Frontrunning: January 23
- Doubt Greets Bank of Japan's Easing Shift (WSJ)
- Japan hits back at currency critics (FT)
- Japan upgrades economic view for first time in eight months (Australian) - only to lower them in a few months again
- GOP critics get opportunity to grill Secretary Clinton on Benghazi (Hill)
- Global economy set for ‘slow recovery’ (FT)
- Obama to back short debt limit extension (FT)
- Spain economy contracted 1.3% in 2012: Bank of Spain (Presstv)
- Unfinished Luxury Tower Is Stark Reminder of Las Vegas’s Economic Reversal (NYT)
- Draghi Says ‘Darkest Clouds’ Over Europe Have Subsided (BBG)
- High-Speed Dustup Hits a Clubby Corner (WSJ)
- U.S. Budget Discord Is Top Threat to Global Economy in Poll (BBG)
- Sir Mervyn King says abandoning inflation target would be 'irresponsible' (Telegraph)
- Spain Says It May Cover 13% of 2013 Funding in January (BBG)
- BOE Cites Pound as Rebalancing Obstacle in 8-1 Stimulus Vote (BBG)
- Riksbank Has Room for More Cuts as Krona Gains, Ekholm Says (BBG)
Overnight Media Digest
* Microsoft Corp entered discussions in recent days with private equity firm Silver Lake Partners and Dell Inc founder Michael Dell to help finance a leveraged buyout of the computer maker, according to people familiar with the deliberations. (http://link.reuters.com/vuq45t)
* Google Inc reversed the trend of slowing revenue growth in its core online advertising business, signaling that the internet giant is beginning to get a handle on how the consumer shift toward mobile devices is affecting the online ad industry. (http://link.reuters.com/xuq45t)
* Johnson & Johnson officials learned of problems with a metal hip-replacement implant in 2008, a year before the company stopped making the joints and two years before recalling them, according to documents unsealed in a California state court. (http://link.reuters.com/gyq45t)
* Allergan Inc said it will buy MAP Pharmaceuticals Inc in a $958 million deal that would help the Botox maker expand sales of medical treatments. (http://link.reuters.com/jyq45t)
* IBM Corp got back on track in the fourth quarter after disappointing investors the previous quarter as its software business and sales in emerging markets returned to growth. (http://link.reuters.com/byq45t)
* The White House offered a tacit endorsement of a House Republican plan to defer a fight over the U.S.'s borrowing limit, likely clearing the way for a deal that would forestall a showdown over the country's borrowing limit until late spring. (http://link.reuters.com/tuq45t)
* Prime Minister David Cameron plans to let the British people vote in about five years on whether or not to stay in the European Union, a surprise move critics say will hurt both economies and cast a new shadow over the troubled bloc. (http://link.reuters.com/suq45t)
* Two prominent names in semiconductors, Advanced Micro Devices Inc and Texas Instruments Inc, provided more evidence of soft demand for personal computers and other products. (http://link.reuters.com/myq45t)
* Dish Network Corp plans to close a further 300 Blockbuster stores in the U.S. in the coming weeks, leaving the video chain with less than one-third of the stores acquired by the satellite-television company in 2011. (http://link.reuters.com/nyq45t)
* Banks are fighting an effort by Fannie Mae to cut costs on backup insurance policies often imposed on cash-strapped homeowners, a step that would crimp the lucrative fees the lenders collect on the coverage. (http://link.reuters.com/hyq45t)
* The U.S. Securities and Exchange Commission barred Egan-Jones Ratings Co from issuing ratings on certain bonds, an unprecedented step by the regulator and a setback for a small credit-rating firm. (http://link.reuters.com/zuq45t)
* IKEA is poised to embark on a global spending spree, but its departing chief executive says red tape is slowing how fast the home-furnishings retailer can open its pocket book. (http://link.reuters.com/dyq45t)
CAMERON TO PROMISE IN-OUT EU BALLOT David Cameron will on Wednesday vow to settle Britain's future in the European Union with a straight in-out referendum by 2017, in a high-risk strategy which will test the willingness of Paris and Berlin to cut the UK a better membership deal.
KING STANDS BY INFLATION TARGETING The governor of the Bank of England has called for it to shed some of the burden of reviving Britain's economy, suggesting the UK government should do more to support the "disappointingly slow" recovery.
POSEN ATTACKS BANK OF ENGLAND'S CULTURE A former policy maker at the Bank of England has attacked the management and culture of the bank, saying its directors abdicated responsibility for reining in a governor who had become far too powerful.
BoJ ACTION TRIGGERS CURRENCY WAR FEARS The Bank of Japan bowed to domestic political pressure and pledged to buy government bonds in potentially unlimited quantities as international policy makers aired fresh concern about the possibility of a global currency war.
BARCLAYS REVAMP TO COST UP TO 2,000 JOBS Barclays is cutting up to 2,000 jobs in its investment bank as part of a strategic overhaul by the bank's chief executive Antony Jenkins. BUMI MOVES CLOSER TO TAKING LEGAL ACTION Bumi intends to take legal action to recover lost funds at its Indonesian subsidiary, Berau Coal, as well as considering other claims resulting from a four-month long investigation into "financial irregularities" at its mining businesses.
* Microsoft Corp is in talks to help finance a takeover bid for Dell Inc that would exceed $20 billion, a person briefed on the matter said. Microsoft is expected to contribute up to several billion dollars. (http://link.reuters.com/gar45t)
* A closer look at Google Inc's results shows that while the company continues to be a moneymaking machine, its most lucrative business, search on desktop computers, is slowing, while it has not yet figured out how to make equivalent profits on mobile devices. (http://link.reuters.com/har45t)
* Allergan Inc has agreed to pay nearly $1 billion to acquire MAP Pharmaceuticals and gain full control of its experimental treatment for migraine headaches, the two companies announced Tuesday night. (http://link.reuters.com/par45t)
* Investigators in the United States and Japan indicated on Tuesday that many questions remained unanswered in their search for the cause of two incidents in which lithium-ion batteries burned on Boeing Co's 787 aircraft. (http://link.reuters.com/var45t)
* An internal analysis conducted by Johnson & Johnson in 2011 not long after it recalled a troubled hip implant estimated that the all-metal device would fail within five years in nearly 40 percent of patients who received it, newly disclosed court records show. (http://link.reuters.com/kar45t)
* Celgene Corp's drug Abraxane prolonged the lives of patients with advanced pancreatic cancer by almost two months in a clinical trial, researchers reported Tuesday, signifying an advance in treating a notoriously difficult disease but not as big a leap as some doctors and investors had hoped. (http://link.reuters.com/nar45t)
* A hotly contested tax on financial trades took a big step forward on Tuesday when European Union finance ministers allowed a vanguard of member states to proceed with the plan. (http://link.reuters.com/qar45t)
* The governor of Nebraska on Tuesday approved a revised route through the state for the Keystone XL pipeline, setting up a decision for President Obama that pipeline opponents say will be a crucial test of his intentions on climate change. (http://link.reuters.com/rar45t)
* Facing criticism for selling garments made at a Bangladesh factory where 112 workers died in a fire last November, Wal-Mart Stores Inc told its worldwide suppliers that it was adopting tougher rules on fire safety at its contractors and would have "zero tolerance" for suppliers that used unauthorized subcontractors.
THE GLOBE AND MAIL
* British Columbia community minister Bill Bennett said on Tuesday that the final regulatory pieces have fallen in place for a new liquefied natural gas plant to be built on a native reserve near Kitimat.
The massive LNG plant, a joint venture by Apache Canada Ltd and Chevron Canada Ltd, in cooperation with the Haisla First Nation, will process about 700 million cubic feet of gas per day, becoming a key link in the transportation chain between the province's northeast gas fields and off-shore markets.
* Cash-strapped Parks Canada is consulting the public on a long list of proposed fee hikes for the country's national parks and historic sites, pointing out that the rates have been frozen since 2008 and costs are on the rise.
But at the same time as fees are going up, many services are in decline following C$55 million in announced budget cuts and the resultant 600 jobs lost across the system.
Reports in the business section:
* Quebecor Inc may be the next Canadian regional cable company that will strike a deal to eventually sell some of its unused wireless spectrum, predicts a new analyst report.
* The Canadian federal government is ready to offer financial incentives as part of a pitch to get Volkswagen AG to locate some manufacturing facilities in the country.
Industry minister Christian Paradis said he urged senior Volkswagen executives to "look north" during meetings in Berlin this week, offering the prospect of tapping into Ottawa's newly-replenished C$250 million ($252 million) auto innovation fund.
* Calgary energy firm Griffiths Energy International Inc (GEI) pleaded guilty to a bribery charge under the Corruption of Foreign Public Officials Act and faces fines in excess of C$10.3 million. The company admitted that it paid C$2 million to officials in Chad to get an advantage in two exploration blocks in the oil-rich African country.
* Manitoba chiefs meeting in Winnipeg this week are reportedly slated to consider pulling out of the Assembly of First Nations, highlighting the fragility of a national body that some say needs a reset of its own.
* Inmet Mining Corp made its long-awaited rejection of First Quantum Minerals Ltd's C$5.1 billion hostile bid on Tuesday.
The Toronto-based miner disputed First Quantum's assertion that it could realize enormous cost savings at Cobre Panama project by using its internal project team and hiring far fewer contractors.
* Supermarket chain Metro Inc will sell about half of its 25-year investment in convenience store operator Alimentation Couche-Tard to three Canadian banks for C$479 million.
The Montreal-based company said on Tuesday that it has agreed to sell 10 million Class B subordinate voting shares to BMO Nesbitt Burns, National Bank Financial and TD Securities for C$47.90 per share.
* Air Canada's Chief Executive Calin Rovinescu said he had faith that Boeing Co will be able to resolve the issues plaguing its 787 Dreamliner and believed in the benefits the plane will bring the country's largest carrier.
CHINA SECURITIES JOURNAL
--Analysts expect China's inflation to fall below 2 percent in January due to a high base from last year and as food prices have remained stable.
--China could cut its reserve requirement ratio twice at the beginning of this year with a reduction of 0.5 percent each time, the Bank of Communications said in its outlook report.
SHANGHAI SECURITIES NEWS
--Party Chief Xi Jinping took his campaign against corruption to the petty bureaucracy and minor infractions of low-level officials. Xi said it was just as important to go after junior officials as it was to tackle the seniors in the battle against graft. He called for a "disciplinary prevention and guarantee mechanism" to be set up to prevent corruption.
--Investors who lost money in a wealth management product sold in Hua Xia Bank have recouped their principal amount from the credit guarantee firm, a local TV station reported. Investors recently recovered their principal after Zhongfa Investment Guarantee Co stepped in to acquire the whole investment plan, Shanghai TV station said.
--The national security fund and foreign investors were the two biggest net buyers of Chinese mainland shares last year, the top securities regulator said.
CHINA DAILY (www.chinadaily.com.cn)
--China's State Development and Investment Corp (SDIC), the country's major investment holding company, saw profit grow 16 percent in the first eleven months of 2012 and plans to expand its overseas businesses, its chairman said. SDIC plans to raise the share of its overseas investment business, currently focused on fuel tank manufacturing, to 10 percent in the near future.
--Turnover in China's land market fell 14 percent in 2012, the finance ministry said.
Fly On The Wall 7:00 am Market Snapshot
Alcatel-Lucent (ALU) upgraded to Neutral from Sell at Citigroup
Costco (COST) upgraded to Market Perform from Underperform at Bernstein
D.R. Horton (DHI) upgraded to Market Perform from Underperform at Raymond James
Honda (HMC) upgraded to Outperform from Neutral at Macquarie
IBM (IBM) upgraded to Hold from Sell at Societe Generale
KB Home (KBH) upgraded to Market Perform from Underperform at Raymond James
Middleby (MIDD) upgraded to Outperform from Neutral at RW Baird
Novartis (NVS) upgraded to Buy from Neutral at Citigroup
Platinum Group (PLG) upgraded to Outperform from Sector Perform at RBC Capital
Questar (STR) upgraded to Buy from Neutral at Citigroup
Spirit Realty (SRC) upgraded to Outperform from Market Perform at Raymond James
Unum Group (UNM) upgraded to Overweight from Equal Weight at Barclays
Verizon (VZ) upgraded to Buy from Hold at Canaccord
Ellie Mae (ELLI) downgraded to Market Perform from Outperform at William Blair
Ford (F) downgraded to Hold from Buy at Deutsche Bank
France Telecom (FTE) downgraded to Underperform from Market Perform at Bernstein
GrafTech (GTI) downgraded to Neutral from Buy at Davenport
Grupo Aeroportuario (ASR) downgraded to Equal Weight at Morgan Stanley
Hartford Financial (HIG) downgraded to Market Perform from Outperform at FBR Capital
Incyte (INCY) downgraded to Underweight from Equal Weight at Morgan Stanley
NewBridge (NBBC) downgraded to Market Perform from Outperform at Keefe Bruyette
Synovus (SNV) downgraded to Market Perform from Outperform at Bernstein
Allot Communications (ALLT) initiated with an Overweight at Barclays
Avago (AVGO) initiated with an Outperform at RBC Capital
Emulex (ELX) initiated with a Neutral at Piper Jaffray
FIS (FIS) initiated with a Buy at UBS
Fiserv (FISV) initiated with a Neutral at UBS
Global Eagle Acquisition (EAGL) initiated with an Outperform at Imperial Capital
Harbinger Group (HRG) initiated with a Buy at Jefferies
Mellanox (MLNX) initiated with an Overweight at Piper Jaffray
QLogic (QLGC) initiated with a Neutral at Piper Jaffray
Starz (STRZA) initiated with a Neutral at ISI Group
Workday (WDAY) initiated with a Neutral at RW Baird
Allergan (AGN) to acquire MAP Pharmaceuticals (MAPP) for $25 per share
IBM (IBM) said good opportunities to drive profit growth, margin expansion in FY13
Said 1H13 growth rate will be “slightly higher” than 2H13
Texas Instruments (TXN) CEO Templeton said demand environment still weak
Praxair (PX) said backlog will contribute 4%-6% growth in 2013
Reported $2.6B project backlog at FY12-end
Heinz (HNZ) made $60M earn-out payment to China business
First Cash Financial (FCFS) to open 75-85 new stores in 2013, majority in Mexico
Gannett's (GCI) USA TODAY, American Media announced partnership
Choice Hotels (CHH) and Bluegreen (BXG) announced strategic alliance
Companies that beat consensus earnings expectations last night and today include:
Air Products (APD), Wellpoint (WLP), Novartis (NVS), Texas Instruments (TXN), International Game (IGT), AMD (AMD), IBM (IBM), Celestica (CLS), Norfolk Southern (NSC), CA Technologies (CA), Google (GOOG), Cree (CREE)
Companies that missed consensus earnings expectations include:
Textron (TXT), Southwest Bancorp (OKSB), Praxair (PX), Baker Hughes (BHI), Woodward (WWD), Total System (TSS)
The estimated $1.7T that American companies say they have indefinitely invested overseas is actually sitting right here at home. Some companies, including Google (GOOG), Microsoft (MSFT) and EMC Corp. (EMC), keep over three-quarters of the cash owned by their foreign subsidiaries at U.S. banks, held in U.S. dollars or parked in U.S. government and corporate securities, sources say, the Wall Street Journal reports
U.K. Prime Minister Cameron today pledged to hold a referendum on whether the country should remain a member of the EU within two and a half years of the next general election, due in 2015, the Wall Street Journal reports
Fewer investors are taking corporate America to court for fraud as the number of new federal securities fraud lawsuits seeking class-action status fell to a seven year low in 2012, according to a study by Stanford Law School and Cornerstone Research, Reuters reports
In 2007, the FAA cleared Boeing's (BA) use of a highly flammable battery in the 787 Dreamliner, deciding it was safe to let the lithium-ion battery burn out if it caught fire mid-air as long as the flames were contained, and smoke and fumes vented properly, according to documents reviewed by Reuters.That decision is now coming under scrutiny, Reuters reports
Clients of the largest U.S. banks withdrew funds this month at the fastest weekly pace since the September 11 attacks as a deposit-insurance program ended and customers tapped into a year-end cash hoard. Net withdrawals at the 25 largest U.S. banks totaled $114.1B in the week ended January 9, pushing deposits down to $5.37T, according to Federal Reserve data, Bloomberg reports
Global investors say the state of the U.S. government’s finances is the greatest risk to the world economy and nearly 50% are curbing their investments in response to continuing budget battles, according to a Bloomberg poll
Invesco Mortgage (IVR) files to sell 15M shares of common stock
KB Home (KBH) files to sell $100M in common stock; $150M in convertible senior notes
Numerex (NMRX) files to sell common stock
Senior Housing (SNH) files to sell 8M shares of common stock
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