Frontrunning: October 2
- RBA Cuts Rate to 3.25% as Mining-Driven Growth Wanes (Reuters)
- Republicans Not Buying Bernanke’s QE3 Defense (WSJ)
- Spain ready for bailout, Germany signals "wait" (Reuters)
- EU says prop trading and investment banking should be separated from deposit taking (Reuters)
- Call for bank bonuses to be paid in debt (FT)
- Spanish Banks Need More Capital Than Tests Find, Moody’s Says (Bloomberg) ... as we explained on Friday
- "Fiscal cliff" to hit 90% of US families (FT)
- The casualties of Chesapeake's "land grab" across America (Reuters)
- U.K. Government Needs to Do More to Boost Weak Economy, BCC Says (Bloomberg)
- World Bank Sees Long Crisis Effect (WSJ)
- UBS Co-Worker Says He Used Adoboli’s Umbrella Account (Bloomberg)
- And more easing: South Korea central bank switches tack to encourage growth (Reuters)
Overnight Media Digest:
* New York's top prosecutor opened a new front in efforts to hold banks accountable for the financial crisis by filing a civil lawsuit against JPMorgan Chase & Co, alleging widespread fraud by the company's Bear Stearns unit in the sale of mortgage-backed securities.
* The judge overseeing the patent dispute between Apple Inc and Samsung Electronics Co in a California federal court lifted a sales ban on a Samsung tablet computer after a jury found in August that the product didn't infringe an Apple patent.
* EADS shareholder Lagardère SCA said the terms of the aerospace company's proposed merger with BAE Systems Plc are "unsatisfactory" and should be re-examined, throwing another wrench into negotiations to create the world's largest defense and aerospace conglomerate.
* American Express Co, the credit-card giant with a reputation for affluent customers and customer service, agreed to pay $112.5 million to resolve charges from banking regulators that it engaged in illegal card practices.
* Federal Reserve Chairman Ben Bernanke pushed back against criticism that the central bank's low-interest-rate policies are enabling bad fiscal policy in Washington, saying the Fed's approach could help shrink the federal budget deficit over time.
* U.S. manufacturers rebounded in September, with fresh data showing factory activity expanded for the first time in four months despite weakening economies around the globe.
* Euro-zone manufacturing activity shrank for the 14th-straight month in September and unemployment hit a fresh record in August, suggesting prospects are slim for a quick return to growth in the currency bloc.
* Greece's international lenders cast doubt on parts of Athens' plans to save billions of euros through new cutbacks and tax measures, throwing a potential wrench in the government's efforts to reach a quick deal to unlock new aid for the country.
* The former head of failed lender IndyMac Bancorp Inc will pay $80,000 to settle a charge he misrepresented the company's financial condition, after a judge dismissed other civil allegations against him.
* British authorities have charged four people, including a former executive at Deutsche Bank AG, in relation to an alleged insider-trading ring in the most high-profile U.K. case of its kind
BANKS REAP PROFITS ON MORTGAGES AFTER QE3
Bank profits from new mortgages have soared since the Federal Reserve began its third round of bond purchases two weeks ago.
CALL FOR BANK BONUSES TO BE PAID IN DEBT
Banks should pay bonuses in debt, which would be wiped out if a bank failed, according to the Liikanen commission.
GOOGLE MARKET CAP TOPS MICROSOFT
Google's stock market value topped that of long-time rival Microsoft for the first time on Monday.
XSTRATA RECOMMENDS GLENCORE OFFER
Xstrata's novel structure for its long-awaited merger with Glencore has gained further shareholder support.
FOUR CHARGED IN INSIDER TRADING DEALING CASE
Four people have been charged with a 3 million pounds ($4.84 million) alleged conspiracy to commit insider dealing.
WORKDAY EYES $3.8 BLN VALUATION IN IPO
Workday, a lossmaking U.S. business software company, paved the way on Monday for the biggest technology IPO since Facebook's listing.
BAKRIES TO SELL ASSETS TO REPAY LOAN
Indonesia's Bakrie family have agreed to sell non-core assets to repay a loan that fell into default because of the share price collapse of Bumi.
FRANCE THROWS COLD WATER ON EADS DEAL
The two key French and German private sector shareholders in EADS are pressing for changes to its 34 billion euros proposal to merge with BAE Systems.
SAC PLACES TOP MANAGER ON LEAVE
SAC Capital has placed a top portfolio manager on paid leave after an analyst who reported to him pleaded guilty to insider trading last week.
* New York's attorney general, under the aegis of a federal mortgage task force, filed a civil suit against Bear Stearns, now part of JPMorgan Chase & Co, asserting that it defrauded investors who purchased mortgage securities.
* American Express Co will reimburse $85 million to about 250,000 customers to resolve accusations that the company violated federal law in its marketing, billing and debt collection practices, the company and the government said Monday.
* Greece's government submitted its 2013 draft budget on Monday, outlining enormous spending cuts as the country's foreign lenders returned to resume talks over a broader austerity package in exchange for the rescue money the country needs to meet expenses.
* Crédit Agricole, the big French bank, said Monday it had begun exclusive talks to sell its Greek unit, Emporiki, to Alpha Bank for a symbolic one euro.
* Unemployment in the euro zone hovered at a record 11.4 percent in August, according to data released on Monday, underscoring the pain inflicted by the slowing world economy and the financial problems plaguing many of the countries that share the euro.
* Softbank Corp, the cellphone service provider that brought Apple Inc's iPhone to Japan, said on Monday that it would buy a smaller rival, eAccess Ltd, for about $2.3 billion in stock, in the face of intensifying competition.
* Two of the largest economies in the world, China and Japan, presented fresh data on Monday that underscored the persistent economic drag on the global economy despite the efforts of policy makers and central bankers around the world.
* The U.S. Postal Service sank deeper into debt on Monday after the agency defaulted on a $5.6 billion payment due at the end of September, the second time it has missed a deadline this year to set aside money for its future retiree health benefits
THE GLOBE AND MAIL
* A witness before Quebec's corruption probe sketched out an elaborate portrait of bribes and kickbacks reaching from major Montreal construction firms to top city employees and into the political party of Mayor Gérald Tremblay.
Former construction boss Lino Zambito testified before the Superior Court that he paid 3 percent of city contracts' value through a middleman to the coffers of Mayor Tremblay's Union Montréal party.
* The federal government has been billed more than $3-million for its unsuccessful attempts to keep a high-stakes battle over first nations child welfare out of the courts.
Invoices obtained through the Access to
* A second abortion-related motion proposed by a backbench Conservative MP could trigger a new debate about the parameters of a woman's right to choose in Canada.
A day before, MPs voted down a separate motion to study whether a fetus should have rights before it is born. Pro-choice activists staunchly opposed MP Stephen Woodworth's fetus-rights motion, suggesting it could open a national debate on a woman's right to access abortion - something Prime Minister Stephen Harper promised not to do during the last federal election campaign.
Reports in the business section:
* Hedge fund Jana Partners unveiled a 41-page presentation suggesting there's $50 a share in Agrium Inc's stock if management agrees to carve up the company into a fertilizer producer and a retail farm store chain, revamps how it allocates capital, and cuts costs by closing stores and other measures.
As much as $20 would come from the split, $20 more from cost reductions and the rest from using capital more efficiently.
* New revisions show Canada's economy was sturdier than previously thought just before the last downturn - even as the U.S. was sputtering - but when the fall came, it was more painful than earlier data had indicated.
Though Canadian growth in the second and third quarters of 2008 has been revised upwards, the economy's slide in the next half year is more stark than prior estimates.
* B.C. Premier Christy Clark met with her Alberta counterpart at the historic McDougall Centre in downtown Calgary on Monday, for the first time since Alison Redford stormed out of an all-premiers' meeting in Halifax two months ago. But the meeting did little to end the impasse over the Northern Gateway pipeline.
* A situation that officials described as volatile and dangerous began to ease late Monday as fire crews started to knock back a massive blaze at a Winnipeg warehouse holding highly explosive fuel used for car racing.
No one was hurt when fire and explosions rocked Speedway International, a company that boasts on its website it is "North America's No. 1 source for 99.99 percent racing methanol".
* The B.C. government has rejected plans for a copper and gold mine in the province's northwest, saying the project could endanger salmon in the Skeena River.
Pacific Booker Minerals Inc had proposed the mine at Morrison Lake, a 15-kilometre-long lake surrounded by Crown land near Smithers. The lake is at the headwaters of the Skeena River, which produces the second-largest amount of sockeye salmon in B.C.
* Ottawa is redefining and refocusing its immigration rules - expected to be in place next year - that are meant to attract workers between the ages of 18 to 35, a move the federal government argues is an essential shift to fill the tax-generating gap being left by the exodus of baby-boomers from the labor market.
The government argues that despite high youth unemployment, there are not enough skilled workers to fill the jobs that are available.
European economic summary:
- Hungary Trade Balance 431.0M. Previous 457.5M.
- United Kingdom Construction PMI 49.5 – lower than expected. Consensus 49.9. Previous 49.0.
Fly on the Wall 7:00 AM Market Recap
Citigroup (C) upgraded to Outperform from Market Perform at Keefe Bruyette
Kilroy Realty (KRC) upgraded to Hold from Sell at Cantor
Kinross Gold (KGC) upgraded to Outperform from Sector Perform at RBC Capital
Lennar (LEN) upgraded to Neutral from Sell at Citigroup
Liberty Media (LMCA) upgraded to Buy from Neutral at Citigroup
Microchip (MCHP) upgraded to Buy from Hold at ThinkEquity
ON Semiconductor (ONNN) upgraded to Buy from Hold at ThinkEquity
PNC Financial (PNC) upgraded to Buy from Hold at Deutsche Bank
Pan American Silver (PAAS) upgraded to Buy from Hold at Deutsche Bank
XL Group (XL) upgraded to Neutral from Sell at Goldman
Zoltek (ZOLT) upgraded to Buy from Hold at Needham
Baidu (BIDU) downgraded to Outperform from Strong Buy at Raymond James
BB&T (BBT) downgraded to Hold from Buy at Deutsche Bank
Barclays (BCS) downgraded to Neutral from Buy at UBS
Brooks Automation (BRKS) downgraded to Underweight from Equal Weight at Barclays
Consolidated Edison (ED) downgraded to Underperform from Neutral at Credit Suisse
Entropic (ENTR) downgraded to Underperform from Neutral at Credit Suisse
Fifth Third Bancorp (FITB) downgraded to Market Perform from Outperform at Wells Fargo
FormFactor (FORM) downgraded to Underweight from Equal Weight at Barclays
Goldcorp (GG) downgraded to Hold from Buy at Deutsche Bank
Healthcare Services (HCSG) downgraded to Hold from Buy at Benchmark Co.
IDEX Corp. (IEX) downgraded to Perform from Outperform at Oppenheimer
KB Home (KBH) downgraded to Sell from Neutral at Citigroup
Lloyds Banking (LYG) downgraded to Neutral from Buy at UBS
MKS Instruments (MKSI) downgraded to Underweight from Overweight at Barclays
Mondelez (MDLZ) downgraded to Hold from Buy at Jefferies
Old Dominion (ODFL) downgraded to Sector Perform from Outperform at RBC Capital
Parkway Properties (PKY) downgraded to Hold from Buy at Cantor
RenaissanceRe (RNR) downgraded to Neutral from Buy at Goldman
Royal Bank of Scotland (RBS) downgraded to Neutral from Buy at UBS
Safeway (SWY) downgraded to Underperform from Neutral at Credit Suisse
Southern Company (SO) downgraded to Underperform from Neutral at Credit Suisse
Travelers (TRV) downgraded to Buy from Conviction Buy at Goldman
W. R. Berkley (WRB) downgraded Sell at Goldman
Wells Fargo (WFC) downgraded to Hold from Buy at Deutsche Bank
Whiting Petroleum (WLL) downgraded to Neutral from Buy at SunTrust
API Technologies (ATNY) initiated with a Buy at C.K. Cooper
Aruba Networks (ARUN) initiated with an Outperform at Wells Fargo
Cepheid (CPHD) initiated with an Outperform at Cowen
DealerTrack (TRAK) initiated with an Overweight at JPMorgan
Genomic Health (GHDX) initiated with an Outperform at Cowen
Hillshire Brands (HSH) initiated with a Market Perform at Wells Fargo
Hologic (HOLX) initiated with an Outperform at Cowen
Kraft Foods Group (KRFT) initiated with a Buy at Jefferies
Kraft Foods Group (KRFT) initiated with a Buy at UBS
Kraft Foods Group (KRFT) initiated with a Neutral at Citigroup
MYR Group (MYRG) initiated with a Buy at DA Davidson
Mead Johnson (MJN) initiated with an Outperform at Wells Fargo
Mondelez (MDLZ) initiated with a Hold at Deutsche Bank
Mondelez (MDLZ) initiated with an Outperform at RBC Capital
Myriad Genetics (MYGN) initiated with an Outperform at Cowen
Palo Alto (PANW) initiated with an Outperform at JMP Securities
Radware (RDWR) initiated with a Market Perform at Wells Fargo
New York State sued JPMorgan (JPM) in state court over mortgage securities, Bloomberg reported. JPM said suit relates to Bear Stearns conduct before takeover
Metlife (MET) won new extension from Fed on stress test
Pershing Square: Procter & Gamble (PG) should hire new CEO from outside company
Ackman said General Growth (GGP) one of the "great stable businesses"
Boeing (BA), Gol Linhas Aereas (GOL) announced $6B order for 60 737 MAX planes
Dynegy (DYNIQ, DYN) emerged from Chapter 11 bankruptcy
Acacia Research (ACTG) subsidiary entered into a license agreement with IBM (IBM)
Core Laboratories (CLB) sees Q4 activity levels similar to Q3
Constellation Energy (CEP) engaged Lantana for possible sale of Black Warrior assets
POZEN (POZN) patents upheld in Treximet patent litigation appeal
Forum Energy (FET) acquired Syntech Technology
Measurement Specialties (MEAS) acquired RTD
LeMaitre (LMAT) to acquire XenoSure rights
Wabtec (WAB) acquired LH Group for about $48M
Companies that missed consensus earnings expectations include:
Fed Chairman Bernanke answered criticism that the central bank's low-interest-rate policies are enabling bad fiscal policy in Washington, saying the Fed's approach could help reduce the federal budget deficit over time, the Wall Street Journal reports
Facebook (FB) is looking at new ways to leverage its greatest asset—personal data on about 900M people—again raising concerns about privacy. The strategy: selling access to its users, the Wall Street Journal reports
ConocoPhillips (COP) will sell its 8.4% stake in Kazakhstan's giant Kashagan oilfield, and the Central Asian nation is eager to acquire this share, senior Kazakh officials said, Reuters reports
The Danish shipping group Torm A/S (TRMD) struck a deal with its banks that will see them take a majority stake in the firm in exchange for extending $1.8B of debt and giving it access to new funds, Reuters reports
Wall Street banks’ equities-trading units aren’t getting much relief from the strongest stock rally since 2009, as sinking volume and already thin margins threaten to make their annual performance the worst in six years. Q3 equities-trading revenue probably slid 14% from the same period in 2011, the fifth straight drop of more than 8%, according to estimates by JPMorgan Chase (JPM), Bloomberg reports
The SEC is playing catch up in its ability to analyze the computerized trading that has come to dominate American stock markets. Initiatives to increase the breadth of data received from exchanges and to record orders from origination to execution are at the center of the effort, Bloomberg reports
American Superconductor (AMSC) files to sell 10.26M shares of common stock for holders
Cynosure (CYNO) files to sell 2.94M shares of common stock for holders
DDR Corp. (DDR) files to sell 40.58M shares of common stock for holders
Genesis Energy (GEL) announces offering of 6M common units for holders
Gladstone Investment (GAIN) announces 4M share common stock offering
Laredo Petroleum (LPI) files to sell 12.5M shares for Warburg Pincus
SBA Communications (SBAC) announces offering of 4.59M shares of common for holders
Ship Finance (SFL) announces offering of 6M shares of common stock
Tesoro Logistics (TLLP) announces offering of 3.7M common units
Urstadt Biddle Properties (UBA) announces offering of 2.5M shares of common stock
Steadfast Capital reports 5.21% passive stake in Yelp (YELP)