Frontrunning: September 27
- House GOP banking on Plan C (Politico)
- Pimco shook hands with the Fed - and made a killing (Reuters)
- BlackBerry's Torsten Heins has a $55 Million golden parachute (Reuters)
- JPMorgan Urged to Pay More in Mortgage Deal (NYT)
- Soros Adviser Turned Lawmaker Sees Crisis by 2020 (BBG)
- U.N. Members Agree on Syria Disarmament (WSJ)
- U.N. Says Humans Are 'Extremely Likely' Behind Global Warming (WSJ)
- The non-falsifiable threats emerge: Shutdown Would Shave Fourth-Quarter U.S. Growth as Much as 1.4% (BBG)
- Swaps Rules Worry Industry: Coming Regulations Have Market Players Concerned About Possible Disruption (WSJ)
- Multinationals beach tax bills in Spanish shells (FT)
- JPMorgan chief meets Holder in bid for deal to end probes, avoid criminal charges (WaPo)
- Billionaires Battle as Bezos-Musk Companies Vie for Launch Pad (BBG)
Overnight Media Digest
* The U.S. and Iran held their highest-level talks in 36 years on Thursday, in what some officials present described as a substantial meeting over Tehran's disputed nuclear program that could begin to counter decades of enmity.
* Congress's rocky path to avoiding a government shutdown became even rougher Thursday, as Speaker John Boehner said the house wouldn't accept the spending plan likely to emerge from the Senate.
* Upstart BATS Global Markets, with its deal to merge with Direct Edge, is upending Wall Street's decades-old pecking order of exchanges.
* EBay agreed to buy Braintree, a global payment platform, for $800 million in cash, in a bid to grow its PayPal unit's mobile capabilities.
* J.C. Penney moved to raise as much as $1 billion by selling stock, boosting its cushion of cash ahead of what could be a hard-fought holiday season.
* Some marquee bond-fund managers who took a beating in the second quarter were vindicated when bets that the Federal Reserve would be cautious in paring its stimulus program recently paid off.
* JPMorgan CEO Dimon met with the U.S. attorney general amid intensifying talks of a possible $11 billion settlement over potential criminal and civil charges against the bank.
* Bloomberg LP's news division announced significant management changes that will result in a smaller number of editors reporting directly to Editor in Chief Matt Winkler. The reorganization comes as Bloomberg attempts to streamline the management lines of a news operation that has expanded to 2,400 journalists in recent years, reflecting broader growth at the company.
* Banks, brokers and investors are warning of potential turmoil in a major part of the derivatives market on Oct. 2, when new U.S. rules kick in governing how instruments known as swaps are traded. Swaps are derivatives, traditionally not traded on exchanges, which corporations and financial institutions use to protect against or speculate on changes in everything from fuel costs to interest rates.
A meeting between JPMorgan Chase & Co chief executive Jamie Dimon and U.S. attorney general Eric Holder at the Department of Justice in Washington on Thursday failed to produce a final deal on the settlement of all outstanding mortgage probes for $11 billion but people familiar with the situation described the talks as "constructive".
Rabobank, one of the several banks named by the authorities in the international Libor interest rate rigging scandal, is on track to settle the allegations as early as next month, according to people familiar with the matter.
Ebay Inc will buy payment gateway Braintree for about $800 million as it seeks to compensate for slow innovation by its own payments arm, PayPal.
Alibaba Group, which this week abandoned plans for a $60 billion-plus listing in Hong Kong, hit back at regulators over their refusal to allow China's biggest e-commerce firm keep its control structure.
Maersk Line, the world's largest container shipping line by market share, said on Thursday it believed the slide in trade had bottomed out and forecast a 4-6 percent growth in demand for global containers in 2014 and 2015.
The Office of Fair Trading has found numerous cases of "unfair commercial practices" in "free" video games that encourage young players to spend money on virtual goods. It said some of the 38 popular apps and web-based games it examined were likely to breach consumer protection law and told developers to implement changes or face prosecution.
* The Justice Department is moving closer to striking a multibillion-dollar settlement with JPMorgan Chase & Co over questionable mortgage practices, after authorities urged the bank to raise its offer and the bank's chief executive took the rare step of meeting with Attorney General Eric Holder in Washington to discuss the deal.
* Detroit's emergency manager wants to freeze the city's pension system for public workers in light of mounting evidence that it was operated in an unsound manner for many years, contributing to the city's downfall. The emergency manager, Kevyn Orr, issued on Thursday the preliminary results of a three-month investigation that identified questionable actions, including diversions of pooled money into individual accounts and excessive real estate investments that lost millions of dollars.
* Google Inc on Thursday announced one of the biggest changes to its search engine, a rewriting of its algorithm to handle more complex queries that affects 90 percent of all searches. The change, which represents a new approach to search for Google, required the biggest changes to the company's search algorithm since 2000.
* Two months after Detroit became the largest city ever to file for bankruptcy, top Obama administration officials will be there on Friday to propose nearly $300 million in combined federal and private aid toward a Motown comeback - only a fraction of the billions the city owes and a reflection of the budget and political limits on President Obama.
* Although the new federal health care law is designed to help people buying individual policies, even people with employer-provided policies are beginning to see changes in their coverage as companies rethink health care for their workers, discontinuing it in a few cases and redesigning it in many others.
* Under pressure to provide healthier meals, McDonald's Corp announced on Thursday that it would no longer market some of its less nutritional options to children and said it also planned to include offerings of fruits and vegetables in many of its adult menu combinations.
* Federal authorities, broadening their investigation of Bernard Madoff's multibillion-dollar Ponzi scheme five years after the fraud was uncovered, unveiled criminal charges on Thursday against Paul Konigsberg, a longtime accountant in Madoff's inner circle.
* In an expanding global antitrust investigation, nine Japanese automotive suppliers, along with two former executives, have agreed to plead guilty to conspiracy and pay more than $740 million in criminal fines for fixing the price of auto parts sold in the United States and abroad, the Justice Department said on Thursday.
THE GLOBE AND MAIL
* The number of doctors in Canada and the amount they get paid by government health plans hit record highs in each of the past several years - and 2012 was no different. Canada had more than 75,000 doctors working last year, an increase of 4 percent over 2011, and governments paid them C$22 billion ($21.29 billion) for their services, about 9 percent more than the previous year, according to new data released on Thursday by the Canadian Institute for Health
* Canada's foreign service has reached a deal on a new contract with the federal government, ending a lengthy dispute and rotating strikes that have slowed visa processing and other consular services abroad. A summary shows the government agreed to boost base pay for senior ranks of the foreign service, bringing it more in line with what the union had argued were comparable positions elsewhere in government.
* A long-time Conservative member of Parliament has quit the Tory caucus after being charged under the Canada Elections Act - a fresh ethics embarrassment for Canada's Prime Minister Stephen Harper as he struggles to move beyond the Senate expenses scandal. Dean Del Mastro resigned from the Conservative government caucus on Thursday and was stripped of his duties as a parliamentary secretary.
Reports in the business section:
* Prem Watsa has a message for those skeptical of his ability to pull off a takeover of BlackBerry Ltd : Don't underestimate him. The chief executive of Fairfax Financial Holdings Ltd says his company has plenty of potential partners - so many that he believes the equity part of the $4.7 billion offer will be oversubscribed.
* Newfoundland's government is touting a major offshore discovery as the start of a new chapter in the province's oil industry, and a reason for international energy companies to consider investments there. Statoil ASA of Norway said on Thursday that its discovery in the Flemish Pass Basin, called Bay du Nord, could hold 300 million to 600 million barrels of light oil.
* New entrant wireless carriers that launched cellphone services after buying licenses in Canada's last spectrum auction failed to pick up significant market share last year. The Canadian Radio-television and Telecommunications Commission released a report on Thursday showing the newcomers adding few new subscribers despite generally undercutting the Big Three carriers on price.
* The Stephen Harper government is set to propose a number of new measures to close the U.S.-Canada consumer price gap, including the possibility of extending the tariff relief offered on sports equipment in the last budget to consumer electronics and other products. Internal documents reveal the government's concern at prices it says are, on average, 15 percent higher than those paid by U.S. consumers before taxes.
* When Rwandan President Paul Kagame and other officials from the East African country meet with Toronto's business community on Friday, their message will be simple: Rwanda is open for business. It may be the biggest push for foreign investment that Rwandan leaders have ever made on Canadian soil. But thanks to the recent experience of a small Canadian oil and gas company, it could be a tough sell.
* Oilfield service companies are hoping a boost from liquefied natural gas projects will lift the industry in 2014 after oil and gas producers spent much of the past two years hunkering down in an environment of low commodity prices. "We haven't had a price increase in our service for a long time," said Garnet Amundson, president and chief executive officer at Essential Energy Services Ltd, which has drilling operations across Western Canada. "There are 1,100 service rigs, and only about half of them are working on a regular basis, that means there is a lot of idle equipment sitting there."
CHINA SECURITIES JOURNAL
-- China's Bank of Communications Co Ltd expects to get approval soon for setting up a subsidiary in the Shanghai Free Trade Zone, said Qian Wenhui, the bank's deputy head.
-- The Dalian Commodity Exchange will launch two trials for trading the country's first iron ore futures on Sept 28 and Oct 12, suggesting the product could be officially listed soon.
SHANGHAI SECURITIES NEWS
-- China will suspend restrictions on foreign investment in Shanghai's free trade zone from Oct. 1, aimed at allowing greater access to overseas participants.
-- China's semiconductor use grew 8.7 percent in 2012, hitting a record high, according to a PricewaterhouseCoopers report issued on Thursday. The country's semiconductor use accounts for over 50 percent of the global total.
-- Over 130 billion yuan ($21.24 billion) of business deals were signed during the 12th World Chinese Entrepreneurs Convention in Chengdu on Thursday. The total of 241 business deals involved more than 10 overseas Chinese enterprises.
-- Shanghai has decided to cut flower decorations for the important National Day holiday by 40 percent, according to the cities greenery and urban landscaping bureau. The measure comes amid national government efforts to curb official spending.
-- Criticism and self-criticism should be frequently used to increase the efficiency of the Party, said an editorial in the paper that acts as the government's mouthpiece.
Fly On The Wall 7:00 AM Market Snapshot
Alpha Natural (ANR) upgraded to Neutral from Sell at Goldman
CONSOL Energy (CNX) upgraded to Buy from Neutral at Goldman
DCP Midstream (DPM) upgraded to Neutral from Underperform at Credit Suisse
Occidental Petroleum (OXY) upgraded to Positive from Neutral at Susquehanna
Trina Solar (TSL) upgraded to Buy from Hold at Deutsche Bank
WPP PLC (WPPGY) upgraded to Overweight from Neutral at HSBC
Walter Energy (WLT) upgraded to Neutral from Sell at Goldman
Yingli Green (YGE) upgraded to Buy from Hold at Deutsche Bank
Akamai (AKAM) downgraded to Neutral from Buy at B. Riley
Arch Coal (ACI) downgraded to Sell from Neutral at Goldman
Avis Budget (CAR) downgraded to Neutral from Buy at Goldman
Cameco (CCJ) downgraded to Neutral from Buy at BofA/Merrill
Cloud Peak Energy (CLD) downgraded to Neutral from Buy at Goldman
Esterline (ESL) downgraded to Underperform from Neutral at BofA/Merrill
Home Bancshares (HOMB) downgraded to Hold from Buy at Wunderlich
International Game (IGT) downgraded to Hold from Buy at Deutsche Bank
International Paper (IP) downgraded to Hold from Buy at Deutsche Bank
Marathon Oil (MRO) downgraded to Hold from Buy at Stifel
Nike (NKE) downgraded to Hold from Buy at Stifel
Sunoco Logistics (SXL) downgraded to Neutral from Outperform at Credit Suisse
Targa Resources Partners (NGLS) downgraded to Neutral from Outperform at Credit Suisse
Thompson Creek (TC) downgraded to Underperform from Neutral at BofA/Merrill
URS Corporation (URS) downgraded to Hold from Buy at KeyBanc
Bruker (BRKR) initiated with a Buy at Maxim
Cheniere Energy Partners (CQP) initiated with a Hold at Deutsche Bank
Cheniere Energy (LNG) initiated with a Buy at Deutsche Bank
Cytec Industries (CYT) initiated with an Outperform at Oppenheimer
Healthcare Services (HCSG) initiated with a Hold at Jefferies
Marlin Midstream (FISH) initiated with a Perform at Oppenheimer
Netgear (NTGR) initiated with an Outperform at Raymond James
Signet Jewelers (SIG) initiated with a Buy at Brean Capital
Teck Resources (TCK) initiated with a Neutral at Citigroup
Waters (WAT) initiated with a Buy at Maxim
Western Alliance (WAL) initiated with an Outperform at Credit Suisse
- KKR (KKR) to purchase all outstanding Panasonic Healthcare (PCRFY) shares for $1.67B
- PPL Corp.’s (PPL) PPL Montana subsidiary to sell hydroelectric facilities to NorthWestern Energy (NWE) for $900M in cash
- U.S. District Court awarded KBR (KBR) $465M in arbitration against Pemex subsidiary
- Zoltek (ZOLT) to merge with Toray Industries for $16.75 per share or $584M
- Nike (NKE) said currency headwinds 'getting a little stiffer'
- MetLife (MET), Bank for Investment & Development of Vietnam signed JV agreement to form life insurance company
- Polypore (PPO) filed application with FCC to sell microporous business
- Accenture (ACN) approved $5B share repurchase
- Marathon Petroleum (MPC) announced incremental $2B share repurchase plan
- PetSmart (PETM) authorized new $535M share purchase program
- Nestle (NSRGY) considers sale of Power Bar, Reuters reports
Companies that beat consensus earnings expectations last night and today include:
Thor Industries (THO), Nike (NKE)
Companies that missed consensus earnings expectations include:
AZZ Inc. (AZZ)
Companies that matched consensus earnings expectations include:
- Banks, brokers and investors are warning of potential turmoil in a major part of the derivatives market on Oct. 2, when new U.S. rules kick in governing how instruments known as swaps are traded The Bank for International Settlements estimates that there are $633T of swaps outstanding, the Wall Street Journal reports
- McDonald's (MCD) plans to offer customers in its largest markets a choice of side salad, fruit or vegetable in place of French fries in its value meals and to push healthier beverages for its Happy Meals, the Wall Street Journal reports
- Bankers worldwide expect a string of large, high-profile IPOs during the rest of the year, on the back of strong equity markets and U.S. Fed policies that have driven an uptick in IPO activity. Global equity fundraising is up 16.3% so far this year, Reuters reports
- The Federal Reserve confused financial markets over scaling back its bond buying, four top officials said, with one arguing the central bank should link tapering to drops in the jobless rate and another calling for a broad remake of strategy, Reuters reports
- Li & Fung, the world’s largest supplier of clothes and toys to retailers, said U.S. orders are solid and it hasn’t seen reductions from Wal-Mart Stores (WMT), Bloomberg reports
- A shutdown of the U.S. government would reduce Q4 economic growth by as much as 1.4 percentage points depending on its length, economists say, as numerous government workers are furloughed, Bloomberg reports
Emerald Oil (EOX) 15M share Secondary priced at $6.70
Enduro Royalty Trust (NDRO) 11.2M share Secondary priced at $13.85
Enzymotec (ENZY) 4.412M share IPO priced at $14.00
J. C. Penney (JCP) commences offering of 84M shares, range is $9.35-$9.75
Pattern Energy (PEGI) Group 16M share IPO priced at $22.00
RingCentral (RNG) 7.5M share IPO priced at $13.00
Supertel Hospitality (SPPR) withdraws 16.7M common share offering
Tri-County Financial Corporation (TCFC) 1.4M share Secondary priced at $18.75
UIL Holdings (UIL) 5M share Secondary priced at $37.25
Violin Memory (VMEM) 18M share IPO priced at $9.00