Frontrunning: June 21

  • Turmoil Exposes Global Risks (WSJ)

  • China Money Rates Retreat After PBOC Said to Inject Cash (BBG)

  • Fed Seen by Economists Trimming QE in September, 2014 End (BBG)

  • Booz Allen, the World's Most Profitable Spy Organization (BBG)

  • Abe’s Arrows of Growth Dulled by Japan’s Three Principles (BBG)

  • FAA to Relax Rules for Gadgets in Flight (WSJ)

  • China steps back from severe cash crunch (FT)

  • Smog at Hazardous as Singapore, Jakarta Spar Over Fires (BBG)

  • U.S. Weighs Doubling Leverage Standard for Biggest Banks (BBG)

  • Eurozone bailout fund given power to ‘directly recapitalise’ banks (FT)

  • Germany blocks Turkey’s bid to join EU (FT)

  • Cyprus must stick to its bailout plan, Eurogroup says (Reuters)

  • Bond market sell-off causes stress in $2tn ETF industry (FT)


Overnight Media Digest


* Worries about China and the U.S. Federal Reserve's plans rattled global markets for a second day, sending U.S. stocks to their biggest loss this year and hammering bonds and many commodities.

* The Conference Board, which produces a leading consumer-confidence survey, is suspending its practice of giving media organizations an early preview because it fears the information may be leaking early.

* Greece's shaky coalition government was hit with a double blow on Thursday as talks over the shutdown of the state broadcasting company threatened to fracture the government and new worries over the financing of the country's bailout program emerged.

* Sprint Nextel Corp raised its offer for Clearwire Corp to $5 a share, topping a rival bid from Dish Network that could end the battle for the mobile-broadband provider.
* Now that his attempt to sell Nokia's struggling mobile-phone business to a close ally has hit a dead end, Chief Executive Stephen Elop has little time to waste if he hopes to persuade investors that the company's core business can be revived.

* Securities and Exchange Commission Chairman Mary Jo White is having difficulty finding an industry veteran or seasoned attorney to fill a top post overseeing trading firms and stock exchanges - a critical role for the agency given growing concerns about the speed and complexity of trading.

* Employees of some of the world's largest financial institutions conspired with a former bank trader to rig benchmark interest rates, British prosecutors alleged Thursday, a sign authorities have their sights on an array of banks and brokerages.

* If this year's Paris air show proved one thing, it's that the commercial-aviation industry is in unusually fine fettle, in contrast to a defense sector grappling with anemic military budgets. Airline hunger for capacity and fuel efficiency also bode well for suppliers.



U.S. Federal Reserve Chairman Ben Bernanke's announcement that the U.S. central bank plans to pull back on its $85 billion in monthly asset purchases sent global equities, bonds and commodities into a tizzy on Thursday and has fuelled fears that the world is entering a fresh phase of financial turbulence.

U.S. Internet giant Google Inc has been for the first time threatened with a fine on Thursday by data protection authorities in Europe if it does not change its policies on collecting user data within three months.

Germany blocked moves to open a new chapter in Turkey's EU membership talks next week, criticising Prime Minister Tayyip Erdogan's heavy-handed response to weeks of anti-government mass demonstrations and refusing to agree to open a new negotiation area.

UBS AG and Credit Suisse Group AG should be more transparent about the risk they are running, the Swiss National Bank said on Thursday in its yearly stability report, and added that it still considers current leverage ratios at the Swiss big banks to be low.

British confectionery maker Cadbury, before its takeover by U.S. food group Kraft, engaged in aggressive tax avoidance schemes that aimed at cutting its UK tax bill by more than a third.

Rio Tinto delayed inaugural shipments from its flagship $6.2 billion Oyu Tolgoi copper mine in Mongolia after the government withheld support on the eve of the expected start.



* Tumbling stock, bond and commodity prices around the world are demonstrating just how reliant the global economy has become on the monetary policies of the U.S. Federal Reserve.

* Fed officials are convinced they have done enough stimulus, but some critics see evidence in the persistence of high unemployment and low inflation that the Fed should do even more.

* The Supreme Court reinforced the ability of corporations to impose arbitration on customers, ruling that merchants could not bring a class-action suit against American Express Co .

* Facebook Inc will add an instant 15-second video service to Instagram, in an answer to Twitter's Vine feature. The new feature allows users to record as much as 15 seconds of video, enhance it with image filters and post it immediately.

* In battling the government's charges that it engaged in e-book price fixing, Apple Inc has warned a judge that what is at stake is not just healthy competition in the book industry, but the way business is conducted between retailers and providers of everything from music to books to movies.

* A warning from Senator Sherrod Brown of Ohio that there was a risk to the economy in the lax oversight of firms that banks hire to help them comply with federal rules.

* The Agriculture Department approved a label to show that meat certified by the Non-GMO Project came from animals that never ate feed containing genetically engineered ingredients like corn, soy and alfalfa.

* Federal Trade Commission Chairwoman Edith Ramirez called for an inquiry into patent-assertion entities, which buy bundles of patents and make money by threatening infringement lawsuits.




* Calgarians are being urged to stay away from the city's downtown core, and all public and Catholic schools are closed Friday as river water levels are projected to rise throughout the night, with the city bracing for the overland flooding expected this morning.

* Vancouver university student Elisa Lam, whose mysterious death during a stay at a Los Angeles hotel sparked speculation from amateur sleuths around the world, accidentally drowned, according to the L.A. coroner's office.

Reports in the business section:

* Canadian wealth is hitting new heights, though still-high consumer debts remain a worry. Household debt grew at a slower pace than assets for a third consecutive quarter, a sign that the Canadian household debt burden is easing, according to data from Statistics Canada on Thursday.

* Maple Leaf Foods Inc has emerged as a potential takeover target in the rapidly consolidating global food sector. Sources familiar with Maple Leaf Foods, Canada's largest processor of meat and baked goods, said international food giants are circling the Toronto-based company as they scramble to lock up food sources for expanding emerging markets.


* A woman who survived a gangland hit that left her boyfriend paralyzed and his friend dead choked back tears on Thursday at the trial of reputed former mob boss James "Whitey" Bulger as she recalled ducking in the front seat of a new Mercedes Benz when she heard a hail of gunfire. Diane Sussman de Tennen, who was shot in the arm, was the first of a series of witnesses who described being wounded or losing a loved one in shootings allegedly orchestrated by Bulger and his gang.


* A new report says Canadian youth face the risk of chronic unemployment despite being more educated than ever. The report by Canadian Imperial Bank of Commerce says a lack of summer jobs and part-time work makes it difficult for youth to gain the experience necessary for permanent positions.

* S.C. Johnson & Son Inc, the Wisconsin-based maker of household products like Windex glass cleaner and Saran plastic wrap, confirmed on Thursday it reached a deal to sell Canadian body care and fragrance retailer Fruits & Passion.




- An official at Bank of China denied media reports that the lender had defaulted in the interbank market.


- China's provincial governments are starting to dole out higher-than-expected subsidies to solar firms.


- Companies that produce baby formula will be required to have their own dairy farms, allowing greater supervision of the production process to help ensure food safety and restore consumer confidence in the industry, according to measures released by nine ministries on Thursday.


- Shanghai has lifted a ban on the sale of live poultry which was imposed in April amid H7N9 bird flu fears. Officials said live poultry trade will be scaled down due to hygiene problems and the number of retail stores will be reduced to 200 from 461 currently.


- China will spend 4.7 trillion yuan ($766.95 billion) by 2030 to expand the country's highway network to 401,000 kilometres, according to a blueprint announced by the State Council on Thursday.

Fly On The Wall 7:00 AM Market Snapshot



Brown Forman (BF.B) upgraded to Equal Weight from Underweight at Morgan Stanley
Cardinal Health (CAH) upgraded to Outperform from Market Perform at William Blair
Facebook (FB) upgraded to Buy from Neutral at UBS
Forest Labs (FRX) upgraded to Buy from Neutral at Goldman
Kimberly Clark (KMB) upgraded to Market Perform from Underperform at BMO Capital
Methode Electronics (MEI) upgraded to Buy from Neutral at B. Riley
Methode Electronics (MEI) upgraded to Outperform from Neutral at RW Baird
Questcor (QCOR) upgraded to Outperform from Perform at Oppenheimer
Southern Company (SO) upgraded to Buy from Neutral at Citigroup
Total System (TSS) upgraded to Outperform from Market Perform at Wells Fargo


Allergan (AGN) downgraded to Neutral from Buy at Goldman
C.H. Robinson (CHRW) downgraded to Sell from Neutral at Goldman
Fulton Financial (FULT) downgraded to Underperform from Neutral at Credit Suisse
Idenix (IDIX) downgraded to Hold from Buy at Deutsche Bank
Idenix (IDIX) downgraded to Neutral from Overweight at JPMorgan
Idenix (IDIX) downgraded to Underperform from Market Perform at JMP Securities
Idenix (IDIX) downgraded to Underperform from Neutral at RW Baird
Newmont Mining (NEM) downgraded to Neutral from Buy at UBS
Questcor (QCOR) downgraded to Neutral from Buy at BofA/Merrill
SPX Corp. (SPW) downgraded to Sell from Neutral at Citigroup
The Medicines Co. (MDCO) downgraded to Perform from Outperform at Oppenheimer
Validus (VR) downgraded to Neutral from Outperform at Credit Suisse


Amarin (AMRN) initiated with a Perform at Oppenheimer
Chevron (CVX) initiated with an Outperform at Wells Fargo
Darling (DAR) initiated with an Outperform at Wedbush
Exxon Mobil (XOM) initiated with a Market Perform at Wells Fargo
Gartner (IT) initiated with a Buy at Stifel
Intercept (ICPT) initiated with an Outperform at Oppenheimer
Ironwood (IRWD) initiated with an Outperform at Credit Suisse
Merck KGaA (MKGAY) initiated with a Sell at Goldman
Palatin Tech (PTN) initiated with an Overweight at Piper Jaffray
Renewable Energy (REGI) initiated with an Outperform at Wedbush
Sucampo (SCMP) initiated with a Neutral at Credit Suisse
Synergy Pharmaceuticals (SGYP) initiated with an Outperform at Credit Suisse
Tetra Technologies (TTI) initiated with an Equal Weight at Stephens
Wendy's (WEN) initiated with a Market Perform at Wells Fargo


Oracle (ORCL) raised dividend 100%, announced $12B share buyback program
Applied to list common stock on NYSE
Sees growth in total hardware as early as Q1
Wi-LAN (WILN), Samsung (SSNLF) agreed to long-term license, terms confidential
Archer Daniels (ADM) engaged in discussions regarding sale of cocoa business
FDA approved Plan B One-Step (TEVA) for use without prescription
GE Healthcare (GE) to acquire certain assets of Rayence
Fitch affirmed Lennar's (LEN) IDR at 'BB+', rating outlook Stable
Fitch affirmed Mercury General's (MCY) ratings, outlook Stable
Walter Energy (WLT) placed on CreditWatch negative by S&P
Endo Health (ENDP) unit AMS to pay $54.5M in settlement
Medtronic (MDT) announced 80M share repurchase plan


Companies that beat consensus earnings expectations last night and today include:
American Software (AMSWA)

Companies that missed consensus earnings expectations include:
Armada Hoffler (AHH)

Companies that matched consensus earnings expectations include:


  • U.S. stocks had  their biggest loss this year as bonds and many commodities were hammered. The turmoil exposed vulnerabilities in the financial markets and the world economy that had been mostly ignored because central banks were willing to ride to the rescue with huge amounts of money, the Wall Street Journal reports

  • Samsung Electronics (SSNLF) showed off a number of new devices with wide appeal, in its bid to gain more market share in the highly competitive mobile-devices market. The product launches come amid concerns that sales of the company's Galaxy S4 smartphone may not be as strong as estimated, the Wall Street Journal reports

  • Wal-Mart Stores (WMT) is considering bids from retirement plan managers to run its $15.6B 401(k) program, which has been administered by Bank of America's Merrill Lynch unit (BAC) for 15 years, sources say. Wells Fargo (WFC) and  Bank of America are said to be among the candidates, Reuters reports

  • Hess (HES) and Newfield Exploration (NFX) have launched two separate auctions to sell part of their Asian oil and gas field stakes that have a combined value of about $3B, sources say, Reuters reports

  • U.S. regulators are considering doubling a minimum capital requirement for the largest banks, which could force some of them to halt dividend payments. The standard would increase the amount of capital the lenders must hold to 6% of total assets, regardless of their risk, sources say,  twice the level set by global banking supervisors, Bloomberg reports

  • AT&T (T) explored potential deals in the last two months including buying part of Telefonica (TEF) or some of its foreign assets, sources say, Bloomberg reports


Ares Commercial Real Estate (ACRE) 18M share Secondary priced at $13.50
Ashford Hospitality (AHT) 11M share Secondary priced at $12.00
Brookfield Renewable (BEP) postpones proposed offering, cites market conditions
First PacTrust Bancorp (BANC) files to sell voting common stock
Five Below (FIVE) postpones secondary offering
GoGo (GOGO) 11M share IPO priced at $17.00
Home Loan Servicing (HLSS) 13M share Secondary priced at $23.00
Real Goods Solar (RSOL) files to sell 5.05M shares for holders
Rexnord (RXN) 6.5M share Secondary priced at $16.00

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