Frontrunning: October 3
- Mounting Wall Street fears of US default (FT)
- This is what the US government does when it is "shut down" - CIA ramping up covert training program for moderate Syrian rebels (WaPo)
- SEC Weighs Overhaul of Exchanges’ Self-Regulatory System (WSJ) - just let Goldman and JPM do all the policing; not like anyone cares anymore
- Reid Sets Tone for Democrats in Shutdown Fight (WSJ)
- No Movement in Shutdown Standoff (WSJ)
- Shutdown will not slow Fed nomination, says Obama (FT)
- Syrian Regime Chokes Off Food to Town That Was Gassed (WSJ)
- Tesla Says Car Fire Began in Battery (AP)
- China Services Index Increases in Sign of Sustained Rebound (BBG) or sustained data manipulation
- Australia New Vehicle Sales Dip in Sept (Reuters)
- Draghi Said to Ask ECB Panel to Weigh Liquidity Options (BBG)
- ECB says ready to use any option to temper market rates (Reuters)
- U.S.-Japan Set Road Map for Next 20 Years Amid Asian Threats (BBG)
Overnight Media Digest
* Obama and congressional leaders met for the first time since the federal government shut down, emerging with no evidence of progress toward resolving their impasse over spending and health care.
* Activist hedge-fund manager William Ackman has restructured his big bet against Herbalife Ltd to protect against further paper losses. Ackman said he wanted to mitigate his firm's risks while still providing for big gains if Herbalife shares decline within the near future, as he expects.
* Federal prosecutors are investigating whether the top executive at Cantor Fitzgerald LP's gambling unit participated in his company accepting illegal sports bets, according to people familiar with the matter.
* The United States is overtaking Russia as the world's largest producer of oil and natural gas, a startling shift that is reshaping markets and eroding the clout of traditional energy-rich nations.
* Dan Loeb is adding art criticism to his investor activism, accusing the management of auction powerhouse Sotheby's of failing to understand what kind of art sells best. The hedge fund manager is seeking to oust William Ruprecht as the chairman and chief executive officer of Sotheby's, claiming the auction house's leader has failed to grasp the modern art world. Loeb, himself an avid art collector, says he should be on the board.
* BlackBerry has drawn the interest of Cerberus Capital and other firms that specialize in distressed investing, according to people familiar with the matter.
* The civil case against Bank of America is shining a spotlight on mortgage practices that unfolded more than five years ago. But the testimony so far is also a reminder of how difficult it is to prove outright fraud.
* Banks in Germany, Belgium and Luxembourg that own about $1 billion of bankrupt Detroit's bonds are taking a page out of the hedge fund playbook to carve out their share of the city's meager cash pile.
* After wrangling for months with U.S. regulators over new swaps-trading rules, banks, brokers and investors had a new grievance Wednesday as the regulations took effect: The Commodity Futures Trading Commission's out-of-office message was on. Market participants groused that the agency wasn't available for guidance following a raft of clarifications on the new rules in recent weeks. Just 4 percent of staffers at the CFTC, the main U.S. regulator for derivatives, were working Wednesday because of the partial government shutdown.
* Thousands of customers of MF Global Inc are on the verge of receiving the rest of the estimated $1.6 billion they lost in the collapse of the brokerage in 2011.
* A federal appeals court ordered a lower-court judge to halt payments to some Gulf Coast businesses that say they suffered damage after the 2010 oil spill in the Gulf of Mexico. In Wednesday's ruling, the Fifth Circuit Court of Appeals ordered District Court Judge Carl Barbier to craft a "narrowly tailored injunction" that would halt some payouts while the lower court continues to study questions raised by BP PLC .
As claimants in the 2010 Deepwater Horizon disaster allege that BP stalled in capping the Macondo well, an executive from the company stated that sealing the well too quickly would have risked causing uncontrolled escapes of oil from the seabed.
Government owners and management of Alrosa, the world's largest diamond producer by output, plan to sell a collective 16 percent stake in the company for an estimated $1 billion to $1.5 billion.
Private equity firm Cerberus Capital Management, which specialises in buying distressed assets, has asked to see the accounts of smartphone maker Blackberry as it readies a possible bid for the company.
Activist investor Dan Loeb launched a scathing attack on New York-based auctioneer Sotheby's chief executive William Ruprecht accusing him of lacklustre leadership.
U.S. designer Marc Jacobs is set to leave Louis Vuitton after an extraordinary 16-year run as the French luxury brand's creative director to concentrate instead on his own brand.
* Facebook Inc and Twitter both see the social conversation around television as a way to increase use of their sites and win a bigger piece of advertisers spending, which eMarketer estimates will be $171 billion across all types of media this year in the United States.
* In their first meeting since a budget impasse shuttered many federal operations, President Obama told Republican leaders on Wednesday that he would negotiate with them only after they agreed to the funding needed to reopen the government and also to an essential increase in the nation's debt limit, without add-ons.
* Federal and state officials moved Wednesday to strengthen the computer underpinnings of the new online health exchanges, which proved inadequate to handle a flood of consumer inquiries that began as soon as the system opened on Tuesday and continued into the next day.
* Cerberus Capital Management LP is seeking a confidentiality agreement that would allow it to examine the books and internal operations of BlackBerry Ltd, a person briefed on Cerberus's plans said on Wednesday.
* Clean Energy Fuels Corp will announce on Thursday that it has started selling a transportation fuel made by converting methane, a byproduct of decomposing organic matter, from landfills and other waste sources. The fuel will be available at more than 40 filling stations in California. Clean Energy Fuels, backed by T. Boone Pickens, is developing a nationwide network of natural gas pumps and plans to introduce the fuel elsewhere as well.
* Activist investor Daniel Loeb said on Wednesday that he wanted to join the board of the auction house Sotheby's and called for the chief executive to step down.
* Boutique investment bank Greenhill & Co has opened an office in Brazil and hired the former Goldman Sachs Group Inc executive Daniel Wainstein to run it, a move that comes as several Wall Street players have been retrenching amid Brazil's economic woes.
* Three portfolio managers with an SAC Capital Advisors unit in London have left the firm, according to documents filed with a British agency that tracks corporate registrations. Alidod Shirinbekov, Woei Chan and Paul Crouch left the firm's SAC Global Investors unit in London on Sept. 26, according to filings with the agency, the Companies House.
* Vernon Hill II shook up American retail banking more than a decade ago, and now he's bringing the same model to Britain. In central London, at the flagship branch of his three-year-old banking startup, Metro Bank, eager young tellers greet waiting customers as soon as they enter, directing them to plush leather couches.
* Fashion designer Marc Jacobs is leaving Louis Vuitton to focus on his own label and prepare it for an initial public offering, Louis Vuitton Chief Executive Michael Burke said Wednesday, ending the 16-year tenure of the highest profile American designer at the helm of a major European fashion house.
THE GLOBE AND MAIL
* Vehicle production in Canada is poised to slump by as much as 25 percent by 2020, as global automakers invest heavily in rival auto centers such as Mexico, the United States and other growing markets.
* Women's groups are reporting a spike in verbal and physical assaults against veiled Muslim women in Quebec since the introduction of the province's Charter of Values, evidence that the Parti Quebecois's bid to curb religious symbols in some workplaces is inflaming social tensions.
Reports in the business section:
* Interest among possible buyers of troubled smartphone maker BlackBerry Ltd is heating up, despite revelations by the company that its business is in even worse shape than it disclosed last week.
* A majority of affluent Canadians say they are better off now than they were in pre-recession days, according to the results of a new survey. Fifty-four percent of high net worth individuals in a poll conducted for BMO Harris Private Banking said they felt more financially secure than they did before the 2008 downturn.
* Manitoba's aboriginal affairs minister rejected an initial draft apology for comments he made referring to ignorant white people, documents show. The documents, released under the province's freedom-of-information law, shed new light on the government's response to a controversy that erupted after Eric Robinson criticized a burlesque show fundraiser at the Osborne House women's shelter in Winnipeg.
* The Caisse de depot says it has boosted its leading stake in SNC-Lavalin Group Inc, a couple days after the engineering company announced plans to sell a portion of its AltaLink electricity transmission company. The Quebec pension fund manager says it holds nearly 15.5 million shares, or 10.2 percent stake, of SNC after adding 445,000 shares at an average price of C$44.44 ($42.98) per share.
SOUTH CHINA MORNING POST
-- Tycoon Li Ka-shing could raise more than HK$100 billion ($12.90 billion) by spinning off Hongkong Electric and Watsons to fund a spending spree on beaten-down telecommunications businesses in debt-ridden Europe - his favoured hunting ground since 2011. (link.reuters.com/nyt53v)
-- Hongkong Land, the largest landlord in Central, is rebranding its four major shopping properties under the "Landmark" brand, in anticipation of further increases in retail rents. The four properties - Landmark, Landmark Prince's, Landmark Chater and Landmark Alexandra - offer a total of 208 shops and restaurants. (link.reuters.com/pyt53v)
-- Sany Heavy Industry, China's largest listed construction machinery maker, plans to pay 108 million euros ($146.78 million) for 10 percent of Austrian firm Palfinger . The deal will also result in Palfinger, the world's leading lifting machinery maker, investing 110 million euros for a 10 percent stake in Sany's two lifting machinery subsidiaries. (link.reuters.com/ryt53v)
-- Three of the big four accounting firms will either cut or freeze the pay of thousands of staff in Hong Kong amid global economic uncertainty and keen competition in the initial public offering business, sources said. Both Deloitte China and PricewaterhouseCoopers Hong Kong will freeze salaries from this month and reduce new hirings, while Ernst & Young will slash pay. The big four, which include KPMG, have a combined workforce of 30,000 in Greater China. (link.reuters.com/syt53v)
-- Golden Week lost some of its glitter on day one of the holiday with some companies reporting a 30-40 percent drop in business due to the mainland's ban on cheap tours. Under the law, extremely low or zero-priced tours are out and travel agencies that force customers to make purchases could be penalised up to 300,000 yuan. (link.reuters.com/vyt53v)
HONG KONG ECONOMIC JOURNAL
-- Henderson Land acquiring minority stakes in Hongkong and China Gas, Hong Kong Ferry, Henderson Investment and Miramar Hotel from chairman Lee Shau Kee and his family members for about HK$3 billion has fuelled speculation that Lee is preparing to pass on his wealth to his two sons with the eldest taking charge of China business and younger son overlooking the Hong Kong business. Henderson Land's spokesperson denied the speculation saying it is a move to simplify the group's holding structure.
HONG KONG ECONOMIC TIMES
-- Benefiting from the popularity of internet games, Forgame Holdings Ltd is set to post a strong performance on the first day of trading in the city with the grey market price ahead of its trading debut surging 18 percent as compared to the offer price of HK$51 a share.
Fly On The Wall 7:00 AM Market Snapshot
BlackBerry (BBRY) upgraded to Neutral from Sell at Citigroup
Five Below (FIVE) upgraded to Buy from Neutral at Sterne Agee
Hatteras Financial (HTS) upgraded to Outperform from Market Perform at Keefe Bruyette
Riverbed (RVBD) upgraded to Sector Perform from Underperform at RBC Capital
Ternium (TX) upgraded to Overweight from Equal Weight at Morgan Stanley
Alcatel-Lucent (ALU) downgraded to Market Perform from Strong Buy at Raymond James
Ashland (ASH) downgraded to Hold from Buy at Jefferies
Edgen Group (EDG) downgraded to Equal Weight from Overweight at Morgan Stanley
Redwood Trust (RWT) downgraded to Market Perform from Outperform at Wells Fargo
Unilever (UN) downgraded to Buy from Conviction Buy at Goldman
ExamWorks (EXAM) initiated with a Buy at Needham
Mast Therapeutics (MSTX) initiated with a Buy at Canaccord
Murphy Oil (MUR) initiated with a Neutral at Credit Suisse
NPS Pharmaceuticals (NPSP) initiated with a Buy at BofA/Merrill
Noodles & Company (NDLS) initiated with an Equal Weight at Barclays
Regions Financial (RF) initiated with a Buy at Wunderlich
TC PipeLines (TCP) initiated with a Sector Perform at RBC Capital
S&P put Home Depot (HD) on watch for potential upgrade
Wilbur Ross told CNBC crude by rail helping railroad stocks, said not currently in coal stocks
Digital Realty (DLR), Prudential Real Estate Investors (PRU) announced $369M JV
Fresh Del Monte (FDP) acquired 7,200 acres in North America for tomato sector
Visa (V), @UKplc announced strategic partnership to launch cloudBuy
MasterCard (MA), Parkeon announced global partnership
Suncor (SU) said short of diesel fuel in parts of western Canada, Reuters reports
PVH Corp. (PVH) to sell G.H. Bass & Co. unit to G-III Apparel (GIII)
Target (TGT) to offer prepaid mobile phone service with T-Mobile (TMUS)
Companies that beat consensus earnings expectations last night and today include:
Companies that matched consensus earnings expectations include:
Texas Industries (TXI), National American University (NAUH)
- SEC Chairman White opened the door to a potential overhaul of financial-market oversight, saying the special regulatory status of U.S. exchanges may not best serve investors or public companies, the Wall Street Journal reports
- The partial federal government shutdown is leading to layoffs and production disruptions at defense contractors including United Technologies (UTX), BAE Systems (BAESY) and Navistar International (NAV), and some manufacturing companies, the Wall Street Journal reports
- Standard Chartered (SCBFF), DBS Group Holdings (DBSDY) and HSBC (HBC) submitted first round bids for Societe Generale's (SCGLY) Asian private bank valued at $600M, sources say, Reuters reports
- U.S. retail sales should rise 3.9% to over $600B this holiday season, outpacing last year's gains, though economic concerns may impact shoppers' spending, says the National Retail Federation, Reuters reports
- Blackstone Group (BX) raised over $4B in 2009 to buy European property assets anticipating that cash-strapped banks would be forced to sell as the region’s debt crisis worsened. Most of it sat idle for two years. Now there’s a surge of deals, as lenders cut loose soured real estate, corporate and consumer loans, Bloomberg reports
- UBS O’Connor, the UBS (UBS) unit with $5.2B of assets, plans to open its first Asia-focused hedge fund to investors later this year, sources say. The fund started trading in August with internal money, Bloomberg reports
Bridge Bancorp (BDGE) 1.675M share Secondary priced at $20.75
Dynegy (DYN) files to sell 31.46M shares of stock for holders
Investors Real Estate (IRET) files to sell 166,667 shares of beneficial interest
Memorial Production (MEMP) 14.5M share Secondary priced at $19.90
Prothena (PRTA) 5.91M share Secondary priced at $22.00
Whitestone REIT (WSR) files to sell 4M shares of common stock
Zale (ZLC) files to sell 11.06M shares of common stock for holders