Frontrunning: October 8
- Hilsenrath: Tense Negotiations Inside the Fed Produced Muddled Signals to Markets (WSJ)
- Biggest US Foreign Creditors Show Concern on Default Risk (BBG)
- Shutdown Costs at $1.6 Billion With $160 Million Each Day (BBG)
- What default? Republicans downplay impact of U.S. debt limit (Reuters)
- Top Bankers Warn on U.S. Debt Proposal (WSJ)
- India to stick with austerity despite looming election (Reuters)
- Japan's Current-Account Surplus Plunges (WSJ)
- Amazon Wins Ruling for $600 Million CIA Cloud Contract (BBG)
- German Factory Orders Unexpectedly Fall on Weak Recovery (BBG)
- Britain's Higgs, Belgium's Englert win 2013 physics Nobel prize (Reuters)
- Supreme Owner Made a Billionaire Feeding U.S. War Machine (BBG)
- Problems at main Obamacare website are being fixed: White House (Reuters)
- How Investors Lose 89 Percent of Gains from Futures Funds (BBG)
Overnight Media Digest
* The Federal Reserve's decision to continue one of the most audacious experiments in monetary history - an $85 billion-a-month bond-buying program designed to boost growth - followed six months of tense negotiations inside the central bank, and a stumbling effort to let the public know what was going on.
* Chronic electrical surges at the massive new data-storage facility central to the National Security Agency's spying operation have destroyed hundreds of thousands of dollars worth of machinery and delayed the center's opening for a year.
* The International Monetary Fund proceeded with its record 2010 bailout of Greece despite deep internal divisions over whether it would work, according to confidential documents that contradict the fund's public statements.
* Alcatel-Lucent's 15,000 planned job cuts are the latest step in its effort to reshape itself as a smaller company focused on a few core businesses. The money-losing company plans to announce Tuesday that it will cut the jobs, largely in older technologies such as second- and third-generation wireless equipment, said people familiar with the matter.
* Anxiety is spreading through financial markets in the second week of the partial federal-government shutdown, but several prominent money managers don't share it.
* JAL's decision to buy planes from Airbus upset the carrier's half-century relationship with Boeing .
* One of corporate India's largest takeover bids, a $2.5 billion deal for Cooper Tire & Rubber, looks increasingly precarious with the two sides trading accusations over terms of the sale. India's Apollo Tyres Ltd asked its $35 a share bid be reduced substantially because of what it sees as increased costs arising from negotiations with the union at two of Cooper Tire's U.S. factories and a disagreement with the company's Chinese joint venture partner.
China and Japan have asked the U.S. to avoid an unprecedented debt default as the U.S. government shutdown entered its second week after the Congress remained divided.
EU regulators are planning to penalise banks that remain reliant on the European Central Bank's landmark cheap funding scheme during the stress tests of European banks scheduled next year.
Italy's Banca Monte dei Paschi di Siena has agreed to EU demands for a 2.5 billion euro capital increase as it struggles to avoid nationalisation.
Britain's Vodafone plans to invest as much as $2 billion to buy out minority shareholders in Vodafone India.
Goldman Sachs Group Inc said that former World Bank Group president Robert Zoellick will rejoin the investment bank as chairman of its international advisory board.
Serbian deputy prime minister warned of bankruptcy without urgent steps to cut public sector wages and said the country plans to borrow billions from the United Arab Emirates at favourable rates.
* Wall Street is showing few signs so far that it is fearing the financial panic it has been predicting should the government default on its debt. The fiscal impasse in Washington continued to weigh on stock prices on Monday, as the market's "fear gauge", the C.B.O.E. volatility index, jumped 15.95 percent to its highest level since June. (http://link.reuters.com/cyq63v)
* The CtW Investment Group, an adviser to several union pension funds, is expected to send a letter to Oracle Corp's shareholders on Tuesday, urging them to again vote against the executive compensation at the enterprise software giant at the annual meeting on Oct. 31. (http://link.reuters.com/pyq63v)
* Bill Gates's role at Microsoft Corp has been a source of wide fascination since he left his day-to-day responsibilities in 2008. But interest has grown in the past few years as Microsoft has stumbled, and it intensified sharply in the weeks since Steven Ballmer announced he would be retiring as Microsoft's chief executive next year. (http://link.reuters.com/tyq63v)
* A New York regulator used an admission of wrongdoing to the Securities and Exchange Commission by billionaire Philip Falcone to punish him in an unrelated case and imposed a seven-year ban on him from controlling insurance companies licensed in New York. Falcone was also barred from serving as an officer or director of Fidelity and Guaranty Life Insurance, which is owned by the Harbinger Group Inc, the publicly traded company that Falcone runs. (http://link.reuters.com/wyq63v)
* The proposed buyout of Cooper Tire & Rubber Co by Apollo Tyres Ltd has been delayed by labor opposition in China and the United States, and now Cooper has filed a complaint against Apollo in a Delaware court, seeking to force its Indian suitor to close the deal. Apollo hit back, saying Cooper had agreed to lower its sale price and that it couldn't close given the deal's problems. (http://link.reuters.com/zyq63v)
* Mired in debt, Puerto Rico has been effectively shut out of the bond market and is financing its operations with bank credit and other short-term measures. The biggest concern is that the territory, which has bonds that are widely held by mutual funds, will need some sort of federal lifeline, an action for which there is no precedent. (http://link.reuters.com/bar63v)
* Mark Cuban, the billionaire owner of the Dallas Mavericks basketball team, testified on Monday that he was cooperating with the Securities and Exchange Commission as early as 2004 in an inquiry into an Internet search engine company and was taken aback when he turned on the news one day in 2008 and heard that the agency was charging him with insider trading. (http://link.reuters.com/car63v)
* Stung by all the problems with its new 787 Dreamliner over the past decade, Boeing waited too long to start updating its larger 777 jets, giving Airbus an opening to break into the Japanese market that Boeing had dominated for decades, aviation analysts said Monday. And the European company rushed through that opening, announcing a $9.5 billion order from Japan Airlines earlier Monday for 31 A350 wide-body jets. (http://link.reuters.com/dar63v)
* New shopping services will allow consumers to instantly buy items they see on television, in magazines and even in their refrigerators. On Tuesday MasterCard plans to announce a partnership with Conde Nast, the publisher of Vogue, Wired, Vanity Fair and other popular magazines, that will allow digital readers to instantly buy items described in an article or showcased in an advertisement by tapping a shopping cart icon on the page. (http://link.reuters.com/gar63v)
* Robert Peck, the first research analyst to set a public target on the not-yet-public stock, said in an interview that he is betting Twitter will have a lot of room to grow. The SunTrust Robinson Humphrey analyst set a $50 price target for Twitter, more than double the $20.62 at which the company itself valued its stock in August. http://link.reuters.com/har63v)
THE GLOBE AND MAIL
* The Canadian government has rejected another high-profile foreign takeover, quashing an Egyptian billionaire's bid to buy a division of Manitoba Telecom Services Inc because of unspecified national security concerns about the C$520 million ($504 million) deal.
* The number of aboriginal people with university degrees has nearly doubled over the past decade, yet the gap in education levels between aboriginal and other Canadians has only grown wider. New projections show that under current conditions the post-secondary attainment of aboriginal Canadians will not catch up to the rest of the population "any time soon".
Reports in the business section:
* Activist shareholder Carl Icahn has snapped up nearly 6 per cent of Talisman Energy Inc and hinted he may seek to push the Canadian oil producer to put itself up for sale or accelerate its restructuring plan.
* The president of General Motors of Canada Ltd is worried that ultra-cheap auto loans could be causing Canadian vehicle sales to spike just as home sales did during the U.S. housing bubble. Canadians are on pace to drive more than 1.73 million new vehicles off dealers' lots this year, breaking the record of 1.703 million, but that's a higher level than economic indicators suggest sales should be, Kevin Williams told The Globe and Mail's editorial board on Monday.
* Canadian security officials and mining companies were skeptical on Monday over claims Canada had spied on Brazil's mining and energy department, even as Brazil's president accused Canada of apparent industrial espionage. The Brazilian Foreign Minister summoned the Canadian ambassador to "transmit the indignation of the Brazilian government and demand explanations", the Foreign Ministry said in a statement that followed the revelations that were aired Sunday night on Brazil's Globo network.
* In a bid to rescue an economy in danger of slipping into recession, the Parti Quebecois government has launched a multibillion-dollar job creation effort anchored by a program that will offer Quebec's surplus hydroelectric power at below-market rates to corporate investors.
* BlackBerry Ltd is laying off 300 employees from its Waterloo, Ontario, headquarters this week, the first round of cuts as the struggling smartphone maker looks to reduce its worldwide staff by 4,500.
CHINA SECURITIES JOURNAL
- China's economic growth is likely to slow in the fourth quarter, according to a report by the State Information Center. The country's full-year GDP is likely to grow by roughly 7.6 percent in 2013.
- APEC economies need to cooperate on their macroeconomic policies and maintain the spirit of mutual cooperation in order to play a leading role in advancing an open world economy, an editorial said.
- Shanghai enjoyed record retail and tourism sales over the National Day holiday, Shanghai authorities said on Monday. Sales in the city's department stores, supermarkets and speciality shops increased 11.8 percent year-on-year during the seven-day holiday to almost 7 billion yuan ($1.14 billion).
- China's government officials have been afforded privileges that have led to runaway corruption, said a commentary in the paper that acts as the government's mouthpiece. It is important for officials to remember that they serve the people, it said.
Fly On The Wall 7:00 AM Market Snapshot
Avon Products (AVP) upgraded to Outperform from Market Perform at Wells Fargo
Fibria Celulose (FBR) upgraded to Buy from Neutral at Goldman
Finisar (FNSR) upgraded to Hold from Underperform at Jefferies
Lukoil (LUKOY) upgraded to Buy from Hold at Deutsche Bank
Procter & Gamble (PG) upgraded to Outperform from Market Perform at Wells Fargo
Tenet Healthcare (THC) upgraded to Buy from Neutral at Goldman
Alaska Air (ALK) downgraded to Hold from Buy at Deutsche Bank
AudioCodes (AUDC) downgraded to Perform from Outperform at Oppenheimer
Boston Properties (BXP) downgraded to Neutral from Buy at BofA/Merrill
Brookfield Office (BPO) downgraded to Neutral from Outperform at Macquarie
CEVA (CEVA) downgraded to Perform from Outperform at Oppenheimer
Crown Holdings (CCK) downgraded to Market Perform from Outperform at Wells Fargo
Cytec Industries (CYT) downgraded to Hold from Buy at Deutsche Bank
Group 1 Automotive (GPI) downgraded to Underweight from Overweight at Morgan Stanley
J.C. Penney (JCP) downgraded to Neutral from Buy at Sterne Agee
M/A-COM (MTSI) downgraded to Neutral from Buy at Goldman
MV Oil Trust (MVO) downgraded to Underperform from Market Perform at Raymond James
Novartis (NVS) downgraded to Neutral from Overweight at JPMorgan
RBC Bearings (ROLL) downgraded to Neutral from Buy at BofA/Merrill
Wells Fargo (WFC) downgraded to Neutral from Outperform at Macquarie
Alimera Sciences (ALIM) initiated with an Outperform at Northland Securities
CVS Caremark (CVS) initiated with a Buy at Jefferies
Charter (CHTR) initiated with a Buy at Wunderlich
Chatham Lodging (CLDT) Trust initiated with a Buy at Cantor
Energizer (ENR) initiated with an Outperform at Wells Fargo
GNC Holdings (GNC) initiated with a Buy at Jefferies
Kimberly Clark (KMB) initiated with a Market Perform at Wells Fargo
Kroger (KR) initiated with a Hold at Jefferies
LifePoint Hospitals (LPNT) initiated with a Neutral at Goldman
Newell Rubbermaid (NWL) initiated with an Outperform at Wells Fargo
ResMed (RMD) initiated with a Market Perform at Northland Securities
Rite Aid (RAD) initiated with a Hold at Jefferies
Safeway (SWY) initiated with a Hold at Jefferies
Sally Beauty (SBH) initiated with a Market Perform at Wells Fargo
Sysco (SYY) initiated with a Hold at Jefferies
The Fresh Market (TFM) initiated with a Hold at Jefferies
Union First Market (UBSH) initiated with a Buy at Sterne Agee
Universal Health (UHS) initiated with a Buy at Goldman
Vitamin Shoppe (VSI) initiated with a Hold at Jefferies
Walgreens (WAG) initiated with a Hold at Jefferies
West Pharmaceutical (WST) initiated with a Buy at BofA/Merrill
Whole Foods (WFM) initiated with a Buy at Jefferies
comScore (SCOR) initiated with a Market Perform at Northland Securities
pSivida (PSDV) initiated with an Outperform at Northland Securities
Crossroads Systems (CRDS) filed patent infringement suit against Oracle (ORCL)
Quest Diagnostics (DGX) bought ConVerge Diagnostic Services, terms not disclosed
Spirit Airlines (SAVE) in service pact with United Technologies (UTX)
- Wall Street CEOs (GS) warn that any effort to pay interest on U.S. debt before other obligations such as Social Security, a strategy some lawmakers think would placate bond investors if the government breaches its borrowing limit, would pose severe risks to financial markets and the economy, the Wall Street Journal reports
- Samsung Electronics Co. (SSNFL) is stepping up its search for acquisitions and building out its presence in Silicon Valley to try and overcome its key weakness: software, the Wall Street Journal reports
- China’s CNOOC (CEO) issued a tender to invite foreign firms to bid for oil and gas blocks in the East and South China Sea, saying it would offer 25 offshore blocks for foreign participation this year, Reuters reports
- Airbus (EADSY) sales head John Leahy says the company could sell over 1,200 aircraft in 2013 after exceeding its full-year goal of at least 1,000 in the first nine months, Reuters reports
- Morgan Stanley (MS), Bank of America (BAC) and Wells Fargo (WFC) are poised to lead the six largest U.S. lenders by reporting a jump in earnings that may surprise some investors fixated on a slump in trading and mortgage lending, Bloomberg reports
- Amazon.com (AMZN) defeated IBM’s (IBM) attempt to reopen bidding for a $600M CIA cloud computing contract as the U.S. Court of Federal Claims in Washington granted Amazon’s request for judgment on the administrative record following a hearing yesterday, Bloomberg reports
CEL-SCI (CVM) files to sell common stock and warrants
Chimerix (CMRX) files to sell $50M in common stock for holders
Cumulus Media (CMLS) files to sell $80M shares of common stock
Intercept (ICPT) files to sell 1.5M shares of common stock for holders
Kythera (KYTH) files to sell $100M in common stock
Portola Pharmaceuticals (PTLA) files to sell $100M of common stock for holders
Seaspan (SSW) files to sell 5.7M shares, $125M in convertible notes
Unwired Planet (UPIP) files to sell 2.48M shares of common stock for holders