Frontrunning: June 5


  • Inside the White House's decision to free Bergdahl (Reuters)
  • Dimon’s Raise Haunts BNP Paribas as U.S. Weighs $10 Billion Fine (BBG)
  • Jobs Are on the Line as Banks' Revenue Slides (WSJ)
  • Wall Street Adjusts to the New Trading Normal (WSJ)
  • Nothing like objective, intense probes: GM recall probe to clear senior execs, finds no concerted coverup (Reuters)
  • ECB ready to cut rates and push banks into lending to boost euro zone economy (Reuters)
  • China Should Resist Further Stimulus, IMF Says (BBG)
  • Carney Finds Ally in Draghi as Key Rate Kept at 0.5% (BBG)
  • Assad wins Syria election with 88.7 percent of votes (Reuters)
  • Florida facing threat from two mosquito-borne diseases (Reuters)
  • As IPO nears, Alibaba prepares employees for $40 billion windfall (Reuters)

 

Overnight Media Digest

WSJ

* Slammed by declining revenue, the trading businesses inside the biggest global investment banks are expected to suffer job losses that could run into the thousands by the end of the year. The culprit: a persistent gap between revenue and employment. (http://r.reuters.com/suh89v)

* An internal probe of General Motors Co's delay in recalling cars with defective ignition switches linked to at least 13 deaths is expected to conclude there was no concerted coverup and clear senior management of blame. (http://r.reuters.com/qah89v)

* The prospect of massive penalties for allegedly violating U.S. sanctions has sparked a debate within BNP Paribas SA's executive suites over whether top officials, including the French bank's chairman, should resign. (http://r.reuters.com/keg89v)

* Sprint Corp and T-Mobile US Inc have agreed on the broad outlines of a merger valuing T-Mobile at around $32 billion, as recent regulatory developments convinced executives at both telecommunications companies that they have an opening to get a deal approved. (http://r.reuters.com/vuh89v)

* A planned $50 billion merger between cement giants Holcim Ltd of Switzerland and Lafarge SA of France still faces significant hurdles in Europe as the companies seek to reshape an industry that is already under investigation on several fronts by European Union antitrust authorities. (http://r.reuters.com/nuh89v)

* China's powerful state-run television broadcaster criticized Microsoft Corp's Windows 8 operating system in a national news show on Wednesday, adding to the software maker's challenges in a traditionally tough market. In its widely watched noon news broadcast, China Central Television aired a segment that questioned the operating system's security. (http://r.reuters.com/muh89v)

 

NYT

* T-Mobile and Sprint have agreed on the terms of a merger deal worth $32 billion. Under the terms of the agreement, which are still preliminary, Sprint would acquire T-Mobile for about $40 a share in cash and stock, a 17 percent premium to Wednesday's price. (http://r.reuters.com/zeh89v)

* H Lee Scott, who was Walmart's chief executive when widespread bribery charges surfaced against Walmart de México, will retire from the board this month. Come July, almost all top executives who held critical positions when corruption scandals engulfed the company's international division will no longer be with the company - but no departure has been cited by Walmart as a way to clean house after those scandals. (http://r.reuters.com/guh89v)

* A federal appeals court on Wednesday overturned Judge Jed Rakoff's decision in 2011 to reject an S.E.C. settlement deal with Citigroup, undercutting the judge's concerns that the bank got off with little more than a slap on the wrist. (http://r.reuters.com/juh89v)

* Yuri Victor, a designer and developer at Vox Media, who was streaming a television show on Netflix noticed an on-screen message from the company blaming Verizon for congestion that was slowing the stream. The message read "The Verizon network is crowded right now. Adjusting video for smoother playback." Netflix said on Wednesday that the message was simply a way the company is testing for notifying its customers about how their viewing experience is affected by their Internet service provider's network. To Verizon, the whole thing is little more than "a P.R. stunt," a company blog post said. (http://r.reuters.com/quh89v)

* General Motors on Thursday will release the results of its three-month internal investigation into the events leading up to this year's recall of 2.6 million small cars with defective ignition switches. (http://r.reuters.com/ruh89v)

 

Canada

THE GLOBE AND MAIL

* Heavily armed Royal Canadian Mounted Police officers searched through the night for a gunman suspected of killing three mounted police personnel and wounding two others in Moncton, New Brunswick, as police asked residents in a large section of the city to stay indoors. (http://r.reuters.com/nyj89v)

* Toronto Mayor Rob Ford breached public trust when he and his brother, Councillor Doug Ford, helped a prominent printing firm lobby city staff for contracts without disclosing that the Ford family label company was also trying to do business with the printing firm, said Mr. Ford's two main rivals in the municipal election. (http://r.reuters.com/hak89v)

Reports in the business section:

* May appears to have been a relatively strong month for Canadian housing sales, based on preliminary data released by local real estate boards. Many banks had mortgage promotions during the month in an effort to lure home buyers off the sidelines as unusually frigid weather kept activity down in the early months of the year. (http://r.reuters.com/syj89v)

NATIONAL POST

* The family of a pregnant American woman, who went missing in Afghanistan in late 2012 with her Canadian husband, received two videos last year in which the couple asked the U.S. government to help free them from Taliban captors, The Associated Press has learned. (http://r.reuters.com/vyj89v)

* Salman Ashrafi, a suicide bomber who attacked an Iraqi army base last November, was a Calgary business analyst and had disappeared after his wife divorced him, friends said on Wednesday amid rising concerns about the flow of Canadians to overseas terror groups. (http://r.reuters.com/wyj89v)

FINANCIAL POST

* Torontonians who can barely wrap their minds around a housing market where $1 million is the average price for a detached home might want to take notice of a new fast-approaching benchmark. Data released by the Toronto Real Estate Board on Wednesday shows there were 461 detached home sales for more than $2-million through its Multiple listing Service system in the first five months of the year. (http://r.reuters.com/zyj89v)

* Maple Leaf Foods Inc Chief Executive Michael McCain put takeover speculation to rest on Wednesday as industry watchers eye the U.S. bidding war currently under way for Hillshire Brands Co. (http://r.reuters.com/bak89v)

 

China

CHINA SECURITIES JOURNAL

- China's western Gansu province is set to be the pilot testing ground for the "one belt, one road" programme, a national strategy aiming to improve integration among the countries along the traditional silk road, sources told the paper.

- China will prioritise safety and environmental protection, as well as energy security, in the development of its petrochemical industries, the central government said at a conference on Wednesday.

CHINA BUSINESS NEWS

- China's property market has not reached a turning point and so far no local government has cancelled the property-purchasing limitation policy, a senior economist at China's housing authority said in a press conference on Wednesday.

CHINA DAILY

- Only three out of 27 cities in China met air quality standards last year, according to a government report on the country's environment. China suffers high levels of air, water and soil pollution, which has become a focus for Xi Jinping's government.

- More than 1,800 people in China have signed an online petition to U.S. fast-food chain McDonald's Corp, asking the firm to boost store security after a woman was beaten to death at an outlet in eastern China last week.

SHANGHAI DAILY

- Overall spending in China's entertainment and media sector is set to hit $214 billion in 2018, growing at close to 11 percent each year, according to a report from PricewaterhouseCoopers (PwC).

PEOPLE'S DAILY

- The economic and social development of Xinjiang, China's restive western province, should focus on improving the living standards and promoting the national identity of the region's people, the paper, which acts as a party mouthpiece, said in an editorial.

Britain

The Telegraph

MONITISE APPOINTS JOINT CHIEF EXECUTIVE TO DELIVER AMBITIOUS EXPANSION PLAN

Monitise, the AIM-listed payments technology company, has taken the unusual step of appointing a co-chief executive as it attempts to deliver on ambitious expansion targets. (http://link.reuters.com/jug89v)

The Guardian

MANAGEMENT CHANGES AT AILING MORRISONS COULD SEE 2,000 JOBS AXED

Morrisons is set to reveal a management restructuring in its stores within weeks that could lead to as many as 2,000 job losses. The move, resulting from trials of three possible slimmed-down management structures in around seven of its new stores, is likely to affect managers overseeing product categories such as fresh food or non-food across the chain's 500 stores, according to industry insiders. (http://link.reuters.com/bug89v)

DESMOND TUTU TELLS G4S TO STOP SUPPLYING TO ISRAEL PRISONS

South African retired archbishop and Nobel peace laureate Desmond Tutu will lead protesters on Thursday campaigning against British security firm G4S's role in maintaining prisons and detention centres in the West Bank and Israel. (http://link.reuters.com/qug89v)

TESCO SUFFERS WORST SALES FOR DECADES

The pressure has increased on Tesco Chief Executive Philip Clarke after he revealed the supermarket's worst sales performance in decades, despite spending over 1 billion pounds ($1.68 billion) on store revamps and price cuts in a fightback against discounters such as Aldi and Lidl. (http://link.reuters.com/hug89v)

The Times

PENNON DISAPPOINTS ON FUTURE OF DIVIDENDS

Investors punished Pennon yesterday after the FTSE-250 group gave little clarity on what its dividends will look like over the next five years and how strong the recovery will be in its waste business, Viridor. (http://link.reuters.com/kug89v)

LET'S KEEP BRITAIN MOTORING, SAY BUSINESS CHIEFS

Business called on the government to make good on its promise to make Britain the best place to start, build and run a company after the Queen set out the parliamentary agenda for the last time before the general election. (http://link.reuters.com/mug89v)

The Independent

BANKS MAY HAVE COST PPI VICTIMS AN EXTRA 1 BLN STG IN PENALTIES

Major banks and credit card companies may have cost victims of the payment protection insurance scandal an extra 1 billion pounds by refusing to refund charges and penalties triggered by the premiums paid for the mis-sold policies, according to a BBC investigation. (http://link.reuters.com/nug89v)

HOW PRIVATE FIRMS MAKE QUICK KILLING FROM PFI

Private contractors have pocketed hundreds of millions of pounds of profits in the past four years by exploiting deals that were controversially awarded to them by the last Labour government. (http://link.reuters.com/pug89v)

 

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
Chain store sales
Challenger job-cut report @ 7:30am
Jobless claims @ 8:30am -- consensus 310,000
EIA Nautral Gas Report @ 10:30am
Fed Balance Sheet & Money Supply @ 4:30pm

ANALYST RESEARCH

Upgrades

Abraxas Petroleum (AXAS) upgraded to Buy from Neutral at SunTrust
Bankrate (RATE) upgraded to Outperform from Sector Perform at RBC Capital
Broadcom (BRCM) upgraded to Equalweight from Underweight at Barclays
Clovis (CLVS) upgraded to Buy from Hold at Stifel
Discovery (DISCA) upgraded to Overweight from Neutral at Atlantic Equities
lululemon (LULU) upgraded to Neutral from Underperform at Sterne Agee
Microsoft (MSFT) upgraded to Outperform from Market Perform at FBR Capital
National Bank of Greece (NBG) upgraded to Buy from Hold at Deutsche Bank
Verint Systems (VRNT) upgraded to Outperform from Neutral at Credit Suisse

Downgrades

BHP Billiton (BHP) downgraded to Sector Perform from Outperform at RBC Capital
Coca-Cola Femsa (KOF) downgraded to Neutral from Buy at Goldman
Life Time Fitness (LTM) downgraded to Neutral from Overweight at Piper Jaffray
Protective Life (PL) downgraded to Equalweight from Overweight at Barclays

Initiations

Cardtronics (CATM) initiated with an Outperform at Wells Fargo
Endocyte (ECYT) initiated with a Neutral at Citigroup
Gap (GPS) initiated with a Neutral at Wedbush
National Oilwell (NOV) reinstated with an Outperform at Credit Suisse
Neogen (NEOG) initiated with a Market Perform at William Blair
Whirlpool (WHR) initiated with a Buy at Sterne Agee
Whole Foods (WFM) initiated with an Outperform at Imperial Capital

COMPANY NEWS

Halozyme Therapeutics (HALO) said the FDA removed the clinical hold on patient enrollment and dosing of PEGPH20 in the ongoing Phase 2 trial
Abraxas Petroleum (AXAS) raised its FY14 production guidance to 5,500-5,700 Boepd
Costco (COST) reported May SSS up 6%
Verizon (VZ) struck back at Netflix (NFLX) for 'PR stunt' 
PVH Corp (PVH) lowered FY14 EPS view to $7.30-$7.40 from $7.40-$7.50 on revenue of $8.5B and forecast Q2 EPS $1.40-$1.45 on revenue of $2B
Verint Systems (VRNT) reported better than expected Q1 results and raised FY15 guidance

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Joy Global (JOY), Verint Systems (VRNT), Five Below (FIVE), RealD (RLD)

Companies that missed consensus earnings expectations include:
Greif (GEF), K2M Group (KTWO), PVH Corp. (PVH), Bazaarvoice (BV)

Companies that matched consensus earnings expectations include:
Vince Holding (VNCE)

NEWSPAPERS/WEBSITES

General Motors (GM) recall probe to clear senior executives, WSJ reports
Sprint (S) agrees to purchase T-Mobile (TMUS) for about $40 per share, Reuters says
Amazon (AMZN) said to plan smartphone to compete with Apple (AAPL), Bloomberg reports
Twitter (TWTR) weighed bid for Pandora (P), Spotify, FT says
Vevo (VIVHY, GOOG, SNE) could be worth close to $1B, Business Insider reports (AMZN, YHOO, LMCA, DWA)
Microsoft's (MSFT) Window mobile devices to sell below $200 this year, WSJ reports
Pandora (P) still looks pricey, Barron's says

SYNDICATE

Novavax (NVAX) files to sell $100M of common stock
Spirit AeroSystems (SPR) 8.17M share Spot Secondary priced at $32.45
TC PipeLines (TCP) files to sell $200M of common units representing limited partners
Trina Solar  (TSL)files to sell 8.8M American Depositary Shares









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