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Frontrunning: September 26

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  • The new normal name of a broken market: glitches - NYSE, Nasdaq Consider Cooperating to Address Glitches (WSJ)
  • Early Thursday Humor: Abe Tells Wall Street Japan’s Economy Is Exceptionally Good (BBG)
  • Rising Rates Seen Squeezing Swaps Income at Biggest Banks (BBG)
  • JPMorgan Mortgage Talks Said to Discuss $11 Billion Deal (BBG)
  • Hertz Cuts Full-Year Forecast on Weak U.S. Airport Rentals (BBG)
  • Can't make this up: HFT firm "finds" Fed did not leak data early to benefit HFT firms (FT)
  • Greece does not need third bailout, seeks debt 'reprofiling' - deputy PM (Reuters) - right, it needs a fourth and fifth
  • Hezbollah gambles all in Syria (Reuters)
  • Twitter Adds J.P. Morgan and Morgan Stanley as Bankers on IPO (WSJ)
  • Messi in Court Shows Tax Collectors Set to Pursue Star Athletes (BBG)
  • Additional BOJ Easing Unlikely to Coincide With Tax Hike (WSJ)
  • Penney leaning toward $1 billion equity raise (Reuters)
  • Pentagon Contractor Used Iran for Project (WSJ)
  • Barclays to shut wealth management services in 130 countries (Reuters)

 

Overnight Media Digest

WSJ

* The U.S. government is closer to running out of money to pay its bills than previously thought, the Treasury Department warned Wednesday, clarifying the fiscal deadlines confronting Congress amid continued disarray on Capitol Hill.

* JPMorgan Chase is in discussions to settle probes related to mortgage-backed securities for $11 billion. The amount being discussed would include $7 billion cash and $4 billion in relief to consumers.

* Anham FZCO, which holds the multibillion-dollar Pentagon contract to supply U.S. forces in Afghanistan with food and water brought in supplies to build an Afghan warehouse through Iran, is in a possible violation of U.S. sanctions.

* With tech glitches becoming more common, the two stock-exchange giants - NYSE Euronext and Nasdaq OMX Group Inc - are pondering a scenario some might have considered unlikely: teaming to protect one another in the event of breakdowns.

* Twitter has added two more banks, JPMorgan Chase and Morgan Stanley, to help lead its upcoming initial public offering.

* Payday lenders are under pressure to report customer information to state databases in an effort by regulators to rein in the high-cost loans.

* Citigroup Inc agreed to pay $395 million to Freddie Mac as part of a settlement over defective mortgages sold to the government controlled home-loan financier, the bank said Wednesday.

* The Federal Housing Administration, which emerged as a major backstop of the U.S. residential-mortgage market throughout the housing downturn, is likely to require an infusion from the U.S. Treasury at the end of the month, according to people familiar with the matter.

* Bribes of curries and a broker nicknamed "Lord Libor" lent a distinctly British flavor to an $87 million settlement by ICAP of rate rigging allegations with U.S. and UK regulators. The London-based brokerage became the fourth major financial firm to settle allegations its employees manipulated benchmark interest rates. All four firms are European.

* Coming U.S. environmental regulations are encouraging some commercial marine operators to power vessels with liquefied natural gas instead of diesel.

* Nokia Corp's board of directors has discussed pursuing a tie-up with Alcatel-Lucent, following Nokia's recent deal to sell its handset business to Microsoft Corp, several people familiar with the deliberations said.

 

FT

JPMorgan Chase & Co is in talks with U.S. state and federal authorities to settle all outstanding mortgage probes for $11 billion, according to people familiar with the situation.

Colin Goodman, a cash broker in ICAP Plc's London office nicknamed "Lord Libor", wanted more after being in a scheme to help a key client manipulate yen Libor rates for one year, U.S. and UK authorities alleged in court papers.

Shares in BlackBerry Ltd fell below the proposed offer price on Wednesday on doubts about the $4.7 billion bid from a consortium led by Prem Watsa's Fairfax Financial Holdings Ltd to take the smartphone maker private.

Russian billionaire Mikhail Prokhorov, who owns the Brooklyn Nets basketball team, and two Asian groups are among a list potential bidders for a stake in potash producer Uralkali , as the group's oligarch shareholder prepares to sell out amid a row that has soured relations with Belarus.

Barclays Plc will stop offering wealth management services in about 130 countries by 2016 and cut jobs in the unit as part of an effort to rein in costs and boost profit.

 

NYT

* Detroit's municipal pension fund made payments for decades to retirees, active workers and others above and beyond normal benefits, costing the struggling city billions of dollars and helping push it into bankruptcy, according to people who have reviewed the payments.

* A group of Stanford researchers has moved a step closer to answering the question of what happens when silicon, the standard material in today's microelectronic circuits, reaches its fundamental limits for use in increasingly small transistors. In a paper in the journal Nature on Wednesday, the researchers reported that they had successfully built a working computer - albeit an extremely simple one - entirely from transistors fashioned from carbon nanotubes.

* No business represents the rapid rise of the Internet in China quite like Alibaba, a company that is part eBay, part Google and part PayPal. Alibaba is now moving forward with plans for one of the biggest initial public offerings since Facebook's Inc rocky debut last year - but in New York and not in its home market.

* The upstart stock exchange SecondMarket has made a name for itself allowing investors to buy shares of hot private companies like Twitter. Now that those companies are going public, SecondMarket is turning its attention to the next new thing - bitcoin. On Thursday, SecondMarket is expected to begin raising money for an investment fund - the first of its kind in the United States - that will hold only bitcoins, giving wealthy investors exposure to the trendy but controversial virtual currency.

* The Treasury has handed Congress an urgent deadline: Oct. 17. On that day, unless Congress were to raise the debt ceiling, the Treasury would have only $30 billion cash on hand, putting the United States on the precipice of an unprecedented default, the department said on Wednesday.

* Only one in three Americans has confidence in the Federal Reserve's ability to promote economic growth, while little more than a third think the Fed is spinning its wheels, according to a New York Times/CBS News poll. The remaining respondents said they did not know enough to answer.

* American and British authorities moved a step further on Wednesday in their investigation into the manipulation of the benchmark interest rate known as Libor, fining the British financial firm ICAP Plc a combined $87 million for its role.

* The management of the ailing smartphone maker BlackBerry Ltd canceled a conference call scheduled for Friday to discuss the company's quarterly financial results. While BlackBerry said on Wednesday evening that those results would still be released, it added that the call with analysts and investors was called off because of a conditional and tentative bid for the company announced by its largest shareholder, Fairfax Financial Holdings Ltd.

 

Canada

THE GLOBE AND MAIL

* Google Inc is giving Kitchener-Waterloo a morale boost as the region's largest technology company, BlackBerry Ltd , struggles to survive. The search giant will invest an undisclosed amount of money in Communitech, a regional economic development initiative that works closely with 650 technology startups to help them build their ideas into viable companies by providing them with space, funding and support.

* Canada's Prime Minister Stephen Harper continues to engage the United Nations on his own terms, refusing to sign a landmark UN treaty regulating the arms trade while pushing his maternal health agenda. Canada is holding off signing the treaty, citing concern over how it affects firearm owners - even though the United States has now joined the global accord over the objections of that country's powerful gun lobby.

* The race to replace Adrian Dix as British Columbia's New Democratic Party leader is starting in Ottawa. Dix's impending departure has set off a leadership contest that four members of the federal NDP caucus are thinking about entering. Those considering bids are Peter Julian, Jinny Sims, Nathan Cullen and Fin Donnelly.

Reports in the business section:

* Days after Fairfax Financial Holdings Ltd announced a $4.7 billion plan to take over BlackBerry, investors appear to be losing faith that a deal will actually materialize. BlackBerry shares soared Monday, immediately after the company and Fairfax announced a letter of intent outlining the broad strokes of a deal that would pay the smartphone maker's stockholders $9 per share.

* Rogers Communications Inc is partnering with Sprint Corp to introduce a "connected car" wireless service next year that will provide Canadians with high-speed Internet access while they are on the road. The agreement between the two carriers, to be announced on Thursday, enables auto makers that deploy the Sprint Velocity system - as Chrysler Group does on some of its U.S. vehicles - to use Rogers Communications' cellular networks to provide equipped vehicles with a wireless connection.

* Two of Bay Street's best-known money managers are selling off large portions of Gluskin Sheff + Associates Inc, the wealth management firm they founded. Ira Gluskin and Gerald Sheff said on Wednesday that they have organized a deal worth about C$122 million ($118.50 million) to part ways with 6.4 million subordinate voting shares of the company.

NATIONAL POST

* The Parti Quebecois's controversial charter of values proposal, which would ban public servants from wearing religious symbols, has drawn a sharp rebuke from voters as a poll suggests the opposition Liberals are poised to win the next election. About 42 percent of Quebeckers polled would vote for the provincial Liberals if an election were held today, compared with 35 percent for the Parti Quebecois, a Forum Poll says. Only about 12 percent would vote for the Coalition Avenir Quebec.

* Canadian officials are providing "assistance" in Kenya in the wake of the Nairobi shopping mall siege, a Foreign Affairs official said on Wednesday, as the Royal Canadian Mounted Police issued its first statement on the attack that killed 72 people, including two Canadians.

FINANCIAL POST

* When Canada's Big Three wireless providers launched an aggressive advertising campaign this summer accusing the federal government of giving an unfair advantage to foreign providers looking to enter the Canadian market, it didn't sit well with some Canadians. Several letters to the Canadian Radio-television and Telecommunications Commission (CRTC) obtained by Postmedia News under access-to-information law show the public's displeasure with the "Fair for Canada" campaign by Bell , Rogers Communications Inc and Telus Corp, which attempted to rally public opinion against the possible entry of a fourth major wireless carrier such as U.S. giant Verizon Communications Inc into Canada.

 

China

CHINA SECURITIES JOURNAL

- China's private banks should take responsibility for their own risks, said Pan Gongsheng, the deputy governor of the People's Bank of China.

SHANGHAI SECURITIES NEWS

- Founder Securities Co Ltd, a company that had suspended share trading for a month, announced on Thursday that it plans to acquire China Minzu Securities as part of its efforts to restructure.

- Yunnan Yuntianhua Co Ltd will swap 4.76 billion yuan ($777.78 million) worth of loss-making assets with 540 million shares in itself owned by its parent, and then, cancel them, in the first such move by a China-listed company.

21st Century Business Herald

- China plans to expand a pilot scheme for consumer financing companies to 16 cities, from four currently.

CHINA DAILY

- China's youth lack safe sex knowledge, an official survey showed. Half of youths aged 15 to 24 who had reported having pre-marital sex had used no contraceptive measures when they first had sex.

PEOPLE'S DAILY

- Self-criticism is a powerful tool to help Communist Party leaders dealing with personal problems, increase personal responsibility and strengthen party morale, Chinese president Xi Jinping told a Communist Party meeting in southern Hubei province on Wednesday.

 

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Cubist (CBST) upgraded to Outperform from Market Perform at Leerink
Diamond Foods (DMND) upgraded to Buy from Hold at BB&T
Fabrinet (FN) upgraded to Buy from Hold at Stifel
Grainger (GWW) upgraded to Neutral from Sell at Citigroup
Occidental Petroleum (OXY) upgraded to Outperform from Market Perform at Wells Fargo
Portland General Electric (POR) upgraded to Outperform at Wells Fargo
Watsco (WSO) upgraded to Outperform from Neutral at RW Baird
Xylem (XYL) upgraded to Overweight from Equal Weight at Barclays

Downgrades

Arrow Electronics (ARW) downgraded to Neutral from Buy at UBS
Avnet (AVT) downgraded to Neutral from Buy at UBS
Diamondback Energy (FANG) downgraded to Hold from Buy at Canaccord
HomeAway (AWAY) downgraded to Equal Weight from Overweight at Morgan Stanley
Hubbell (HUBB) downgraded to Equal Weight from Overweight at Barclays
Intrepid Potash (IPI) downgraded to Underperform from Market Perform at BMO Capital
Lindsay Corp. (LNN) downgraded to Market Perform from Outperform at William Blair
Omnicell (OMCL) downgraded to Neutral from Buy at B. Riley
Valmont (VMI) downgraded to Market Perform from Outperform at William Blair

Initiations

ARI Network (ARIS) initiated with a Buy at Ascendiant
Akorn (AKRX) initiated with a Buy at Guggenheim
Baidu (BIDU) initiated with an Outperform at Credit Suisse
Cavium (CAVM) initiated with an Overweight at Morgan Stanley
Changyou.com (CYOU) initiated with an Outperform at Credit Suisse
Ctrip.com (CTRP) initiated with an Outperform at Credit Suisse
Dangdang (DANG) initiated with an Outperform at Credit Suisse
Evolution Petroleum (EPM) initiated with an Outperform at Northland Securities
GNC Holdings (GNC) initiated with a Buy at Deutsche Bank
Gulfport Energy (GPOR) initiated with an Outperform at Northland Securities
Hospira (HSP) initiated with a Buy at Guggenheim
Kennametal (KMT) initiated with a Neutral at SunTrust
Kroger (KR) initiated with a Buy at Deutsche Bank
Laredo Petroleum (LPI) initiated with an Outperform at Northland Securities
Masco (MAS) initiated with a Hold at Jefferies
Nortek (NTK) initiated with a Hold at Jefferies
Owens Corning (OC) initiated with a Buy at Jefferies
Pharmacyclics (PCYC) initiated with a Buy at Deutsche Bank
Pharmacyclics (PCYC) initiated with an Overweight at JPMorgan
S.Y. Bancorp (SYBT) initiated with a Buy at DA Davidson
Safeway (SWY) initiated with a Buy at Deutsche Bank
Sohu.com (SOHU) initiated with an Outperform at Credit Suisse
Sprouts Farmers Markets (SFM) initiated with a Buy at Deutsche Bank
The Fresh Market (TFM) initiated with a Buy at Deutsche Bank
USG (USG) initiated with a Buy at Jefferies
Valeant (VRX) initiated with a Buy at Guggenheim
Vitamin Shoppe (VSI) initiated with a Buy at Deutsche Bank
Whole Foods (WFM) initiated with a Buy at Deutsche Bank

HOT STOCKS

  • Citigroup (C) announced deal with Freddie Mac (FMCC) to resolve future mortgage repurchase claims
  • Google's (GOOG) Schmidt told CNBC growth in next 3-5 years to come from advertising
  • Cisco's (CSCO) Chambers said Europe recovering more than most expect
  • Wellpoint (WLP) board increased share repurchase authorization by $3.5B
  • Flow International (FLOW) to be acquired by PE firm American Industrial Partners for over  $200M, or $4.05 per share
  • IntercontinentalExchange (ICE) to launch Swap Trade for OTC energy markets
  • Sallie Mae (SLM) to sell Upromise Investments to Ascensus; sees transaction adding about 14c to Q4 EPS
  • Plum Creek Timber (PCL) invested $154M in Georgia Vulcan Materials (VMC) natural resource assets

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
H.B. Fuller (FUL), Worthington (WOR), Progress Software (PRGS), Bed Bath & Beyond (BBBY), Jabil Circuit (JBL), SYNNEX (SNX)

NEWSPAPERS/WEBSITES

  • Apple (AAPL) victorious in Brazil iPhone trademark case, Verge says
  • Banks may lose millions as they struggle to sell rue 21 debt, WSJ reports
  • Commerical marine operators look to LNG ,WSJ reports
  • Fairfax's Watsa confident in success of BlackBerry (BBRY) bid, Reuters says
  • J. C. Penney (JCP) seeks to raise $1B, Reuters says
  • JPMorgan (JPM), Morgan Stanley added to Twitter IPO, WSJ says
  • Mobile DRAM bit demand to rise 35.5% in Q4, DigiTimes reports
  • NYSE, Nasdaq in talks to cooperate in event of glitch, WSJ says
  • Oracle (ORCL) shareholders unhappy with Ellison's pay, WSJ reports
  • Pentagon, Lockheed Martin (LMT) close to finalizing F-35 contract, Reuters says
  • T-Mobile US (TMUS) to stop stocking BlackBerry (BBRY), Reuters says

SYNDICATE

Altisource Residential (RESI) 15M share Secondary priced at $21.00
Ares Capital (ARCC) files to sell 11M shares of common stock
Caesar's (CZR) files to sell 10M shares of common stock
Covisint (COVS) 6.4M share IPO priced at $10.00
Enduro Royalty Trust (NDRO) files to sell 11.2M shares of common stock
Fibrocell Science (FCSC) files to sell common stock
Global Brass & Copper (BRSS) 5M share Secondary priced at $16.50
Montage Technology (MONT) 7.1M share IPO priced at $10.00
Morgans Hotel (MHGC) files to sell 954,065 shares of common stock for holders
Speed Commerce (SPDC) files to sell common stock
TCP Capital (TCPC) files to sell 3.8M shares of common stock
UIL Holdings (UIL) files to sell 5M shares of common stock
Westport Innovations (WPRT) files to sell 6M shares of common stock
Winthrop Realty (FUR) files to sell 2.75M common shares of beneficial interest

 

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