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Frontrunning: August 12

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  • Solyndra Cola: California aims to 'bottle sunlight' in energy storage push (Reuters)
  • Ackman may sues himself after all - Penney Board Assails Director William Ackman, Considered 'Rogue' After Releasing Deliberations (WSJ)
  • CFTC subpoenas metals warehousing firm as inquiry heats up (Reuters)
  • Obama Plan to Revamp NSA Faces Obstacles (WSJ)
  • Japan growth slows in second quarter, adds to sales tax uncertainty (Reuters)
  • China Urbanization to Hit Roadblocks Amid Local Opposition (BBG)
  • Parents Losing Jobs a Hidden Cost to U.S. Head Start Budget Cuts (BBG)
  • US seeks better access to Africa as part of trade pact review (FT)
  • Singapore Cuts Trade Outlook as China Slowdown Caps Recovery (BBG)
  • White House Sifts Fiscal Ideas With Band of Senators (WSJ)
  • Spain may ask United Nations for support over Gibraltar (Reuters)
  • Michigan Safety Net for Boomers Frays on Bankrupt Detroit (BBG)
  • SNB’s Danthine Says Rate Increase Would Mean End of Cap (BBG)
  • Monster Zombie Spider to Crush Super Mario’s China Dreams (BBG)
  • German Second-Quarter GDP Growth to Be Estimated at 0.75% (BBG)

 

Overnight Media Summary

WSJ

* Federal health officials have launched a probe into the use of antipsychotic drugs on children in the Medicaid system, amid concerns that the medications are being prescribed too often to treat behavioral problems in the very young.

* The dollar is stumbling as investors begin to question the relative strength of the U.S. economic recovery, which had powered a rally in the greenback in the first half of 2013. The WSJ Dollar Index, a gauge of the dollar's exchange rate against seven of the world's most heavily-traded currencies, is down 4 percent in the past month and hit a seven-week low on Friday.

* J.C. Penney Co Inc's board is weighing whether to take action against William Ackman, a director and the company's largest shareholder, after the hedge fund manager publicly released confidential boardroom deliberations in two separate salvos last week, people close to the company said.

* Aviation equipment supplier Rockwell Collins Inc, seeking a larger presence in the growing global market for advanced air traffic control systems and in-flight connectivity, on Sunday announced a $1.39 billion deal to buy closely held ARINC Inc from the investment firm Carlyle Group LP.

* Swiss drug giant Novartis AG faces a mounting problem in Japan, its second largest market, where researchers have retracted studies that touted the benefits of the company's most popular heart medicine, Diovan. Two university led investigations into Novartis related research discovered data had been altered to produce inaccurate results.

* Retailers Wal-Mart Stores Inc, Macy's Inc, Kohl's Corp and Nordstrom Inc are reporting their second-quarter results this week. All eyes will be on their early reads about back-to-school sales and the outlook for the rest of the year, with analysts expecting Wal-Mart to be a season winner because its discount positioning can better resonate with consumers pressured by the payroll tax rise and other economic concerns.

 

FT

Authorities in the U.S. are preparing criminal charges against two former JPMorgan bankers linked to the multi billion-dollar "London whale" trading loss.

Business Secretary Vince Cable is looking at fining businesses who fail to pay their suppliers promptly.

Brazil is pushing for its own trade deal with the European Union, after years of struggling to reach one alongside its neighbours.

Banks in the eurozone region will need to shed 3.2 trillion euros ($4.27 trillion)in assets by 2018 to meet Basel III regulations on capital and leverage, according to a report by UK's Royal Bank of Scotland.

China has started investigating French drugmaker Sanofi SA as it steps up scrutiny of prices of medicines sold in the country by western pharmaceutical groups.

The world's biggest airlines are reluctant to move from Heathrow, Europe's busiest hub, to another UK airport, boosting chances of a highly contentious third runway being built.

 

NYT

* As federal authorities prepare to charge criminally two former JPMorgan Chase & Co employees suspected of misrepresenting a multi-billion dollar trading loss last year, prosecutors in Manhattan are separately exploring ways to penalize the bank over the trading blowup that has come to be known as the "London Whale."

* The market for initial public offerings has made a comeback, with banking fees from helping companies list their shares on stock exchanges topping $1.7 billion in the United States so far this year. At the same time, concerns have resurfaced over the role of Wall Street research analysts in these lucrative deals.

* Whether from a sense of obligation, responsibility or guilt, the technology elite has taken up the cause of helping print journalism adapt to change. Google Inc, which has been criticized for profiting from news content created by others, began financing journalism fellowships for eight people this year. The founder of Craigslist, the free listing service that helped ruin newspapers' classified advertising, helped finance a book on ethics for journalists.

* Thousands of foreign-trained immigrant physicians are living in the United States with lifesaving skills that are going unused because they stumbled over one of the many hurdles in the path toward becoming a licensed doctor in the country. But many foreign physicians argue that the process is unnecessarily restrictive and time-consuming, particularly since America's need for doctors will expand sharply in a few short months under President Obama's health care law.

 

Canada

THE GLOBE AND MAIL

* The Senate expenses scandal could bring a fresh round of bad news for the Canadian government this week, with Tuesday's release of an independent audit into expenses claimed by Senator Pamela Wallin. Wallin has repaid at least C$38,000 ($36,900) since the audit by Deloitte began, and sources told The Globe in June she could be asked to repay an additional C$20,000 for excessive travel claims.

* A combination of new dairy technology and the inherently rich incentives to get around Canadian tariffs of 200 to 300 percent have spawned an explosion of protein imports. Major Canadian dairy farmers and processors, who have long fought imports, have started adding foreign milk ingredients to their products instead of domestic milk, underscoring the increasingly difficult task of shielding home markets in a globalized industry.

Reports in the business section:

* Housing starts, sales and prices are once again defying expectations, one year after Finance Minister Jim Flaherty shocked the market with tighter mortgage insurance rules. The sector is showing such strength this summer that some economists are wondering whether Flaherty will go further in a bid to stem rising house prices and consumer debt levels.

* The government won't back down on allowing large foreign companies into Canada's wireless market, says Prime Minister Stephen Harper, adding that he is more interested in promoting competition than in protecting the big domestic telecom companies.

* Canada lost nearly 40,000 jobs in July, the latest manifestation of an economy stuck awkwardly between recession and recovery. The sharp drop in employment last month, led by losses in the public sector, comes just two months after the economy turned in a record monthly job gain of nearly 100,000. Volatility, it seems, has suddenly become the new normal in the Canadian job market.

NATIONAL POST

* After two months in jail, former Liberal Senator Raymond Lavigne is expected to petition the Ontario Parole Board on Tuesday to serve the last four months of his sentence from home, according to reports. Lavigne was convicted of fraud in March 2011 after making false travel claims and found guilty of breach of trust.

* Canada's Integrated Terrorism Assessment Centre, which operates within CSIS, the Canadian spy agency, closely monitored the activities of the aboriginal "Idle No More" movement in late 2012 and early 2013. The intelligence agency claimed it was doing so not over fear of protests getting out of hand, but to protect the activists from potential violence by others.

* Canada should get out of is cold war mindset and move the majority of its warships from Halifax to the British Columbia coast in response to the Chinese navy's aggressive military buildup, say defence analysts. The U.S. government has already announced its plan to put 60 percent of its naval assets on its west coast by 2020.

China

PEOPLE'S DAILY

- China's plan to spend more money to tackle pollution will make clean energy and environment protection important pillars of the economy in coming years, economists said.

SHANGHAI SECURITIES NEWS

- China posted a slew of better-than-expected data for July last week, indicating the worst of the slowdown in growth may be over, economists said.

- The China Financial Futures Exchange may put off the launch of trading in government bond futures which had been expected to start in mid-August, as it needs more time to draft trading regulations and make other preparations.

CHINA SECURITIES JOURNAL

- Some small Chinese banks have raised rates for fixed deposits by 10 percent, an indication that there is less liquidity in the banking system and that it has become increasingly difficult for banks to attract savings.

- China's Railway Corp, the new commercial entity created out of the restructured Ministry of Railways, said it will auction 200 billion yuan ($33 billion) in corporate bonds on Wednesday.

CHINA BUSINESS NEWS

-- Shanghai Zhongxing (Group) Co Ltd raised 1.3 billion yuan in the city's first privately placed debt to support the government-sponsored cheap home programme, following similar moves by Beijing, Nanjing and other cities.

CHINA DAILY

-- The northern city of Tianjin will become the latest in a string of Chinese cities to restrict automobile purchases as pressure mounts on infrastructure and the environment.

SHANGHAI DAILY

-- The government has urged Chinese Internet celebrities to be more socially responsible and play a more constructive role in social media, the official Xinhua news agency said.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

CEMEX (CX) upgraded to Buy from Neutral at Citigroup
Cablevision (CVC) upgraded to Buy from Neutral at Guggenheim
Empresas ICA (ICA) upgraded to Buy from Neutral at BofA/Merrill
F5 Networks (FFIV) upgraded to Overweight from Equal Weight at Barclays
Global Power Equipment (GLPW) upgraded to Buy from Neutral at Roth Capital
Health Care REIT (HCN) upgraded to Market Perform from Underperform at BMO Capital
ING Group (ING) upgraded to Buy from Hold at Deutsche Bank
KAR Auction (KAR) upgraded to Buy from Neutral at BofA/Merrill
Krispy Kreme (KKD) upgraded to Buy from Neutral at Janney Capital
LKQ Corp. (LKQ) upgraded to Neutral from Underperform at BofA/Merrill
LTC Properties (LTC) upgraded to Outperform from Sector Perform at RBC Capital
LinkedIn (LNKD) upgraded to Buy from Hold at Needham
Lowe's (LOW) upgraded to Hold from Sell at Canaccord
PartnerRe (PRE) upgraded to Outperform from Market Perform at Keefe Bruyette
Southwest Gas (SWX) upgraded to Buy from Hold at Brean Capital
Sun Bancorp (SNBC) upgraded to Outperform from Market Perform at Keefe Bruyette
Sunoco Logistics (SXL) upgraded to Buy from Neutral at UBS
Ventas (VTR) upgraded to Market Perform from Underperform at BMO Capital

Downgrades

Arch Capital (ACGL) downgraded to Underperform from Market Perform at Keefe Bruyette
Broadcom (BRCM) downgraded to Neutral from Buy at Goldman
EV Energy (EVEP) downgraded to Perform from Outperform at Oppenheimer
GSE Holding (GSE) downgraded to Perform from Outperform at Oppenheimer
ING U.S. (VOYA) downgraded to Underweight from Neutral at JPMorgan
Juniper (JNPR) downgraded to Sector Perform from Outperform at RBC Capital
KPN (KKPNY) downgraded to Reduce from Neutral at Natixis
Lithia Motors (LAD) downgraded to Neutral from Buy at BofA/Merrill
Olympic Steel (ZEUS) downgraded to Neutral from Outperform at Macquarie
Quiksilver (ZQK) downgraded to Neutral from Buy at B. Riley
Royal Dutch Shell (RDS.A) downgraded to Perform from Outperform at Oppenheimer
Vitamin Shoppe (VSI) downgraded to Neutral from Outperform at Credit Suisse

Initiations

Intercept (ICPT) initiated with a Buy at Citigroup
NRG Yield (NYLD) initiated with a Buy at Citigroup
NRG Yield (NYLD) initiated with a Hold at Deutsche Bank
NRG Yield (NYLD) initiated with a Neutral at Goldman
OncoMed (OMED) initiated with a Buy at Jefferies
OncoMed (OMED) initiated with an Overweight at Piper Jaffray
Taylor Morrison (TMHC) initiated with an Outperform at JMP Securities
UCP, Inc. (UCP) initiated with a Buy at Citigroup
UCP, Inc. (UCP) initiated with a Hold at Deutsche Bank

HOT STOCKS

Rockwell Collins (COL) to purchase ARINC (CG) for $1.39B
Apple (AAPL) won patent case against Samsung (SSNLF), Bloomberg reports
DISH (DISH) and Raycom reach agreement in 36 markets
DaVita (DVA) declared a two-for-one split of its common stock

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Consolidated Water (CWCO), Enstar Group (ESGR)

Companies that missed consensus earnings expectations include:
CTI Industries (CTIB), Nordic American Tanker (NAT), NGL Energy Partners (NGL), Inovio (INO), Codexis (CDXS), Zoltek (ZOLT), Health Management (HMA), MannKind (MNKD)

NEWSPAPERS/WEBSITES

  • J.C. Penney’s (JCP) board is weighing whether to take action against William Ackman, a director and the company's largest shareholder, after he publicly released confidential boardroom deliberations in twice last week, sources say. The board is also considering its next steps after Ackman pressed directors to quickly replace CEO Ullman, sources added, the Wall Street Journal reports
  • The dollar is stumbling as investors begin to question the relative strength of the U.S. economic recovery. The WSJ Dollar Index, a gauge of the dollar's exchange rate against seven of the world's most heavily traded currencies, is down 4% in the past month and hit a seven-week low on Friday, the Wall Street Journal reports
  • The U.S. Commodity Futures Trading Commission subpoenaed a metals warehousing firm, sources say, seeking documents and communications related to the London Metal Exchange since January 2010, as an inquiry into complaints about inflated metals prices gathers steam, Reuters reports
  • Carlos Slim's American Movil (AMX) wants to 'unlock value' from Dutch telecoms group KPN and is not just interested in its German business E-Plus, according to Dutch newspaper het Financieele Dagblad, Reuters reports
  • U.K. Prime Minister Cameron said shale gas will bring down power bills for Britons, writing to defend his push to kick-start the industry in the country. Cameron wrote in the Daily Telegraph that the industry will also create jobs and bring money to local neighborhoods, Bloomberg reports
  • Qualcomm (QCOM) the most cash-rich semiconductor company, needs to keep a large portion of those reserves to help maintain its dominance in the phone-chip market, says CEO Paul Jacobs, who’s focused on investing in new products, Bloomberg reports

BARRON’S

Washington Post (WPO) looks undervalued
Washington Post could benefit from paywall, different editions
HD Supply (HDS) could rise over 20% in a year
Isis Pharmaceuticals (ISIS) could be overvalued
Outerwall (OUTR) could jump 20%
LINN Energy (LINE) not worth more than $18

SYNDICATE

Clean Energy (CLNE) files to sell 761K shares of common stock for holders
Glu Mobile (GLUU) files to sell 3.33M shares of common stock for holders
Northstar Realty (NRF) files to sell 35.48M shares of common stock for holders
Xoom (XOOM) files to sell common stock for holders

 

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