Frontrunning: October 24

  • Central Banks Drop Tightening Talk as Easy Money Goes On (BBG)

  • More Democrats voice Obamacare concerns as website blame goes around (Reuters)

  • Contractors Point Fingers Over Health-Law Website (WSJ)

  • Jury Decides Against BofA on 'Hustle' Program (WSJ)

  • Credit Suisse to overhaul interest rates trading business (FT)

  • Home Builders Target Higher End (WSJ)

  • The Many Lives of Iron Mountain (NYer)

  • Busy tourist season nudges Spanish unemployment lower (Reuters)

  • Morgan Stanley Joins BofA in Broker Recruiting Truce (BBG)

  • Ending World’s Longest Nonstop Flight Adds Five Hours (BBG)

  • Walmart to expand number of stores in China (FT)

  • Hamptons Sales Surge Fuels High-End Home Tear-Downs (BBG)

Overnight Media Digest

WSJ

* Germany said it believed U.S. intelligence may be spying on the chancellor's cellphone, an intrusion that it said would constitute a "grave breach of trust" between the longtime allies.

* Airlines' push to lure high-paying fliers with flatbed business seats is leaving economy-class passengers with less space. Big carriers including American Airlines, Air Canada and Air France are cutting space by wedging an extra seat into each coach row.

* A jury found Bank of America liable for fraud related to loans its Countrywide unit sold to mortgage-finance giants Fannie Mae and Freddie Mac in a program called the "Hustle" in 2007 and 2008.

* A preliminary gauge of Chinese factory activity showed an uptick in October, in a mildly positive sign for the world's No. 2 economy amid questions of whether it can sustain rapid growth.

* Big aluminum makers Alcoa and Rusal have objected to a proposal aimed at easing bottlenecks.

* Bambi Holzer, a Beverly Hills, California, financial broker, has been suspended from practicing after dozens of consumer complaints dating back more than two decades.

* Brazil's government Wednesday swept into the global bond market, issuing $3.2 billion in new bonds due 2025, as investors set aside some of their pessimism on emerging markets and Brazil in particular.

* The remnants of Lehman Brothers Holdings Inc is suing the New York Giants for more than $100 million it says it is owed for a soured interest-rate swap tied to the financing of the football team's stadium.

FT

A jury found Bank of America liable for fraud on Wednesday over selling defective home loans to two government-backed mortgage companies, delivering the U.S. government a major win on a financial crisis case.

The U.S. Department of Justice has launched a probe into the mortgage-backed securities sales of at least nine banks as part of an effort by the task force that slapped JPMorgan Chase with a $13 billion fine, people familiar with the matter say.

American Realty Capital Properties said it would pay $11.2 billion for Cole Real Estate Investments, creating the largest net-leased real estate investment trust in the United States.

GlaxoSmithKline's third-quarter drug sales in China plunged 61 percent following a high-profile bribery probe launched by Beijing into Britain's biggest drugmaker's alleged business practices.

The value of San Francisco-based Pinterest rose by over 50 percent to $3.8 billion after the online scrapbook raised $225 million in equity funding.

NYT

* Bank of America, one of the nation's largest banks, was found liable on Wednesday of having sold defective mortgages, a jury decision that will be seen as a victory for the government in its aggressive effort to hold banks accountable for their role in the housing crisis.

* Prosecutors are said to be considering criminal penalties against JPMorgan over its dealings with Bernard Madoff, suspecting it turned a blind eye to his Ponzi scheme.

* As technical failures bedevil the rollout of President Obama's health care law, evidence is emerging that one of the program's loftiest goals - to encourage competition among insurers in an effort to keep costs low - is falling short for many rural Americans.

* The legal battle over Detroit's eligibility for bankruptcy pits the city against unions and retirees, with a star witness, Governor Rick Snyder of Michigan, to come.

* Chicago Mayor Rahm Emanuel on Wednesday proposed a spending plan for his city next year that is full of nips and tucks: a 75 cent per pack increase in the cigarette tax, higher zoning permit fees for big developments, an end to some retirees' health insurance subsidies and a rolling hiring freeze.

* Pinterest confirmed on Wednesday that it has raised $225 million in a new round of financing that values the company at $3.8 billion.

* To help finance the expansion into America, British peer-to-peer lender Funding Circle, has raised $37 million from investors led by the venture capital firm Accel Partners.

* A decision by a federal appeals court has ended Delaware's experiment with confidential arbitration. In an opinion released Wednesday, a three-judge panel for the United States Court of Appeals for the Third Circuit upheld a lower court ruling that Delaware's state-sponsored arbitration program violated the First Amendment.

* Two of Caterpillar's biggest-ever deals may have played a role in the $3 billion of market value that the company's stock shed on Wednesday morning. The maker of heavy equipment disclosed that its third-quarter profit tumbled 44 percent from the same time last year, while revenue fell more than 18 percent for the same period.

* Properties and Cole Real Estate Investments, two of the largest commercial property owners in the country, have agreed to a $7.2 billion deal on Wednesday in which American Realty will buy Cole with a mix of cash and stock, bringing an end to tensions between the companies that have simmered much of the last year.

Canada

THE GLOBE AND MAIL

* John Sculley, the former Apple Inc chief executive who famously clashed with Steve Jobs, is exploring a bid for beleaguered BlackBerry Ltd with Canadian partners, sources have told The Globe and Mail.

* Canadian Prime Minister Stephen Harper went on the offensive in the Senate expense-claims scandal, trying to diminish the impact of Senator Mike Duffy's allegations that the Prime Minister's Office threatened him with expulsion from the Red Chamber if he didn't repay questionable claims.

Reports in the business section:

* Telus Corp is buying urban-focused wireless upstart Public Mobile for an undisclosed price, eliminating an independent player that had struggled to attract a critical mass of customers.

* Montreal-based CGI Group Inc is hitting back against critics that have blamed it for the glitch-ridden release of the website at the heart of U.S. healthcare reform, arguing the Canadian company is not the "quarterback" that bears the overall responsibility for the failures.

NATIONAL POST

* The chief of the Irish Coast Guard is expressing frustration with Canadian authorities for their February decision to send a derelict, rat-infested "biohazard" bobbing toward the Emerald Isle.

* The Progressive Conservatives are trying to force Ontario's governing Liberal Party to pay back $950 million for canceling two gas plants prior to the 2011 election.

FINANCIAL POST

* Bank of Canada Governor Stephen Poloz changed the direction of Canadian central banking on Wednesday, back to what it once was - an international bellwether of cautious common sense focused on inflation.

* The Canadian federal government has not been friendly to deals in the telecom sector lately, but Ottawa has actually approved an agreement for Telus Corp to acquire startup mobile carrier Public Mobile.

China

SOUTH CHINA MORNING POST

-- A suspected triad member was arrested on Wednesday night for attempting to extort money from the crew of the fourth 'Transformers' movie in Kowloon. This was the second attempt in five days to blackmail the Paramount Pictures crew during filming in Hong Kong. (link.reuters.com/pac24v)

-- DeVere, one of the biggest financial advisory firms to expatriates in Hong Kong, controlling $9 billion in assets worldwide, is facing down accusations of mis-selling and bad practice from former clients and employees, an investigation by the South China Morning Post has revealed. (link.reuters.com/qac24v)

-- Sino Land has earned more than HK$4 billion ($515.94 million) from the sale of properties in Hong Kong and the mainland since July. While many see uncertainties in Hong Kong's residential market, chairman Robert Ng Chee Siong said the company would continue to focus on the city, along with expansion on the mainland and Singapore. (link.reuters.com/sac24v)

THE STANDARD

-- More than half of Hong Kong's financial sector professionals expect a larger bonus this year as they believe their companies' performances and their own achievements have been satisfactory, according to a poll conducted by eFinancialCareers last month. (link.reuters.com/wac24v)

-- The Hong Kong Monetary Authority has reached a consensus with local banks that are likely to scrap the charge for inactive accounts at the end of this month. (link.reuters.com/tac24v)

-- Bank of Chongqing's HK$4.6 billion ($593.33 million) initial public offering was covered by a third. The municipal lender attracted HK$740 million worth of orders from the National Bank of Canada, Tianjin-based micro-investment firm China Fortune Finance and a Chongqing-based investment firm. (link.reuters.com/vac24v)

HONG KONG ECONOMIC JOURNAL

-- Zhang Shaoxia, spouse of Yantai North Andre Juice Co Ltd's chairman Wang An, is to buy a 16.08 percent stake in the company from another shareholder Zhang Jiaming for HK$70.25 million, raising the couple's stake to 45.55 percent and triggering a general offer for outstanding shares the couple did not already own in the company.

-- Jewellery retailer Chow Tai Fook hopes to see online sales contributing to 5 percent of its total revenue in five years, from less than 1 percent currently, according to managing director Kent Wong.

Fly On The Wall 7:00 Am Market Snapshot

ANALYST RESEARCH

Upgrades

Chesapeake (CHK) upgraded to Buy from Neutral at Citigroup
Ferro (FOE) upgraded to Outperform from Neutral at Credit Suisse
Goldman Sachs (GS) upgraded to Buy from Hold at Deutsche Bank
JAKKS Pacific (JAKK) upgraded to Buy from Neutral at B. Riley
Lam Research (LRCX) upgraded to Buy from Neutral at Goldman
MainSource Financial (MSFG) upgraded to Outperform at Keefe Bruyette
Texas Capital (TCBI) upgraded to Overweight from Equal Weight at Evercore
US Airways (LCC) upgraded to Buy from Hold at Deutsche Bank
YPF SA (YPF) upgraded to Neutral from Sell at Goldman

Downgrades

Angie's List (ANGI) downgraded to Neutral from Buy at B. Riley
CF Industries (CF) downgraded to Neutral from Overweight at JPMorgan
Caterpillar (CAT) downgraded to Market Perform from Outperform at Raymond James
Caterpillar (CAT) downgraded to Neutral from Overweight at JPMorgan
Commercial Vehicle Group (CVGI) downgraded to Neutral from Outperform at RW Baird
Dycom (DY) downgraded to Market Perform from Outperform at Raymond James
F5 Networks (FFIV) downgraded to Neutral from Buy at BofA/Merrill
Fusion-io (FIO) downgraded to Equal Weight from Overweight at Morgan Stanley
Fusion-io (FIO) downgraded to Underweight from Neutral at JPMorgan
KKR Financial (KFN) downgraded to Market Perform from Outperform at FBR Capital
Mac-Gray (TUC) downgraded to Sell from Buy at Roth Capital
Modine Manufacturing (MOD) downgraded to Underperform from Neutral at RW Baird
Motorola Solutions (MSI) downgraded to Market Perform from Outperform at Wells Fargo
On Assignment (ASGN) downgraded to Market Perform from Outperform at Wells Fargo
Owens Corning (OC) downgraded to Equal Weight from Overweight at Barclays
Panera Bread (PNRA) downgraded to Hold from Buy at Deutsche Bank
Prosperity Bancshares (PB) downgraded to Market Perform at Keefe Bruyette
Stericycle (SRCL) downgraded to Market Perform from Outperform at Raymond James
U.S. Bancorp (USB) downgraded to Hold from Buy at Deutsche Bank

Initiations

Agnico-Eagle (AEM) initiated with a Hold at Canaccord
Apollo Global (APO) initiated with a Sector Perform at RBC Capital
Baltic Trading (BALT) initiated with an Outperform at Imperial Capital
Barrick Gold (ABX) initiated with a Hold at Canaccord
CVS Caremark (CVS) initiated with an Outperform at FBR Capital
Eldorado Gold (EGO) initiated with a Hold at Canaccord
Express Scripts (ESRX) initiated with an Outperform at FBR Capital
Goldcorp (GG) initiated with a Buy at Canaccord
IAMGOLD (IAG) initiated with a Buy at Canaccord
Kinross Gold (KGC) initiated with a Hold at Canaccord
Plains GP Holdings (PAGP) initiated with a Buy at Jefferies
Silver Wheaton (SLW) initiated with a Buy at Canaccord
Tahoe Resources (TAHO) initiated with a Buy at Canaccord
Walgreens (WAG) initiated with a Market Perform at FBR Capital
Yamana Gold (AUY) initiated with a Buy at Canaccord

HOT STOCKS

McKesson (MCK) to purchase Celesio for $8.3B
R.R. Donnelley (RRD) to acquire Consolidated Graphics (CGX) for $620M
TELUS (TU) to obtain 100% ownership of Public Mobile
Boston Scientific (BSX) to cut up to 1,500 jobs, take $30M charge in Q4
Fidelity National (FNF) to make public offering of $400M in common stock

EARNINGS

Companies that beat consensus earnings expectations last night and today include:

Starwood Hotels (HOT), R.R. Donnelley (RRD), O'Reilly Automotive (ORLY), Ethan Allen (ETH), Teradyne (TER), Hill-Rom (HRC), Symetra Financial (SYA), Assurant (AIZ), Equifax (EFX), Graco (GGG), Everest Re (RE), Leggett & Platt (LEG), Evercore Partners (EVR), Allegiant Travel (ALGT), Symantec (SYMC), Akamai (AKAM), AT&T (T)

Companies that missed consensus earnings expectations include:

Dunkin' Brands (DNKN), Potash (POT), Cash America (CSH), Diamond Offshore (DO), Safeguard Scientifics (SFE), Elan (ELN), TAL International (TAL), CMS Energy (CMS), Service Corp. (SCI), Clearwater Paper (CLW), Varian Medical (VAR), E-Trade (ETFC), 8x8 Inc (EGHT), Fortune Brands (FBHS), Angie's List (ANGI), Skechers (SKX)

Companies that matched consensus earnings expectations include:

Sequans (SQNS), VASCO Data Security (VDSI), TrueBlue (TBI), Quantum (QTM), , Interface (TILE), Polycom (PLCM), Swift Transportation (SWFT), TripAdvisor (TRIP), Torchmark (TMK)

NEWSPAPERS/WEBSITES


  • Alibaba Group Holding (ALBCF) is getting a lot more active in finding U.S. investment opportunities at a time when the Chinese e-commerce giant is also considering an IPO in New York, the Wall Street Journal reports

  • Newly built homes in the U.S. are getting pricier as better-heeled buyers have rebounded more quickly from the recession than entry-level buyers, spurring home builders (DHI, KBH, HOV, TMHC, PHM, BZH) to go upscale, the Wall Street Journal reports

  • Wal-Mart Stores (WMT) is expanding its China business as it seeks to raise profitability in a slowing retail sector. The company will open up to 110 facilities in China between 2014 and 2016, in addition to the 30 it has already opened this year, Reuters reports

  • Korean Air Lines will $3.77B worth of aircraft from Boeing (BA), Reuters reports

  • The heads of WellPoint (WLP), Aetna (AET) and at least 10 other insurers met with the Obama administration to discuss correcting flaws in how data from the U.S. health-care marketplaces is transferred to the companies, Bloomberg reports

  • Home purchases by institutional buyers reached a record high in September and all-cash buyers accounted for almost half of sales as investors responded to rising demand from renters. Institutional purchases accounted for 14% of sales, according to a new RealtyTrac report, Bloomberg reports

SYNDICATE

Athersys (ATHX) files to sell 10M shares of common stock for Aspire Capital Fund
Fidelity National (FNF) files to sell $400M in common stock
Horsehead Holding (ZINC) files to sell 5M shares of common stock
ING U.S. (VOYA) 33M share Secondary priced at $29.50
Mirati Therapeutics (MRTX) 3.25M share Secondary priced at $17.50
Novadaq (NVDQ) files to sell common stock
XG Technology (XGTI) files to sell $10.375M of common stock

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