Author Salman Rushdie gestures during an interview with Reuters in central London, September 28, 2012.

MUMBAI | Tue Oct 9, 2012 9:55am EDT

MUMBAI (Reuters) - A film based on Salman Rushdie's novel "Midnight's Children" is set to be screened in India, its distributor said, a month after the movie's director said she feared "insecure politicians" could prevent it from being shown.

The film, which chronicles the story of an Indian family living through the tumultuous events from India's recent past including the partition in 1947 and 1970s state of emergency, features a voiceover by Rushdie.

The British author, who won the coveted Booker Prize for Midnight's Children in 1981, was forced to cancel a visit to a literature festival in his native India earlier this year after assassination threats were made against him.

Rushdie's 1988 novel "The Satanic Verses", which many Muslims deemed blasphemous, is banned in India, and his depiction of sensitive issues like former Prime Minister Indira Gandhi's role during the Emergency in Midnight's Children had thrown the film's screening into doubt.

Director Deepa Mehta chose to film the movie in Sri Lanka instead of India, after her previous production in the country was hit by protests from right-wing Hindu groups.

But PVR Pictures, the distribution company that has acquired the film in India, does not expect any problems.

"We are not (expecting any trouble). We don't think the film is controversial," Kamal Gianchandani, PVR's president, told Reuters, adding that the film was expected to be released in India in December.

He declined to say whether Rushdie, who has promoted the movie at festivals such as Toronto and Telluride, would be in India to launch it there.

"If the censor board has a perspective, it will be respected," Gianchandani added. "Whatever is the law of the land will be followed in (its) entirety."

Last month, Mehta said she feared "insecure politicians" might derail the film's release plans in India.

(Reporting by Shilpa Jamkhandikar; Editing by Henry Foy and Paul Casciato)

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A gallery worker walks past Seagram murals by Russian-born American painter Mark Rothko during a media view of the first major exhibition dedicated to his late works at the Tate Modern in London September 24, 2008.

LONDON | Mon Oct 8, 2012 7:13am EDT

LONDON (Reuters) - A man who claims to have defaced a major painting by Mark Rothko over the weekend in London said on Monday that Marcel Duchamp, the French artist most famous for his 1917 urinal that shocked the art establishment, would be "happy" at what he had done.

Police are investigating the incident on Sunday at Tate Modern gallery on the River Thames, where witnesses saw a man approach Rothko's 1958 canvas "Black on Maroon" and inscribe it with black ink in the lower right-hand corner.

Although the ink had run down the canvas, a photograph posted by a witness on the Twitter website showed the words: "VLADIMIR UMANETS '12, A POTENTIAL PIECE OF YELLOWISM."

A man answering a mobile phone number provided via a link on the website of the "Yellowism" movement (www.thisisyellowism.com) answered to the name of Vladimir Umanets and told Reuters he had carried out the attack.

"I'm aware they (the police) will come at some point and arrest me," he said, speaking in an eastern European accent.

"It was an artistic statement, but it was more about having the opportunity to speak about galleries and art," he added, explaining his actions.

"Marcel Duchamp, when he made 'readymades' (art), everyone was shocked. I don't want to be considered a vandal or someone who wants to destroy something, especially such a valuable painting.

"It's more about to change perception of things, of spectators. It's more about an idea."

Duchamp's iconoclastic urinal, entitled "Fountain" and featuring the words "R.Mutt", is considered one of the most influential works of the 20th century by challenging people's understanding of what constitutes art.

"What I do believe is the most creative thing left to do in contemporary art today is to abandon this (art) and Marcel Duchamp was trying to do this," Umanets said.

"I'm not saying I'm another Marcel Duchamp. I'm not a tag-maker. I'm doing my own thing ... After Duchamp, nothing actually happened. I definitely believe that Marcel Duchamp would be really happy."

In its online manifesto, "Yellowism" is described as neither art nor anti-art and that the "context for works of art is already art".

The Metropolitan Police said the suspect was a white man believed to be in his late-20s. No arrest has been made.

A Tate Modern spokeswoman said the painting would be repaired by an in-house team of experts. Asked whether the gallery, one of the world's most popular, was considering beefing up its security, she replied in a statement:

"Tate has strong security systems in place including physical barriers, security officers in the galleries, alarms and CCTV."

In the case of the Rothkos, which are hanging on Level 3 of the converted power station, the barrier is a low wire.

The damaged work was one of the "Seagram Murals" the Russian-American artist was commissioned to paint in the 1950s for the new Four Seasons restaurant in New York.

Several ended up in the Tate collection after they were given as gifts before Rothko took his life, and Tate describes the famous series of soft-edged rectangles as "iconic".

No one knows why the artist abandoned the bright, intense colors of his earlier canvases and painted in dark maroons, reds and black, but one theory is that he said he wanted to "ruin the appetite of every son of a bitch who ever eats in that room."

Rothko is considered one of the 20th century's most important artists, and in May, his "Orange, Red, Yellow" sold for $86.9 million, a new auction record for the artist, at Christie's in New York.

Tim Wright, who witnessed Sunday's attack, wrote on Twitter: "This guy calmly walked up, took out a marker pen and tagged it. Surreal ... Very bizarre, he sat there for a while then just went for it and made a quick exit."

(Reporting by Mike Collett-White)

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LONDON | Tue Oct 9, 2012 9:45am EDT

LONDON (Reuters) - Central banks, among the most conservative asset managers in the world, are buying more stocks because of the paltry returns and negative yields available from top-rated sovereign bonds.

It is a move that may at first seem counterintuitive given that most are required to focus on capital preservation and take little risk to ensure quick access to national hard currency stockpiles in the event of a national emergency.

There is also a degree of irony in their finding scant attractiveness in low-yielding fixed income, which they themselves helped engender with rock bottom interest rates.

But changing tack they are - at least some of them.

Israel's central bank started buying equities this year, investing 2 percent of its foreign exchange reserves in U.S. stocks. Eventually, it plans to raise this to 10 percent, or nearly $8 billion.

South Korea's central bank's share of stocks in its reserves grew to 5.4 percent last year from 3.1 percent in 2009 and the Czech Republic's bank has increased its equities holdings to 10 percent of its foreign reserves over the past three years.

"The goalposts have been moved," said Gary Smith, head of official institutions at BNP Paribas Investment Partners, pointing at very low to negative yields on bonds issued by the United States, Germany and other sought-after sovereigns.

"If risk-free assets start to be riskier, what we used to view as risky assets, like equity, appears relatively less risky ... The push away factor is negative yields."

Germany and even France are among the top-rated sovereigns issuing debt at negative yield, meaning investors will not get all their capital back. There is also the fear of major sell off at a later date.

By contrast, the S&P 500 .SPX offers on average a dividend yield of 2.2 percent, half a percentage more than 10-year U.S. treasuries. For two-year U.S. bonds, the real yield - nominal yield minus inflation - is negative by about half a percentage point.

"The share of equity (in central banks reserves) five years ago was almost zero ..., There is significant potential for the equity allocation to grow," BNP Paribas' Smith said.

HIGHER YIELDS

Stocks may still be only a tiny fraction of overall foreign exchange reserves, estimated by the International Monetary Fund to be in excess of $10.5 trillion in the second quarter of 2012, but even small increases in share can equate to vast sums.

Czech National Bank board member Eva Zamrazilova says her country chose in the mid-2000s to buy stocks because it had reserves beyond its monetary policy needs. It has increased the exposure gradually from 2008 to 2011.

"Bond yields are very low in absolute terms and dividend yields are exceeding bond yields," Zamrazilova told Reuters, adding that the central bank had maintained a "stable market risk profile" while buying stocks.

The Czech bank defines itself as a "risk-aversed investor" using a purely passive management, simply tracking the likes of the MSCI Euro, S&P 500, FTSE 100 .FTSE and Nikkei 225 .N225.

"Equities are an efficient diversifier with a potential to enhance returns (equity premium) and smoothen volatility of returns (negative correlation)," Zamrazilova said.

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Graphic on asset performance link.reuters.com/muc46s

U.S. dividend yield vs. bond yield link.reuters.com/dat23t

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EXCESS RESERVES

Buying equities is growing in parallel with the increase in foreign exchange reserves, said Patrick Thomson, global head of sovereigns at JP Morgan Asset Management.

"It's mostly the large reserve holders, people with excess reserves ... diversifying and looking for higher yield than currently available in the bond markets," Thomson said, adding that his firm advises reserve managers to diversify to account for the risk of negative return on bond portfolios.

Most central banks do not spell out where and how they invest their reserves. Buying equities is not a traditional way to manage reserves and some who could afford it decide not to so, Thomson said, but Asian central banks, in particular, have been fairly active in their reserve management policies.

Reserve managers' investments in equities usually start with large global brands, he said.

"It's global to begin with but once they become more comfortable we've seen strong interest in emerging market equity over the last couple of years. That's a fairly significant asset allocation change, taking advantage of growth in those economies."

Investing in equities clearly has its risks and the Swiss National Bank, which had 9 percent of foreign currency investments in stocks last year, saw price losses on equity exceed dividends, the bank said in its annual report.

Still, its report said that share price risk "contributed very little to total risk" in contrast with gold prices and exchange rates because the portfolio only accounted for nine percent foreign currency investments.

Sixty percent of reserve managers consider that equities are more attractive than a year before, according to a survey of 54 central banks, who control 49 percent of global reserves, carried out in January by Central Banking Publications.

"Overwhelmingly reserve managers feel their central bank need to diversify - or in some cases resume more active diversification. This is their dominant long-term reaction to the crisis," the survey published in April said.

(Graphics by Scott Barber. Editing by Jeremy Gaunt.)

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Minneapolis Federal Reserve Bank President Narayana Kocherlakota (far R) poses with board members at a drilling site near Stanley, North Dakota, August 16, 2012 in this handout photo supplied by Minneapolis Federal Reserve Bank.

CHICAGO | Tue Oct 9, 2012 8:55am EDT

CHICAGO (Reuters) - Narayana Kocherlakota surprised economists around the world last month when he called on the U.S. central bank to hold interest rates near zero, possibly for several years to come.

One of the newest members of the Federal Reserve's top table had been seen by many in financial markets as one of its more inflation-focused "hawks."

Only six months earlier, the head of the Minneapolis Fed had been calling for a tightening of monetary policy by the end of this year.

So it was considered an unusually swift about-face when Kocherlakota proposed keeping the Fed's benchmark rate near zero until unemployment is brought way below its current level.

For those who know him well, it was no surprise.

"Narayana was a very independent student. That was something I saw at a very young age," said Lars Peter Hansen, a professor at the University of Chicago, where Kocherlakota completed his dissertation at age 23, having entered Princeton University just before his 16th birthday.

"I've never really seen him as a person who is rigid."

Kocherlakota was unusually eclectic in his research and he jumped from one discipline to another with ease, Hansen said.

Born in Baltimore, Kocherlakota spent most of his childhood in Winnipeg, Canada, where his parents taught statistics at the University of Manitoba. His father was an immigrant from India and his mother hailed from a Pittsburgh suburb.

Kocherlakota now lives with his wife, also an economist, and two Australian shepherd dogs in the Minneapolis suburb of Golden Valley, where he watches "a totally embarrassing amount of sports on TV," as he told an employee newsletter after taking the top job at the Minneapolis Fed in 2009.

As Wall Street Fed-watchers reassessed him after his headline-grabbing speech last month, Kocherlakota said he had been persuaded by fellow economists that lower interest rates could indeed boost employment, despite his previous skepticism.

Work by Edward Lazear, a professor at Stanford Graduate School of Business, and a speech by Fed Chairman Ben Bernanke at this year's Jackson Hole conference convinced him that the U.S. labor market had not undergone such major, structural changes that monetary policy would not help reduce joblessness, he said.

He was also struck by how inflation had ticked down more than he had expected.

Kocherlakota was keen to downplay talk of a sudden conversion to a new view on the economy. "I wouldn't say I woke up one morning and thought it; it was more a cumulative process," he told reporters.

THE VIEW FROM THE BUS

Colleagues put it simply: he cares about on-the-ground data, and he knows how to listen.

That much was clear in August when Kocherlakota, who turns 49 on Friday, donned a pair of jeans and took his board's nine directors on a tour of the booming oil fields of North Dakota.

In a 14-hour, 300-mile bus trek, they visited a fracking rig, a pipeline, a workers' camp, and a natural gas plant. They heard locals speak of life in the heart of the U.S. energy boom.

"His style is to let everybody else do the talking and he listens intently," said Lawrence Simkins, one of the board members and president of Montana-based Washington Cos, a privately owned transportation and equipment firm.

As the bus maneuvered truck-clogged roads, Kocherlakota got into a discussion with another director about the mental health toll on workers separated for months on end from their families.

Despite his reputation as an inflation hawk, Kocherlakota's push for the Fed to do more to stimulate the economy was not a bolt from the blue. He praised its first round of bond buying, which began in 2008, and backed its second round in 2010.

Those programs took place against the backdrop of a U.S. economy in crisis or still limping its way back to recovery.

Last year Kocherlakota opposed further Fed easing because the economy, in his view, was mending.

At the same time, he liked the thinking behind a proposal from Chicago Fed President Charles Evans, one of the Fed's most dovishly growth-focused policymakers, to promise to keep interest rates low until unemployment fell below 7 percent, as long as inflation did not threaten to breach 3 percent.

Tying policy to economic milestones, Evans argued, boosts its effectiveness.

"I thought he framed things pretty nicely," Kocherlakota said last October. "But actually getting into the quantities, that's something I'd have to think about more, and also discuss with my colleagues more."

Less than two months later, he had his own outline: The Fed should spell out how it would respond to a rise or decline in unemployment, and to changes in the inflation outlook.

UNLIKELY PARTNERS

Kocherlakota and Evans sit next to one another at the 27-foot-long elliptical mahogany table around which Fed officials gather every six weeks in Washington to decide monetary policy.

They had made an unlikely couple, given their long contrasting views on the role of interest rates in stirring jobs growth.

That changed at the Fed's meeting last month. As fellow policymakers agreed to a third and this time open-ended round of bond-buying to spur the U.S. economy, Kocherlakota said inflation running below his forecast left room for the Fed to keep rates low for years.

For a week, he kept his plan under wraps before announcing it to an audience of roughly 80 people at a community college in Western Michigan, known locally for training ski-lift operators.

He said the Fed should not even start talking about tightening monetary policy until the jobless rate dropped to 5.5 percent - a big drop from just under 8 percent in September -- or until the medium-term outlook for inflation topped 2.25 percent.

The plan drew immediate criticism.

If the Fed adopted it, "inflation credibility would not be eroded. It would be exploded," said Eric Green of TD Securities, a former senior economist at the New York Fed. "His views were quite different six months ago and will no doubt be very different again" when he rotates into a voting spot on the Fed's policy-setting panel in 2014.

But Kocherlakota's former professor Hansen said the plan is not a radical shift, noting it allows very little deviance from the Fed's 2-percent inflation goal.

So far, Kocherlakota has won little public backing from Fed colleagues.

Hawkish policymakers worry that more Fed easing will not help the economy and could fuel inflation expectations.

San Francisco Fed President John Williams, a centrist, said the plan risks overheating the economy.

By contrast, Chicago's dovish Evans fears it could cause the Fed to tighten too soon because it only allows "a very modest increase in inflation" over its 2-percent target.

Nonetheless, the relatively new idea of tying Fed policy to specific economic turning points is gaining traction.

Fed policymakers left out any numerical thresholds for joblessness and inflation when they began their new round of asset purchases last month. But most still think doing so would be useful in providing more clarity about their policy intentions, minutes of their most recent meeting show.

Those who know Kocherlakota caution against discounting his persuasive powers, which helped him get his job in the first place, according to Mary Brainerd, chief executive of health-insurance firm HealthPartners and Minneapolis Fed Board chair.

"Because he communicates clearly and thoughtfully, he's very compelling," she said.

(Additional reporting by Pedro da Costa in Washington; editing by William Schomberg, Tim Ahmann and Gerald E. McCormick)

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A ''for sale'' sign is seen outside a home in New York June 19, 2012. U.S. housing starts fell in May from a 3-1/2 year high, although permits to build new homes rose sharply, suggesting a nascent housing recovery remains on track.

NEW YORK | Tue Oct 9, 2012 9:48am EDT

NEW YORK (Reuters) - The number of U.S. homes that could soon come onto the market fell to the lowest in more than three years as of July as distressed sales offset new delinquencies in an encouraging sign for the housing market, a data analyst firm said on Tuesday.

The pending supply of homes, also known as shadow inventory, fell to 2.3 million units as of the end of July, down 10.2 percent from 2.6 million units a year ago and at the same level as March 2009, CoreLogic said. The July data is the most recent available.

Shadow inventory includes the number of properties that are seriously delinquent or behind with loan payments, in foreclosure or held by lenders and servicers but not currently listed on the market. At the end of July it was equal to about six months' supply, CoreLogic said.

While many economists believe the housing market has finally turned a corner as prices have stabilized, the sector still faces many challenges including the swollen pipeline of foreclosures that need to be absorbed by the market.

A decline in shadow inventory should help the nascent recovery as fewer properties coming onto the market means less downward pressure on prices.

"Broadly speaking, the shadow inventory continued to shrink in July," Anand Nallathambi, chief executive of CoreLogic said in a statement. "This is yet another hopeful sign that the housing market is slowly healing."

Of the properties in shadow inventory, one million homeowners were 90 days or more behind on their mortgage payments, considered to be seriously delinquent. As well, 900,000 homes were in some stage of foreclosure, and 345,000 had already been seized by the banks.

The dollar volume of shadow inventory was $382 billion, down from $397 billion a year ago.

CoreLogic revised its methodology for the report and updated previous figures.

(Reporting by Edward Krudy; Editing by James Dalgleish)

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