Frontrunning: January 8
- Here comes JPM's next multibillion legal reserve: Federal Probe Targets Banks Over Bonds (WSJ)
- Mulally Bows Out of Microsoft CEO Race, Staying at Ford (BBG)
- United States sending more troops and tanks to South Korea (Reuters)
- Eurozone unemployment sticks at record high (FT)
- China-Japan 'Voldemort' attacks up ante in propaganda war (Reuters)
- Alternative Lenders Peddle Pricey Commercial Loans (WSJ)
- John McAfee: glad Intel dropping name from security software (Reuters)
- Jobless Benefits Bill Stays Alive Amid Talks on Offsets (BBG)
- Chicago Colder Than South Pole as Frigid Air Clamps Down (BBG)
- Former Miss Venezuela shot dead in attempted robbery (Reuters)
- Bedroom-Invading Smartphones Jumble Body’s Sleep Rhythms (BBG)
- Netflix Loses Its Cloud Guru to a VC Firm (BBG)
- Goldman Sachs promotes investment bankers in U.S., Asia (Reuters)
- Swiss Anxiety Stoked by Immigration as Zurich Transformed (BBG)
Overnight Media Digest
* Federal investigators are probing whether a number of Wall Street banks cheated clients in the years following the financial crisis by deliberately mispricing a type of mortgage bond that was central to the economic turmoil.
* Three years after IBM began trying to turn its "Jeopardy"-winning computer into a big business, revenue from Watson is far from the company's ambitious targets.
* JPMorgan will pay roughly $2.6 billion as part of several criminal and civil settlements that resolve allegations the largest U.S. bank failed to provide adequate warnings about Madoff's decades-long Ponzi scheme.
* Investors are bailing out of emerging markets from Turkey and Brazil to Thailand and Indonesia, extending a selloff that began last year, amid concerns about faltering economies and political unrest.
* Goldman Sachs names George Lee as the chief information officer for investment banking, as part of an effort to shake up its technology banking team and raise its profile among startups. Viewed as Wall Street's most tech-savvy firm, Goldman has often preferred to develop its own programs rather than bring in outside vendors.
* Citigroup Inc is considering selling its $1 billion stake in a private-equity fund to comply with new federal rules, said a person familiar with the matter.
* Amazon doesn't rush into filling higher-level jobs. Indeed, the e-commerce giant has a gantlet of people, dubbed "bar raisers," who must sign off on would-be hires.
* Ford CEO Alan Mulally said he won't leave the auto maker to take the top job at Microsoft, ending months of speculation about his future.
* As Apple sells more iPhones and iPads, it also sells more apps. The volume of those sales became clear for the first time when Apple said it sold more than $10 billion worth through its App Store last year.
* Apple asked a federal judge late Tuesday to remove the lawyer she appointed to monitor the company's e-book pricing reform, escalating an already contentious feud between the company and the lawyer.
JPMorgan Chase & Co agreed on Tuesday to pay $2.6 billion to settle a criminal prosecution and private litigation over failures to report suspicious activity involving Bernard Madoff's Ponzi scheme.
Apple Inc said on Tuesday that its customers spent $10 billion on purchases in its applications store in 2013, roughly as much as it sold in the previous four years combined, cementing the company's lead over Google Inc in a key battleground of mobile computing.
AP Moller Maersk has agreed to sell most of its stake in Denmark's largest retailer, Dansk Supermarked, as the shipping-to-oil conglomerate continues to prune its sprawling portfolio.
The entire financial services industry should comply with tighter rules over the appointment of senior bankers, the Financial Conduct Authority (FCA) watchdog said on Tuesday as it admitted to shortcomings in its screening senior staff at the Co-operative Bank.
Centrica Plc finance director Nick Luff will quit this year to join information group Reed Elsevier, adding to a string of recent departures from Britain's biggest household energy supplier.
Yields on government debt for the euro zone's crisis-hit countries tumbled on Tuesday after Ireland made a storming return to the international bond market with bumper demand for the country's first debt sale since exiting its international bailout programme last month.
* As part of a deferred-prosecution agreement, JPMorgan Chase & Co will pay $1.7 billion to the Justice Department for not maintaining proper anti-money laundering controls and failing to file a "suspicious activity report" on Bernard Madoff's account.
* The Federal Trade Commission charged Sensa Products, L'Occitane, HCG Diet Direct and LeanSpa with deceptively marketing weight-loss products, asserting they made "unfounded promises" that consumers could shed pounds by using their food additives, skin creams and other dietary supplements.
* An indictment by the Manhattan district attorney's office charged 106 people in the largest fraud ever perpetrated against the Social Security disability system. The scheme, stretching back to 1988 and involving as many as 1,000 people, many of whom are officers and firefighters already collecting pensions from the city, is suspected to have cheated the federal government out of about $400 million.
* The Senate voted to advance legislation extending expired unemployment benefits. The three-month extension of benefits passed on a vote of 60 to 37, and some of the six Republicans who voted yes said they wanted the $6.4 billion cost paid for through cuts elsewhere in the budget.
* While the federal government is spending more than $22 billion to encourage hospitals and doctors to adopt electronic health records, it has failed to put safeguards in place to prevent the technology from being used for inflating costs and overbilling, according to a new report by a federal oversight agency.
* A legal struggle over Utah's voter-approved ban on same-sex marriage has catapulted the socially conservative state to the center of the national debate over who should be allowed to wed, and whether states have the right to limit marriages to one man and one woman.
* A U.S. military helicopter crashed on the coast of eastern England on Tuesday, and all four people aboard were believed to have been killed, authorities said. The cause of the crash was unclear. The helicopter was a United States Air Force HH-60 Pave Hawk that was based at the Royal Air Force base in Lakenheath in Suffolk, also in eastern England.
* Drawing on lessons from Hurricane Sandy, New York Governor Andrew Cuomo outlined how the state would spend more than $16 billion in federal disaster aid on items like high-tech weather stations and seals for entrances to subway stations.
THE GLOBE AND MAIL
** Toronto's Pearson International Airport, Canada's largest airport, said the deep freeze gripping the eastern part of the continent forced it to temporarily halt landings for hundreds of flights.
** Parka maker Canada Goose is trying to "bully" Sears Canada Inc and other retailers through litigation, Sears said in court documents as it hit back at a trademark infringement lawsuit filed last year. Canada Goose's real motive is to curtail the sales of lower-priced winter jackets so it can keep selling its products "at a huge markup," Sears said.
Reports in the business section:
** Insurers are expected to increase homeowners' premiums by hefty amounts as the industry seeks to protect itself against the steepening costs of severe weather. Some property and casualty insurers are already charging more for home insurance following a particularly expensive year for claims from flooding, ice storms and hail.
** Two Canadian women were under Mexican custody, suspected of lobbing Molotov cocktails at Mexico City government offices. Late Sunday night, three suspects allegedly ignited a series of gasoline bombs at a Nissan Motor dealership and a high-rise building housing the offices of Mexico's Secretariat of Communications and Transportation.
** The "polar vortex" weather system blasting Canada and the U.S. with extreme cold has disrupted infrastructure and threatened crops and cattle. But economists do not expect to see a lasting impact on Canada's GDP.
** The Desmarais family disposed of a major block of stock in Power Corp of Canada, for the third time in less than six years, through a marketed overnight offering. The latest deal was announced on Dec. 24 and marked the first sale since the death of Paul Desmarais, the company's founder, last October.
- China's box office generated 21.77 billion yuan ($3.60 billion) of revenue last year, an increase of 27.51 percent from 2012, according to the State Administration of Press, Publication, Radio, Film and Television. Meanwhile, overseas movies made 9 billion yuan, an increase of 54.32 percent.
- Sina Weibo, a popular micro-blogging site, and Alipay, an e-payment provider, announced on Tuesday that they would integrate their systems to boost e-commerce, in a bid to rival WeChat, an increasingly popular chatting app owned by Tencent Holdings Ltd.
- The marginal cost to China of accumulating foreign exchange reserves surpasses the marginal revenue and is no longer beneficial for the country, said Yi Gang, deputy governor of the People's Bank of China. New foreign exchange measures will be introduced in 2014, he said.
- Revisions made by the Ministry of Finance to travel spending regulations have been successful, said an article in the paper that acts as the Party's mouthpiece. The introduction of stringent travel management is not only to control invoices, but to promote thrift, it said.
EUROZONE LOSING 'SAFETY MARGIN' AGAINST DEFLATION TRAP AS CORE GAUGE FALLS TO RECORD LOW
Eurozone inflation has fallen to the lowest recorded under two key measures, raising the risk of a textbook deflation trap if recovery falters or there is an unexpected shock.
IMF TO REVISE UP GLOBAL GROWTH FORECASTS, SAYS CHRISTINE LAGARDE
The International Monetary Fund will revise upward its global growth forecast in about three weeks, Managing Director Christine Lagarde has revealed.
FCA STANDS BY DECISION TO SANCTION PAUL FLOWERS AS CO-OP BANK CHAIRMAN
The regulator who authorised Paul Flowers's appointment as chairman of the Co-operative Bank faced intense criticism from MPs on Tuesday after he insisted he stood by the decision to allow the now disgraced Methodist minister to take on the role after a 90-minute interview in 2010.
JPMORGAN CHASE TO PAY MORE THAN $2BLN IN PENALTIES FOR MADOFF TIES
JPMorgan Chase & Co has agreed to pay a record $2 billion to settle charges that it knowingly ignored evidence that convicted fraudster Bernard Madoff's massive Ponzi scheme was "too good to be true."
GATWICK CHIEF APOLOGISES FOR FLOOD FAILURE
Gatwick Airport ignored its own contingency plan when floods struck on Christmas Eve and tried to get as many passengers away as possible, even though it lacked sufficient staff or bus drivers to transfer travellers between terminals, Parliament was told on Tuesday.
HARVEY NICHOLS' NEW CHIEF SETS SIGHTS ON CHINA
A former Burberry executive at the forefront of the designer's transformation into a global powerhouse has been named as the new boss of Harvey Nichols and set out plans of how she plans to "supercharge" the luxury department store chain. Stacey Cartwright said that she wanted to introduce a Harvey Nichols own-brand clothing range, roll out more overseas stores, launch transactional websites and weigh up opening a store in mainland China.
EASYJET NARROWS GAP WITH RYANAIR AS PASSENGER NUMBERS TAKE OFF
EasyJet flew more than 60 million passengers last year as more Britons spent Christmas overseas. In total, the airline flew 61.33 million passengers in 2013, which is 3.6 per cent more than during the previous 12 months. EasyJet's growth in 2013 helped it to narrow the gap with Europe's biggest budget carrier, Ryanair, which saw passenger numbers grow only 2.3 percent last year.
MAN GROUP DENIES IT MISLED RICHARD DESMOND OVER 'INCOMPREHENSIBLE' DEAL
Hedge fund giant Man Group has brushed off Richard Desmond's 20-million-pound High Court claim for losses on a financial product, insisting it did not even act as the counter-party in the disputed transaction.
Fly On The Wall 7:00 AM Market Snapshot
C.R. Bard (BCR) upgraded to Overweight from Neutral at Atlantic Equities
Comerica (CMA) upgraded to Perform from Underperform at Oppenheimer
Crown Holdings (CCK) upgraded to Overweight from Neutral at JPMorgan
Guidance Software (GUID) upgraded to Buy from Hold at Benchmark Co.
Helmerich & Payne (HP) upgraded to Outperform from Sector Perform at RBC Capital
Hershey (HSY) upgraded to Buy from Hold at Deutsche Bank
Integra LifeSciences (IART) upgraded to Neutral from Underperform at BofA/Merrill
Kraft Foods (KRFT) upgraded to Buy from Hold at Deutsche Bank
MV Oil Trust (MVO) upgraded to Market Perform from Underperform at Raymond James
Manitowoc (MTW) upgraded to Overweight from Equal Weight at Morgan Stanley
MetLife (MET) upgraded to Buy from Neutral at Citigroup
NASDAQ (NDAQ) upgraded to Buy from Neutral at Citigroup
Nabors Industries (NBR) upgraded to Outperform from Sector Perform at RBC Capital
Oceaneering (OII) upgraded to Outperform from Sector Perform at RBC Capital
PDC Energy (PDCE) upgraded to Outperform from Market Perform at Wells Fargo
Panera Bread (PNRA) upgraded to Outperform from Market Perform at Wells Fargo
Patterson-UTI Energy (PTEN) upgraded to Outperform from Sector Perform at RBC Capital
Philippine Long Distance (PHI) upgraded to Buy from Sell at Citigroup
Rite Aid (RAD) upgraded to Overweight from Neutral at JPMorgan
Rowan Companies (RDC) upgraded to Outperform from Sector Perform at RBC Capital
TCF Financial (TCB) upgraded to Outperform from Perform at Oppenheimer
Tyco (TYC) upgraded to Buy from Neutral at Citigroup
Valeant (VRX) upgraded to Overweight from Equal Weight at Morgan Stanley
WESCO (WCC) upgraded to Buy from Neutral at Citigroup
Ambarella (AMBA) downgraded to Hold from Buy at Needham
CME Group (CME) downgraded to Neutral from Buy at Citigroup
Cardinal Health (CAH) downgraded to Neutral from Overweight at JPMorgan
Clorox (CLX) downgraded to Underweight from Neutral at JPMorgan
Container Store (TCS) downgraded to Neutral from Buy at BofA/Merrill
Cooper Tire (CTB) downgraded to Hold from Buy at BB&T
Copa Holdings (CPA) downgraded to Neutral from Buy at Goldman
Dean Foods (DF) downgraded to Hold from Buy at Deutsche Bank
Eli Lilly (LLY) downgraded to Underperform from Market Perform at BMO Capital
First Midwest (FMBI) downgraded to Perform from Outperform at Oppenheimer
Generac (GNRC) downgraded to Hold from Buy at Stifel
Honeywell (HON) downgraded to Neutral from Buy at Citigroup
Humana (HUM) downgraded to Equal Weight from Overweight at Barclays
Ingredion (INGR) downgraded to Market Perform from Outperform at BMO Capital
J.M. Smucker (SJM) downgraded to Hold from Buy at Deutsche Bank
KeyCorp (KEY) downgraded to Perform from Outperform at Oppenheimer
Magellan Health (MGLN) downgraded to Equal Weight from Overweight at Barclays
McDonald's (MCD) downgraded to Market Perform from Outperform at Wells Fargo
National Oilwell (NOV) downgraded to Sector Perform from Outperform at RBC Capital
Neurocrine (NBIX) downgraded to Equal Weight from Overweight at Morgan Stanley
Noble Corp. (NE) downgraded to Sector Perform from Outperform at RBC Capital
Steven Madden (SHOO) downgraded to Neutral from Overweight at Piper Jaffray
Tenet (THC) downgraded to Market Perform from Outperform at Raymond James
Transocean (RIG) downgraded to Sector Perform from Outperform at RBC Capital
Twitter (TWTR) downgraded to Sell from Hold at Cantor
U.S. Bancorp (USB) downgraded to Neutral from Outperform at Credit Suisse
United Technologies (UTX) downgraded to Neutral from Buy at Citigroup
Bank of America (BAC) initiated with a Buy at Jefferies
Brinker (EAT) initiated with an Outperform at Credit Suisse
Buffalo Wild Wings (BWLD) initiated with a Buy at UBS
Burger King (BKW) initiated with a Neutral at Credit Suisse
Burger King (BKW) initiated with a Neutral at UBS
Cheesecake Factory (CAKE) initiated with a Neutral at UBS
Cheesecake Factory (CAKE) initiated with an Outperform at Credit Suisse
Chipotle (CMG) initiated with a Neutral at UBS
Chipotle (CMG) initiated with an Outperform at Credit Suisse
Citigroup (C) initiated with a Hold at Jefferies
Darden (DRI) initiated with a Neutral at UBS
Darden (DRI) initiated with an Underperform at Credit Suisse
Delta Air Lines (DAL) initiated with an Overweight at Atlantic Equities
Ignite Restaurant (IRG) initiated with a Buy at UBS
IntercontinentalExchange (ICE) assumed with a Neutral at Citigroup
JPMorgan (JPM) initiated with a Buy at Jefferies
Jack in the Box (JACK) initiated with a Neutral at UBS
Mallinckrodt (MNK) initiated with an Overweight at Piper Jaffray
McDonald's (MCD) initiated with a Buy at UBS
McDonald's (MCD) initiated with a Neutral at Credit Suisse
NeoGenomics (NEO) initiated with an Outperform at William Blair
Nimble Storage (NMBL) initiated with a Market Perform at William Blair
Noodles & Company (NDLS) coverage assumed with a Neutral at UBS
Panera Bread (PNRA) initiated with a Buy at UBS
Ruby Tuesday (RT) initiated with a Neutral at UBS
SodaStream (SODA) initiated with a Buy at KeyBanc
Sonic (SONC) initiated with a Sell at UBS
Southwest (LUV) initiated with a Neutral at Atlantic Equities
Starbucks (SBUX) initiated with a Neutral at UBS
Starbucks (SBUX) initiated with an Outperform at Credit Suisse
Texas Roadhouse (TXRH) initiated with a Neutral at UBS
United Continental (UAL) initiated with an Overweight at Atlantic Equities
Wendy's (WEN) initiated with a Sell at UBS
Yum! Brands (YUM) initiated with a Buy at UBS
Yum! Brands (YUM) initiated with a Neutral at Credit Suisse
Hess Corp. (HES) filed for tax-free spin-off retail unit
Shares of Ford (F) were higher, Microsoft (MSFT) lower, in after hours trading after Ford CEO Mulally told the Associated Press he will stay at the carmaker through at least 2014
WellPoint (WLP) to sell online contact lens retail subsidiary 1-800 CONTACTS to Thomas H. Lee Partners
WellPoint (WLP) entered into an asset-purchase agreement for glasses.com and its virtual try-on technology with Luxottica (LUX)
Era Group (ERA) to purchase four S92 helicopters from Sikorsky (UTX) for $129M
Comcast (CMCSA) , Live Nation (LYV) extended partnership, naming agreement
Companies that beat consensus earnings expectations last night and today include:
Micron (MU), Apollo Education (APOL), Container Store (TCS)
Companies that missed consensus earnings expectations include:
AZZ Inc. (AZZ), Franklin Covey (FC), Micron (MU)
Companies that matched consensus earnings expectations include:
Federal investigators are probing whether a number of Wall Street banks (BCS, C, DB, GS, MS, JPM, RBS, UBS) cheated clients in the years following the financial crisis by deliberately mispricing a type of mortgage bond that was central to the economic turmoil, sources say, the Wall Street Journal reports
Three years after IBM (IBM) began trying to turn its "Jeopardy"-winning computer into a big business, revenue from Watson is far from the company's ambitious targets, the Wall Street Journal reports
Forest Laboratories (FRX) is nearing an agreement to acquire specialty pharmaceutical company Aptalis Holdings from private equity firm TPG Capital for about $3B, sources say, Reuters reports
Chinese tycoon Chen Guangbiao dialed back his ambitious plans to buy The New York Times Co. (NYT) about a week after making his intentions public. Chen, does not hold shares in the Times, nor does he plan to buy any of its common shares, he said, noting that the Times rebuffed a request for a meeting. The company has a market value of $2.3B. Chen thinks it’s worth $1B, Reuters reports
Delta Air Lines (DAL) and United Airlines (UAL) were forecast to experience fewer canceled flights today as weather warms and schedules begin to return to normal after winter storms erased more than 11,000 flights in four days and marooned millions of fliers, Bloomberg reports
Cisco Systems (CSCO) CEO John Chambers, speaking at the International Consumer Electronics Show, said that the Internet of Everything, connected products ranging from cars to household goods, could be a $19T opportunity, Bloomberg reports
Cedar Realty Trust (CDR) to offer 6M common shares
Rouse Properties (RSE) 7M share Secondary priced at $19.50
Rubicon (RBCN) 2.46M share Spot Secondary priced at $10.65