Frontrunning: October 2
- U.S. Government Shut Down With No Quick Resolution Seen (BBG)
- 12 House Republicans now say they’d back a ‘clean’ CR (WaPo)
- Republicans’ 2014 Senate Edge Muddied by Shutdown Message (BBG)
- Obama Shortens Asia Trip Due to Government Shutdown (WSJ)
- Fed Said to Review Commodities at Goldman, Morgan Stanley (BBG)
- Foreign Firms Tap U.S. Gas Bonanza (WSJ)
- Behind Standoff, a Broken Process in Need of a Broker (WSJ)
- Japan Awaits Abe’s Third Arrow as Companies Urged to Invest (BBG)
- Microsoft investors push for chairman Gates to step down (Reuters)
- Australia Trade Deficit Narrows on China, Currency (WSJ)
- BoE to Stress Test Big Banks Every Year (FT)
Overnight Media Digest
* Lawmakers and the White House dug in for a long fight as the federal government shutdown showed no signs of breaking, increasing the likelihood it will become entangled in an even larger battle over the Treasury's ability to pay its bills.
* The idling of the federal government moved from the momentous to the mundane on Tuesday, as thousands of workers packed up their belongings and headed home.
* The health-insurance marketplaces at the center of President Barack Obama's health law saw a surge of consumer interest Tuesday that surprised even many of the law's backers. But the debut proved patchy, with few applicants actually able to buy coverage on clogged websites that were bedeviled with technological problems.
* Merck said it plans to slash its 81,000-strong workforce by 20 percent over the next two years, a stark show of the diminishing research-and-development capabilities of some of America's biggest health companies.
* New York's top prosecutor plans to announce on Wednesday both an agreement with Bank of America and a lawsuit against Wells Fargo over alleged violations of a mortgage settlement reached last year.
* The U.S. boom in natural-gas production is luring investment from foreign manufacturers eager to tap a cheap, abundant supply of fuel and feedstocks.
* New troubles are piling up for U.S. banks as they prepare to release third-quarter earnings results amid warnings of weak trading revenue, a sharp decline in mortgage refinancing and rising legal costs.
* Brazilian commodity magnate Eike Batista's oil firm OGX missed a crucial bond payment Tuesday, setting up one of the biggest defaults in the history of Latin America.
* Activist investor Carl Icahn said he pressed Apple Inc Chief Executive Tim Cook to more than double the company's stock buyback program to $150 billion during a dinner meeting at his apartment.
* The U.S. Supreme Court on Tuesday took no action on an appeal by the government of Argentina in a closely watched sovereign debt case. The high court added eight new cases to its docket Tuesday but made no mention of Argentina's appeal. The court could indicate as soon as next Monday what it plans to do with the case.
* Former Goldman Sachs Group Inc trader Fabrice Tourre is seeking to reverse a federal jury's decision that found him liable for defrauding investors in a mortgage-linked deal that soured during the financial crisis.
Mortgage lenders in the UK are wary of the government's latest 'Help to Buy' government loan initiative with only state-backed banks Royal Bank of Scotland and Lloyds as the only pair to have endorsed the scheme.
Vítor Constâncio, vice-president of the European Central Bank, says European banks are being unjustly undervalued by investors and are just as strong as their U.S. rivals.
Italy's stock market regulator has demanded an explanation from Intesa, the country's largest retail bank, why CEO Enrico Cucchiani, who quit on Sunday, is being kept on for another six months as an employee with no specific responsibility.
BP had equipment available that could have sealed its well in the Gulf of Mexico within a month of it blowing out in April 2010, two months earlier than the spill was actually ended, a safety consultant appearing as an expert witness told a U.S. court on Tuesday.
Pressure from shareholders on companies to provide them with income, even as profitability falls, has led to a fall in dividend cover - the ratio of profits to dividends - among FTSE 350 companies, according to a study.
European multinationals, which have long relied on fast-growing sales in emerging markets, are realising that they are not immune to the sharp currency falls in such regions.
* Fielding complaints from borrowers struggling to save their homes, New York's top prosecutor is preparing a lawsuit against Wells Fargo & Co, accusing the nation's largest home lender of flouting the terms of a multibillion-dollar settlement aimed at stanching foreclosure abuses.
* Millions of Americans visited new online health insurance exchanges as enrollment opened on Tuesday, suggesting a broad national appetite for the affordable coverage that President Obama has promised with his healthcare law. But many people quickly encountered technological problems that prevented them from getting rates, comparing health plans or signing up.
* Google Inc must defend itself against accusations that it is illegally wiretapping in the course of its everyday business - gathering data about internet users and showing them related ads. The accusations, made over several years in various lawsuits that have been merged into two separate cases, ask whether Google went too far in collecting user data in Gmail and Street View, its mapping project.
* HarperCollins is the latest publisher to try a Netflix -style e-book subscription service, announcing on Tuesday that it has struck a deal to make its backlist books available on Scribd, a website for sharing documents and books.
* Mark Cuban, the billionaire entrepreneur who owns the Dallas Mavericks basketball team, is a "righteous man" whose stock trading practices are "inconsistent with someone who's done something wrong." Or he's a brazen billionaire whose trading ran afoul of securities laws. These dueling narratives were presented to a jury on Tuesday as the Securities and Exchange Commission and Cuban's lawyers delivered opening arguments in his civil insider trading trial.
* Federal authorities expect that one of the former JP Morgan Chase & Co employees facing criminal charges in connection with the bank's multibillion-dollar trading loss in London will eventually be extradited to the United States, a senior prosecutor said on Tuesday.
* Tesco Corp, the British supermarket chain that last month sold off its U.S. businesses, is turning instead to China. The company said on Wednesday it would pay 4.3 billion Hong Kong dollars ($554.6 million) to set up a new Chinese retail joint-venture with a state- run partner.
* Shares of Empire State Realty Trust Inc, whose office properties include the iconic 102-story Art Deco tower, raised $929.5 million on Tuesday in one of the largest initial public offerings of a United States real estate investment trust. The 71.5 million shares were priced at $13 each, at the low end of the expected range. The REIT will trade under the symbol ESRT on the New York Stock Exchange.
* A federal judge has denied a request by two American Indian tribes to stop New York State's top financial regulator from cracking down on their online lending businesses. The tribes had argued that Benjamin Lawsky, superintendent of the state's Department of Financial Services, overstepped his jurisdictional bounds in trying to regulate business activity taking place on Indian reservations in Oklahoma and Michigan.
* Fabrice Tourre, the former Goldman Sachs Group Inc trader, has asked a federal judge to give him a new trial - or throw out the charges against him. Tourre was accused of misleading a small group of investors about the role of the hedge fund Paulson & Co in a 2007 trade he helped structure. Paulson & Co made about $1 billion on the trade while others lost big.
* Herschend Family Entertainment, a private group that operates Dolly Parton's Dollywood theme parks among other quintessentially American attractions, agreed to buy the acrobatic basketball troupe from Shamrock Capital Advisors, a private equity firm based in Los Angeles. Terms of the deal were not disclosed.
* Carl Icahn, the billionaire activist hedge fund manager with a penchant for rattling corporate boards, is poised to fight his next battle over Apple Inc on Twitter. Icahn said on Tuesday that he "pushed hard" during a "cordial dinner with Tim last night" for Apple to do a $150 billion stock buyback
THE GLOBE AND MAIL
* Canada's recreational firearms lobby is telling the Harper government to avoid signing a landmark United Nations arms trade treaty, arguing it could lead to an insidious return of the federal long-gun registry.
* The provinces are gearing up to battle Ottawa this fall over the federal government's signature skills-training program, with British Columbia's Christy Clark and Ontario's Kathleen Wynne hunkering down to plan strategy for the coming fight.
Reports in the business section:
* BlackBerry Ltd is looking at options to quickly unlock value from its substantial real estate portfolio in its hometown of Waterloo, Ontario as the company works to finalize a $4.7 billion takeover plan. The smartphone maker owns more than 20 buildings in the Waterloo area, a collection built up during its rapid expansion over the past 10 years.
* Rogers Communications Inc is looking to strike it big in the oil patch, with a C$700 million ($677.93 million)investment that will see its cellphone network extended to the far reaches of Alberta. Albertans spend more on voice and data plans than subscribers in any other part of the country, making the province a key battleground as Canada's established cellphone companies try to find new customers in a highly competitive market.
* Canada's economy is being overshadowed by its big neighbour. Despite data on Monday showing a strong rebound in growth in Canada, it's the funding crisis in the United States that dominates the spotlight.
* Former Ontario speaker and cabinet minister Chris Stockwell is on the verge of a political comeback after winning the endorsement of Etobicoke York Community Council to fill the ward seat left vacant by Doug Holyday. A majority of councillors agreed, after three ballots, that city council should appoint Stockwell to represent Ward 3 at a meeting later this month.
* The head of Canadian Imperial Bank of Commerce's retail banking operation says he is "comfortable" with the bank's business mix despite continuing rapid growth of the consumer mortgage portfolio. All the big banks have been aggressively pursuing the consumer loan business, especially mortgages. Canada's fifth biggest bank by assets is confident the issue won't come back to haunt it as CIBC has worked hard to cut its exposure to potential losses.
* After promising bold action to remake Encana Corp into a winner, newly appointed CEO Doug Suttles cleared much of the remaining old guard from the natural gas producer's executive team Tuesday and appointed a smaller, next-generation group.
SOUTH CHINA MORNING POST
-- Nearly half of urban residents in China own smartphones and 60 percent of them would give up their television sets rather than their phones, says a report. "Our Mobile Planet: China," conducted by Google and research firm IPSOS, said 69 percent of respondents said they accessed the Internet everyday on their smartphones.
-- Ctrip.com International, the mainland's largest online travel agency, may be an unintended beneficiary of the proposed US$125 million initial public offering by Qunar.com, the leading Chinese travel search engine controlled by Baidu. A bigger Qunar platform after the stock listing is likely to drive even more business to Shanghai-based Ctrip.
-- Hong Kong jewellers are expected to benefit from Beijing's possible easing of limits on gold imports that would allow mainlanders to bring more of the precious metal across the border without paying levy. Only those carrying more than 200 grams of gold each time will be taxed after clearing immigration, according to a People's Bank of China draft rule which is under consultation. The current import limit is 50 grams.
HONG KONG ECONOMIC JOURNAL
-- Electricity supplier Power Assets Holdings Ltd is bidding for a 50 percent stake in Marchwood Power, a joint venture between Scottish and Southern Energy and ESB International, in the United Kingdom as the Hong Kong-listed company further expands its overseas investment, according to sources.
-- Chinese ship builder Guangzhou Shipyard International Co Ltd said it planned to issue 387 million H shares, raising HK$2.82 billion to fund acquisitions and for working capital.
MING PAO DAILY NEWS
-- New World Development is set to raise US$700-800 million from a spinoff of its hotel business in Hong Kong, with trading in shares expected to begin by end-October, while Kerry Properties Ltd's logistics spinoff is aimed to list before Christmas, according to sources.
Fly On The Wall 7:00 Am Market Snapshot
Allied World (AWH) upgraded to Equal Weight from Underweight at Barclays
Allstate (ALL) upgraded to Outperform from Market Perform at Keefe Bruyette
Barclays (BCS) upgraded to Buy from Hold at Societe Generale
Barrick Gold (ABX) upgraded to Buy from Hold at Deutsche Bank
Everest Re (RE) upgraded to Overweight from Equal Weight at Barclays
Global Payments (GPN) upgraded to Buy from Neutral at Janney Capital
Manpower (MAN) upgraded to Buy from Neutral at BofA/Merrill
Osiris (OSIR) upgraded to Overweight from Neutral at Piper Jaffray
Tesoro (TSO) upgraded to Buy from Neutral at Citigroup
Valero Energy (VLO) upgraded to Buy from Neutral at Citigroup
Alcoa (AA) downgraded to Sell from Hold at Deutsche Bank
AptarGroup (ATR) downgraded to Neutral from Overweight at JPMorgan
Aspen Insurance (AHL) downgraded to Underweight from Equal Weight at Barclays
Baxter (BAX) downgraded to Neutral from Outperform at Credit Suisse
Edgen Group (EDG) downgraded to Hold from Buy at BB&T
Matrix Service (MTRX) downgraded to Equal Weight from Overweight at First Analysis
Montpelier Re (MRH) downgraded to Underweight from Equal Weight at Barclays
OM Group (OMG) downgraded to Equal Weight from Overweight at First Analysis
Progressive (PGR) downgraded to Underweight from Equal Weight at Barclays
Randgold Resources (GOLD) downgraded to Sell from Neutral at Citigroup
ResMed (RMD) downgraded to Neutral from Buy at UBS
Silver Standard (SSRI) downgraded to Sell from Hold at Deutsche Bank
Tesla (TSLA) downgraded to Neutral from Outperform at RW Baird
Unilever (UN) downgraded to Neutral from Buy at UBS
Abercrombie & Fitch (ANF) initiated with an Outperform at FBR Capital
Aeropostale (ARO) initiated with a Market Perform at FBR Capital
American Eagle (AEO) initiated with a Market Perform at FBR Capital
Arotech (ARTX) initiated with a Buy at B. Riley
Cabela's (CAB) initiated with a Market Perform at William Blair
Charles River Labs (CRL) initiated with a Buy at Cantor
Curis (CRIS) initiated with an Outperform at RW Baird
Hologic (HOLX) initiated with a Buy at Needham
IMAX (IMAX) initiated with a Hold at Benchmark Co.
Pretium Resources (PVG) initiated with a Buy at Roth Capital
Protective Life (PL) coverage resumed with an Overweight at Barclays
Urban Outfitters (URBN) initiated with an Outperform at FBR Capital
SAP Ventures (SAP) raised $1B in one year
Berkshire Hathaway (BRK.A) exercised warrant to purchase Goldman Sachs (GS) shares
J.C. Penney (JCP) shareholder sued over stock issuance, Reuters reports
RCS Capital (RCAP) signed LOI to acquire Investors Capital Holdings (ICH)
Tesco (TSCDY) to launch JV in China
Williams (WMB), Boardwalk Pipeline (BWP) signed JV agreement for LPG export terminal
SunTrust (STI) in $65M loan settlement with Freddie Mac (FMCC)
Companies that beat consensus earnings expectations last night and today include:
Global Payments (GPN)
Companies that missed consensus earnings expectations include:
Intellipharmaceutics (IPCI), Team (TISI), Resources Connection (RECN)
Companies that matched consensus earnings expectations include:
- New troubles are piling up for U.S. banks (JPM, WFC, C, BAC, MS, GS) as they prepare to release Q3 results amid warnings of weak trading revenue, a sharp decline in mortgage-refinancing activity and rising legal costs, the Wall Street Journal reports
- The U.S. boom in natural-gas production is luring investment from foreign manufacturers eager to tap a cheap, abundant supply of fuel and feed stocks. Many foreign companies, alone or in joint ventures with U.S. partners (LNAGF, DOW, SSL) are taking advantage of gas that costs a fraction of what it does abroad to expand production in the U.S., the Wall Street Journal reports
- Cargill, one of the world's leading cocoa traders, is in the final stages of a deal to buy Archer Daniels Midland’s (ADM) cocoa business, sources say, creating a price-setting global giant, Reuters reports
- Three of the top 20 investors in Microsoft (MSFT) are lobbying the board to press for Bill Gates to step down as chairman of the company he co-founded 38 years ago, sources say, Reuters reports
- Microsoft (MSFT) directors have discussed CEO candidates, including Ford’s (F) Alan Mulally, as they look for a successor to Steve Ballmer, sources say, Bloomberg reports
- Justice Department lawyers from New York to San Francisco are asking judges to delay civil cases as the government partially shuts down. The requests were made in prominent cases including its bid to block the US Airways (LCC) and AMR Corp. (AAMRQ) merger in Washington and others, Bloomberg reports
Bridge Bancorp (BDGE) files to sell $25M of common stock
Burlington Stores (BURL) 13.333M share IPO priced at $17.00
Empire State Realty (ESRT) 71.5M share IPO priced at $13.00
Enterprise Products (EPD) files to sell $1.25B of common units for limited partners
Identive Group (INVE) files to sell 4.95M shares of common stock for holders
Intercept (ICPT) files to sell $115M of common stock for holders
Memorial Production (MEMP) files to sell 14.5M common units for limited partners
Omega Healthcare (OHI) files to sell $75M of common stock
PennyMac (PFSI) files to sell 43.97M shares of Class A common stock for holders
RE/MAX Holdings (RMAX) 10M share IPO priced at $22.00
Snap Interactive (STVI) files to sell $4M in common stock and warrants
StemCells (STEM) proposes offering of common stock and warrants
Teekay LNG (TGP) files to sell 3M common units for limited partners