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Frontrunning: October 5

Tyler Durden's picture





 
  • Draghi Says Next Move Not His as Spain Resists Bailout (Bloomberg)
  • Europe Readies Bond Buying (WSJ)
  • EU Doubts on Deficit Cutting May Hinder Spain’s Path to Bailout (Bloomberg)
  • Merkel to Visit Greece for First Time Since Crisis Outbreak (Bloomberg)
  • Fed's Bullard warns inflation won't ease U.S. debt burden (Reuters)
  • Walmart Workers Stage a Walkout in California (NYT)
  • Natural Gas Glut Pushes Exports (WSJ)
  • BOJ Refrains From More Stimulus as Political Pressure Mounts (Bloomberg)
  • Big funds seek to rein in pay at Wall Street banks (Reuters)
  • Hong Kong Luxury Sales Fall as Chinese Curb Spending (Bloomberg)
  • Dave and Busters Pulls IPO due to "Market Conditions" (Reuters) - so market at anything but all time highs now is market conditions?
  • Weak U.S. labor market looms ahead of elections (Reuters)
  • Glut of Solar Panels Poses a New Threat to China (NYT)
  • Israeli forces kill American gunman in hotel shoot-out (Reuters)
  • As Iran’s Currency Keeps Tumbling, Anxiety Is Rising (NYT)
  • Republicans lead Obama in war for judicial dominance (Reuters)

Overnight Media Digest

WSJ

* Barry Zubrow, a trusted lieutenant of JPMorgan Chase & Co Chief Executive James Dimon, is expected to give up his job as regulatory affairs chief in what would be the latest reshuffling to follow a multibillion-dollar trading blunder.

* Samsung Electronics Co said Friday it expects a record operating profit for the third quarter, which analysts attributed to stellar sales of the company's flagship smartphones despite an intensifying global patent battle with Apple Inc

* Huawei Technologies Co Ltd has reached out to investment banks for advice on issuing stock to the public as the Chinese telecom company considers ways to improve its odds of winning big contracts in markets like the U.S.

* Zynga Inc forecast a third-quarter net loss including acquisition charges and lowered its 2012 financial outlook for the second time this year.

* Apollo Global Management, parent of "American Idol" owner Core Media Group, is proposing a merger of Core and Endemol, a Dutch production company whose shows include "Big Brother" and "Deal or No Deal," say people familiar with the situation.

* Facebook Inc, the social network started by Mark Zuckerberg in his Harvard dorm eight years ago, reached the milestone of one billion monthly active members on Sept. 14.

* A consortium including Exxon Mobil Corp, ConocoPhillips Co and BP Plc said late Wednesday it is moving forward with plans to export natural gas from Alaska's North Slope in a project that could cost as much as $65 billion.

* AMR Corp's American Airlines said it will now take several extra days, and perhaps disrupt some flight schedules through the early part of the weekend, to ensure that passenger seats on more than four dozen of its jets are properly secured.

* U.S. officials moved this week to shut down websites owned by Canada Drugs, the Internet pharmacy and drug wholesaler that distributed counterfeit Avastin to U.S. doctors last year, the latest in a crackdown on the international gray market for pharmaceuticals.

 

FT

JOHNSON SLAMS GOVERNMENT OVER AIRPORTS

London Mayor Boris Johnson has attacked the government as "blind" and "complacent" for delaying action on London's airport capacity crunch.

MORGAN STANLEY CHIEF WARNS ON WALL ST PAY

Morgan Stanley is preparing to cut job cuts and smaller bonuses planned for next year, the bank's chief executive, James Gorman, said on Friday.

GOOGLE EBOOK WIN LITTLE THREAT TO AMAZON

Google Inc and a group of publishers have agreed to a settlement over making digital copies of books.

RUSSIA MOOTS ARCTIC OIL LICENCES FOR WEST

Russia is considering allowing western companies to own oil licences in its Arctic waters, according to its energy minister, Alexander Novak.

BAE TIE-UP BAD FOR UK, WARNS DARLING

The British government would have no stake in the enlarged group formed by the merger of BAE Systems and EADS , said Alistair Darling, the former chancellor of the exchequer.

BARCLAYS ALTERS INVESTMENT BANKING SHAPE

Barclays announced a shake-up at its investment bank on Thursday as the group tries to cut costs and reduce risks to its reputation.

REDROW'S CHAIRMAN RAISES BID FOR GROUP

Steve Morgan, the chairman of Redrow, has raised his offer for the housebuilding company he founded more than 35 years ago.

ECB KEEPS INTEREST RATES UNCHANGED

Mario Draghi, president of the European Central Bank, on Thursday came close to demanding that European leaders make use of his bond-buying plan.

FACEBOOK REACHES 1 BLN ACTIVE USERS -

Social media company Facebook Inc reported on Thursday it reached the 1 billion user mark last month

 

Canada

THE GLOBE AND MAIL

* XL Foods, the Alberta beef packer at the center of a massive recall, is taking full responsibility for the tainted product as questions mount over why Canadian officials let the company's plant operate for two weeks after the U.S. deemed the meat unfit to cross the border.

The company acknowledged its food-safety practices were "not enough" and said it would work with the Canadian Food Inspection Agency to strengthen them.

* Quebec's ever-expanding corruption scandal has reached into the home and headquarters of a mayor long considered untouchable.

About 70 investigators from the province's anti-corruption squad descended on Laval City Hall and the home of Mayor Gilles Vaillancourt on Thursday, seizing documents and databases related to contracts handed out by Quebec's fastest-growing big city.

Reports in the business section:

* The federal New Democratic Party formally disapproved of CNOOC Ltd's U.S. $15.1 billion offer to acquire Calgary's Nexen Inc, aiming to widen opposition to China's plan to secure a major foothold in the oil sands.

* Canadian Imperial Bank of Commerce, the country's fifth-largest bank by assets, has unveiled an ambitious plan to expand its banking hours by doubling the number of locations open on Sunday, to 107. That will put CIBC squarely in second place, after Toronto-Dominion Bank, which has made weekend banking hours a key part of its strategy.

The strategy for the banks is to lure customers from competitors who aren't open every day, betting that Canadians are too time pressed to do their banking during the week.

NATIONAL POST

* Federal Agriculture Minister Gerry Ritz has faced intense criticism from opposition parties about the extensive recall of beef products sparked by an E. coli scare at an XL Foods plant in Alberta, but Thursday was the first day this week he faced his critics inside the House of Commons.

NDP leader Thomas Mulcair demanded he resign over the largest beef recall in Canadian history.

* Canada is poised to claim ownership of a vast new expanse of undersea territory beyond its Atlantic and Arctic coasts that's greater in size than Quebec and equal to about 20 percent of the country's surface area.

The huge seabed land grab has been in the works since 1994, when federal scientists first conducted a "desktop study" of Canada's potential territorial expansion under a new UN treaty allowing nations to extend their offshore jurisdictions well past the current 200-nautical-mile limit of so-called "Exclusive Economic Zones" in coastal waters.

FINANCIAL POST

* SNC-Lavalin received renewed signs of confidence in its operations Thursday after being selected as the preferred bidder for a $1.4 billion B.C. transit project and winning a potash feasibility project in New Mexico.

A consortium headed by the Montreal-based engineering and construction giant has been tabbed by the B.C. government to design and build the Evergreen Line Rapid Transit project.

* Junior miner Sulliden Gold Corp has backed off plans to introduce a "milestone bonus" program, that would pay insiders for achieving expected goals on the way to developing its Shahuindo project in Peru. The plan, ended after a shareholder revolt, meant that they could receive large amounts of money well before reaching production.

 

Australia

THE AUSTRALIAN FINANCIAL REVIEW (www.afr.com)

--Sources close to takeover talks between surf, street, skate and ski wear retailer Billabong International and private equity firm TPG Capital have revealed that the latter is worried about Billabong's core brand and its medium-term forecasts. TPG is the sole suitor for Billabong after rival Bain Capital withdrew from proceedings last month. The private equity group has until October 24 to finalise due diligence for its A$695 million bid, observers added. Page 15.

--Apollo Global Management and Oaktree Capital , the two hedge funds that control more than A$1 billion of Nine Entertainment Co's senior debt, are considering lodging a bid for the free-to-air broadcaster if Nine's management decides to put the business on the market. Observers said the concept would not damage a sale process, with the senior lenders only being given the option to "buy" the company if Nine does not receive a suitable offer from an outside party. Page 15.

--Discovery Metals yesterday announced that a Chinese private equity firm had lodged a A$830 million takeover bid for the silver and copper producer, with the company's board saying it "strongly believes" that uncovering the offer was in the best interests' of investors. Discovery's share price has soared by 23 percent over the last seven days, with the current price of A$1.455 just below Cathay Fortune Corporation's A$1.70 a share offer. Cathay Fortune already owns 13.7 percent of Discovery. Page 15.

--Elmer Funke Kupper, chief executive of the Australian Securities Exchange, yesterday admitted that relations between the stockmarket and its core clients would become more strained in the future as both parties venture into each other's markets in search of new business opportunities. "I think the relationship between exchanges and banks around the world is being tested  the challenge of course for us and all our clients is that growth is hard to come by," he added. Page 19.

THE AUSTRALIAN (www.theaustralian.news.com.au)

--Street, surf, skate and ski wear group Billabong International yesterday issued a statement to the Australian Stock Exchange confirming that private equity firm TPG Capital had not withdrawn from talks to buy the Australian retailer for A$694 million. The announcement following a 23 percent fall in Billabong's share price to A$1.01, its lowest level in three months. Page 19.

--Global miner BHP Billiton has been identified as one of three suitors for offshore United States oil and gas assets owned by the national oil company of Brazil, Petrobras. Observers note that, provided the report is accurate, it would be a surprising change in tack from BHP chief executive Marius Kloppers, who has been warning stakeholders and investors that the company would limit expenditure after cancelling A$50 billion of development projects. Page 19.

--Rural services firm Elders yesterday surprised observers when it published private correspondence between itself and Ruralco, its largest shareholder, in an attempt to clear the air about discussions the two parties have had about a possible merger. Elders told the stock market in a statement that Ruralco had sent a letter proposing a merger, but the board rejected it because it was "conceptual in nature and lacked sufficient detail to enable it to be evaluated". Pg 19.

--Australia and New Zealand Banking Group (ANZ) yesterday announced it was investing A$1.5 billion in technology to reduce the lender's branch network footprint, a move that would save as much as A$350 million annually in operating costs. "We don't need as much space  as we remodel the branches over the next few years, we won't need to be in as big a location to offer the same services," Phil Chronican, Australian chief of ANZ, said. Page 19.

THE SYDNEY MORNING HERALD (www.smh.com.au)

--The Australian Competition and Consumer Commission yesterday announced that it would not support supermarket giant Woolworths' acquisition of hardware stores owned by G Gay & Co, finding that the takeover was likely to significantly reduce competition by eliminating one of two major competitors to Woolworths in Melbourne's Ballarat region. The regulator added that if the deal proceeded, Woolworths' remaining rivals in the area were unlikely to be able to compete against the supermarket giant's Masters outlets and rival hardware retail chain Bunnings. Page B3.

--Supermarket giant Woolworths will today launch its A$1.4 billion Shopping Centres Australasia Property Group, an entity housing 70 marketplace stores in Australia and New Zealand. The group's largest store will be the 28,000 square metre outlet in Kwinana, Perth, followed by the 22,000 square metre store in Victoria's Lilydale. Analysts from investment house UBS added that a proposed A$500 million capital raising from Woolworths would deliver "modest" returns for shareholders, with the proceeds being used to "retire debt with capital management likely in 2014". Page B3.

--Steel manufacturer Arrium yesterday upgraded guidance for its iron ore exports as the company continues its defence against a A$1 billion takeover bid from a foreign syndicate. Arrium, formerly known as OneSteel, previously predicted 8 million tonnes of iron ore exports for the 2012-13 financial year but yesterday increased that amount to 9 million tonnes. Page B4.

--National Australia Bank (NAB) employees have received a subpoena from a United States court as part of a class action over more than A$1 billion in losses that the lender absorbed on subprime mortgages. NAB shareholders launched the lawsuit after the bank wrote down its investments in collateralised debt obligations four years ago. Court orders have also been given to two staff at accounting giant KPMG. Page B4.

THE AGE (www.theage.com.au)

--Australian pension funds managing up to A$350 billion in assets are expected to join their counterparts in the United States and Britain in asking News Corporation to remove chairman Rupert Murdoch and his sons Lachlan and James from the media conglomerate's board in the wake of the phone hacking scandal. The Australian Council of Super Investors representative body said that family members on the News Corp board should be replaced with talented outside directors with integrity. Page B1.

--Greg L'Estrange, former chief executive of Gunns, yesterday said that the failed forestry group lacked accountability and failed to follow its own guidelines. "It's not a company with a culture of complying with policies  transparency was the most difficult part of my job," Mr L'Estrange said, adding that there was no "standard forward forecasting methodology" in the group's monthly finance management report. Page B2.

--Qantas Airways has begun marketing flights to London via Dubai as part of its alliance deal with Middle Eastern carrier Emirates Airlines, with observers saying that Qantas has decided it can begin laying the foundations of the deal without the approval of regulators. The Australian Competition and Consumer Commission is still reviewing the 10-year alliance between the companies. Analysts said it seemed that the commission could not give an interim approval to the companies before the release of a draft decision on the deal later this year. Page B3.

--Mayne Pharma yesterday announced that it was in the process of acquiring pharmaceutical developer Metrics Inc for as much as US$120 million, which observers noted is more than double the United States-based firm's current market capitalisation. "The combined business will have 14 marketed products plus 17 new products in various stages of development," Mayne Pharma said. Page B3.

 

Fly on the Wall 7:00 Market Snapshot

ANALYST RESEARCH

Upgrades

Automatic Data Processing (ADP) upgraded to Buy from Neutral at Goldman
Dollar Tree (DLTR) upgraded to Outperform from Neutral at Credit Suisse
FIS (FIS) upgraded to Outperform from Neutral at RW Baird
Family Dollar (FDO) upgraded to Outperform from Neutral at Credit Suisse
Informatica (INFA) upgraded to Buy from Neutral at Nomura
Owens-Illinois (OI) upgraded to Buy from Neutral at Goldman
Thermo Fisher (TMO) upgraded to Outperform from Market Perform at Wells Fargo
Western Alliance (WAL)  upgraded to Outperform from Market Perform at Keefe Bruyette

Downgrades

Adtran (ADTN) downgraded to Underweight from Equal Weight at Barclays
ArcelorMittal (MT) downgraded to Neutral from Buy at Citigroup
Autoliv (ALV) downgraded to Sell from Neutral at UBS
Beneficial Mutual (BNCL) downgraded to Market Perform at Keefe Bruyette
Biogen (BIIB) downgraded to Perform from Outperform at Oppenheimer
Capital Federal (CFFN) downgraded to Market Perform from Outperform at Keefe Bruyette
Endo Health (ENDP) downgraded to Sector Perform from Outperform at RBC Capital
F5 Networks (FFIV) downgraded to Equal Weight from Overweight at Barclays
Gardner Denver (GDI) downgraded to Hold from Buy at KeyBanc
Hewlett-Packard (HPQ) downgraded to Neutral from Buy at Sterne Agee
Marriott (MAR) downgraded to Hold from Buy at ISI Group
Marriott (MAR) downgraded to Neutral from Buy at UBS
MeadWestvaco (MWV) downgraded to Neutral from Buy at Goldman
Meridian Interstate (EBSB) downgraded to Market Perform at Keefe Bruyette
PAREXEL (PRXL) downgraded to Hold from Buy at Jefferies
Zynga (ZNGA) downgraded to Neutral from Outperform at RW Baird

Initiations

Annie's (BNNY) initiated with a Neutral at Janney Capital
Astoria Financial (AF) initiated with a Hold at Jefferies
CapLease (LSE) initiated with an Outperform at JMP Securities
Hain Celestial (HAIN) initiated with a Buy at Janney Capital
MarketAxess (MKTX) initiated with a Market Perform at BMO Capital
Molex (MOLX) initiated with a Hold at Jefferies
QCR Holdings (QCRH) initiated with an Outperform at Raymond James
RF Micro Devices (RFMD) initiated with a Neutral at Lazard Capital
Skyworks (SWKS) initiated with a Buy at Lazard Capital
The Inventure Group (SNAK) initiated with a Buy at Janney Capital
TriQuint (TQNT) initiated with a Buy at Lazard Capital
Vanguard Natural (VNR) initiated with a Buy at UBS

HOT STOCKS

Moody's placed long term rating of Hewlett-Packard (HPQ) under review for downgrade
iStar Financial (SFI) said Moody's upgraded its corporate family rating to B2 from B3
National Credit Union Administration sued Credit Suisse (CS) over mortgage-backed securities
AT&T (T) debuts Windows 8 (MSFT) tablets for holiday shopping season
AB Volvo (VOLVY) signed letter of intent to divest plant in Spain
Thor Industries (THO) subsidiary acquires Kansas bus operation
CBIZ (CBZ) acquired anesthesia billing company ProMedical
Saba Software (SABA) delayed certain SEC filings

NEWSPAPERS/WEBSITES

Four years after the financial crisis, as the stock market reaches toward new highs, many investors refuse to return. Stock indexes have doubled in value since the market low in March 2009, but investors have pulled a net $138B from mutual funds and exchange-traded funds that invest in U.S. stocks, according to the Investment Company Institute, a mutual-fund trade group. Investors over the same period put $1T into bond funds, the Wall Street Journal reports
Energy companies are moving to export natural gas from the U.S., looking for more profitable markets as a gas glut pushes prices to the lowest levels in a decade. A consortium including ExxonMobil (XOM), ConocoPhillips (COP) and BP (BP) said it’s going ahead with plans to export natural gas from Alaska's North Slope in a project that could cost as much as $65B, the Wall Street Journal reports
The Greek leader Antonis Samaras said his country couldn’t manage beyond November without the next tranche of international aid and suggested the ECB could help by easing the terms of its Greek debt holdings, Reuters reports
Fiat (FIATY) CEO Marchionne would buy GM’s (GM) European subsidiary Opel if GM's alliance with Peugeot (PEUGY) dissolves, according to Italian daily Il Sole-24 Ore, Reuters reports
UnitedHealth Group (UNH) is in talks to buy a stake or all of the Brazilian insurer and hospital operator Amil Participacoes that has a  market value of $4.47B, sources say, Bloomberg reports
American Airlines (AAMRQ) risks having to tap its $5B bankruptcy cash fund and probably will lose some passengers after on-time arrivals fell, cancellations jumped and incorrectly installed seat clamps were found on six planes, Bloomberg reports

SYNDICATE

Arbor Realty Trust (ABR) commences offering of 3.5M shares of common stock
FXCM (FXCM) files to sell 9M shares of common stock for holders
Fleetmatics (FLTX) 7.813M share IPO priced at $17.00
Infoblox (BLOX) 5M share Secondary priced at $20.00
Walker & Dunlop (WD) files to sell 21.64M shares of common stock for holders

 


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Fri, 10/05/2012 - 07:51 | Link to Comment lolmao500
lolmao500's picture

For the third morning in a row, Arabs rioted on the Temple Mount, attempting to attack groups of Jews who sought to visit the holiest site in Judaism during the Sukkot holiday. Police again Thursday deployed large numbers of officers to keep the Arabs from attacking the Jews.

http://www.israelnationalnews.com/News/News.aspx/160531#.UG7IlFHFA0p

Power Outage in Brazil

"But that does not mean they will not occur along Brazil's more than 62,000 miles (100,000 kilometers) of transmission lines," he added Hours after Chipp spoke, the Brasilia Energy Company said another power outage hit the Brazilian capital on Thursday, leaving at least 1.7 million people without electricity during two hours, company spokesman Mauro Pinheiro said.

http://hisz.rsoe.hu/alertmap/site/?pageid=event_desc&edis_id=PW-20121005...

Syrian rebels say capture air defense base near Damascus

http://www.chicagotribune.com/news/sns-rt-us-syria-crisis-missilebre8940...

State TV: Syrian troops thwarted infiltration by armed group from Turkey

http://www.haaretz.com/news/middle-east/state-tv-syrian-troops-thwarted-...

Fri, 10/05/2012 - 07:53 | Link to Comment saints51
saints51's picture

Thanks for the news. Everybody including myself waiting on the NFP in 40 minutes. Trying to get a good guage on where the market may go for the day.Euro session  just drifted around. NFP along with it being Friday, and we have everyone trying to make a long weekend including myself.

Fri, 10/05/2012 - 07:54 | Link to Comment Catullus
Catullus's picture

* Facebook Inc, the social network started by Mark Zuckerberg in his Harvard dorm eight years ago, reached the milestone of one billion monthly active members on Sept. 14.

500 million of which are people in countries that don't have any money to market to, so who gives a fuck.

--Steel manufacturer Arrium yesterday upgraded guidance for its iron ore exports as the company continues its defence against a A$1 billion takeover bid from a foreign syndicate. Arrium, formerly known as OneSteel, previously predicted 8 million tonnes of iron ore exports for the 2012-13 financial year but yesterday increased that amount to 9 million tonnes. Page B4

The classic "our revenue forecasts suck because the price is falling, so let's shove more volume through the channel" problem.  Sell the company while you still can.

Fri, 10/05/2012 - 08:02 | Link to Comment GMadScientist
GMadScientist's picture

Would that "foreign syndicate" be speaking...Mandarin?

Ha. You still think this is about money.

Fri, 10/05/2012 - 07:57 | Link to Comment negative rates
negative rates's picture

You mean glut of defective solar panels poses a threat.

Fri, 10/05/2012 - 08:02 | Link to Comment saints51
saints51's picture

If you research the real alternative energy solutions, you will find the ones that work have the inventors either iced or bought. If solar and wind was a cheap alternative and worked efficiently they would not be on the market. Just my 2 cents. I looked into solar and without the subsidies that is one expensive ass project. If you have no electrical skills it can get real expensive with maintenance also. Its just not a solution because either the tech for solar/wind is not their or the good tech with solar/wind is kept from us.

Fri, 10/05/2012 - 08:15 | Link to Comment cosmictrainwreck
cosmictrainwreck's picture

".....inventors either iced or bought...." So true, and always has been. Entrenched intersests can't afford to have some asshole rock their world. Urban myths (e.g. the 50 mpg carbuerator) abound, and sadly, that's all I've got to go on, but based on behavior/collusion of banksters, gubbmint, CEO's, a closed group of over-lapping corporate directors and etc. etc etc. I see damn slim hope of any solutions...........

Fri, 10/05/2012 - 09:53 | Link to Comment rufusbird
rufusbird's picture

Now that is what I've been talking about for the last year...

" MEMPHIS, Oct 4 (Reuters) - The United States faces a debt problem, but any suggestion that the burden can be eased by allowing inflation to rise will just result in higher borrowing costs in the future, a senior Federal Reserve official said on Thursday.

James Bullard, president of the Federal Reserve Bank of St. Louis, said that inflation was sometimes seen as a way to "partially default" on existing debts, because it lowers the amount the borrower repays in real, inflation-adjusted terms.

"A partial default today through higher inflation would be paid for via higher inflation premiums in future borrowing. Creditors would want to protect themselves against an unpredictable central bank," he told the Economic Club of Memphis...."

He must read ZH...

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