Frontrunning: July 11


  • Carl Icahn says 'time to be cautious' on U.S. stocks (Reuters)
  • Banco Espirito Santo Lifts Lid on Exposure to Group (BBG)
  • Slowing Customer Traffic Worries U.S. Retailers (WSJ)
  • Insurgents enter military base northeast of Baghdad (Reuters)
  • Obama tells Israel U.S. ready to help end hostilities (Reuters)
  • Japan economics minister warns of premature QE exit, sees room for more easing (Reuters)
  • Greek Banks See Quadrupling of Housing Loans by Next Year (BBG) ... to fund buybacks like in the US?
  • Piggy Banks Being Raided Signal Swedish Housing Dilemma (BBG)
  • London Seeks New Spenders as Russians Skip $719 Champagne (BBG)
  • Reynolds American Confirms Talks to Buy Lorillard (WSJ)
  • Draghi Replaces Kuroda as Banker Currency Bulls Dread (BBG)
  • Obama, Corporate Giants Announce Plan to Boost Suppliers (Reuters)
  • Obama administration warns money low to deal with migrant crisis (Reuters)
  • Thirty Ukrainian troops possibly killed in rebel missile attack (Reuters)
  • House to Sue Obama Over Health-Care Law’s Mandate Waiver (BBG)

 

Overnight Media Digest

WSJ

 Google's rival Yelp Inc says the search giant is promoting its own content at the expense of users, as Google battles to protect a proposed deal in Europe over similar concerns. An internal Yelp presentation, claims that Google is showing results from its Google+ local listings ahead of links to Yelp even in cases when a Google user includes "yelp" in a search query. (http://on.wsj.com/1njCEC5)

* The Authors Guild sent an email to its 9,000 members describing as "highly disingenuous" Amazon.com Inc's recent offer to give Hachette Book Group authors all the revenue from their e-book sales. (http://on.wsj.com/1jisFx4)

* The U.S. Federal Trade Commission sued Amazon.com Inc alleging that the online retailer allowed millions of dollars in unauthorized purchases by children through its app store. (http://on.wsj.com/1w72uK7)

* Microsoft Corp Chief Executive Satya Nadella signaled Thursday he won't quickly reshape what Microsoft does, but is likely to cut the number of people doing it.(http://on.wsj.com/1oKOFjn)

* The Puerto Rico Electric Power Authority tapped reserve funds to pay investors last week in the latest sign the cash-strapped utility may soon restructure its debt. A trustee for the power authority withdrew about $41.6 million from a reserve fund to make payments on July 1. (http://on.wsj.com/1oLGDXv)

* A federal judge on Thursday ordered the Internal Revenue Service to explain how it lost two years' worth of a former official's emails, and tapped a magistrate judge to find out whether the documents can be obtained from other sources. (http://on.wsj.com/1qPtgXR)

 

FT

Portugal's government ministers and central bank have come out saying that Banco Espirito Santo (BES), the country's largest listed bank by assets, faces the threat of being affected by the problems plaguing its biggest shareholder, the Espirito Santo family group.

The U.S. government has sued e-commerce company Amazon.com over accusations that it allowed children to collectively make unauthorised purchases worth millions of dollars on the credit cards of their parents.

The Bank of England is reviewing how banks will deal with increasingly larger penalties relating to misconduct, amid concerns that accumulating fines are hampering lenders' efforts to increase capital.

The world's top two container shippers, Maersk Line and MSC Mediterranean Shipping Co, have struck a long-term deal to trim costs by sharing capacity, after a previous three-way pooling deal unravelled last month.

The sale of Royal Mail achieved poorer value for taxpayers than the government sell-offs of the 1980s and 1990s, according to research published by the UK government's official historian David Parker.

Marketers have exposed themselves to risks such as fraud by automating, the method once cheered as a means for the advertising industry to reduce waste.

 

NYT

* The presence of at least three under-age workers at a Shinyang Electronics factory casts a cloud over the labor practices of Samsung Electronics and its suppliers. (http://nyti.ms/1njCsmr)

* Shares of Portugal's second-largest bank, Banco Espírito Santo, were suspended from trading, prompting fears that the bank might need to be rescued. The move sent high-flying stocks and bonds in Portugal plummeting, forced two Spanish companies to suspend bond offerings and brought concerns over the health of Europe's banking system. (http://nyti.ms/1zsSIXm)

* Questcor Pharmaceuticals, recipient of a $5.6 billion takeover bid, disclosed that the number of patients reporting a so-called adverse event while using its immune-system drug Acthar last year represented almost 5 percent of prescriptions dispensed. (http://nyti.ms/1qPsham)

* An essay sent to Microsoft Corp's employees by the company's chief executive appears to lay the groundwork for significant changes that will be revealed later this month. (http://nyti.ms/1ooKQ0l)

* With refining eroding into a money-losing area for most European players, Exxon Mobil is making a contrarian bet by expanding diesel production. (http://nyti.ms/TWg4DI)

* The Federal Trade Commission contended that Amazon improperly billed customers for "many millions of dollars" of charges that children made without their parents' consent. (http://nyti.ms/TWg6eF)

* Lockheed Martin and two of its biggest suppliers agreed on Thursday to invest up to $170 million of their own money to help lower the high cost of the new F-35 fighter jets. The deal lets the Pentagon shift a small part of the risk to the contractors as it grapples with continuing problems on the giant program, which could cost nearly $400 billion for 2,400 planes.(http://nyti.ms/1rcUrv3)

 

Canada

THE GLOBE AND MAIL

** Canadian fighter jets will be patrolling the edge of Russian airspace starting in September, when Ottawa sends six CF-18s to join air defense missions over the Baltic states as part of the NATO response to Moscow's efforts to destabilize Ukraine. (http://bit.ly/1ztkWRP)

** Canada is pushing for warmer ties with the United Arab Emirates in an effort to boost trade and security relations with a country it sees as a key partner in the Middle East. (http://bit.ly/1nkiCr8)

Reports in the business section:

** Enbridge Inc is turning its eyes north to Alaska, entering talks with the state to build an $8-billion natural gas pipeline there if a competing project falters. (http://bit.ly/1rdpTcH)

NATIONAL POST

** Canada's billion-dollar TV and film business could be at risk because of the government's new temporary foreign worker rules, industry insiders are warning. International actors and film and TV production crews are being classified as temporary foreign workers, and subject to a $1,000 fee and 15-day waiting period under Employment Minister Jason Kenney's reform of the controversial program. (http://bit.ly/1ndRyFc)

** The biggest implosion in Ottawa's history is set for this Sunday as a demolition team is expected to take down an aging, unloved federal office building. The 11-story Sir John Carling Building will be turned into about 40,000 tons of rubble on Sunday when Advanced Explosives Demolition Inc sets off about 400 kilograms of intricately-placed dynamite to take down the structure. (http://bit.ly/1tunnmw)

FINANCIAL POST

** Unionized employees at The Globe and Mail voted 85 percent in favor of ratifying a new contract on Thursday that would allow management the freedom to cut staff, but would not permit them to require newsroom staff work on paid "advertorial" articles. (http://bit.ly/1qQ3lPX)

** Ontario's Finance Minister Charles Sousa said on Thursday that provinces pushing for a co-operative securities regulator in Canada want but don't need Alberta. He acknowledged that the province, which so far opposes the co-operative initiative that includes the federal government, represents a significant part of Canada's capital markets. (http://bit.ly/1jx6F1I)

 

China

CHINA SECURITIES JOURNAL

- The newspaper expected that a total of 30 cities could ease property rules on house buying this year, with rumours that Jinan, Xiamen have already eased policy.

SHANGHAI SECURITIES NEWS

- Chinese automaker Anhui Jianghuai Automobile Co said it plans to merge with its parent company JAC Group.

SECURITY TIMES

- The yearly demand for environment investment in China is likely to be 2 trillion yuan ($322.46 billion) in the coming years, said Ma Jun, chief economist of People's Bank of China.

CHINA DAILY

- The effect of the second-child policy is limited and the policy is less likely to be further loosened in a short period of time, said experts at a news briefing held by the National Health and Family Planning Commission on Thursday.

SHANGHAI DAILY

- Guo Meimei, who caused national outrage in 2011 after flaunting her expensive handbags and sports cars on the Internet, has been detained for betting on 2014 World Cup matches, Beijing policy said.

Britain

The Times

FLIGHTS WILL DOUBLE BY 2033, BOEING PREDICTS

Five jetliners are to be built every day for the next 20 years as aircraft manufacturers gear up to handle 7 billion passengers a year by 2033, by which time the annual number of internal flights in China will have overtaken the domestic US market.

SMES WAITING ON 40 BLN STG IN LATE BILLS

Small and medium-sized companies are struggling under a record late payment burden of almost 40 billion pounds ($68.1 billion), payment provider Bacs has warned.

The Guardian

FORMER BRADFORD & BINGLEY FD FINED AGAIN OVER BOTCHED RIGHTS ISSUE

Britain's accountancy watchdog has fined the former finance director of Bradford & Bingley for failing to alert his board to a serious worsening of the bank's financial position during the financial crisis.

SURGE IN IMPORTS WIDENS UK TRADE DEFICIT

Britain's trade deficit unexpectedly grew to 2.4 billion pounds in May, fuelling concerns that the strength of the pound is undermining efforts to increase exports.

The Telegraph

FCA CRACKS DOWN ON 3 BLN STG DEALER COMMISSION MARKET

Britain's financial regulator has told asset managers that a 3 billion pounds market in charges for handling trades and publishing financial research must be cleaned up, warning that investors may be receiving an unfair deal.

WONGA RIVAL SUNNY ORDERED TO HALT TV ADVERTS

Britain's advertising watchdog has banned two adverts for a payday lender after it failed to warn customers about how much it would cost to borrow money.

SSP FLOAT WORTH 15 MLN STG TO KATE SWANN

Kate Swann, the former boss of WH Smith, stands to gain as much as 15 million pounds from the flotation of catering company SSP <IPO-SSPG.L> less than a year after joining the business.

Sky News

FORMER MAXWELL PRINTER EYES PUBLISHING DEAL

A printing group once owned by Robert Maxwell, the disgraced newspaper tycoon, is looking to merge with one of the UK's biggest independent customer content producers.

TAXPAYER SHORT-CHANGED ON ROYAL MAIL SALE, MPS SAY

The controversy over the 3.3 billion pound privatisation of Royal Mail has erupted again as an influential group of MPs has criticised Vince Cable over his handling of the sale.

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Treasury budget for June at 14:00--consensus $79.0B

ANALYST RESEARCH

Upgrades

Air France-KLM (AFLYY) upgraded to Hold from Underperform at Jefferies
ChannelAdvisor (ECOM) upgraded to Buy from Hold at Deutsche Bank
HollyFrontier (HFC) upgraded to Neutral from Sell at Citigroup
ITG (ITG) upgraded to Outperform from Market Perform at Keefe Bruyette
Joe's Jeans (JOEZ) upgraded to Buy from Neutral at B. Riley
LogMeln (LOGM) upgraded to Outperform from Market Perform at Cowen
Marathon Petroleum (MPC) upgraded to Buy from Neutral at Citigroup
QLogic (QLGC) upgraded to Equal Weight from Underweight at Morgan Stanley
Royal Dutch Shell (RDS.A) upgraded to Overweight from Neutral at JPMorgan
Siemens (SIEGY) upgraded to Outperform from Sector Perform at RBC Capital

Downgrades

Alon USA Partners (ALDW) downgraded to Neutral from Buy at Citigroup
Brinker (EAT) downgraded to Hold from Buy at Wunderlich
Con-way (CNW) downgraded to Neutral from Buy at Citigroup
Finish Line (FINL) downgraded to Neutral from Buy at Sterne Agee
NovaGold (NG) resumed with a Neutral from Overweight at JPMorgan
Open Text (OTEX) downgraded to Sector Perform from Outperform at RBC Capital
Procter & Gamble (PG) downgraded to Market Perform from Outperform at Wells Fargo

Initiations

Altria Group (MO) initiated with an Outperform at Cowen
Berkshire Hills Bancorp (BHLB) initiated with a Hold at Jefferies
Halozyme (HALO) initiated with an Overweight at JPMorgan
Lorillard (LO) initiated with an Underperform at Cowen
MacroGenics (MGNX) initiated with an Outperform at Oppenheimer
Philip Morris (PM) initiated with a Market Perform at Cowen
Prothena (PRTA) initiated with an Outperform at Oppenheimer
Reynolds American (RAI) initiated with a Market Perform at Cowen
Seventy Seven Energy (SSE) initiated with a Buy at Wunderlich
Sprouts Farmers Markets (SFM) initiated with a Neutral at Longbow
Sprouts Farmers Markets (SFM) initiated with an In-Line at Imperial Capital
Sterling Bancorp (STL) initiated with a Buy at Jefferies
Xencor (XNCR) initiated with an Outperform at Oppenheimer
YPF (YPF) initiated with a Neutral at JPMorgan
iGATE (IGTE) initiated with an Outperform at William Blair

COMPANY NEWS

Imperial (ITYBY) confirmed talks with Reynolds (RAI), Lorillard (LO) over asset acquisition
Whirlpool (WHR) to acquire majority interest in Indesit for $15.06 per share
The FHFA said it is seeking input on draft requirements that would apply to private mortgage insurance companies that insure mortgage loans owned or guaranteed by Fannie Mae (FNMA) and Freddie Mac (FMCC). These requirements would apply only to private mortgage insurers that are currently approved to do business with Fannie Mae or Freddie Mac and those seeking approval in the future (MTG, RDN)
Chevron (CVX) forecast Q2 earnings higher than Q1
Baker Hughes (BHI) reports Q2 U.S. onshore well count up 428 from Q1 to 9,394
Isle of Capri (ISLE) names Eric Hausler as CFO

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Infosys (INFY), Barracuda Networks (CUDA), E2open (EOPN), PriceSmart (PSMT), Joe's Jeans (JOEZ)

Companies that missed consensus earnings expectations include:
Rent-A-Center (RCII), VOXX International (VOXX), Zep Inc. (ZEP)

Infosys (INFY) reaffirms FY15 revenue growth outlook 7%-9%
Barracuda Networks (CUDA) sees FY15 EPS 14c-18c, consensus 14c
Barracuda Networks (CUDA) sees Q2 EPS 3c-4c, consensus 3c
Gap (GPS) reports June net sales up 1%, SSS down 2%

NEWSPAPERS/WEBSITES

Reynolds American (RAI), Lorillard (LO) close to merger agreement, FT reports
Alibaba (BABA) may begin IPO process by end of month, WSJ reports
Yelp (YELP) says Google (GOOG) results favoring Google+ local listings, WSJ reports
TSMC (TSM) begins shipping microprocessors to Apple (AAPL), WSJ reports
AbbVie (ABBV) encourages largest Shire (SHPG) shareholders to pursue talks, Bloomberg says
GameStop (GME) CEO says retailer won't tamper with creative direction, CNet reports
Amazon (AMZN) urges FAA to allow increased drone development, CNet reports

SYNDICATE

Envision Healthcare (EVHC) 27.5M share Secondary priced at $34.00
Fifth Street Finance (FSC) files to sell 13.25M shares
Fox Factory (FOXF) 5M share Secondary priced at $15.50
Westmoreland Coal (WLB) 1.46M share Secondary priced at $35.50









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