Frontrunning: October 10
- The ice breaks; fiscal talks set (The Hill); Ryan steps up to shape a deal (The Hill), as predicted here yesterday
- Republicans consider short-term U.S. debt ceiling increase (Reuters)
- Shutdown Standoff Shows Signs of a Thaw (WSJ)
- JPMorgan Clients in Cash as Schwab’s Options Hedge Default (BBG)
- Mitch McConnell, Senate GOP search for way out (Politico)
- Washington Budget Chaos Keeps Fed Rates Low for Longer (BBG)
- Chinese Premier Outlines US Debt Concerns (FT)
- Meredith Whitney Winds Down Brokerage Unit After Setting Up Fund (BBG)
- Saudis brace for 'nightmare' of U.S.-Iran rapprochement (Reuters)
- Obama Urges Action on Yellen’s Fed Nomination (Reuters)
- Libyan Prime Minister Ali Zidan Freed After Kidnap (WSJ)
- Microsoft Board Said to Work on Hiring New CEO This Year (BBG)
- Mobile Advertising Begins to Take Off (WSJ)
- CEO Marchionne says IPO not best way to invest in Chrysler (Reuters)
- ECB's Weidmann sees no need now for new LTRO (Reuters)
- Germany’s SPD Calls for Bank Bailout Tax (FT)
- ECB to Create Currency Swap Line With China Central Bank (Reuters)
Overnight Media Digest
* The partisan logjam showed signs of easing as conservatives warmed to the idea of a short-term increase in the country's borrowing limit and House GOP leaders prepared for a meeting with President Obama.
* Janet Yellen, if confirmed to lead the Federal Reserve, faces the difficult task of defining when the central bank will step back from the expansive monetary programs employed over the past six years to salve the crisis-racked economy.
* Marketers are finally convinced that there's money to be made advertising to the legions of consumers glued to their smartphones and tablets. Spending on mobile ads more than doubled in the first half of the year.
* Pimco held government-related holdings at the world's largest bond fund steady in September as the U.S. bond market's price rebounded last month.
* The market in which banks and other financial firms obtain short-term funding is becoming strained - the latest sign of rising investor anxiety over the debt battle.
* Meredith Whitney, one of Wall Street's best-known and most controversial research analysts, is getting out of the research business, following the departure of numerous clients and employees. Whitney is closing the research part of her firm after four years and next month plans to start a hedge fund, according to her attorney, Stanley Arkin.
* A premature exit by the U.S. Federal Reserve from its easy money policies could cause $2.3 trillion in global bond portfolio losses, the International Monetary Fund warned Wednesday.
* About 20 percent of the people who were warned over a two-year period that they might be sued by U.S. regulators for allegedly violating securities law ended up not facing charges, government figures show. The previously undisclosed numbers track the Securities and Exchange Commission's use of a powerful enforcement tool - called a Wells notice - to alert people that the agency might take enforcement action.
* The investor retreat from the once lucrative currency trading arena passed a milestone Wednesday with the closure of a firm that once was the largest of its sort, FX Concepts. The New York firm, whose assets under management shriveled to $660 million last month, from $14 billion at the dawn of the financial crisis, will close its asset-management business over the next few weeks and return money to investors, the company said in a statement.
* Several of the world's largest banks have scoured through emails and other electronic communications of employees in response to probes by European regulators into suspected manipulation of foreign-exchange markets, according to people familiar with the matter.
* Hedge fund Barington Capital Group LP, along with other investors, has taken a 2.8 percent stake in Darden Restaurants Inc, the owner of Olive Garden, Red Lobster and six other restaurant chains. The fund is pushing for Darden to form two separate companies, among other changes, according to people familiar with the matter.
Janet Yellen prepares to take over the difficult job of chairmanship of the central bank as she seeks to forge consensus at the U.S. Federal Reserve even as policy makers at the Fed remain divided over the merits of slowing its $85 billion-a-month asset purchases in September.
JPMorgan Chase's physical commodities operations has garnered interest from more than two dozen parties, including pension funds and trading houses, following the bank's July decision to divest the business.
UK is contemplating following a U.S.-style procedure of rewarding whistleblowers who uncover economic crimes with payouts.
President Barack Obama and the U.S. Congress are stepping up discussions seeking a way out of a budget crisis that could leave the U.S. government unable to pay its bills.
Vodafone refused a $95 billion offer from Verizon months before it finalised the third-largest deal in corporate history. It later offered to merge with Verizon to create a global telecom company but finally completed the deal after being paid an extra $35 billion.
The Royal Mail IPO is seven times subscribed in an echo of the privatisation frenzies of the 1980s after private investors flocked to buy shares, with 700,000 individual applications leaving the retail offer.
Britain's prime minister has supported a statement by the new head of MI5 that said leaks by Edward Snowden, the former National Security Agency contractor, are harming the fight against terrorism.
The once-sleepy market for derivatives that insure against a US default has seen growing investor activity after fears that Washington could miss a payment on its debt.
* Owners whose companies depend on government services such as a guaranteed loan, regulatory approval or a national park's operation worry about the toll the shutdown may have on them. The toll may not be conspicuous yet in the broader economy, but at the local level, the ripples are spreading.(http://link.reuters.com/red73v)
* Investors are wary of the government's ability to pay its debt on time, shifting the market for short-term Treasury bills and potentially having long-term effects. (http://link.reuters.com/sed73v)
* President Obama on Wednesday announced what he called perhaps his most important economic decision, nominating Janet Yellen to lead the Federal Reserve system and be his independent co-steward of the economy, calling her "one of the nation's foremost economists and policy makers". Janet Yellen's nomination comes amid one of the most rancorous and fraught battles in years between the political parties over the course of the economy. (http://link.reuters.com/ved73v)
* House Republicans, increasingly isolated from even some of their strongest supporters more than a week into a government shutdown, began on Wednesday to consider a path out of the fiscal impasse that would raise the debt ceiling for a few weeks as they press for a broader deficit reduction deal. (http://link.reuters.com/cud73v)
* Janet Yellen, President Obama's pick to run the Federal Reserve, has backed aggressive steps to promote employment but shown only limited willingness to tolerate higher inflation. (http://link.reuters.com/xed73v)
* Meredith Whitney appears poised to leave the industry that lifted her to fame. The brokerage arm of the Meredith Whitney Advisory Group deregistered from FINRA, the securities industry's self-regulatory body, on Aug. 28, according to a filing. The termination of Meredith Whitney Advisory Group's brokerage license follows a rocky period for the onetime star analyst, who shot to fame with her prediction in 2007 that Citigroup Inc would be forced to cut its dividend. (http://link.reuters.com/qud73v)
* Barclays Plc promoted John Miller, its head of global financial sponsors and its global industrial group, to the new role of head of banking for the Americas, according to an internal memorandum sent on Wednesday and reviewed by DealBook. A spokeswoman for Barclays confirmed the memo's contents. (http://link.reuters.com/rud73v)
* Nestle SA, the Swiss food giant, is looking to sell its Jenny Craig brand, just seven years after spending $600 million to buy the weight-loss company from two private equity firms, according to a person briefed on the matter. (http://link.reuters.com/wud73v)
* Irving Picard, the trustee seeking to recover money for the victims of Bernard Madoff's Ponzi scheme, asked the Supreme Court on Wednesday to review a ruling that prohibits him from suing several of the world's largest banks that he contends aided the fraud. (http://link.reuters.com/tud73v)
* Men's Wearhouse Inc rejected an unsolicited $2.3 billion takeover bid by Jos. A. Bank Clothiers Inc on Wednesday, calling the proposed deal "highly opportunistic" and likely to draw antitrust scrutiny. Jos. A. Bank proposed paying $48 a share in cash for Men's Wearhouse, 36 percent above its closing stock price on Tuesday. (http://link.reuters.com/xud73v)
* The Financial Times, signaling a tighter focus on digital publishing, plans to stop printing regional editions and produce only a single global daily newspaper. In a memo to employees on Tuesday, Lionel Barber, the editor of The Financial Times, said that the publication, which is based in London, would make the change during the first half of 2014. (http://link.reuters.com/byd73v)
THE GLOBE AND MAIL
* The arrival of price-slashing U.S. retailers, a high-profile Senate investigation and tariff cuts on select consumer products have done little to narrow the persistent gap between Canadian and U.S. prices. There is still a substantial 10-percent spread, based on a basket of consumer products surveyed by the Bank of Montreal. The last time BMO sampled cross-border prices in May 2012 the gap was 14 percent.
* Canadian Prime Minister Stephen Harper's former chief of staff had a binder full of details on Senator Mike Duffy's official and personal activities, but appears not to have provided it to auditors reviewing Duffy's expenses nor to police when they first opened an investigation.
Reports in the business section:
* A Canadian firm is at the heart of America's historic healthcare overhaul - and smack in the middle of a political maelstrom. A unit of CGI Group Inc, the information technology giant based in Montreal, is the main contractor behind the new federal marketplace for health insurance. The system is the centrepiece of the Affordable Care Act, better known as Obamacare.
* The chief executive of Rogers Communications Inc is apologizing for a national outage that knocked out voice and texting services across the company's wireless network. Nadir Mohamed issued his statement early Thursday, after Rogers said its entire wireless network had been restored shortly before midnight eastern time.
* NDP would pay for future spending commitments by raising corporate taxes back to the level they were at when the Conservatives took office in 2006, said party leader Tom Mulcair. The Conservatives have steadily reduced the federal corporate rate to 15 percent from 22 percent in 2006. The NDP leader mused about hiking corporate taxes during a caucus retreat in Saskatoon, while committing that Canadian combined federal and provincial rates would be "several points" lower than the combined U.S. federal and state rate of nearly 40 percent.
* Kinross Gold Corp has pulled off an increasingly rare feat in the mining industry: building a project on time and on budget. The Toronto-based miner announced Wednesday that its remote Dvoinoye mine in Northeast Russia has entered commercial production. Kinross bought the project back in 2010 and built it for a reasonable price of about $360 million.
* Giving a cash infusion to its shareholders will not take Jean Coutu Group Inc's out of the running for making future acquisitions, the drug retailer's chief executive said on Wednesday. Speculation that the company was building up a war chest with proceeds from its sale of shares in the U.S. retailer Rite Aid Corp was dampened this week after the company announced it would return up to C$502 million ($482.81 million)to shareholders through a share buyback and a special one-time cash dividend.
- China's satellite navigation industry is estimated to exceed 400 billion yuan ($65.35 billion) in value by 2020, according to a development plan released by the China Academy of Telecommunication Research on Wednesday.
- China's premier Li Keqiang proposed a treaty on good-neighbourliness, friendship and cooperation between China and the Association of Southeast Asian Nations (ASEAN) on Wednesday. The treaty involves a legal framework that includes a commitment from Beijing for peaceful co-existence.
- Chinese officials should not engage in superficial activities that do not satisfy the needs of ordinary folk, said a commentary in the paper that acts as the government's mouthpiece.
Fly On The Wall 7:00 AM Market Snapshot
ADTRAN (ADTN) upgraded to Buy from Hold at Needham
ADTRAN (ADTN) upgraded to Neutral from Sell at UBS
Canadian Natural (CNQ) upgraded to Buy from Hold at Canaccord
Check Point (CHKP) upgraded to Outperform from Market Perform at Cowen
Discover (DFS) upgraded to Buy from Neutral at Citigroup
Felcor Lodging (FCH) upgraded to Buy from Neutral at Goldman
HP (HPQ) upgraded to Neutral from Underperform at Mizuho
HP (HPQ) upgraded to Sector Perform from Underperform at RBC Capital
Infoblox (BLOX) upgraded to Buy from Neutral at Sterne Agee
KAR Auction (KAR) upgraded to Buy from Neutral at Goldman
ONEOK (OKE) upgraded to Buy from Hold at Jefferies
Stratasys (SSYS) upgraded to Overweight from Neutral at JPMorgan
Telecom Italia (TI) upgraded to Sector Perform from Underperform at RBC Capital
Tiffany (TIF) upgraded to Buy from Neutral at Sterne Agee
XPO Logistics (XPO) upgraded to Buy from Hold at Stifel
ARIAD (ARIA) downgraded to Neutral from Buy at Citigroup
ARIAD (ARIA) downgraded to Underweight from Equal Weight at Barclays
Aixtron (AIXG) downgraded to Underweight from Neutral at HSBC
GlaxoSmithKline (GSK) downgraded to Underperform from Neutral at Credit Suisse
LeapFrog (LF) downgraded to Neutral from Buy at Ascendiant
Ruby Tuesday (RT) downgraded to Underperform from Market Perform at Raymond James
Ryman Hospitality (RHP) downgraded to Neutral from Buy at Goldman
Shire (SHPG) downgraded to Neutral from Outperform at Credit Suisse
Sony (SNE) downgraded to Neutral from Buy at Citigroup
Artisan Partners (APAM) initiated with a Buy at Jefferies
BE Aerospace (BEAV) initiated with a Buy at Canaccord
Boeing (BA) initiated with a Buy at Canaccord
Catamaran (CTRX) initiated with an Outperform at RBC Capital
Cubist (CBST) initiated with an Outperform at Oppenheimer
Dresser-Rand (DRC) initiated with a Market Perform at William Blair
Ducommun (DCO) initiated with a Buy at Canaccord
Esterline (ESL) initiated with a Hold at Canaccord
FireEye (FEYE) initiated with an Outperform at Cowen
First Niagara (FNFG) initiated with an Outperform at RBC Capital
Fortinet (FTNT) initiated with a Market Perform at Cowen
Franco-Nevada (FNV) initiated with an Equal Weight at Barclays
HEICO (HEI) initiated with a Hold at Jefferies
Hexcel (HXL) initiated with a Buy at Canaccord
Kirby (KEX) initiated with an Outperform at FBR Capital
Matson (MATX) initiated with a Market Perform at FBR Capital
Netflix (NFLX) initiated with a Buy at Needham
Precision Castparts (PCP) initiated with a Buy at Canaccord
Rockwell Collins (COL) initiated with a Hold at Canaccord
Royal Gold (RGLD) initiated with an Overweight at Barclays
Spectrum Brands (SPB) initiated with a Hold at Jefferies
Spirit AeroSystems (SPR) initiated with a Hold at Canaccord
Sun Communities (SUI) initiated with a Neutral at Citigroup
TAL International (TAL) initiated with a Market Perform at FBR Capital
TransDigm (TDG) initiated with a Buy at Canaccord
Virtus Investment Partners (VRTS) initiated with a Hold at Jefferies
Wisdom Tree (WETF) initiated with a Buy at Jefferies
Chevron (CVX) said Q3 earnings expected to be lower than Q2
BlackBerry (BBRY) said to be more open to breakup of company. SAP (SAP), Cisco (CSCO) said to only be interested in parts of BlackBerry. Intel (INTC) said to be only interested in BlackBerry patents, all reported by Bloomberg
Men's Wearhouse (MW) adopted limited duration shareholders rights plan following rejection of unsolicited proposal by Jos. A. Bank (JOSB) to acquire MW for $48.00 per share. JoS. A. Bank to continue pursuit of its $48 per share proposal
Sirius XM (SIRI) announced additional $2B stock repurchase program
KKR & Co. (KKR) to acquire The Crosby Group and Acco Material Handling Solutions from Melrose Industries for about $1B
KKR & Co. (KKR) invested $200M in Weststar Aviation, additional terms not disclosed
Hess Corp. (HES) sold terminal network to Buckeye Partners (BPL) for $850M in cash
Crestwood Midstream (CMLP) acquired Arrow Midstream for $750M
MasterCard (MA) acquired Turkish payment provider Provus, terms not disclosed
Time Warner Cable (TWC) signed multi-year distribution agreement with Univision
Vonage (VG) to acquire Vocalocity for $130M
Lexington Realty (LXP) acquired $302M Manhattan land portfolio
First Solar (FSLR) to sell Mesa, AZ facility
Companies that beat consensus earnings expectations last night and today include:
iGATE (IGTE), VOXX International (VOXX)
Companies that missed consensus earnings expectations include:
Farmer Bros. (FARM), DragonWave (DRWI), ClickSoftware (CKSW), Ruby Tuesday (RT)
Companies that matched consensus earnings expectations include:
Helen of Troy (HELE)
- Spending on mobile advertising in the U.S. (AAPL,GOOG, FB, WPP) more than doubled in the first half of the year, totaling $3B, up from $1.2B a year earlier, according to Interactive Advertising Bureau estimates, the Wall Street Journal reports
- About 20% of the people warned over a two-year period that they might be sued by U.S. regulators for allegedly violating securities law ended up not facing charges, government figures show. The previously undisclosed numbers track the SECs use of a powerful enforcement tool—called a Wells notice—to alert people that the agency might take enforcement action, the Wall Street Journal reports
- Fiat (FIATY) and Chrysler CEO Sergio Marchionne discouraged investors from participating in Chrysler Group LLC's IPO, a process that was forced by the automaker's second-largest shareholder last month, Reuters reports
- The Transport Workers Union, that supports U.S. Airways (LLC) planned merger with American Airlines (AAMRQ), can weigh in on the court fight to stop the deal, the judge hearing a government challenge to the combination said, Reuters reports
- As Fed vice chairman, Janet Yellen played a supportive role in the biggest overhaul of financial regulation since the 1930s. As chairman, she will lead the drive for those policies while monitoring their costs for borrowers and banks, Bloomberg reports
- Worldwide PC shipments (LNVGY, MSFT, DELL) fell 8.6% to 80.3M in Q3, reaching their lowest level for the period since 2008, amid lackluster demand from students returning to school, says market researcher Garner Inc. (IT), Bloomberg reports
Antero Resources (AR) 35.725M share IPO priced at $44.00
Buckeye Partners (BPL) files to sell 6.5M common units for limited partners
Cumulus Media (CMLS) 16.4M share Secondary priced at $5.00
MacroGenics (MGNX) 5M share IPO priced at $16.00
Western Refining Logistics (WNRL) 13.5M share IPO priced at $22.00