Frontrunning: July 2

  • Egypt on the edge after Mursi rebuffs army ultimatum (Reuters)

  • Inside China's Bank-Rate Missteps (WSJ)

  • Obama Urges Morsi to Respond to Protesters' Concerns (WSJ)

  • How Fed’s 7% Jobless Avoids Deterring Bondholders Is Mystery (BBG)

  • Obama Joins With Political Foe Bush at End of Africa Trip (BBG)

  • China may introduce deposit insurance by year-end (China Daily)

  • China’s Slowdown Could Slam Hong Kong (BBG)

  • Government 'to ask Rothschild to advise on RBS split' (Telegraph)

  • Martin Feldstein: The Fed Should Start to 'Taper' Now (WSJ)

  • A Revitalized Car Industry Cranks Up U.S. Exports (WSJ)

  • RBA Holds Rate at Record-Low Saying Aussie May Slide Further (BBG)

  • Spain to Try Again on Bank Sales (WSJ)

  • BOJ Said to Mull Upgrading Assessment to Talk of Recovery (BBG) - even more confidence...

Overnight Media Digest

WSJ

* A rare peek into the actions of China's leaders in a month when a Chinese cash crunch spooked global investors shows a leadership falling short in its struggle to redirect China's economy and also faltering in its efforts to communicate its intentions to markets.

* Edward Snowden, the former National Security Agency contractor accused of espionage, seeks asylum in Russia, but Russia's president says he must stop disclosing U.S. secrets.

* The leaders of Egypt's military warned they would intervene in the country's political crisis if President Mohammed Morsi fails to resolve it within 48 hours, raising the prospect of a military takeover just one day after millions of Egyptians marched to demand the president's resignation.

* The U.S. auto industry, in tatters just four years ago, is emerging as an export powerhouse, driven by favorable exchange rates and labor costs in a trend experts say could drive business for many years.

* Zynga Inc's founder announced that he was stepping down as the CEO of the troubled game maker and will be replaced by Don Mattrick, the current head of Microsoft Corp's Xbox division.

* Biotechnology companies are enjoying their best run with initial public offerings in a decade, amid an upswing in new drug approvals, strong performance by some already public biotech firms and legal changes.

* Investor Carl Icahn said he has raised more than $5 billion to finance his plan to recapitalize ailing PC maker Dell Inc, a move he said should end speculation that the funds wouldn't be available.

* The financial woes of Brazilian billionaire Eike Batista deepened Monday as his group's flagship oil firm once again said it would fall short of its production goals, putting further pressure on the tycoon to rescue his floundering industrial empire.

* France's stock market regulator fined LVMH Moët Hennessy Louis Vuitton $10.4 million for failing to follow market rules when it accumulated a significant stake in Hermès International.

* A lawsuit filed by a group of authors against Google Inc to stop it from scanning millions of books shouldn't have been certified as a class action at this point, a federal appeals court ruled on Monday.

* Jennifer Lopez's Turkmenistan concert provides a window into efforts by state-owned China National Petroleum to boost access to gas supplies in Turkmenistan. The Turkmenistan event underscores the lengths to which China's oil-and-gas companies will go to curry favor in resource-rich locales.

* Apple Inc has filed a trademark application for "iWatch" in Japan, fueling speculation that the company may be preparing to introduce a new watchlike device.

* Businesses suing to overturn a mandate of the Dodd-Frank financial law aimed at drawing attention to and curbing violence in central Africa told a federal judge that it infringes on corporate free-speech rights. ()

FT

The British government is set to name Rothschild to advise on potentially splitting up Royal Bank of Scotland into a good bank and a bad bank.

Mark Carney, the Bank of England's new governor, reported for duty before seven in the morning and told reporters he was "very excited about getting started."

Viscount Rothermere has made a move to consolidate his control over Daily Mail and General Trust with an approach to buy out the outstanding voting shares in the company from his uncle and other holders.

Nick Clegg said his party did not support Prime Minister David Cameron's planned 2017 referendum on EU membership.

The French antitrust watchdog has carried out a search of Apple Inc's premises and also those of some of its French retailers and distributors as part of an investigation into the company's resale practices.

Allied Irish Banks was seen to be just as reckless in its lending as Anglo Irish Bank in the run-up to Ireland's financial crisis, according to remarks between senior bank executives broadcast on Monday.

EasyJet shareholders are planning to back a multibillion-dollar aircraft order, going up against the company's estranged founder Sir Stelios Haji-Ioannou who is opposed to the deal.

NYT

* Regulators say banks have been profiting by offering wealthy Chinese high returns on loans, with banks lending the cash to companies unqualified for loans otherwise.

* Qsymia, the first new prescription weight-loss drug to reach the market in 13 years, is having a hard time winning even a tiny slice of that huge market. The slow start of Qsymia raises questions about what role prescription drugs really can play in combating the nation's epidemic of obesity.

* The Tribune Company, known for its newspapers but moving steadily toward television, accelerated its transformation into a broadcasting company on Monday when it agreed to pay $2.7 billion for 19 local stations from Scranton to Salt Lake City.

* A federal judge in New York, saying the statute of limitations had run out, has dismissed three lawsuits by men who said that the former "Sesame Street" puppeteer Kevin Clash sexually abused them when they were underage.

* Unemployment in the euro zone continued its steady rise in May, according to data published Monday, underscoring the human effects of a financial downturn that has lasted a year and a half.

Canada

THE GLOBE AND MAIL

* Statisticians who parsed data from first National Household Survey were surprised to find many Canadians who had reported no aboriginal identity in the census of 2006 were standing up five years later to declare themselves to be First Nations or Inuit or Métis. (http://link.reuters.com/nuv39t)

* As the Toronto region dithers over transportation problems it worries will hold it back on the global stage, an indisputably world-class city is looking a century ahead, barrelling forward with a massive increase in its subway network. (http://link.reuters.com/puv39t)

Reports in the business section:

* Canadian tech giant BlackBerry has been handed a Canada Day lashing by several analysts in the wake of its dismal quarterly results on Friday, with several major research houses cutting their ratings or price targets. (http://link.reuters.com/quv39t)

NATIONAL POST

* Canadian researchers have achieved a breakthrough in understanding an entirely new way cancer spreads - by hijacking the white blood cells that usually fight diseases. (http://link.reuters.com/suv39t)

* The Conservative government's effort to bring public servants' benefits and compensation in line with the private sector is now taking aim at retired public servants with a proposal to limit their eligibility and boost their share of the cost for the public service health care plan. (http://link.reuters.com/tuv39t)

FINANCIAL POST

* Daniel DiManno sold his Toronto house for less than he had hoped and wanted to see if prices would cool before he bought a new one. But Canadian mortgage rates are rising again and that's spurring DiManno and others to jump back into the market, cutting short an already brief housing downturn. (http://link.reuters.com/vuv39t)

* A new report says a skills gap in Ontario is costing the province more than C$24 billion ($22.85 billion) in economic activity. A report, authored by the Conference Board of Canada, finds that employers can't find workers with the skills their companies need to innovate and grow in the economy.

China

SHANGHAI SECURITIES NEWS

- The China Cement Association has drafted a plan to accelerate the consolidation of the country's cement sector and is awaiting advice from related ministries, said a source from the group. The plan aims for the top 10 producers to command more than 60 percent of domestic market share by 2020.

PEOPLE'S DAILY

- The National Development and Reform Commission and anti-trust authorities are investigating a number of Chinese milk powder companies in an anti-monopoly probe, after prices rose some 30 percent since 2008, a rate which exceeds expected market norms.

CHINA DAILY

- Domestic films in China generated box office revenues of $1.7 billion in the first half of the year, an increase of 27 percent from the same period last year, surpassing foreign movies for the first time in five years, according to entertainment industry consultancy EntGroup Consulting.

- China is likely to start a deposit insurance system by the end of this year which will provide a safety net for individual and institutional depositors, said an official, although coverage limits were not disclosed.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

JPMorgan (JPM) upgraded to Strong Buy from Outperform at Raymond James
Las Vegas Sands (LVS) upgraded to Buy from Neutral at ISI Group
Quiksilver (ZQK) upgraded to Buy from Neutral at B. Riley
Rowan Companies (RDC) upgraded to Buy from Neutral at Citigroup
Seagate (STX) upgraded to Equal Weight from Underweight at Barclays

Downgrades

AT Cross Co (ATX) downgraded to Neutral from Buy at Roth Capital
CME Group (CME) downgraded to Market Perform from Outperform at Raymond James
Hercules Technology (HTGC) downgraded to Neutral from Buy at Janney Capital
Hub Group (HUBG) downgraded to Sector Perform from Outperform at RBC Capital
Hudson Technologies (HDSN) downgraded to Neutral from Buy at Roth Capital
Illumina (ILMN) downgraded to Neutral from Overweight at Piper Jaffray
LINN Energy (LINE) downgraded to Neutral from Overweight at JPMorgan
LinnCo (LNCO) downgraded to Neutral from Overweight at JPMorgan
Oil States (OIS) downgraded to Market Perform from Outperform at Cowen
Transocean (RIG) downgraded to Neutral from Buy at Citigroup
Wells Fargo (WFC) downgraded to Market Perform from Outperform at Keefe Bruyette

Initiations

Blucora (BCOR) initiated with an Outperform at Wedbush
Cheniere Energy Partners (CQP) coverage assumed with an Outperform at Credit Suisse
Cheniere Energy (LNG) coverage assumed with an Outperform at Credit Suisse
Constellium (CSTM) initiated with a Buy at Deutsche Bank
Constellium (CSTM) initiated with a Buy at Goldman
Constellium (CSTM) initiated with an Outperform at Credit Suisse
Constellium (CSTM) initiated with an Overweight at JPMorgan
Dunkin' Brands (DNKN) initiated with a Buy at Lazard Capital
Dynegy (DYN) initiated with a Sell at Deutsche Bank
Global Brass & Copper (BRSS) initiated with a Buy at Goldman
Global Brass & Copper (BRSS) initiated with an Outperform at William Blair
Groupon (GRPN) initiated with a Buy at Wunderlich
Holly Energy (HEP) coverage resumed with a Market Perform at Wells Fargo
Monarch Casino (MCRI) initiated with a Market Perform at Wells Fargo
Multimedia Games (MGAM) initiated with an Outperform at Wells Fargo
News Corp. (NWSA) initiated with a Buy at Deutsche Bank
Ply Gem (PGEM) initiated with a Buy at Goldman
Ply Gem (PGEM) initiated with an Outperform at Credit Suisse
QR Energy (QRE) coverage assumed  with an Outperform at Credit Suisse
Ruckus Wireless (RKUS) initiated with an Overweight at Piper Jaffray
Ryder (R) initiated with a Buy at Wunderlich
Scientific Games (SGMS) initiated with an Outperform at Wells Fargo
Textura (TXTR) initiated with an Outperform at Credit Suisse
Wisconsin Energy (WEC) initiated with a Hold at Deutsche Bank

HOT STOCKS

American Realty (ARCP) to acquire American Realty Capital trust IV in $3.1B merger
European Commission sent objections to 13 investment banks
(BAC, BCS, BNPQY, C, CS, DB, GS, HBC, JPM, MS, RBS, UBS)
Cablevision (CVC) filed with Supreme Court for stay of NLRB proceeding
Icahn told CNBC he “has people in mind’ to run Dell (DELL)
Zynga (ZNGA) confirmed hiring Microsoft's (MSFT) Mattrick to replace Pincus as CEO
Disney extended Iger's tenure as CEO, chairman through 2016
GameStop (GME) unit to launch first mobile games
Emerson Radio (MSN) delayed filing 10K, cited potential income tax liability
Greenbrier (GBX) announced facilities reductions in Wheels, Repair & Parts segment

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Xyratex (XRTX)

Companies that missed consensus earnings expectations include:
A. Schulman (SHLM)

NEWSPAPERS/WEBSITES


  • The U.S. auto industry (GM, F, FIATY, HMC, DDAIF, TM) is now emerging as an export powerhouse, driven by favorable exchange rates and labor costs in a trend experts say could drive business for many years, the Wall Street Journal reports

  • Over 20 big U.S. banks (BAC, C) are working behind the scenes to ease tensions with the Consumer Financial Protection Bureau  whose approach to policing the financial sector has triggered industry criticism, sources say, the Wall Street Journal reports

  • Apple (AAPL) plans to build a new solar farm with NV Energy (NVE)  for power supply to its new data center in Reno, NV, Reuters reports

  • Fiat (FIATY) was not among potential investors sounded out by PSA Peugeot Citroen's founding family, Reuters reports

  • Hedge funds lowered wagers on a gold rally to a five-year low as a record quarterly drop drove prices below $1,200 an ounce for the first time since 2010, and Goldman Sachs (GS) forecast further declines, Bloomberg reports

  • Sprint-Nextel (S) must face a lawsuit for $300M brought by the New York attorney general claiming the third-largest U.S. wireless carrier deliberately failed to pay sales taxes, Bloomberg reports

SYNDICATE

Ascent Solar (ASTI) files to sell 15.38M shares of common stock for holders
ECOtality (ECTY) files to sell 7.69M shares of common stock for holders

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