house in the southern village of Luch, which has suffered frequent shelling.



Photo:

Virginie NGUYEN HOANG for the Wa

Ukraine President

Volodymyr Zelensky

accused Russia earlier this month of deliberately slowing the passage of vessels through the corridor, creating a backlog of more than 170 vessels waiting to transit. The corridor’s capacity is limited by the number of inspectors from Russia, Turkey, Ukraine and the U.N. who must check each ship as it enters and exits the Black Sea.

Russian Defense Ministry spokesman Lt. Gen. Igor Konashenkov said nine aerial drones and seven maritime drones were involved in Saturday’s attack. He said the air attacks were repelled, but a sea minesweeper, the Ivan Golubets, sustained minor damage, as did some defensive infrastructure in Yuzhnaya Bay, one of the harbor bays in Sevastopol.

“You could hear explosions coming in from the sea,” said Yevgeni Babalin, a dockworker at the Port of Sevastopol. “There are fears that the Admiral Makarov was hit by an underwater drone.They shot at it from the ship and from a helicopter.”

The Admiral Makarov, a frigate, replaced the Moskva as the Black Sea Fleet’s flagship after the latter was attacked earlier this year.

A broker in Odessa who arranges cargoes from Sevastopol to the Middle East said the situation at the port was tense with residents asked to stay inside by Russian authorities.

Mikhail Razvozhayev, the Russian-installed governor of Sevastopol, wrote on his Telegram messaging channel that the attack had caused minimal damage to civilian infrastructure but city services were put on alert. He appealed to residents of the city not to publicize videos or information of the attack that could aid Ukrainian forces “to understand how the defense of our city is built.”

Ukrainian officials haven’t claimed responsibility for previous blasts in Crimea, including a drone strike on the headquarters of the Black Sea Fleet in August, but rejoiced and vowed to reclaim the peninsula annexed by Russia in 2014.

Crimea has served as a rear base for Moscow’s military occupation of a swath of territory in southern Ukraine, where Kyiv’s forces are now seeking to dislodge Russian forces from part of the Kherson region.

Gen. Sergei Surovikin, the recently appointed commander of Russian troops in Ukraine, has acknowledged that the position in Kherson is challenging and that “difficult decisions” might be called for, without elaborating.

Russian-installed officials in Kherson began telling residents to leave the city earlier this month in what they said was preparation for a Ukrainian assault.

Kirill Stremousov,

deputy head of the Kherson region’s Russian-installed administration on Friday said the evacuation of civilians was complete.

Meanwhile, the Russian Defense Ministry spokesman accused the British Navy on Saturday of being responsible for sabotaging Nord Stream pipelines in late September. Western governments have found that explosions rocked Nord Stream and a parallel pair of pipelines, Nord Stream 2. Investigations are continuing. Some German officials have said they are working under the assumption that Russia was behind the blasts.

The U.K. Defense Ministry said in a tweet on Saturday: “To detract from their disastrous handling of the illegal invasion of Ukraine, the Russian Ministry of Defence is resorting to peddling false claims of an epic scale. This invented story, says more about arguments going on inside the Russian Government than it does about the west.”

—Alistair MacDonald and Costas Paris contributed to this article.

Write to Ann M. Simmons at ann.simmons@wsj.com, Jared Malsin at jared.malsin@wsj.com and Isabel Coles at isabel.coles@wsj.com

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Business

Amazon Stock Slides After it Gives Weak Outlook Amid Recession Fears

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Amazon.com Inc.

AMZN -4.06%

projected sales in the current quarter would be far below expectations, sending its stock plunging and offering the latest stark sign of how shifting economic forces are battering tech giants that thrived during the pandemic.

The company on Thursday said sales in the recently completed third quarter rose 15% from a year earlier, while net income was $2.9 billion—its first quarterly profit in 2022, though still a 9% decline from the same period last year.

The e-commerce giant jolted investors with its projection for revenue of $140 billion to $148 billion in the current period—analysts had expected more than $155 billion, according to FactSet. Amazon, which said the estimate includes a sizable hit from foreign-exchange factors, also said it anticipated operating income of anywhere between zero and $4 billion, reflecting the uncertainty looming over what is traditionally its biggest quarter of the year because of holiday shopping.

The company’s shares fell more than 12% in after-hours trading following the results to trade near $97. At that level, Amazon’s valuation is below $1 trillion, which it first hit in 2018.

The disappointing outlook capped an extraordinary several days that also saw shares of other tech giants plummet after their results showed worsening conditions in a range of areas.

Shares of

Facebook

parent Meta Platforms Inc., already battered over the past year, dropped nearly 25% on Thursday after it reported its second quarterly revenue decline in a row a day earlier.

Microsoft Corp.’s

stock also fell after it delivered on Tuesday its worst net income decline in more than two years and the weakest revenue growth in over five years. Google-parent

Alphabet Inc.

similarly disappointed investors with slowing sales.

These tech companies flourished during the pandemic, as life and work suddenly shifted more to the internet, pushing up sales and spurring the already fast-growing companies to accelerate hiring and investment.

Now, one after another, engines that drove that growth are sputtering. Sales of personal computers and other gadgets are falling. Consumers, walloped by inflation, are broadly trimming their spending, while companies are tightening their outlays for everything from digital ads to IT services.

“There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets,” Amazon Chief Executive

Andy Jassy

said Thursday. 

In the third quarter, Amazon’s online store sales rose 7% to $53.48 billion after falling in recent quarters. The segment includes product sales primarily on its flagship site and digital media content. Its online sales got a boost from its annual Prime Day sale, which this year fell in the third quarter where last year it was in the second quarter.

While still the nation’s largest online store, Amazon’s e-commerce division has struggled to grow this year. The company in the second quarter reported a 4% year-over-year drop in its online stores segment. That marked the largest drop since the metric was first reported in 2016.

This year, Amazon’s e-commerce machine—which has grown at breakneck speed for decade—has been showing signs that it could be entering a phase of slower growth. After a multibillion-dollar infrastructure build-out and hiring spree, it now has to contend with high inflation and concerns about a recession weighing on consumer spending.

Chief Financial Officer

Brian Olsavsky

said the company has entered a period of caution.

“We are preparing for what could be a slower growth period like most companies. We are going to be very careful on our hiring,” Mr. Olsavsky said during a call with reporters Thursday. “We certainly are looking at our cost structure and looking for areas where we can save money.”

He said Amazon is “seeing signs all around that people’s budgets are tight, inflation is still high.”

Analysts say the new challenges Amazon faces in e-commerce could linger.

Amazon has the largest share of online commerce, about 38%, but its market share has plateaued in recent years, according to market research firm Insider Intelligence. Analysts say the company’s size has made it unlikely the e-commerce unit’s growth would hit the same pace it once did. Amazon also is dealing with increased competition from

Walmart Inc.,

Target Corp.

and others.

Mr. Jassy has shifted toward cost-cutting. The company cut back on subleasing millions of square feet of excess warehouse space and put off opening new facilities while earlier thinning out its hourly workforce through attrition.

It enacted a hiring freeze through the end of the year at its corporate retail division, the segment that drives core sales and is responsible for a large part of this year’s slowdown. The company has paused hiring among some teams at its Amazon Web Services cloud-computing division.

While Amazon’s earnings continue to be aided by AWS and its expanding advertising business, growth slowed in the cloud business. AWS had sales of $20.5 billion during the third quarter, a 27% rise but one of the lowest rates of growth posted by the unit in recent quarters. Mr. Olsavsky said the company saw AWS customers “working to cut their bills.”

Amazon’s advertising revenues rose 25% to $9.5 billion.

Amazon is headed toward the end of the year with added challenges. After needing fewer blue-collar employees earlier in the year, it has looked to add more than 100,000 workers at its warehouses to meet the expected holiday demand. Still, that strategy has come with a cost. Amazon recently said it would spend $1 billion to raise average starting salaries to $19 an hour nationwide and is earmarking millions to raise wages and benefits for its delivery employees.

Consumers will be more likely to return to bricks-and-mortar stores for their holiday shopping this year, and economic concerns will likely weigh on spending, according to analysts. Amazon’s own

Jeff Bezos

seemed cautious about the future. He recently said it is time to “batten down the hatches,” referring to warning signs that the U.S. is headed for a recession.

Write to Sebastian Herrera at sebastian.herrera@wsj.com

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Business

Elon Musk’s Twitter Takeover Debt to Be Held by Banks Amid Turbulent Markets

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Banks that committed to help finance

Elon Musk’s

takeover of Twitter Inc. plan to hold all $13 billion of debt backing the deal rather than syndicate it out, according to people familiar with the matter, in another blow to a market that serves as a crucial source of corporate funding.

Twitter could have the dubious distinction of being the biggest so-called hung deal of all time, surpassing a crop of them in the global financial crisis, when banks were stuck with around $300 billion of committed debt they struggled to sell to investors.

Twitter will become a private company if Elon Musk’s $44 billion takeover bid is approved. The move would allow Musk to make changes to the site. WSJ’s Dan Gallagher explains Musk’s proposed changes and the challenges he might face enacting them. Illustration: Jordan Kranse

The Twitter move threatens to bring the faltering leveraged-buyout pipeline to a standstill by tying up capital that Wall Street could otherwise use to back new deals.

The $44 billion Twitter takeover is backed by banks including Morgan Stanley,

Bank of America Corp.

and Barclays PLC, which signed agreements in April to provide Mr. Musk with the debt financing he needed to buy the company. They had originally intended to find third-party investors, such as loan asset managers and mutual funds, who would ultimately lend the money as is customary in leveraged buyouts.

But rising interest rates and growing concerns about a recession have cooled investors’ appetite for risky loans and bonds. Mr. Musk’s past criticism of Twitter’s alleged misrepresentation of the condition of its business and the number of fake accounts on the platform aren’t helping either—nor is a deterioration in Twitter’s business, the people added.

Banks would likely face losses of around $500 million or more if they tried to sell Twitter’s debt at current market prices, The Wall Street Journal previously reported. If all the banks hold the debt instead, they can mark it at a higher value on their books on the premise that prices will eventually rebound.

Banks also face a timing problem: Mr. Musk and Twitter have until Oct. 28 to close his planned purchase, and there is still no guarantee the unpredictable billionaire will follow through or some other trouble won’t arise. (If the deal doesn’t close by that time, the two parties will go to court in November.) That means the banks wouldn’t have enough time to market the debt to third-party investors, a process that normally takes weeks, even if they wanted to sell it now.

Assuming the deal closes, banks hope to be able to sell some of Twitter’s debt by early next year, should market conditions improve by then, some of the people said. Twitter’s banks are discussing how to potentially slice up the debt into different pieces that could be easier for hedge-fund investors or direct lenders to swallow, one of these people said.

The banks have good reason to want to hold the debt for as short a time period as possible.

Holding loans and bonds can force them to set more capital aside to meet regulatory requirements, limiting the credit banks are able to provide to others. Banks also face year-end stress tests, and they will want to limit their exposure to risky corporate debts before regulators evaluate the soundness of their balance sheets.

So far this year, banks have already taken hundreds of millions of dollars worth of losses and been forced to hold a growing amount of buyout debt.

Twitter’s debt, including $6.5 billion of term loans and $6 billion of bonds, would add to the increasing pile banks eventually intend to syndicate, recently estimated by

Goldman Sachs

at around $45 billion.

Banks’ third-quarter earnings showed a steep drop-off in revenue tied to deal-making. Goldman’s debt-underwriting revenue dropped to $328 million in the third quarter from $726 million a year earlier.

Morgan Stanley CEO

James Gorman

said recently that his bank has been “quite cautious in the leveraged-finance arena” for new deals, while Bank of America’s

Brian Moynihan

said “there’s been a natural retrenching” in the leveraged-loan market and the bank “was working to get through the pipeline” of existing deals.

Private-equity firms, which rely heavily on debt to fund their buyouts, have increasingly turned to private-credit providers such as Blackstone Credit and

Blue Owl Capital Inc.

These firms don’t have to split up and sell debt and can provide funding from investment vehicles established to do so. Although it is more expensive and harder to come by than earlier this year, private-credit providers have been the main source of buyout financing recently.

To deal with debts they have already committed to, banks have gotten increasingly creative.

In a take-private of Citrix Systems Inc., banks agreed to turn some $6 billion of syndicated term loans into a more traditional bank loan that they chose to keep on their balance sheets, but they sold around $8 billion of bonds and loans at a loss of more than $500 million, the Journal reported. There was also a revision in the financing structure of the Nielsen Holdings PLC take-private, with $3 billion in unsecured bonds becoming a junior secured loan that private-credit provider

Ares Capital Corp.

agreed to lead. The banks held the remainder of Nielsen’s roughly $9 billion of debt on their balance sheets.

—Matt Wirz contributed to this article.

Write to Laura Cooper at laura.cooper@wsj.com and Alexander Saeedy at alexander.saeedy@wsj.com

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Sports

Hans Niemann Files $100 Million Lawsuit Against Magnus Carlsen, Chess.com Over Cheating Allegations

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Hans Moke Niemann, the 19-year-old American grandmaster at the center of an alleged cheating scandal that has pulsed drama through the chess world, has made his next move: He sued world champion Magnus Carlsen and others seeking $100 million in damages. 

The federal lawsuit, filed in the Eastern Missouri District Court, says that Carlsen, Chess.com and others, including grandmaster Hikaru Nakamura, are “colluding to blacklist” Niemann from the chess world and have made defamatory statements accusing Niemann of cheating. Niemann is seeking damages of no less than $100 million in the suit, which said that tournament organizers have shunned him since the allegations emerged. 

“This is not a game,” Niemann’s lawyers, Terrence Oved and Darren Oved, said in a statement. “Defendants have destroyed Niemann’s life simply because he had the talent, dedication and audacity to defeat the so-called ‘King of Chess.’ We will hold defendants fully accountable and expose the truth.”

Chess.com chief chess officer Danny Rensch didn’t have an immediate comment. Chess.com has previously said that it did not communicate with Carlsen about its decisions relating to Niemann. A spokesman for Carlsen didn’t immediately respond to a request for comment. Nakamura, while streaming on Twitch, said he didn’t have a comment.

At the heart of Niemann’s suit are the financial relationships between Chess.com, Carlsen and other power players in the industry. The complaint alleged that Chess.com colluded with Carlsen because the company is buying Carlsen’s “Play Magnus” app for nearly $83 million in a merger that will “monopolize the chess world.” The planned acquisition was first announced in August. 

Niemann accused the defendants, which also include Play Magnus and Rensch, of slander, libel, an unlawful boycott and tortious interference with Niemann’s business. 

‘This is not a game,’ Niemann’s lawyers, Terrence Oved and Darren Oved, said in a statement.



Photo:

Oved & Oved LLP

Niemann’s legal action is his most aggressive maneuver since the controversy first erupted in early September at a prestigious tournament in St. Louis when Niemann stunningly upset Carlsen. After the game, Carlsen abruptly withdrew from the tournament—an action that was widely interpreted as a sign of protest. In another event a few weeks later, Carlsen resigned a game against Niemann after making just one move. 

Shortly thereafter, the five-time world champion from Norway confirmed everyone’s suspicions. In a statement, Carlsen said that he believes “Niemann has cheated more—and more recently—than he has publicly admitted.”

As the scandal engulfed the Sinquefield Cup, the tournament in St. Louis, Niemann offered a defense. He admitted to cheating in limited circumstances online when he was 12 and 16 years old, and said they were the biggest mistakes of his life. He said the only instance he cheated when there was money on the line was when he was 12, and that he never cheated during in-person games. 

A report from Chess.com alleging that grandmaster Hans Moke Niemann likely cheated in over 100 online games upended the chess world in October. WSJ explains how a player might bypass security measures to win a game. Illustration: Adele Morgan

However, an investigation by Chess.com, first reported by The Wall Street Journal, contradicted Niemann and indicated the breadth of his fairplay violations was greater then he had let on. The report said Niemann had likely cheated in more than 100 games, including as a 17-year-old and in other events with money on the line, and that Niemann had privately admitted to violating the rules when he was banned from the site in 2020. 

The report didn’t make any conclusions about whether Niemann has cheated in person, as the platform doesn’t police over-the-board events, but it flagged certain events where it said his play merited further investigation. 

Niemann’s lawsuit takes aim at that report, which it said Chess.com “maliciously leaked to The Wall Street Journal to fuel the spectacle of Carlsen’s cheating allegations” before Niemann’s participation in the U.S. Chess Championship. The lawsuit denied that Niemann ever confessed to the cheating allegations and said that its findings about the extent of Niemann’s cheating is false.

After Carlsen withdrew from the Sinquefield Cup, Chess.com removed Niemann from its Chess.com Global Championship, a tournament with $1 million in prize money. 

Chess.com said in the report that while Carlsen’s actions at the Sinquefield Cup prompted it to reassess Niemann’s behavior, Carlsen “didn’t talk with, ask for, or directly influence Chess.com’s decisions at all.” 

The lawsuit further alleged that the parties worked with powerful influencers to amplify the allegations against Niemann. In particular, it names Hikaru Nakamura, a top American grandmaster who has gained extraordinary popularity by streaming chess content. The suit calls Nakamura “Chess.com’s most influential streaming partner” and accused him of “acting in collusion with Carlsen and Chess.com, published hours of video content amplifying and attempting to bolster Carlsen’s false cheating allegations against Niemann.” 

Because of the cheating allegations, the complaint said, one tournament that Niemann was making arrangements to play in ceased communications with him. It also said that another grandmaster canceled an upcoming match against him and that Niemann can’t obtain employment as a chess teacher at a reputable school. 

Write to Andrew Beaton at andrew.beaton@wsj.com and Joshua Robinson at Joshua.Robinson@wsj.com

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Business

Dow Surges 900 Points in Volatile Trading

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U.S. stocks turned sharply higher Thursday, a head-spinning reversal after major indexes spent much of the morning deep in negative territory.

Stocks tumbled in early trading after new data showed that inflation remains persistently high, strengthening expectations for continued large interest-rate increases from the Federal Reserve. At their lows, the Nasdaq Composite had fallen more than 3%, the S&P 500 had dropped more than 2%, and the Dow Jones Industrial Average had declined nearly 2%, according to Dow Jones Market Data.

The morning’s declines followed what had been a dismal stretch for stocks. The S&P 500 on Wednesday fell for the sixth day in a row, hitting its lowest closing level since November 2020.

Traders appeared to decide that the selling had gone too far. Stocks pared their losses throughout the morning, then turned green shortly after 11 a.m. The S&P 500 recently was up 2.8% while the Dow industrials were up about 3%, or about 900 points. The Nasdaq Composite advanced 2.3%.

“What the market is experiencing is the influences of a lot of short-term traders,” said Tom Galvin, chief investment officer at wealth management firm City National Rochdale. While some traders dumped stocks after the inflation data, “once they were done selling, I think markets started to stabilize.”

The turn higher came as a relief after another punishing span in the markets.

The Nasdaq Composite, like the S&P 500, closed lower on Wednesday for a sixth consecutive trading day. On Tuesday those losses tipped the tech-heavy equities gauge into a bear market—Wall Street parlance for a decline of 20% or more from a recent peak—for the second time this year.

Still, such heart-stopping moves—sharp gains as well as steep drops—can be a sign of trouble. Markets were rocked by similar gyrations as they tumbled early in the pandemic.

Investors have been fixated on any signals about the path of inflation and the trajectory of the Federal Reserve’s campaign to tame the price increases by raising interest rates. Rising rates put pressure on the valuations that investors are willing to pay for stocks, while also raising concerns about companies’ future earnings.

Earlier Thursday, new data from the Labor Department showed that a reading of U.S. consumer inflation excluding volatile energy and food prices accelerated to a new four-decade high. The so-called core measure of the consumer-price index gained 6.6% in September from a year earlier, the biggest increase since August 1982.

The overall consumer-price index, meanwhile, increased 8.2% in September from the same month a year ago, down from 8.3% in August and 9.1% in June.

That move lower could be welcome news for investors looking to justify buying back into a stock market that is trading much more cheaply than in the recent past.

“The fact that you’re seeing some peaking out in inflation to where maybe we just don’t have to fight the Fed so much, people will feel comfortable buying in at these levels,” said Dan Genter, chief executive and chief investment officer at Genter Capital Management.

Investors have debated whether signs of stress creeping into some markets might cause the Fed to slow its pace of interest-rate increases. Volatility in U.K. government-bond markets, following government plans for large, debt-funded tax cuts, has sparked margin calls for pension funds and rippled into U.S. junk-debt markets. 

Mortgage rates hit a 20-year high on Thursday, a development that is likely to add to the pressure on the cooling housing market, potentially accelerating the shakeout of this cyclical industry.

Federal Reserve officials expressed concern at their meeting last month over the persistence of high inflation. They revised higher their expectations for rate increases, though some signaled caution about overdoing them amid risks of economic and financial volatility. The International Monetary Fund has warned that global central banks’ moves to quickly raise interest rates have fueled increased risks to the financial system.

A series of interest-rate rises have rippled through the U.S. economy, and more are projected to be on the way. WSJ breaks down the numbers hitting Americans’ wallets this year and beyond. Photo: Elise Amendola/Associated Press

“Market volatility and financial stability is something we’re following closely,” said

Carsten Brzeski,

ING Groep’s

global head of macro research, adding that the fast rise in interest rates “is clearly a potential risk.” 

Additional data from the Labor Department showed that 228,000 Americans applied for unemployment benefits in the week ended Oct. 8, up from 219,000 the week prior.

In bond markets, the yield on the benchmark 10-year U.S. Treasury note rose to 3.939% from 3.901% Wednesday, reversing earlier losses ahead of the inflation data. Yields and prices move inversely. 

In energy markets, Brent crude, the international benchmark for oil prices, rose 2.3% to $94.57 a barrel. 

Overseas, the pan-continental Stoxx Europe 600 rose 0.8%.

Traders worked on the floor of the New York Stock Exchange last week.



Photo:

BRENDAN MCDERMID/REUTERS

In Asia, major indexes closed with losses. Hong Kong’s Hang Seng fell 1.9% and South Korea’s Kospi declined 1.8%. Japan’s Nikkei 225 and China’s Shanghai Composite edged down 0.6% and 0.3%, respectively.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Karen Langley at karen.langley@wsj.com

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Business

Stocks Slip After Fed Minutes and Inflation Data

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U.S. stocks slipped Wednesday in the wake of new inflation data and the release of the minutes of the September meeting of the Federal Reserve’s rate-setting board.

The S&P 500 edged down 11.81 points, or 0.3%, to 3577.03, a nearly two-year low. The Dow Jones Industrial Average lost 28.34 points, or 0.1%, closing at 29210.85. The Nasdaq Composite dropped 9.09 points, or 0.1%, to 10417.10, a day after the tech-heavy index entered its second bear market of 2022, marking a drop of more than 20% from its recent high on Aug. 15.

Investors have been on edge this week ahead of the release of Thursday’s report on consumer prices in the U.S. that will shed light on how much work the Fed has left to do in containing decades-high price rises. In recent months, inflation gauges have shown widespread pricing pressures on categories such as food and housing, while energy prices have eased.

U.S. suppliers increased the prices they charge customers by 0.4% in September from a month earlier, according to data released Wednesday. Economists polled by The Wall Street Journal had expected a 0.2% increase.

As inflation climbs in the U.S., rising food and energy costs have pushed the nation’s most popular price index to its highest level in four decades. WSJ’s Gwynn Guilford explains how the consumer-price index works and what it can tell you about inflation. Illustration: Jacob Reynolds

“Inflation certainly broadened out and entered into areas that were more sticky,” said

Kiran Ganesh,

a multiasset strategist at

UBS.

“That’s why there’s been an increase in expectations…that the Fed needs to keep rates at a higher level for longer to get inflation down.”

The Fed released Wednesday afternoon the minutes of its September meeting, which showed officials concerned over the persistence of high inflation and expecting that bringing prices and wages down would likely require the labor market to weaken.

The Fed’s stance has heightened the risk of a recession, but it doesn’t appear the economy is in one now, said Merk Investments strategist Nicholas Reece. A recession may in fact come as late as the second half of next year, he said. That, however, likely means the market may churn along for several more months before finally hitting a cycle low. “That’s one of the things hanging over this market,” he said.

Corporate earnings over the next several weeks will also provide insight into how businesses are dealing with price pressures.

PepsiCo

on Wednesday again lifted its sales outlook for the year as it continues to push through price increases on its snacks and drinks, sending shares up $6.80, or 4.2%, to $169.39.

Traders working on the floor of the New York Stock Exchange last week.



Photo:

BRENDAN MCDERMID/REUTERS

The coming days will bring updates from a range of companies including

Delta Air Lines

and banks such as JPMorgan Chase and Citigroup.

Mr. Ganesh said earnings estimates for the remainder of the year and 2023 are too optimistic, posing another risk for stocks in the months ahead.

“If you look at market performance so far this year, it’s pretty much fully explained by the move in rates and bond yields,” said Mr. Ganesh. “Higher rates should mean lower expectations for growth and earnings, and that’s not priced into the market yet.”

Investors also continue to watch turmoil in U.K. government-bond markets, which have been highly volatile since the government set plans for large, debt-funded tax cuts last month. The Bank of England’s attempt to prevent broader market dysfunction that had hit pension funds particularly hard has had mixed results. 

On Tuesday, BOE Gov. Andrew Bailey confirmed the central bank plans to wind down its bond-market intervention program by Friday as planned, sparking a selloff in the British pound. The message was reiterated by BOE officials on Wednesday.

U.K. markets were mixed. The pound rebounded 1.2% to $1.1099, but U.K. government bonds, known as gilts, remained under pressure. The 30-year U.K. gilt yield briefly topped 5%, a level last seen before the central bank’s intervention. Yields rise as prices fall.

The U.S. 10-year Treasury note was down slightly at 3.901%.

“Bond markets think the BOE isn’t doing enough,” said

Viraj Patel,

a global macro strategist at Vanda Research. Despite the BOE’s pledge to wind down bond-buying, Mr. Patel still believes the central bank would step in with support if volatility again threatens financial stability.

“They won’t let this get to some sort of chaos that spirals out of control,” he said.

The U.K.’s FTSE 100 fell 0.9% to 6826.15, while the pan-European Stoxx Europe 600 lost 0.5% to 385.88.

Asian stocks were mixed. China’s benchmark Shanghai Composite gained 1.5% to 3025.51, while Hong Kong’s Hang Seng declined 0.8% to 16701.03 and Japan’s Nikkei 225 index was little changed at 26396.83.

Write to Chelsey Dulaney at chelsey.dulaney@wsj.com and Paul Vigna at Paul.Vigna@wsj.com

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Business

Peloton Co-Founder John Foley Faced Repeated Margin Calls From Goldman Sachs as Stock Slumped

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John Foley,

the co-founder and former chief executive of

Peloton Interactive Inc.,

PTON -3.41%

faced repeated margin calls on money he borrowed against his Peloton holdings before he left the fitness company’s board last month, according to people familiar with the situation.

As Peloton’s shares slumped over the past year,

Goldman Sachs Group Inc.

GS -2.11%

asked Mr. Foley several times to provide fresh funds or additional collateral for personal loans the bank had extended to him, the people said. The company’s share price has fallen nearly 95% from its $160 peak in December 2020.

Resigning from the board gave Mr. Foley flexibility to sell or pledge more Peloton shares, though he said the margin calls weren’t the reason he left the company.

“I didn’t resign from the board because I was underwater,” he said. “To the extent that I took on debt through Goldman, it was because I am bullish on Peloton and still am. It was and is a great company.”

The former chairman and CEO had pledged as collateral about 3.5 million Peloton shares as of the end of September 2021, or about 20% of his stake at the time, securities filings show. The pledged shares were worth more than $300 million a year ago. At current prices, they are worth roughly $30 million.

Peloton has cut thousands of jobs this year to stem its losses.



Photo:

John Smith/VIEWpress/Getty Images

Mr. Foley was able to secure private financing and avoid stock sales by Goldman, the people said. He declined to say on Monday how much of his current stake had been pledged or how much he had borrowed against his holdings.

His seat on the board limited his ability to raise additional funds because most public companies prohibit directors and executives from selling their shares during certain trading periods. In addition, Peloton’s policy limits pledges for margin loans by directors or executives to 40% of the value of an individual’s shares or vested options.

Mr. Foley’s decision to leave the board on Sept. 12 followed a tumultuous several months at the company he co-founded a decade ago, as well as a sharp decline in his personal wealth as Peloton’s sagging fortunes diminished the value of his holdings. His stake in the company, worth $1.5 billion a year ago, is currently worth less than $100 million.

“Everyone can see I had a rocky year,” Mr. Foley said. “This was not a fun personal balance-sheet reset.”

Barry McCarthy, a Silicon Valley veteran, became Peloton’s CEO in February.



Photo:

Angela Owens/The Wall Street Journal

In February, Mr. Foley stepped down as Peloton’s CEO and was succeeded by

Barry McCarthy,

a former

Netflix Inc.

and Spotify Technology SA executive. Mr. Foley kept his position as Peloton’s executive chairman and continued to hold a controlling stake in the company through Class B shares with 20 votes apiece.

A few weeks later, Mr. Foley reported selling $50 million worth of Peloton shares in a private transaction. At the time, Peloton said the sale was part of the executive’s personal financial planning. The sale left him and his wife,

Jill Foley,

a former Peloton executive, with 6.6 million shares and options on another 8.4 million, according to securities filings, which combined are currently worth less than $100 million. He hasn’t reported any stock or option sales since March. Business Insider reported in March that Mr. Foley was in discussions with Goldman about restructuring his personal loans.

Peloton’s business deteriorated throughout the spring and summer, with the company in August reporting a $1.2 billion loss and the first ever quarter in which its subscriber numbers failed to grow. The company has cut thousands of jobs this year to stem its losses, including a round of layoffs unveiled last week.

Mr. Foley’s 10-year tenure as CEO was marked by rapid growth and sometimes lavish spending. He took heat from Peloton employees last December for hosting a black-tie holiday party that included some of the company’s celebrity instructors weeks after implementing a hiring freeze. Pictures circulated on Instagram of gown-clad instructors dancing at New York’s luxury Plaza Hotel. Mr. Foley acknowledged on social media that the event caused “frustration and angst” among employees.

Peloton has been on a wild ride, announcing its CEO was stepping down and thousands of jobs would be cut, despite seeing a surge in sales early in the pandemic. Here’s why Peloton became a viral success, and why it’s spinning out now. Photo illustration: Jacob Reynolds

That same month, Mr. Foley paid $55 million to purchase an oceanfront mansion in East Hampton, N.Y., according to real-estate records and people familiar with the transaction. He and Ms. Foley in September put their Manhattan penthouse up for sale. The property, last priced at $6.5 million, is in contract to be sold, according to listings website StreetEasy.

Margin loans, or borrowing against portfolios of stocks and bonds, come with the risk that a broker can call for additional cash or collateral to meet the minimum equity required if a security’s price drops too low. Sharp drops in stock prices during the 2000 dot-com burst and the 2008 financial crisis generated margin calls for executives at well-known companies.

John Foley paid $55 million to purchase this oceanfront mansion in East Hampton, N.Y.



Photo:

PICTOMETRY

Peloton requires directors, executives and employees to get approval for pledging their shares as collateral for margin loans. Other Peloton executives also have pledged some of their Class B holdings, and in the annual report Peloton filed last month, the company warned that investors could be harmed if its stock fell and executives were forced to sell shares.

Goldman has worked closely with Peloton, including when Mr. Foley was the CEO. The investment bank was one of the lead underwriters of the company’s initial public offering in 2019. Goldman bankers also co-led a $1 billion stock offering in November 2021.

Investors initially soured on Peloton—its shares fell 11% the day they made their debut at $29. The stock surged in 2020 during the onset of the Covid-19 pandemic, giving the company a peak market value of $50 billion and making Mr. Foley a billionaire on paper. The shares closed down 3.4% Tuesday at $8.78.

—Theo Francis

and Katherine Clarke contributed to this article.

Write to Sharon Terlep at sharon.terlep@wsj.com and Suzanne Vranica at suzanne.vranica@wsj.com

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Business

Bank of England Further Expands Bond-Market Rescue to Restore U.K.’s Financial Stability

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LONDON—The Bank of England extended support targeted at pension funds for the second day in a row, the latest attempt to contain a bond-market selloff that has threatened U.K. financial stability.

The central bank on Tuesday said it would add inflation-linked government bonds to its program of long-dated bond purchases, after an attempt on Monday to help pension funds failed to calm markets.

“Dysfunction in this market, and the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to U.K. financial stability,” the BOE said.

The yield on a 30-year U.K. inflation-linked bond has soared above 1.5% this week, up from 0.851% on Oct. 7, according to

Tradeweb.

Just weeks ago, the yield on the gilt, as U.K. government bonds are known, was negative. Because yields rise as prices fall, the effect has been punishing losses for bond investors.

Turmoil in the U.K. bond market created a feedback loop that left investors like pension funds short on cash and rippled out into other markets. WSJ’s Chelsey Dulaney explains the type of investment at the heart of the crisis. Illustration: Ryan Trefes

On Tuesday, after the BOE expanded the purchases, the yield on inflation-linked gilts held mostly steady but at the new, elevated levels. The central bank said it bought roughly £2 billion, equivalent to about $2.21 billion, in inflation-linked gilts, out of a £5 billion daily capacity.

The bank’s bond purchases, however, are meant to run out on Friday. The Pensions and Lifetime Savings Association, a trade body that represents the pension industry, urged the central bank on Tuesday to extend its purchases until the end of the month.

The near-daily expansion of the Bank of England’s rescue plan highlighted the challenges facing central banks in stamping out problems fueled by a once-in-a-generation increase in inflation and interest rates. It also raised questions about whether the BOE was providing the right medicine to address the problem.

The turmoil sparked fresh demands on Monday for pension funds to come up with cash to shore up LDIs, or liability-driven investments, derivative-based strategies that were meant to help match the money they owe to retirees over the long term.

LDIs were at the root of the bond selloff that prompted the BOE’s original intervention. Pension plans in late September saw a wave of margin calls after Prime Minister

Liz Truss’s

government announced large, debt-funded tax cuts that fueled an unprecedented bond-market selloff.

The BOE launched its original bond-purchase program on Sept. 28, but it only restored calm for a couple of days before selling resumed. An expansion of the program on Monday backfired, with yields again soaring higher.

The selloff on Monday was “very reminiscent of two weeks ago,” said

Simeon Willis,

chief investment officer of XPS, a company that advises pension plans.

LDI strategies use leveraged financial derivatives tied to interest rates to amplify returns. The outsize moves in U.K. bond markets last month led to huge collateral calls on pensions to back up the leveraged investments. The pension funds have sold other assets, including government and corporate bonds, to meet those calls, adding to pressure on yields to rise and creating a spiral effect on markets.

Pensions are typically big holders of inflation-linked government bonds, which help protect the plans from both inflation and interest-rate changes. But these weren’t eligible in the BOE’s bond-buying program until Tuesday.

The U.K. helped pioneer bonds with payouts linked to inflation, sometimes referred to as linkers, in the 1980s. Linkers were originally sold exclusively to pensions, but the U.K. opened them to other investors over the years.

Pensions remain a dominant force in the market because the bonds offer long-term protection against both inflation and interest-rate changes. Their outsize role left the market vulnerable to shifts in pension-fund demand like that seen in recent weeks.

Adam Skerry, a fund manager at Abrdn with a focus on inflation-linked government bonds, said his firm has struggled to trade those assets in recent days.

“We were trying to sell some bonds this morning, and it was virtually impossible to do that,” he said. “The LDI issue that’s facing the market, the fact that the market is moving to the degree that it did, particularly yesterday, suggests that there’s still an awful lot [of selling] there.”

Pensions have also appeared hesitant to sell their bonds to the BOE, reflecting a mismatch in what the central bank is offering and what the market needs.

“The way that the bank has structured this intervention is they can only buy assets if people put offers into them, but nobody is putting offers in,” said Craig Inches, head of rates and cash at Royal London Asset Management. He said the pension funds would rather sell their riskier assets, including corporate bonds or property.

Mr. Willis of XPS said many pensions want to hold on to their government bonds because it helps protect pensions against changes in interest rates, which impact the way their liabilities are valued.

“If they sell gilts now, they’re doing it in the likelihood that they’ll need to buy them back in the future at some point and they might be more expensive, and that’s unhelpful,” he said.

Also plaguing the program: Pension funds are traditionally slow-moving organizations that make decisions with multidecade horizons. The market turmoil has hurtled them into the warp-speed-style moves usually reserved for traders at swashbuckling hedge funds.

To make decisions about the sale of assets, industry players describe a game of telephone playing out among trustees, investment advisers, fund managers and banks. Pension funds spread their assets among multiple managers, which are in turn held by separate custodian banks. Calling everyone for the necessary signoffs is creating a lengthy and involved process.

To give themselves more time, pension funds are pushing the BOE to extend the bond-buying program at least to the end of the month. That is when the U.K.’s Treasury chief,

Kwasi Kwarteng,

is expected to lay out the government’s borrowing plans for the coming year.

The Institute for Fiscal Studies, a nonpartisan think tank that focuses on the budget, warned Tuesday that borrowing is likely to hit £200 billion in the financial year ending March, the third highest for a fiscal year since World War II and £100 billion higher than planned in March of this year. Increased borrowing increases the supply of bonds and generally causes bond yields to rise.

Mr. Kwarteng on Tuesday declared his confidence in BOE Gov. Andrew Bailey as he faced questions from lawmakers for the first time in his new job.

“I speak to the governor very frequently and he is someone who is absolutely independent and is managing what is a global situation very effectively,” he said.

—Caitlin Ostroff contributed to this article.

Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com, Anna Hirtenstein at anna.hirtenstein@wsj.com and Paul Hannon at paul.hannon@wsj.com

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