Frontrunning: October 14
- Headline of the day: U.S. Risks Joining 1933 Germany in Pantheon of Deadbeat Defaults (BBG)
- As Senate wrestles over debt ceiling, Obama stays out of sight (Reuters)
- The "Truckers Ride for the Constitution" that threatened to gum up traffic in the capital was a dud as of Friday afternoon (WSJ)
- China New Yuan Loans Top Estimates as Money-Supply Growth Slows (BBG)
- Vegetable prices fuel Chinese inflation (FT)
- China Slowing Power Use Growth Points To Weaker Output Data (MNI)
- London Wealthy Leave for Country Life as Prices Rise (BBG)
- Gulf oil production hits record (FT)
- Every year like clockwork, analysts start out bizarrely optimistic about future results, then “walk down” their forecasts (WSJ)
- Weak Exports Show Limits of China’s Growth Model (WSJ)
- How Credit Suisse underwent painful bond surgery -and survived (Reuters)
- Not much left for Europe's left (Reuters)
- Danske Bank Fires Head of Treasury One Month After Ousting CEO (BBG)
Overnight Media Digest
* Senate leaders attempting to avoid a U.S. debt default remained at loggerheads Sunday and escalated the standoff by reopening the contentious issue of automatic spending cuts, damping hopes that some of Congress's most canny negotiators would break the impasse.
* The government shutdown and debt-ceiling fight are clouding the outlook for the global economy and markets, but they are bringing clarity to one area: The Federal Reserve is now likely to keep its foot on the monetary gas pedal even longer to offset damage from the standoff.
* Twitter Inc is parlaying its surging popularity and the intense competition among banks for Internet deals to squeeze unusually favorable terms from the firms that will take it public. The fees banks are set to collect for selling the shares - at 3.25 percent of the money raised, said people familiar with the deal - would be the lowest percentage paid on a U.S.-listed IPO in more than a year, according to Ipreo, a capital-markets data and advisory firm.
* Netflix Inc is in talks with several U.S. pay-television providers including Comcast Corp and Suddenlink Communications to make its online video service available as an app on their set-top boxes, people familiar with the matter say.
* General Motors Co on Monday will open a $200 million metal-stamping plant adjacent to its Arlington, Texas, factory. By locating parts near the assembly plant, GM hopes to save about $40 million a year in shipping costs.
* America's road to recovery faces a costly detour due to congestion in key shipping roads and a fraying transportation network that is expected to raise annual costs by $430 billion by 2020.
* Sifting through the wreckage of the worst municipal-bond rout since the financial crisis, some investors say they are finding bargains in the debt issued by states, cities and local government-related entities.
* Some investors and analysts are beginning to think about whether Berkshire Hathaway Inc will remain such a desirable place to work for senior executives after Warren Buffett turns over the reins.
* As investment banking in Asia suffers its worst year since 2009, instead of proclaiming their work on the latest IPO or merger deal, banks are touting their success in grind-it-out businesses like cash management and cross-border transactions.
* In July, Google Inc made what Chief Executive Larry Page called "the biggest-ever change" to its cash-cow search-advertising service, completing the transition to "enhanced campaigns". When Google reports its third-quarter results on Thursday, investors will see whether the new system is enhancing the bottom line.
The chief executive of Lloyds Bank has warned that the government's "Help to Buy" mortgage scheme will risk creating a dangerous bubble in property prices unless steps are taken to boost the supply of new housing and free up planning restrictions.
Senate leaders in the U.S were in talks on Sunday attempting to resolve the stalemate over the debt ceiling even the country risks a global recession if it runs out of money to pay its bills. British visa requirements for Chinese businessmen and tourists will be relaxed as the chancellor, George Osborne, begins a five-day tour for drumming-up Chinese investment in UK.
Banks and financial institutions are more exposed to domestic sovereign funds since the eurozone crisis, raising concerns.
New rules requiring banks to split lower-risk deposit taken from higher-risk investment and trading activities may force them to inject millions more into their pensions funds.
Merck of Germany is planning to raise funds from external investors to boost its prospects of developing new products.
The Gulf states are producing record levels of oil, even as U.S. shale oil production was expected to surpass them and diminish Gulf oil's importance. Finance directors at more than half of the UK's biggest companies say they do not have enough information to stave off cyber attacks effectively.
* The fiscal problems of the United States dominated meetings of the World Bank and the International Monetary Fund in Washington this weekend. Leaders on Sunday pleaded, warned and cajoled: the United States must raise its debt ceiling and reopen its government or risk "massive disruption the world over", as IMF Chief Christine Lagarde, put it.
* With a possible default on government obligations just days away, Senate Democratic leaders - believing they have a political advantage in the continuing fiscal impasse - refused Sunday to sign on to any deal that reopens the government but locks in budget cuts for next year.
* To help ward off corporate data breaches, Lookout Inc is using its app to slip under the door of enterprises via the employees who regularly bring their personal devices to work. Lookout is among a handful of tech companies trying to capitalize on the bring-your-own-device phenomenon that people in charge of securing corporate networks say has become their biggest headache.
* A program in Oakland that will collect and analyze reams of surveillance data from around town is one of the latest and most contentious examples of cities using big data technology, and federal dollars, for routine law enforcement.
* After shedding outside holdings, the New York Times Company this week will introduce the International New York Times and, later, new subscription, video and consumer initiatives.
* In recent months, as his legal troubles have deepened, billionaire hedge fund manager Steven Cohen has sold stocks to meet withdrawal requests from skittish investors. In addition to stocks, Cohen is selling significant works of art from his celebrated collection.
* Wells Fargo & Co and JPMorgan Chase & Co reported third-quarter results on Friday. Low interest rates are crimping a major source of bank profits. But higher rates are not necessarily the answer either - for the banks or the economy.
* Some doctors and dentists offer older patients a way to pay for costly procedures not covered by Medicare, but the plans' high interest rates can strain the finances of people on fixed incomes.
THE GLOBE AND MAIL
* Toronto Mayor Rob Ford is pledging to put out more robo-calls like one he made on Friday criticizing a councillor for voting against his Scarborough subway plan. Councillors, meanwhile, accused Ford of using "bullying" tactics and called for him to be dealt with by the city's integrity commissioner.
* Canada's housing market is back on a roll, a finding that should be evident in the September sales data that the Canadian Real Estate Association will release on Tuesday. The slump that began in the summer of 2012 came to an end this past summer, with sales topping economists' forecasts, and the market showing a surprising amount of momentum.
Reports in the business section:
* Discount behemoth Wal-Mart Canada Corp has quietly started to sell food online, ranging from Halloween candy to gluten-free organic cereals and prepared Thai dishes. Its initiative sets the stage for an even more intense battle with grocery rivals in an already cutthroat field.
* An Ontario government order holding directors and officers of defunct Northstar Aerospace Inc personally responsible for a C$15 million ($14.4 million) cleanup of a polluted parcel of company land is sending a chill through the country's community of corporate directors.
* The federal government will unveil plans this week to force cable and satellite TV providers to offer consumers so-called pick-and-pay services. Consumers are frustrated over being forced to buy large bundles of channels they don't want when they sign up for satellite and cable TV services, says Industry Minister James Moore.
CHINA SECURITIES JOURNAL
- China may widen financing channels for developers and introduce new tax and land policies to promote long-term growth in the real estate industry, according to unidentified sources.
SHANGHAI SECURITIES NEWS
- The number of China's rural banks has increased to 1,000 since the first was set up in 2007. The banks support the financing needs of small rural enterprises.
- HSBC Holdings PLC and the Chinese unit of Bank of East Asia Ltd received regulatory approval to open a branch in Shanghai's test free trade zone, according to email statements from both banks received over the weekend.
- Improving rural living and agricultural production is important for long-term and balanced social progress, said an editorial. The importance of this sector should be on par with the priority given to urbanization, it said.
- Small enterprises pave the way to a great future, said a report in the paper that acts as the government's mouthpiece. Innovation will drive the economic strategy forward, it said.
Fly On The Wall 7:00 AM Market Snapshot
Alcatel-Lucent (ALU) upgraded to Overweight from Equal Weight at Barclays
ArcelorMittal (MT) upgraded to Outperform from Neutral at Macquarie
Buckeye Partners (BPL) upgraded to Buy from Hold at Deutsche Bank
Buenaventura (BVN) upgraded to Overweight from Neutral at JPMorgan
CTC Media (CTCM) upgraded to Buy from Hold at Deutsche Bank
Glu Mobile (GLUU) upgraded to Buy from Neutral at B. Riley
Harsco (HSC) upgraded to Buy from Hold at BB&T
Iron Mountain (IRM) upgraded to Outperform from Neutral at RW Baird
Liberty Interactive (LINTA) upgraded to Outperform from Market Perform at Wells Fargo
Mattson Technology (MTSN) upgraded to Buy from Neutral at B. Riley
Nokia (NOK) upgraded to Equal Weight from Underweight at Barclays
NuVasive (NUVA) upgraded to Market Perform from Underperform at BMO Capital
TSYS (TSS) upgraded to Outperform from Market Perform at JMP Securities
XPO Logistics (XPO) upgraded to Outperform from Market Perform at FBR Capital
Arrow Electronics (ARW) downgraded to Hold from Buy at Deutsche Bank
Avnet (AVT) downgraded to Hold from Buy at Deutsche Bank
Coach (COH) downgraded to Hold from Buy at Canaccord
Consolidated Water (CWCO) downgraded to Hold from Buy at Brean Capital
Covanta (CVA) downgraded to Outperform from Strong Buy at Raymond James
Delhaize (DEG) downgraded to Underperform from Hold at Jefferies
Ericsson (ERIC) downgraded to Underweight from Equal Weight at Barclays
Expedia (EXPE) downgraded to Hold from Buy at Deutsche Bank
Hi-Crush Partners (HCLP) downgraded to Sector Perform from Outperform at RBC Capital
K12 (LRN) downgraded to Underperform from Neutral at BofA/Merrill
Merck (MRK) downgraded to Market Perform from Outperform at Bernstein
Mylan (MYL) downgraded to Equal Weight from Overweight at Morgan Stanley
PVR Partners (PVR) downgraded to Hold from Buy at BB&T
Waters (WAT) downgraded to Neutral from Buy at Mizuho
Acceleron Pharma (XLRN) initiated with a Buy at Citigroup
Acceleron Pharma (XLRN) initiated with an Overweight at Piper Jaffray
Benefitfocus (BNFT) initiated with a Buy at Canaccord
Benefitfocus (BNFT) initiated with a Buy at Goldman
Benefitfocus (BNFT) initiated with a Buy at Jefferies
Benefitfocus (BNFT) initiated with an Overweight at Piper Jaffray
CIT Group (CIT) initiated with a Neutral at SunTrust
Capital One (COF) initiated with a Buy at SunTrust
Discover (DFS) initiated with a Buy at Deutsche Bank
Five Prime (FPRX) initiated with a Buy at Jefferies
Plantronics (PLT) initiated with a Buy at Deutsche Bank
Texas Capital (TCBI) initiated with a Buy at Jefferies
21st Century Fox (FOXA), Bundesliga announced global media rights partnership
Acacia Research (ACTG) entered exclusive license agreement to acquire 40 U.S. patents relating to social media technology
Superior Energy (SPN) authorized $400M share repurchase program
Yahoo (YHOO) acquired social advertising startup Bread
- Twitter Inc. is parlaying its surging popularity and the intense competition among banks for Internet deals to squeeze unusually favorable terms from the firms that will take it public, the Wall Street Journal reports
- Automated ad buying, in which marketers use computerized systems to target users based on consumer data and Web-browsing histories, is expected to increase 56% this year in the U.S. to $7.4B, according to a study to be released today by Magna Global, a part of Interpublic Group (IPG), the Wall Street Journal reports
- Alibaba Group's (ALBCF) plans to revolutionize China's retail industry, investing $16B in logistics and support by 2020, will open up China's vast interior and bring access to hundreds of millions of potential new customers, Reuters reports
- Lawmakers shouldn’t risk a default on U.S. debt because the impact would be devastating and the full extent of the damage isn’t knowable in advance, said JPMorgan CEO Jamie Dimon (JPM) and Deutsche Bank (DB) co-CEO Anshu Jain, at financial industry conference in Washington, Bloomberg reports
- Warren Buffett isn’t the only CEO that Berkshire Hathaway (BRK.A) shareholders have to worry about replacing. Managing CEO turnover has become more demanding with the company’s expansion, Bloomberg reports
Allstate (ALL), Occidental (OXY), Smucker (SJM), three others (SNA, CELG, COF) raise guidance
EMC (EMC), Cisco (CSCO), NetApp (NTAP) could be threatened by Google (GOOG), Amazon (AMZN)
VMware (VMW) could see second chance with cloud penetration
Coeur Mining (CDE) could double with restructure, silver price rises
Potbelly (PBPB) shares are 'grossly overvalued'
Spirit Realty (SRC) could rally to around $12 per share
Kulicke & Soffa (KLIC) looks really cheap
Aratana Therapeutics (PETX) raises $19.75M in a private placement
Calavo Growers (CVGW) files to sell 201,939 shares of common stock for holders
Document Security (DSS) files to sell 15M shares of common stock, warrants
Document Security (DSS) files to sell 4.86M shares of common stock for holders
Wave Systems (WAVX) files to sell 372,578 shares of Class A common stock for holders