Frontrunning: October 15
- Hilsenrath Humor du jour: Bernanke Advocates Stronger Currencies (WSJ)
- Auditors want two more years for Greece on deficit (Spiegel)
- More bluster: Schaeuble Rules Out Greek Default as Samaras, Troika Bargain (Bloomberg)
- And even more bluster: De Jager Says Greece Needs to Make Fiscal Reforms Immediately (Bloomberg)
- Global Economy Distress 3.0 Looms as Emerging Markets Falter (Bloomberg)
- Central bank governor stresses inflation control (China Daily)
- Greek Yields Reach Post Debt-Swap Low as Bunds Slip on Schaeuble (Bloomberg)
- Roth and Shapely win Nobel prize for economics (Reuters)
- Fed chief rounds on stimulus critics (FT)
- IMF Board Sees Biggest Power Shift Reshuffle in Two Decades (Bloomberg)
- EU Girds for Summit as Nobel’s Glow Fades on Crisis Response (Bloomberg)
- Japan security environment tougher than ever (Reuters)
- Banks Temper Job Cutting After Surge in 2011 Reductions (Bloomberg)
Overnight Market Digest
* Japanese company Softbank Corp is close to a $20 billion deal to buy a majority stake in Sprint Nextel Corp , people familiar with the matter said.
* The collapse of Royal Bank of Scotland Group Plc's plan to sell 316 UK branches to Banco Santander SA forces both banking heavyweights to scramble for alternatives and threatens to complicate their efforts to weather Europe's financial crisis.
* Google Inc's market capitalization recently pulled even with Microsoft Corp for the first time, fueled by good news about Google's online-ad business and missteps from its top competitors.
* Private equity-owned French cable operator Numericable is among the latest to float an offer, proposing to merge with Vivendi SA's French telecommunications arm SFR, people familiar with the proposal said.
* Caxton Associates LP plans to lower the fees it charges clients of its $7.5 billion hedge fund, a sign that even veteran money managers are bowing to investor pressure amid lackluster returns and low interest rates.
* U.S. crude production is expected to rise 12 percent this year and 8 percent in 2013, when it will hit the highest level since 1993, according to government figures.
* A settlement to pay off some of the debt of failed law firm Dewey & LeBoeuf LLP gave hundreds of former partners an escape hatch from ugly litigation. The $71.5 million agreement between Dewey's estate and more than 400 former partners provides the biggest chunk recovered so far for creditors.
* ZTE Corp forecast it would lose between 1.9 billion yuan ($303.17 million) and 2 billion yuan in the third quarter, illustrating the challenges facing China's biggest telecommunications-equipment makers.
* Sprint Nextel Corp is putting the final touches on a deal to sell 70 percent of itself to SoftBank Corp of Japan for $20 billion, according to people briefed on the matter, in the struggling cellphone service provider's boldest move yet to revive its fortunes.
* Microsoft Corp plans to announce On Monday a service called Xbox Music that will offer access to a global catalog of about 30 million songs.
* The American Civil Liberties Union is accusing Morgan Stanley of fueling the production of risky, expensive loans that targeted African-American borrowers.
* The very loans that are supposed to help seniors stay in their homes are in many cases pushing them out. Now, as the vast baby boomer generation heads for retirement, the newly minted Consumer Financial Protection Bureau is working on new rules that could mean better disclosure for consumers and stricter supervision of lenders.
THE GLOBE AND MAIL
* Canada's second-largest meat processing plant will resume partial operations Tuesday after a bizarre weekend standoff that saw XL Foods lay off its entire work force on Saturday, and then recall more than a third of them the next day.
* As Premier Pauline Marois starts her three-day official visit to Paris by meeting French President François Hollande, the Parti Québécois Leader hopes France will revert to its long-standing diplomatic position toward Quebec.
Reports in the business section:
* Housing markets across Canada - with the exception of Calgary - are continuing to soften, even as the fall sales season kicks off. Figures to be released Monday by the Canadian Real Estate Association are expected to show falling sales in most major cities in September, with Vancouver leading the decline. September's decrease in sales comes on the heels of a 5.8 percent monthly drop from July to August.
* Canada's economy is struggling, but the manufacturing sector is expected to show some growth when the factory shipment figures for August are released Tuesday. Still, most of the improvement - if it happens - may be because of increased car production and petroleum exports, rather than any significant broad-based recovery among manufacturers.
* Former Bank of Canada governor John Crow reflects on the legacy of fellow former governor James Elliott Coyne, who passed away Friday at the age of 102.
* Canada has been so stuck on the idea that energy development depends on boosting exports to the United States and Asia that the obvious other option, increasing domestic use, has been getting less attention than it deserves. That option will be thrust to the top of the national agenda if TransCanada Corp moves ahead with plans to convert parts of its underutilized Canadian Mainline system from gas to oil transportation, which could be ready for takeoff by the end of the year.
* A trading halt and regulatory investigation into a Canadian junior miner has raised questions about the company's ownership structure and cast a cloud over its board members, which include some high-profile Canadian businessmen. When the U.S. Securities and Exchange Commission halted Liberty Silver Corp on Oct. 5, it had "questions concerning publicly available information about Liberty Silver, the control of its stock, its market price, and trading in the stock."
THE AUSTRALIAN FINANCIAL REVIEW (www.afr.com)
Corporate governance experts CGI Glass Lewis and the Australian Shareholder Association have called on investors to reject nearly A$1 million worth of options to Chris Roberts, chief executive of Cochlear, after his biotechnology group spent A$101.3 million in recalling bionic implants. "The performance hurdles for awards are not challenging at all, with the likelihood of vesting a near certainty," Aaron Bertinetti, director of CGI Glass Lewis, said. Page 13.
OzForex, a technology firm supported by investment house Macquarie Group, has secured a contract with foreign exchange group Travelex to launch an online payments transfer offering. Neil Helm, chief executive of OzForex, said the arrangement would "be from a global perspective our biggest success story". The service, which will allow Travelex clients to transfer funds across accounts internationally, will be launched in Britain before being made available in Canada, Singapore, Hong Kong, New Zealand, the United States and Australia over the next twelve months. Page 13.
Bill Morrow, chief executive of Vodafone Hutchison Australia , yesterday said the mobile phone network operator would not launch an ambitious bid for "digital dividend" spectrum, with the embattled company concentrating on restoring its reputation and rebuilding its service. "We will participate [in the auction], but we are not going to be putting forward any large amounts of money," Mr Morrow said. Vodafone currently has the most amount of spectrum in the 1800MHz frequency band, which is developing into a standard for 4G next generation services, out of the major Australian carriers. Page 13.
Cheryl Cartwright, chief executive of the Australian Pipeline Industry Association, yesterday said the day before the lobby group's annual conference that natural gas needed to be supplied at an affordable price for local clients to prevent the sector from contracting. "We don't want to have the price so high that the companies which are complaining now about the price of gas go out of business, because in another five to 10 years the prices could come right down and we don't want to lose these companies in the meantime," she said. Page 15.
THE AUSTRALIAN (www.theaustralian.com.au)
Russell Tate, chairman of Macquarie Radio Network, which recently pulled advertising from the show hosted Alan Jones following an online backlash against the shock jock, warned that company boards "are not at all well prepared" to handle social media. "The issue for boards is that social media is relatively new and a relatively young person's thing, while directorships are for experienced people," Julie Garland McLellan, an adviser and company director, said. Page 19.
Justin Arter, the new head of global asset manager BlackRock's Australian operations, forecast widespread consolidation of local industry super funds and warned that fund managers who kept poorly performing equity strategies would be vulnerable. "We've withdrawn from some areas of the market We've certainly seen a few boutique suppliers withdraw over the past three or four months. Fund managers have to move with what their clients want," Mr Arter stated. Page 19.
James Suckling, a wine critic with the United States (US) industry publication Wine Spectator for three decades, called on Australian winemakers to increase their efforts to export overseas to improve their overall reputation. "Last year when I came to Australia I told a big US retailer I was going down under, and he said, 'Why? We can't sell the stuff.' - It says to me winemakers need to spend more time in the US and exports market, everything from consumers to sommeliers to wine buyers - and that's something the French do really well," he added. Page 19.
Tony Crawford, chairman of accounting firm Grant Thornton, remarked that "it's time for the mid-size enterprises to have a greater voice" about doing business in Asia, saying the majority of the debate about doing business in the region had been controlled by major corporations, bankers and large miners. "If the next wave of Australian engagement with Asia is to be led by these dynamic organisations which drive so much of the growth in our domestic economy, then they must develop a more 'Asia capable' workforce," he added. Page 20.
THE SYDNEY MORNING HERALD (www.smh.com.au)
Elmer Funke Kupper, chief executive of the Australian Securities Exchange, has been in talks with Federal Treasurer Wayne Swan over concerns surrounding high-frequency trading. "I'd like to think that in the next 12 months we could take this off the front page of the paper because I don't think its that hard [to solve] [the Australian Securities and Investments Commission] is very engaged on it," Mr Funke Kupper said. The corporate regulator is reviewing possible changes to the rules covering the Australian sharemarket. Page B1.
Virgin Australia has quietly launched a number of The Club lounges at airports across Australia, with observers noting the lack of marketing surrounding the venues. The private location is designed to be Qantas's counter to the Chairman's Lounge offering from Qantas Airways, a small invite-only getaway in airports across Australia for lucrative government and business passengers. The Club offers a la carte menus, luxury facilities, escorts to take members to terminal gates and a personalised service. Page B1.
Financiers behind free-to-air television group Nine Entertainment Co will decide the future of the company at a meeting tomorrow, with Nine's management making one last bid to get lenders to accept a restructure of its debt that would result in the latter receiving control of the group. Nine has threatened to go into voluntary administration unless it receives an agreement from its financiers by tomorrow. Second-ranked mezzanine lenders have approved the deal, which gives them A$150 million in Nine, but the higher-ranked senior lenders are yet to approve. Page B3.
Andrew Smith, head of Invocare, Australia's largest cremation, burials and funerals provider, yesterday said that funeral insurance plans were unnecessary and insurers were "misleading" clients about the possibility of being forced to pay for a funeral. "Most people don't appreciate that if you are executor of a will, you can provide evidence of the funeral directors' fees and that is the one expense that the banks are allowed to release funds to cover," he noted. Page B3.
THE AGE (www.theage.com.au)
Elmer Funke Kupper, chief executive of the Australian Securities Exchange, has revealed that he is in "two minds" about whether some of the Australian Securities and Investments Commission's expenditure on cost recovery could be covered by a transaction levy for super-high-speed trading. "I'm still deciding whether I should go along with that idea the reason I'm hesitating is that the cost of market supervision is a consequence of the market structure the people who asked for the new market structure are now the people who don't want to pay the charge," he noted. Page B1.
Australian industry superannuation fund First Super, which oversees A$1.6 billion in members' savings, has announced it would follow the recommendation of the Australian Council of Superannuation Investors lobby group by supporting a move to replace Murdoch family members on the board of News Corporation with talented and reputable outsiders. The move follows a decision by two of the largest United States pension funds, the California State Teachers' Retirement System and the California Public Employees' Retirement System, to do the same. Page B1.
The latest quarterly report compiled by the Market Intelligence Strategy Centre researchers has found that Australia's four major banks are issuing larger discounts through their own branches and using mortgage brokers less. The study found that 59.8 percent of mortgages sold by brokers in the three months to June were backed by one of the four major lenders, down from 64 percent the same time last year. The fall is the largest reduction in the major banks' financing of mortgage brokers since the three months to September in 2007. Page B3.
Shelley Collins Trbuhovich, owner of the Galerie Montmartre vintage poster art firm in Melbourne, yesterday said that she and her partner, Stephan Trbuhovich, decided to expand the company after they began to run out of space in their warehouse. "The business began to grow and eventually, we though, 'Art needs to be seen' - so we made the decision to open a retail space," she said. Kate James, an executive coach at advisers Total Balance Group, said the hardest choice for small businesses was knowing when to evolve into a medium or large entity. Page B4.
Fly On The Wall 7:00 AM Market Snapshot
Clearwire (CLWR) upgraded to Neutral from Underperform at Macquarie
Credit Suisse (CS) upgraded to Neutral from Underperform at Exane BNP Paribas
Intuitive Surgical (ISRG) upgraded to Overweight from Neutral at JPMorgan
Louisiana-Pacific (LPX) upgraded to Outperform from Sector Perform at RBC Capital
Lowe's (LOW) upgraded to Buy from Neutral at BofA/Merrill
New Oriental Education (EDU) upgraded to Outperform from Perform at Oppenheimer
Realty Income (O) upgraded to Neutral from Sell at UBS
Sprint (S) upgraded to Hold from Underperform at Jefferies
Titan International (TWI) upgraded to Buy from Hold at Jefferies
Weyerhaeuser (WY) upgraded to Outperform from Sector Perform at RBC Capital
BMC Software (BMC) downgraded to Market Perform from Outperform at Raymond James
Brookfield (BAM) downgraded to Hold from Buy at Canaccord
Celgene (CELG) downgraded to Perform from Outperform at Oppenheimer
Ecolab (ECL) downgraded to Neutral from Outperform at Credit Suisse
FreightCar America (RAIL) downgraded to Sell from Neutral at UBS
Harris (HRS) downgraded to Sell from Neutral at Lazard Capital
Hasbro (HAS) downgraded to Sell from Neutral at Goldman
Hercules Offshore (HERO) downgraded to Neutral from Outperform at Macquarie
Landstar System (LSTR) downgraded to Hold from Buy at BB&T
Progressive (PGR) downgraded to Sell from Neutral at Citigroup
Thompson Creek (TC) downgraded to Sector Performer from Sector Outperformer at CIBC
Travelzoo (TZOO) downgraded to Neutral from Buy at Ascendiant Capital
Capital Bank (CBF) initiated with a Market Perform at Keefe Bruyette
Capital Bank (CBF) initiated with a Neutral at Goldman
DealerTrack (TRAK) initiated with an Overweight at Evercore
Gladstone Investment (GAIN) initiated with a Buy at Jefferies
KEYW (KEYW) initiated with an Outperform at RBC Capital
National Bank (NBHC) initiated with an Outperform at Keefe Bruyette
Omeros (OMER) initiated with an Outperform at Burrill
ServiceNow (NOW) initiated with an Equal Weight at Evercore
Trinity Industries (TRN) initiated with a Buy at UBS
Trulia (TRLA) initiated with a Neutral at JPMorgan
Trulia (TRLA) initiated with an Outperform at RBC Capital
Softbank (SFTBF) acquired 70% stake in Sprint (S) for $20.1B
Softbank (SFTBF) stake in Sprint (S) requires no action involving Clearwire (CLWR)
Sprint (S) CEO Hesse will continue as CEO of New Sprint
Comverse (CMVT) spin-off and share distribution expected on October 31
Watson Pharmaceuticals (WPI) unit received FDA approval of generic Avapro, generic Sanctura XR
Genetic Tech (GENE) filed patent infringement suit against multiple alleged infringers
Carrizo Oil & Gas (CRZO) sold portion of its properties in the Utica Shale
Amazon (AMZN) acknowledged Kindle Paperwhite limitations including uneven lighting
A growing number of suitors are approaching Vivendi (VIVHY) as it moves forward with potential asset sales to reduce debt and focus on media and content businesses, sources say. Private-equity owned French cable operator Numericable is among the latest to float an offer, proposing to merge with Vivendi's French telecommunications arm SFR, the Wall Street Journal reports
A weekend meeting of the IMF and World Bank drew the world's top finance officials that intensified conflicts among some of the largest economies, raising new doubts about their ability to find significant steps quickly to boost the flagging global recovery, the Wall Street Journal reports
Amazon.com (AMZN) is in advanced talks to buy the mobile chip business of Texas Instruments (TXN), according to Israeli financial newspaper Calcalist, Reuters reports
As U.S. authorities seek to make Wall Street pay for its role in triggering the financial crisis more than four years ago, banks are starting to fight back, frustrated that they are being asked to pay more than once for the same conduct, Reuters reports
Bristol Myers Squibb (BMY) is the only U.S. drugmaker among the top 12 to decline in trading this year, and investors and analysts say they don’t expect a comeback in 2012 because of drug pipeline setbacks. The company has fallen 6.1% this year, while the the Standard & Poor’s 500 Pharmaceutical Index has jumped 13%, Bloomberg reports
HSBC Holdings (HBC), the administrator of $150B in assets for hedge funds, is ending agreements with some smaller Asian clients to focus on more profitable ones, sources say, Bloomberg reports
The Dow industrials are more attractively priced now than in 2007 and that could lead to a new high by early 2013
JPMorgan (JPM) should attract more investors
BlackRock (BLK) shares could rally to $210
CarMax's (KMX) stock could climb 20% or more
Realogy Holdings (RLGY) is a play on a housing recovery
Arms merchants Applied Materials (AMAT), ASML (ASML) should prosper
Four stocks that private-equity might find attractive:
Big Lots (BIG), Charles River Labs (CRL), Guess (GES) and Terex (TEX)