Frontrunning: August 15
- This won't end well: Islamists call Cairo protest march as Egypt death toll mounts (Reuters)
- JPMorgan Said to Expect Multiple Fines for Whale Loss (BBG)
- Ex-bosses at JPMorgan unlikely to face charges in 'Whale' scandal (Reuters)
- China could target oil firms, telecoms, banks in price probes (Reuters)
- For once, it's not the weather's fault: U.K. Retail Sales Increase More Than Forecast on Heatwave (BBG)
- Japanese visits to shrine on war anniversary anger China (Reuters)
- India Fighting Worst Crisis Since ’91 Seeks to Buoy Rupee (BBG)
- Japan Signals Corporate Tax Cut a Long Shot as Deflation Eases (Reuters)
- Indonesia Tackles Graft in Energy Sector (Reuters)
- Merkel Touts Strength of German Economy (WSJ)
- and... British stuntman who parachuted into London Olympics opening ceremony as James Bond dies in fall (AP)
Overnight Media Digest
* Lawyers for American Airlines and US Airways Group Inc spelled out the arguments they would use to defend their proposed merger, one day after the Justice Department sued to block the deal. The suit ignored several benefits the merger would offer, including more flights to more destinations, reduced airlines' costs, lower fares and better service, they said.
* Network equipment maker Cisco Systems Inc on Wednesday said it would cut 4,000 jobs, or 5 percent of its workforce, despite reporting an 18 percent jump in profit in the fourth quarter. Chief Executive John Chambers said the job cuts were due to a disappointing economic recovery that is affecting particular countries and product lines in different ways.
* Many of the new health insurance marketplaces will include relatively few choices of doctors and hospitals. The big reason behind these limited plans: Cost. Insurers are betting that consumers will be willing to trade some choice and flexibility in order to get cheaper premiums.
* The television industry is anticipating an advertising bonanza related to the rollout of the federal health overhaul, with as much as $1 billion expected to be spent on ads by insurers alone, according to TV executives and a broadcasters' trade group.
* Activist investor Nelson Peltz's Trian Fund Management LP has taken a $1.3 billion stake in DuPont Co, said people familiar with the New York investment firm, and will push the venerable chemical maker to improve its long term growth prospects.
* A United Parcel Service Inc plane approaching the Birmingham, Alabama, airport crashed about a mile short of the runway early Wednesday, killing the pilot and co-pilot.
* Activist hedge fund manager William Ackman exited his stake in snack maker Mondelez International Inc in the second quarter and reduced his position in Matson Inc. Ackman has been under pressure recently, with his Herbalife Ltd and JC Penney bets working against him.
* Samsung Electronics Co is facing a lawsuit that alleges dangerous work conditions at its factory in Brazil. Federal prosecutors said that the company is subjecting employees to the risk of disease by repetitive activity and intense pace of work on the assembly line at its Manaus plant, which employs 6,000 workers producing electronics for Latin American markets.
Two former JPMorgan Chase traders face criminal charges for allegedly falsifying the bank's books to hide its multibillion dollar "London whale" trading losses.
A German court has blocked Liberty Global's completed 3 billion euro ($4 billion) purchase of KabelBW, putting in doubt latest attempts to consolidate the country's cable industry.
Chinese authorities announced on Wednesday they would widen their investigation into drug pricing and corruption in the healthcare sector in the country.
An independent foundation that can block a takeover of Dutch telecoms group KPN wants Mexican billionaire Carlos Slim to set out his strategy for KPN or risk a poison pill defence of his 7.2 billion euro bid.
International Airlines Group announced an order with Airbus for 62 narrow-body passenger jets as it embarks on an aggressive expansion plan for Vueling, its new budget airline.
Spain's Telefonica SA emerged as the preferred bidder for two smart metering contracts in the United Kingdom.
* After a decade of rapid consolidation in the U.S. airline industry, the Justice Department filed a lawsuit on Tuesday to block the proposed merger between American Airlines parent AMR Corp and US Airways Group Inc, which would create the world's largest airline. It underscores a newly aggressive approach by the Justice Department's antitrust division, which has been more closely scrutinizing proposed mergers as the economy recovers.
* Hedge fund titan William Ackman resigned this week from the board of J.C. Penney Co Inc, just days after he began a public rebellion against his fellow directors over the future of the company. At the same time, he has made a very public bet against Herbalife Ltd, the nutritional supplements company, that has not gone his way over the last several months. By some counts, Ackman has lost about $1 billion on both companies.
* Private equity firm Kohlberg & Co, which offered last month to buy Steinway Musical Instruments Inc, said on Tuesday that it would not seek to raise its bid in the face of a rival offer. That puts Steinway in a position to complete a buyout deal with the rival bidder, which offered this week to buy the company for $38 a share, or about $475 million. The rival bidder, which has not been publicly identified, is the hedge fund Paulson & Co, according to a person briefed on the matter.
The Senate's committee on homeland security sent a letter this week to the major financial regulators and law enforcement agencies asking about the threats and risks related to virtual currency like bitcoin. These currencies, whose popularity has grown in recent years, are often used in online transactions that are not monitored by traditional financial institutions.
* The Public Company Accounting Oversight Board is proposing a major overhaul of how company audits are reported to the public, a move that could provide investors with deeper insights into the health of corporations.
* On Wall Street, strange financial products sometimes exist not because they are good for investors or companies, but because they offer their promoters a way to profit. Silver Eagle is a special purpose acquisition company, or SPAC, which raises money through an IPO and then casts a wide net in search of a private company to buy. Silver Eagle's IPO is the largest in the past seven years for a SPAC and sure to earn its promoters millions, but the outcome is not so clear for its investors or even the company itself.
* Private equity firm Advent International agreed on Tuesday to sell Domestic and General, an extended warranty company, to CVC Capital Partners for about $1.2 billion, according to a person with direct knowledge of the matter.
THE GLOBE AND MAIL
* Two Canadian Conservative MPs who hosted fundraising events featuring Senator Pamela Wallin say they didn't know she had billed taxpayers for travel costs. Wallin attended events for Harold Albrecht and Kellie Leitch that were flagged by auditors in a report released this week. All told, the report found Wallin claimed C$121,000 ($117,200) in improper expenses, some of it for partisan work.
* Canada has so weakened its environmental laws that it is "in violation" of its obligations under the North American free trade agreement, the West Coast Environmental Law association says. The non-profit legal foundation asked the Commission for Environmental Cooperation to take a hard look at Canada's actions, saying the government has exposed the environment to undue risk to give Canadian industry an edge over the U.S. and Mexico.
Reports in the business section:
* Verizon Communications Inc is putting off the potential acquisition of two small wireless companies, Wind Mobile SA and Mobilicity, a shift that may signal the U.S. carrier is cooling on the idea of entering Canada despite moves by Ottawa to entice foreign players into the market.
* The deadly oil-by-rail disaster in Quebec has done little to quell plans to move more crude on trains in Canada, with the third announcement of a new loading terminal unveiled in as many weeks. Proposals to ratchet up capacity to move oil to market on rails, the latest being a C$100 million terminal planned for Saskatchewan, are coming as major pipeline projects, including TransCanada Corp's Keystone XL conduit to Texas refineries from Alberta.
* Ongoing hostilities are likely to flare up as new defense minister Rob Nicholson is forced to make some unpalatable decisions on resource allocation, including the possibility of reducing the size of Canada's 68,000 regular forces by chopping one or more of its nine infantry battalions.
* Concerns are rising about several government proposals for flood recovery, chief among them, a plan to brand homes that take disaster recovery program money from the government. Homeowners who take the cash and fail to adhere to the government's pricey flood mitigation standards will have it noted on their property titles. Those properties will never again be allowed to access disaster recovery funds. The regulatory changes could affect hundreds of Calgary homes on flood fringes.
* Canadian home prices rose in July from June to an all-time high, but the modest monthly gain suggests the robust housing market may be cooling again, according to data from the Teranet-National Bank Composite House Price Index on Wednesday. The report echoes data on both sales activity and prices that suggest Canada's housing market has recovered well after the government tightened mortgage rules in July 2012, causing a sharp slowdown in demand in the second half of 2012.
* Toronto's thunderstorm last month set a record for the most expensive natural disaster in Ontario's history, with insured property damage estimated at more than C$850 million, in what has been one of the worst summers for insurers in recent memory, according to the Insurance Bureau of Ontario
CHINA SECURITIES JOURNAL
- China's use of electricity in July increased by 8.8 percent year-on-year, according to data released by the National Energy Administration.
- China's micro-stimulus policies, such as railway and airport construction, are important for local economies, but must be dealt with caution in order to control risks inherent in local financing platforms, the paper said in a front-page editorial.
- Chinese millionaires' confidence in the country's economy in the next two years has fallen for a second year in a row, according to a report released by the GroupM Knowledge and Hurun Wealth Report on Wednesday.
- China plans to increase the value of information technology consumption to above 3.2 trillion yuan ($522.91 billion) by 2015, which would mean a yearly increase of over 20 percent, according to an opinion adopted by the State Council at an executive meeting on Wednesday.
Fly On The Wall 7:00 AM Market Snapshot
BRF Brasil Foods (BRFS) upgraded to Buy from Neutral at BofA/Merrill
Baker Hughes (BHI) upgraded to Outperform from Sector Perform at RBC Capital
Carnival (CCL) upgraded to Buy from Neutral at Goldman
Cisco (CSCO) upgraded to Neutral from Cautious at ISI Group
ITC Holdings (ITC) upgraded to Buy from Neutral at ISI Group
Integra LifeSciences (IART) upgraded to Overweight from Neutral at Piper Jaffray
JinkoSolar (JKS) upgraded to Buy from Neutral at Roth Capital
M.D.C. Holdings (MDC) upgraded to Buy from Neutral at Sterne Agee
Martin Midstream Partners (MMLP) upgraded to Outperform at Raymond James
National Oilwell (NOV) upgraded to Outperform from Sector Perform at RBC Capital
Nexstar (NXST) upgraded to Overweight from Equal Weight at Evercore
SunTrust (STI) upgraded to Buy from Hold at Drexel Hamilton
The Medicines Co. (MDCO) upgraded to Buy from Neutral at BofA/Merrill
Anixter (AXE) downgraded to Market Perform from Outperform at William Blair
Avago (AVGO) downgraded to Hold from Buy at Brean Capital
Green Dot (GDOT) downgraded to Neutral from Buy at Compass Point
HSBC (HBC) downgraded to Neutral from Buy at Mizuho
Helmerich & Payne (HP) downgraded to Sector Perform from Outperform at RBC Capital
Houston Wire & Cable (HWCC) downgraded to Market Perform at William Blair
Oceaneering (OII) downgraded to Sector Perform from Outperform at RBC Capital
PulteGroup (PHM) downgraded to Outperform from Top Pick at RBC Capital
Smith & Wesson (SWHC) downgraded to Underweight from Hold at KeyBanc
Synovus (SNV) downgraded to Hold from Buy at Drexel Hamilton
ArcelorMittal (MT) initiated with an Underweight at Barclays
Bazaarvoice (BV) initiated with a Buy at B. Riley
Cole Real Estate Investments (COLE) initiated with an Outperform at JMP Securities
Quantum (QTWW) initiated with a Strong Buy at Ascendiant
Westport Innovations (WPRT) initiated with a Sector Perform at RBC Capital
American Safety Insurance (ASI) holder Catalina offers $30.75 per share
CorpBanca (BCA) acquired control of Helm Bank through subsidiary CorpBanca Columbia
Cisco (CSCO) announced workforce reduction of about 4,000 employees
Said comfortable with 5% to 7% revenue growth “over the long run”
Cisco (CSCO) CEO Chambers: "My confidence in our ability to be the number one IT company is increasing.”
Dean Foods (DF) announced 1-for-2 reverse stock split
IBM (IBM) acquired Trusteer, terms not disclosed
Plains All American (PAA) discontinued joint pursuit with Keyera
Precision Castparts (PCP) announced additional $750M share repurchase plan
Companies that beat consensus earnings expectations last night and today include:
Constellation Energy (CEP), NetEase.com (NTES), Vertex Energy (VTNR), WidePoint (WYY), Dillard's (DDS), Agilent (A), Cisco (CSCO), Vermillion (VRML), NetApp (NTAP)
Companies that missed consensus earnings expectations include:
Alexco Resource (AXU), Silver Wheaton (SLW), Bluebird Bio (BLUE), Hyperion Therapeutics (HPTX), Vipshop (VIPS), Summer Infant (SUMR), Atossa Genetics (ATOS)
Companies that matched consensus earnings expectations include:
CUI Global (CUI)
- As details emerge about the coverage available through the new consumer marketplaces created by the federal health law, many of the plans (WLP, UNH) will include relatively few choices of doctors and hospitals. In some cases, plans will layer on other limits, such as requirements that patients get referrals to see specialists, or obtain insurer authorization before pricey procedures, the Wall Street Journal reports
- Billionaire investor John Paulson, who has been one of the most bullish investors in gold, cut his hedge-fund firm's exposure to the precious metal by more than half in Q2, according to a securities filing, the Wall Street Journal reports
- Exxon Mobil (XOM) and Royal Dutch Shell (RDS.A) are among the suitors advancing to the next round of bidding for Newfield Exploration’s (NFX) Malaysian and Chinese oil and gas fields valued at about $1.2B, sources say, Reuters reports
- China Mobile (CHL) Chairman Xi Guohua said talks with Apple (AAPL) have been progressing smoothly and both sides are positive about reaching a possible agreement, Reuters reports
- BP (BP) asked a federal judge in Houston to deny U.S. investors the right to pursue a class action, or group, lawsuit claiming the company misled them before and after the 2010 Gulf of Mexico oil spill, Bloomberg reports
- Lenovo Group (LNVGY) CEO Yang Yuanqing said the company is looking for acquisitions in PCs and smartphones as expanding share for those products boosted quarterly profit 23%, Bloomberg reports
Diamondback Energy (FANG) 4M share Secondary priced at $40.25
Hyperion Therapeutics (HPTX) files to sell 8.73M shares of common stock
Medical Properties Trust (MPW) to sell 10M shares of stock
Third Point Reinsurance (TPRE) 22.222M share IPO priced at $12.50
ZELTIQ Aesthetics (ZLTQ) files to sell 12.5M shares of common stock