Frontrunning: May 31
- Record unemployment, low inflation underline Europe's pain (Reuters)
- The ponzi gets bigger and bigger: Spanish banks up sovereign bond holdings by more than 10% (FT)
- China’s Growing Ranks of Elderly Beset by Depression, Study Says (BBG)
- Tokyo Prepares for a Once-in-200-Year Flood to Top Sandy (BBG)
- Morgan Stanley Cutting Correlation Unit Added $50 Billion (BBG)
- IMF warns over yen weakness (FT)
- Rising radioactive spills leave Fukushima fishermen floundering (Reuters)
- California Lawmakers Turn Down Moratorium on Fracking (BBG)
- India records slowest growth in a decade (FT)
- What’s Inside the Government’s Deal With Citigroup? (BBG)
- Three more coronavirus deaths in Saudi Arabia (Reuters)
Overnight Media Digest
* Analysts differ on whether a sharp May rise in long-term interest rates signals a bursting bond bubble, the aftereffect of clumsy Fed communication or a welcome sign the U.S. economy is, at last, on the mend.
* The top-selling class of blood pressure drugs is under attack from an unusual source: a senior regulator at the Food and Drug Administration. Bucking his bosses, Thomas Marciniak is seeking stronger warnings about the drugs known as angiotensin receptor blockers, or ARBs, according to internal documents reviewed by The Wall Street Journal.
* China already owns ThinkPad laptops, Volvo cars and AMC movie theaters. Can it sell Smithfield Ham? A look at past Chinese purchases suggests that the answer is likely, "Yes." Chinese companies have stumbled in efforts to build homegrown brands in areas ranging from autos to tennis shoes. But with a few hitches - notably Volvo's in the sputtering European car market - the companies have managed to keep existing global brands healthy by investing and persuading senior managers to stay on board.
* Blackstone Group LP backed out of the bidding for Dell Inc last month. Yet many of the buyout firm's investors still are part of the tussle. One of them is the New Jersey Division of Investment, an agency managing money for seven state pension funds. It committed $50 million to the investment fund Blackstone would have tapped to finance a bid for the computer maker.
* Corporate profits declined and the government pulled back even more than first thought early this year, but consumers showed resiliency despite higher taxes. U.S. gross domestic product, a measure of all goods and services produced in the economy, advanced at a 2.4 percent seasonally adjusted annual rate between January and March, a small downward revision from last month's 2.5 percent reading, the Commerce Department said on Thursday. Consumers were the overwhelming driver of the moderate growth in the quarter. Personal consumption expenditures were revised up to a 3.4 percent gain - the largest increase in the category since the fourth quarter of 2010.
The British government will next month announce 15 billion pounds ($22.82 billion) extra spending for infrastructure projects in the future, as part of new capital expenditure plans to stimulate the economy and revive growth.
Royal Bank of Scotland has narrowed a list of prospective bidders for hundreds of branches it must sell, and informed Apollo and JC Flowers that their bid was unsuccessful, according to people familiar with the matter.
British engineering company Smiths Group is in early-stage talks to sell its medical division, which played a role in the first successful IVF treatment, for potentially more than 2 billion pounds, said people familiar with the talks.
Major consumer products groups such as Johnson & Johnson and Anheuser-Busch InBev are delaying payments to advertisers and commodity producers leading to supply chain issues and constricted cash flows.
Google Inc has made a $12 million investment in a solar power project in South Africa, highlighting the attractiveness of Africa's largest economy to global investors.
Singapore Airlines Ltd said it would spend more than $17 billion to buy 30 Airbus and 30 Boeing Co aircraft, representing one of the biggest orders ever placed by the airline.
* After several deadly factory disasters in Bangladesh, Obama administration officials remain conflicted over what measures would work best to improve labor conditions there.
* The initiative began two decades ago, with the best of intentions, after apartheid fell and southern Africa's future brightened. Today that program, the Southern Africa Enterprise Development Fund, is in its death throes, apparently victimized by mismanagement, insider dealings and a lack of oversight by federal officials.
* The U.S. Transportation Department made its first formal policy statement on autonomous vehicles on Thursday. In a nonbinding recommendation to the states, it said that driverless cars should not yet be allowed, except for testing. But it said that semiautonomous features, like cars that keep themselves centered in lanes and adjust their speed based on the location of the car ahead, could save lives.
* Dr Peter Butler, chairman of endocrinology at the University of California, Los Angeles, who initially declined a request to test drugmaker Merck's new diabetes drug Januvia, found worrisome changes in the pancreases of rats, that could lead to pancreatic cancer. The discovery, in early 2008, turned Dr Butler into a crusader whose follow-up studies now threaten the future of not only Januvia but all the drugs in its class, which have sales of more than $9 billion annually and are used by hundreds of thousands of people with Type 2 diabetes.
* Japan inched closer to the end of deflation and factory output picked up, government data showed Friday, offering proof that the real economy is slowly catching up to the high expectations set by its recent bold economic policies.
* The health care law is injecting more competition into insurance markets nationwide, drawing additional companies into states long dominated by a few carriers, Obama administration officials said on Thursday.
* Newly minted university graduates who have landed coveted jobs on Wall Street may have impressive resumes and sought-after references. But often, nuts-and-bolts skills like spreadsheet building and database extraction are not part of university curriculums. When millions of dollars can be won or lost on one calculation, firms are finding it essential that their new hires can tell the difference between a pivot table and a header row. Enter specialized boot camps where - for fees that sometimes exceed $1,000 a day - would-be masters of the universe can perfect Excel modeling techniques and financial analysis.
THE GLOBE AND MAIL
* Toronto Mayor Rob Ford, the embattled leader who has now seen five of his employees depart since he was accused of using crack cocaine, has vowed to remain at Toronto City Hall, guaranteeing his name will be on next year's election ballot. Ford spoke with reporters about the two latest employee resignations on Thursday. He spent 90 seconds reading a prepared statement, then about 2 minutes fielding questions, five times swatting away inquiries about the drug scandal with the phrase: "Anything else?"
* The Harper government was forced to put further distance between itself and Senator Mike Duffy after an email surfaced suggesting the Prince Edward Island politician, under fire for illegitimate expense claims, had lobbied for a cabinet post and more compensation given his role as a fundraising star for the Tories. "Duffy has never held a cabinet position and has never been considered for cabinet," Andrew MacDougall, director of communications for Prime Minister Stephen Harper, said in a bluntly worded statement on Thursday.
Reports in the business section:
* Chile President Sebastian Pinera says Barrick Gold Corp must follow 23 steps to comply with orders from his country's environmental regulator, a message that underscores the tough road ahead for the company to get its crucial Pascua-Lama gold project back on track. Pinera, in Ottawa to discuss Canada-Chile economic relations, admonished Barrick for its handling of the $8.5 billion mine development so far.
* About 700 protesters, some on horseback, besieged a gold mine run by Canada-based miner Centerra Gold Inc in Kyrgyzstan, demanding its nationalization and more social benefits, officials said on Thursday. As part of the protest that has been going on for several days, the demonstrators earlier this week cut road access leading to the Kumtor mine operated by Centerra.
* The negotiations over the free trade deal between Canada and the European Union offer plenty of fresh evidence that Canada's own worst enemy is its unwieldy constitutional structure. Ottawa is set to sign a free trade deal with the EU when Stephen Harper visits Europe for the G8 conference next month. But there are fears that Newfoundland and Labrador may walk away from any agreement that does not protect its fish processing industry.
* With serious accusations being hurled throughout the media and mass resignations hitting Rob Ford's office, a senior Ford staffer said the mayor's former chief of staff is out to "kill the mayor, politically and otherwise." The source said Mark Towhey, who was fired by the mayor last week, has an "axe to grind" with the mayor's office and accused him of leaking "revisionist history" in the Toronto Star.
* China is counting on "breakthroughs in energy trade" with Canada to help fuel economic growth in the world's most populous country, one of the country's top diplomats said on Thursday. Speaking to a Calgary business crowd, Zhang Junsai, China's ambassador to Canada, said his country is prepared to "deepen" ties with Canada on infrastructure development to help move the country's oil and natural gas to the West Coast for export.
* The lengthy battle by Bre-X investors to recover billions in Canada's largest mining fraud appears to be over in what one of the original plaintiff lawyers in the case called a "sad day" for accountability in Canada. Under a settlement approved on Thursday by the Alberta Court of Queens Bench, the remaining class action suits were dismissed against the main defendants in the case, the estate of Bre-X's late founder and chief executive, David Walsh, and Chief Geologist John Felderhof.
-- President Xi Jinping's forthcoming visit to the United States and three other American countries in early June will help create favourable external conditions for a new round of China's economic growth, this newspaper, which reflects views of the ruling Chinese Communist Party, said in a commentary.
SHANGHAI SECURITIES NEWS
-- There are still doubts about whether China's Shuanghui International Holdings Ltd could successfully acquire U.S. Smithfield Foods Inc as some foreign experts believe Shuanghui's bid price at $4.7 billion was relatively low.
-- Assets managed by China's trust industry are poised to exceed 10 trillion yuan ($1.63 trillion) in the first half of this year from 7.47 trillion yuan at the end of last year, with risk mounting due to the extraordinary expansion of the sector.
CHINA SECURITIES JOURNAL
-- China will step up reforms this year to liberalise its interest rates and to make the yuan fully convertible under the capital account, Xu Shaoshi, head of the National Development and Reform Commission, the top economic planner, told the annual meeting of economic structure reforms opened in Beijing on Thursday.
-- China's central bank is likely to keep liquidity in the country's money markets relatively tight next month.
CHINA BUSINESS NEWS
-- A new round of urbanisation in China may mean that regulators would loosen tight grip on debt issuance by local government financing vehicles even after warnings of high risk involved in such debt.
-- More European companies are planning further investment in China amid signs that the country will carry out more economic reforms, the paper said, citing the European Union Chamber of Commerce in China.
-- China is studying the possibility of joining the U.S.-led Trans-Pacific Partnership trade talks, Shen Danyang, a spokesman for the Ministry of Commerce, said.
CME Group (CME) upgraded to Market Perform from Underperform at Keefe Bruyette
Calpine (CPN) upgraded to Buy from Hold at Deutsche Bank
HomeAway (AWAY) upgraded to Overweight from Neutral at Piper Jaffray
Morgan Stanley (MS) upgraded to Buy from Hold at Deutsche Bank
NorthWestern (NWE) upgraded to Outperform from Neutral at RW Baird
Oaktree Capital (OAK) upgraded to Outperform from Market Perform at Keefe Bruyette
Aon plc (AON) downgraded to Market Perform from Outperform at Keefe Bruyette
CIBC (CM) downgraded to Neutral from Buy at BofA/Merrill
Cepheid (CPHD) downgraded to Hold from Buy at Jefferies
Charles River (CRL) downgraded to Underperform from Market Perform at Raymond James
Golar LNG Partners (GMLP) downgraded to Sector Perform from Outperform at RBC Capital
Mellanox (MLNX) downgraded to Neutral from Buy at UBS
Myriad Genetics (MYGN) downgraded to Hold from Buy at Jefferies
Panera Bread (PNRA) downgraded to Neutral from Buy at Lazard Capital
Scotts Miracle-Gro (SMG) downgraded to Underperform from Market Perform at BMO Capital
Alexion (ALXN) initiated with a Neutral at Credit Suisse
Balchem (BCPC) initiated with an Overweight at Piper Jaffray
BioMarin (BMRN) initiated with a Neutral at Credit Suisse
Boston Scientific (BSX) initiated with a Neutral at Wedbush
CVS Caremark (CVS) initiated with an Outperform at Wells Fargo
Catamaran (CTRX) initiated with a Market Perform at Wells Fargo
Dynegy (DYN) initiated with a Neutral at Goldman
Express Scripts (ESRX) initiated with a Market Perform at Wells Fargo
Haemonetics (HAE) initiated with a Neutral at Goldman
Medtronic (MDT) initiated with a Neutral at Wedbush
Melco Crown (MPEL) initiated with an Outperform at Oppenheimer
RPM (RPM) initiated with an Overweight at Piper Jaffray
SeaWorld (SEAS) initiated with an Overweight at Barclays
St. Jude Medical (STJ) initiated with an Outperform at Wedbush
Tiffany (TIF) initiated with an Outperform at Credit Suisse
Valeant (VRX) initiated with an Outperform at BMO Capital
DISH (DISH) commenced tender offer of $4.40 for outstanding Clearwire (CLWR) shares
Crest sent letter to Clearwire (CLWR) urging repeal of recommendation of Sprint (S) merger
Clearwire's (CLWR) special committee to review unsolicited DISH (DISH) offer
Dell (DELL) recommended shareholders vote for transaction with Michael Dell, Silver Lake
Samsung (SSNLF) selected Intel (INTC) "Clover Trail" processor to be in upcoming Galaxy 3 Tablet, Reuters reports
American Realty (ARCP) acquired $807M GE Capital (GE) portfolio of 471 net lease properties
Ford (F) surpassed previous hybrid sales record in first five months of FY13
Acacia Research (ACTG) entered into license agreements with Costco (COST), Target (TGT)
Companies that beat consensus earnings expectations last night and today include:
Pall Corp. (PLL), OmniVision (OVTI), Krispy Kreme (KKD), Envivio (ENVI), Guess (GES), Palo Alto (PANW), Lionsgate (LGF)
Companies that missed consensus earnings expectations include:
Copart (CPRT), Uroplasty (UPI), Esterline (ESL)
Companies that matched consensus earnings expectations include:
- A group of top government officials is expected to decide Monday whether several large, nonbank financial firms should be designated as "systemically important" and subjected to increased government scrutiny, sources say. Prudential Financial (PRU), AIG (AIG) and GE Capital (GE) are being considered, the Wall Street Journal reports
- Boeing (BA) is powering up efforts to put the three-month long grounding of its Dreamliner behind it, re-focusing on increasing production and accelerating a spate of new jets it hopes to design, build and deliver before the end of the decade, the Wall Street Journal reports
- Carlyle Group (CG) and Blackstone Group (BX) as well as Indian outsourcers L&T Infotech and Tech Mahindra Ltd, are lining up bids for Hewlett-Packard’s (HPQ) $1B stake in India's MphasiS Ltd, sources say, Reuters reports
- Toyota Motor (TM) has a "good chance" of selling a record number of luxury Lexus vehicles this year, an executive said, as a weaker yen adds to the brand's allure globally and in its biggest market the U.S., Reuters reports
- California lawmakers rejected a bill that would have stopped drillers from using hydraulic fracturing to free oil and natural gas from shale beds until state regulators implement rules for the controversial practice, Bloomberg reports
- Armour Residential REIT (ARR) has about $22.5B of government-backed home-loan debt, and has lost 13% this year, including reinvested dividends. It’s now leading the declines in mortgage REITs as concern grows that the Fed will slow its bond-buying program as soon as June, Bloomberg reports
Air Lease (AL) 8M share Secondary priced at $26.75
Epizyme (EPZM) 5.142M share IPO priced at $15.00
Graphic Packaging (GPK) files to sell 15M shares of common stock for holders
Magnegas (MNGA) to offer common stock and warrants
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