Frontrunning: July 18
- MSM always "ahead" of the curve: Fed’s Messages Raise Volatility in Threat to Profits (BBG)
- Bernanke Plays Down Link Between Jobless Rate, Fed Moves (WSJ)
- Draghi to Carney Face Test Backing Guidance on Rates (BBG)
- China will replace America as the leading superpower, global attitudes survey finds (SCMP)
- Nonqualified mortgages make up as much as $1.5 trillion of the $10 trillion home-loan market (BBG)
- Dell $24.4 Billion Buyout Plan Is a Nail-Biter as Vote Looms (BBG)
- Republicans could see more bruising Senate primaries (Reuters)
- GM delays Chevy Cruze debut by a year (Reuters)
- Peltz needs support for PepsiCo restructuring dealsa (FT)
- Sweaty Wall Streeters Skip Booze for Spin-Class Meetings (BBG)
- US Airways, American offer EU concessions over merger deal (Reuters)
Overnight Media Digest
* Penn State's board of trustees has authorized payment of roughly $60 million to settle some personal injury claims by men who say they were sexually abused by Jerry Sandusky, according to people familiar with the matter.
* JPMorgan and U.S. energy market regulators are close to a settlement over allegations of electricity-market manipulation that could involve the largest payout in the history of the Federal Energy Regulatory Commission.
* Global regulators are pursuing disparate approaches to protecting the financial system against future shocks.
* Fed Chairman Bernanke played down the unemployment rate's weight in the central bank's calculation of when to start raising short-term borrowing costs, a fresh example of the challenge the Fed faces in explaining its easy-money policies to an often perplexed public.
* Some of Dell's biggest institutional shareholders are expected to vote against a proposed buyout of the computer maker, a blow for deal proponents.
* A question-and-answer tool launched with little fanfare on the European Banking Authority's website is stirring up bond markets and upsetting investors.
* In separate remarks, Treasury Secretary Jacob Lew and Federal Reserve Chairman Ben Bernanke called for additional measures to ensure banks can't threaten the economy.
* IBM reported second-quarter earnings declined 17 percent, but the large computer, software and services provider raised its profit outlook for the full year in a positive sign for the technology industry.
* Alibaba Group founder Jack Ma reportedly labeled the 1989 crackdown on protesters in Tiananmen Square as "the most correct decision" at the time, drawing sharp criticism online.
* Pescanova said its chairman resigned after an outside accounting audit claimed financial irregularities at the multinational fishing giant, one of Spain's most well-known companies.
* The European Union's competition watchdog has asked Google Inc to make further concessions as part of its investigation into the way the company ranks and displays search results.
The Bank of England retreated from its flagship asset buying programme as a means to stimulate the economy, instead signalling a more 'mixed' strategy centred on guiding financial markets, minutes of the July Monetary Policy Committee meeting showed.
The International Monetary Fund's governing body has backed Finance Minister George Osborne's austerity push, overruling the organisation's staff who have called for looser fiscal policy.
Drugmaker GlaxoSmithKline's finance director in China, Steve Nechelput, has been banned from leaving the country, the company confirmed on Wednesday.
Prime Minister David Cameron on Wednesday faced questions over his chief election strategist Lynton Crosby's links to the tobacco industry following the government's decision not to ban branded cigarette packaging.
Four out of five banks are planning to raise base pay for employees affected by a European Union-wide cap on bonuses, a survey showed.
Activist shareholder Nelson Peltz has called on PepsiCo to buy Mondelez in a $60 billion deal to first form a snack foods company before spinning out its soda business to shareholders.
Four Deutsche Bank employees have sued the lender after they were fired as part of an internal investigation into the manipulation of benchmark interbank lending rates.
* JPMorgan Chase wants to settle accusations by the Federal Energy Regulatory Commission that it gleaned profits from power plants via "manipulative schemes".
* The European Commission said that Google Inc's proposal for addressing antitrust concerns did not go far enough and that the company will need to come up with a better plan.
* Technology investment company SoftBank is joining with Bloom Energy to introduce its "energy server" technology to Japan.
* Ben Bernanke said that the Federal Reserve expected the economy to gain strength in the coming months, potentially allowing the central bank to decelerate its stimulus campaign.
* IBM's net income fell 17 percent to $3.2 billion, or $2.91 a share, but the technology giant has weathered well as demand drops in a slumping economy.
* Intel's lower earnings reflect the trend of fewer personal computer sales worldwide and the trouble Intel has had moving to mobile devices.
* The SEC's plan in its lawsuit against a former Goldman Sachs trader was thrown into disarray in several hours of combative testimony on Wednesday.
* As more shareholders seem against Dell's founder buyout proposal, some company directors mull postponing a scheduled vote on the $24.4 billion bid.
* Bank of America's second-quarter net income rose 63 percent and while revenue rose, it received a lift from much lower expenses.
* Steve Nechelput, a British finance executive at the pharmaceutical giant GlaxoSmithKline, is prohibited from leaving the country.
* U.S. drugmaker Eli Lilly and Co, which expects to lose about 20 percent of its global revenue next year due to the expiration of key drug patents, is suspending base pay increases for most employees in 2014 to cut costs.
THE GLOBE AND MAIL
* Stephen Harper's office denies that it is withholding from the Royal Canadian Mounted Police an internal e-mail about the C$90,000 ($86,300) cheque that the prime minister's former chief of staff wrote to Senator Mike Duffy.
* Language barriers may be putting the sexual health of some new Canadian teens at risk, says a study that suggests sex education must be tailored to the needs of immigrant adolescents.
* One day after an autopsy confirmed "Glee" star Cory Monteith died of a toxic mix of heroin and alcohol, police in Abbotsford, east of Vancouver, warned of a surge of overdoses in their city.
Reports in the business section:
* Stephen Poloz has spelled out what he expects to see from the economy before the Bank of Canada hikes interest rates, and the timeline appears to be a long one.
* About 3,000 salaried retirees have won a class-action case against their former employer, General Motors of Canada Ltd, after the auto giant slashed their health and life insurance benefits as it scrambled to stay afloat during the financial crisis.
* Real estate players spent a record C$4.9 billion ($4.70 billion) buying and investing in commercial property in the Greater Toronto Area in the latest quarter, but some are questioning whether this is the peak.
* Cineplex Inc is looking beyond blockbusters and popcorn with a C$40 million ($38.36 million) takeover of EK3 Technologies Inc, a digital sign maker whose clients include some of the largest retailers and restaurant chains in Canada.
* Lisa Raitt's return to the front-line makes her one of the two most senior women in Cabinet, alongside Diane Finley, and has already sparked suggestions that she could be a leadership contender when Stephen Harper finally hangs up his enemies list.
* A memo to WestJet Airlines Ltd staff reveals the roll out of its new premium economy seats and fares has been rougher than the carrier hoped.
* A controversial plan to build a massive quarry in rolling farmland north of Toronto appears officially dead in the water after a $20 billion hedge fund in Boston agreed to sell the land on which the project was to be located.
* Loblaw Companies Ltd's planned acquisition of Shoppers Drug Mart Corp put a charge into Canadian consumer stocks this week, but the C$12.4 billion ($12.40 billion) deal isn't the only thing bolstering the sector's share returns of late. A combination of catalysts including M&A and corporate restructuring as well as real estate spinoffs and shareholder activism have turned the country's largest publicly-traded retailers from an afterthought into one of the hottest plays around.
* Bank of Canada on Wednesday said its view "balances the many upside and downside risks to inflation" and that will keep interest rates near record lows for some time to come.
CHINA SECURITIES JOURNAL
- China will not use large-scale fiscal stimulus measures this year, Minister of Finance Lou Jiwei said on Wednesday at a Sino-U.S. meeting, but will instead introduce 900 billion yuan ($146.69 billion) of tax cuts, focussing on small businesses, to be implemented within two years.
- China's June Foreign Direct Investment (FDI) hit $14.389 billion, a 27-month high and an increase of 20.12 percent (excluding banking, securities and insurance field data) from the same month last year, according to figures released by the Ministry of Commerce on Wednesday.
- China's positive June FDI numbers underline the nation's continuing appeal to overseas investors and the investment should be harnessed to help stabilise the economy, said an editorial.
- China's consumer consumption is expected to grow at a faster rate in the second half of this year, Ministry of Commerce spokesman Shen Danyang told a news conference on Wednesday.
Fly On The Wall 7:00 AM Market Snapshot
Lincoln National (LNC) upgraded to Buy from Hold at Deutsche Bank
Pinnacle Financial (PNFP) upgraded to Outperform from Market Perform at Raymond James
Quality Systems (QSII) upgraded to Equal Weight from Underweight at Morgan Stanley
ASML (ASML) downgraded to Neutral from Overweight at Piper Jaffray
Alexco Resource (AXU) downgraded to Sell from Hold at Canaccord
CYS Investments (CYS) downgraded to Neutral from Outperform at Credit Suisse
Citrix Systems (CTXS) downgraded to Market Perform from Outperform at Raymond James
Elizabeth Arden (RDEN) downgraded to Perform from Outperform at Oppenheimer
Merck (MRK) downgraded to Market Perform from Outperform at BMO Capital
Nexstar (NXST) downgraded to Equal Weight from Overweight at Evercore
Northern Trust (NTRS) downgraded to Underweight from Equal Weight at Evercore
Northern Trust (NTRS) downgraded to Underweight from Neutral at JPMorgan
Renasant (RNST) downgraded to Market Perform from Outperform at Keefe Bruyette
SanDisk (SNDK) downgraded to Equal Weight from Overweight at Morgan Stanley
Wabash (WNC) downgraded to Hold from Buy at BB&T
Xilinx (XLNX) downgraded to Market Perform from Outperform at Wells Fargo
eBay (EBAY) downgraded to Hold from Buy at Needham
21st Century Fox (FOXA) initiated with an Outperform at Bernstein
Chuy's (CHUY) initiated with a Market Perform at Wells Fargo
Fiesta Restaurant Group (FRGI) initiated with an Outperform at Wells Fargo
Guidance Software (GUID) initiated with a Buy at B. Riley
Health Care REIT (HCN) initiated with a Neutral at Citigroup
J.B. Hunt (JBHT) initiated with a Neutral at Macquarie
Landstar System (LSTR) initiated with an Outperform at Macquarie
PBF Energy (PBF) coverage reinstated with a Neutral at Citigroup
Pharmacyclics (PCYC) initiated with an Outperform at RW Baird
Southern First Bancshares (SFST) initiated with an Outperform at Keefe Bruyette
Under Armour (UA) initiated with an Outperform at Wedbush
Universal Truckload (UACL) initiated with a Neutral at Macquarie
Vantage Drilling (VTG) initiated with an Outperform at RBC Capital
Quest Diagnostics (DGX) sold Ibrutinib royalty rights to Royalty Pharma for $485M
Allstate (ALL) to sell Lincoln Benefit Life Co. for $600M
To cease issuing fixed annuities at year-end
Flagstar Bancorp (FBC) to shift focus of mortgage servicing business to performing servicing assets
Noble Corp. (NE) continuing to work through steps for partial fleet spin off
Companies that beat consensus earnings expectations last night and today include:
BlackRock (BLK), KeyCorp (KEY), Orbital Sciences (ORB), Danaher (DHR), UnitedHealth (UNH), BB&T (BBT), IBM (IBM), Valmont (VMI), HNI Corporation (HNI), Xilinx (XLNX), Sallie Mae (SLM), American Express (AXP), SanDisk (SNDK), Covanta (CVA), RLI Corp. (RLI)
Companies that missed consensus earnings expectations include:
Kinder Morgan (KMI), Albemarle (ALB), Cohen & Steers (CNS), eBay (EBAY), Greenhill & Co. (GHL), Select Comfort (SCSS), Intel (INTC)
Companies that matched consensus earnings expectations include:
Core Laboratories (CLB), Steel Dynamics (STLD), Pacific Continental (PCBK), Cathay General (CATY)
- Global regulators are pursuing disparate approaches to protecting the financial system against future shocks, fracturing an agreement forged in the wake of 2008 financial crisis to adopt a coordinated response, the Wall Street Journal reports
- For decades, car shoppers in the U.S.’s coastal states largely bought Japanese and European imports over Ford (F) and other American brands. But that’s changing for Ford, highlighting the success its new models are having hitting the right notes for consumers looking to buy small and medium size passenger cars, the Wall Street Journal reports
- US Airways (LCC) and American Airlines (AAMRQ) offered concessions to EU antitrust regulators to win approval for their planned $11B merger to create the world's largest airline. The EC will decide by August 6 whether to clear the deal, Reuters reports
- Bank of America’s (BAC) balance sheet suffered from rising bond yields in Q2, suggesting that the second-largest U.S. bank may be more exposed to interest-rate risk than some of its major rivals, Reuters reports
- GM (GM) CEO Akerson sees Telsa Motors (TSLA) as a potentially disruptive force to the automotive industry and he doesn’t want to be caught off guard. So he assigned a small team to study billionaire industrialist Elon Musk’s upstart electric-car maker and how it might threaten GM, Bloomberg reports
- Japan’s Softbank Corp. (SFTBF), now the majority owner of Sprint (S), formed a joint venture with Bloom Energy Corp. to market and distribute the California firms’s fuel cell technology in Japan, Bloomberg reports
AcelRx (ACRX) files to sell common stock
Berry Plastics (BERY) 15M share Secondary priced at $21.63
OncoMed (OMED) 4.8M share IPO priced at $17.00
TG Therapeutics (TGTX) files to sell common stock
UCP, Inc. (UCP) 7.75M share IPO priced at $15.00
WhiteWave Foods (WWAV) 29.9M share Secondary priced at $17.75
Nelson Peltz says PepsiCo (PEP) should buy Mondelez (MDLZ), amounting large stake in DuPont (DD), according to CNBC
Carl Icahn told CNBC he feels “pretty good” ahead of Dell (DELL) shareholder meeting
Said wants to own Dell, “doesn't care” if Michael Dell raises his bid
Icahn said Herbalife (HLF) still undervalued, hasn't sold a share