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Frontrunning: March 14

Tyler Durden's picture




 
  • Ukraine anxiety triggers flight to safety, stocks tumble (Reuters)
  • Woodrow Wilson’s Ukraine Failure Foreshadows West’s Dilemmas (BBG)
  • Fortress Executives Join Peers Selling Stock After Rally (BBG)
  • 303 Deaths Seen in G.M. Cars With Failed Air Bags (NYT)
  • Putin Deports Executives for Speeding as Sanctions Loom (BBG)
  • Russia blocks internet sites of Putin critics (Reuters)
  • China Bond Risk Exceeds Ireland as Defaults Unavoidable (BBG)
  • China H-Shares Post Biggest Weekly Drop Since October (BBG)
  • Surge in Rail Shipments of Oil Sidetracks Other Industries (WSJ)
  • Blackstone’s Home Buying Binge Ends as Prices Surge (BBG)
  • Teslas in California Help Bring Dirty Rain to China (BBG)
  • Norway’s Oil Stimulus Nears Tipping Point as Growth Fades (BBG)
  • China’s Big Four Banks See $70 Billion Vanish From Stocks (BBG)

 

Overnight Media Digest

WSJ

* Malaysia Airlines' missing jet transmitted its location repeatedly to satellites over the course of five hours after it disappeared from radar, people briefed on the matter said, as searchers zeroed in on new target areas hundreds of miles west of the plane's original course.

* Ukraine appealed for arms, ammunition and intelligence support, according to senior U.S. officials. But the Obama administration has agreed to send only military rations for now, wary of inflaming Russia.

* General Electric Co filed for an initial public offering of the unit that provides financing plans and private-label credit cards for North American retailers.

* BP PLC and the U.S. Environmental Protection Agency have reached an agreement that will allow the oil and gas company to start doing business again with the federal government.

* Asian stock markets are lower as tensions between Ukraine and Russia combined with fears about China's economic slowdown, pushed the Nikkei almost 3 percent lower.

* Amazon.com Inc said it will raise the annual price of its Prime shipping and streaming-video service by $20 to $99, the first increase in its nine-year history.

* China's central bank is temporarily suspending the use of two forms of smartphone payments in a setback for China's two largest Internet companies as they try to gain a larger share of the online finance market.

* Target Corp's computer-security team was alerted when hackers broke into the retailer's systems during the holiday shopping season, but decided the warning didn't need a follow-up.

* U.S. Transportation Secretary Anthony Foxx said Thursday that regulators might have acted sooner to push for a recall of General Motors Co cars equipped with faulty ignition switches, but lacked the information company officials had about problems with the vehicles.

* Consumers appear to be emerging from their dens to visit stores and restaurants, a sign the U.S. economy could be poised to perk up from a winter chill.

 

FT

Barclays is planning to axe thousands of jobs in a radical shake-up of its investment bank and may replace the European and the U.S. heads of the unit.

Facebook Chief Executive Mark Zuckerberg has criticised the United States over revelations that the government has secretly spied on the activities of some of his company's 1.2 billion users.

The U.S. government lifted a ban on Thursday that excluded BP from new federal contracts, following a lawsuit by the British oil major saying it was being unfairly penalised for its Gulf of Mexico spill in 2010.

Bank of England has unveiled what appear to be the world's toughest rules for clawing back bonuses under new proposals aimed at preventing a repetition of the mis-selling and rate manipulation scandals that have hit the sector.

Alexei Kudrin, former Russian finance minister and a key ally of President Vladimir Putin, has warned that the country could soon face capital outflows as high as $50 billon a quarter and no economic growth, should western countries press forward with proposed sanctions against Moscow.

 

NYT

* A new review of federal crash data shows that 303 people died after the air bags failed to deploy on two of the General Motors Co models that were recalled last month.

* Four years after the Deepwater Horizon rig explosion, BP is being welcomed back to seek new oil leases in the Gulf of Mexico. The U.S. government lifted a 2012 ban that was imposed after the Environmental Protection Agency concluded that BP had not fully corrected problems that led to the well blowout in 2010 that killed 11 rig workers, spilled millions of gallons of oil and contaminated hundreds of miles of beaches.

* Sotheby's, the auction house fending off attacks by the activist billionaire Daniel Loeb, dug in its heels on Thursday by rejecting his proposal for new board members and instead selected two others.

* Liberty Media Corp, the company controlled by John Malone, announced late Thursday that it had abandoned its plan to buy the shares of Sirius XM Holdings Inc that it did not already own as part of a move to set up two tracking stocks to house the company's assets.

* Olam International Ltd, a Singapore agricultural commodities company that has been targeted by the short seller Carson Block, said on Friday that it had received a cash buyout offer led by Temasek Holdings, a Singapore government investment firm valuing it at more than $4 billion.

* U.S. Securities and Exchange Commission said on Thursday that Lions Gate Entertainment Corp had agreed to admit wrongdoing and pay a $7.5 million penalty for its actions in fending off a takeover by Carl Icahn.

* Moody's cut Royal Bank of Scotland Group Plc's long-term debt rating a notch on Thursday in light of the potential difficulties of the British lender's turnaround plan.

* Gleacher & Co Inc, the troubled investment bank that had tried unsuccessfully to sell itself, announced on Thursday that it planned to liquidate its assets, closing up shop after 24 years.

* General Electric Co on Thursday took the next step to reduce the size of its North American retail finance unit, filing to spin off its GE Capital division in an initial public offering.

* The president of the European Central Bank, Mario Draghi, said on Thursday that euro zone banks faced a period of "creative destruction" that would be healthy for the economy, and he praised the banks that were moving more aggressively to deal with their problems.

 

Canada

THE GLOBE AND MAIL

* Sobeys Inc is focused on shaving costs to win a tough food fight, with plans to consolidate manufacturing and distribution operations, cut jobs in two regional offices and force suppliers to retroactively reduce their prices.

* Transport Canada is investigating a fatal car accident in Canada that it says appears to be linked to the same failure of General Motors Co ignition switches that led to 12 deaths in the United States.

Reports in the business section:

* PetroChina Co Ltd is close to securing government approval for a northern Alberta oil sands project, though a dispute with a native community that dragged the process out for months shows how the industry faces increasingly tough hurdles for new developments.

NATIONAL POST

* Passengers aboard a U.S. Airways flight were forced to evacuate the plane via its emergency slide after its nose gear collapsed on a runway at Philadelphia International Airport Thursday evening.

FINANCIAL POST

* E-book retailer Kobo Inc and Indigo Books & Music Inc are challenging the Canadian Competition Bureau's deal with major e-book publishers that removed restrictions on retailer discounting, arguing Kobo would "suffer significant unrecoverable losses" and could allow Amazon to gain a "monopoly or near-monopoly on the supply of e-books in Canada."

* Thirty-three years after it was discovered, and nine years after construction began, Cameco Corp has finally brought the much-anticipated Cigar Lake uranium mine into production.

 

China

SHANGHAI SECURITIES NEWS

- China Power Investment Corp, one of China's top state-owned power suppliers, plans to launch ownership reform this year to allow private investors to hold shares of its subsidiaries, its general manager Lu Qizhou told the paper.

CHINA SECURITIES JOURNAL

- Tencent Holdings Ltd's online brokerage product "Yong Jin Bao", run in conjunction with Sinolink Securities Co Ltd, has attracted over 250,000 users since its launch, according to data from CITIC Securities.

21ST CENTURY BUSINESS HERALD

- China's banking regulator is expected to include four major Chinese banks, including Bank of China Ltd and Bank of Communication Co Ltd, in a preferred stock pilot scheme, unnamed sources told the paper.

CHINA DAILY

- China's western province of Shaanxi will clamp down on medicine being given to students, after almost 1,500 preschoolers were given prescription drugs without parental consent over a four-year period.

SHANGHAI DAILY

- Chinese scientists have discovered a molecular compound that can be used to treat potentially fatal hand, foot and mouth disease. The disease affects over one million children in China every year, according to Rao Zihe, who led the research.

PEOPLE'S DAILY

- China should deepen political and economic reform under the rule of law and socialist democratic politics, the paper which act as the ruling Communist Party's mouthpiece said. This comes after the country's annual parliamentary meeting closed on Thursday.

 

Britain

The Telegraph

CUT HIGHER TAX RATE FOR MIDDLE EARNERS, SAYS LORD LAWSON

(http://link.reuters.com/red67v)

Former Tory chancellor says the Coalition is wrong to drag more workers into the 40 percent tax band, and blames Liberal Democrats for blocking rate cuts which could help middle earners.

RBS RESTRUCTURING WILL 'HEAVILY DEPRESS' PROFITS, WARNS MOODY'S

(http://link.reuters.com/sed67v)

Royal Bank of Scotland's massive restructuring plan will "heavily depress" profits and could leave the lender struggling to cope with unexpected costs, Moody's has warned. The credit ratings agency, which also expects RBS to suffer from lower capital levels than previously thought, cut the bank to "Baa1" from "A3" with a negative outlook, meaning it could slash the rating further.

The Guardian

MORRISONS TO CUT PRICES AFTER SECOND PROFIT WARNING IN THREE MONTHS

(http://link.reuters.com/ted67v)

Supermarket chain Morrisons has issued its second profit warning in three months as it announced a programme of aggressive price cuts to take on Aldi and Lidl .

STOCK MARKET TRADERS BEING REPLACED BY COMPUTERS, ACCORDING TO SURVEY

(http://link.reuters.com/ved67v)

European equity investors placed more orders via computers than through flesh-and-blood traders for the first time last year, as new market rules drive more money managers to go high-tech and low-cost.

The Times

Global tensions send Wall Street into a spin

(http://link.reuters.com/cud67v)

Traders on Wall Street took fright last night after a day in which world stock markets were hit by rising concerns over Russia's stand-off with Ukraine, slower growth in China and the growing threat of deflation in the eurozone.

Sky News

LIBERTY GLOBAL AIMS TO BLOOM WITH £500M DAISY

(http://link.reuters.com/xed67v)

The U.S.-based cable giant Liberty Global has been holding secret talks about a 500 million pound plus takeover of the London-listed IT supplier Daisy Group.

CITY INVESTORS COURT LAWYERS IN ESSAR FIGHT

(http://link.reuters.com/bud67v)

Leading City investors have approached lawyers to assist their battle against a potential delisting of Essar Energy , stoking an increasingly fractious tussle over the future of the India-based oil refiner.

 

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Producer Price Index for February at 8:30--consensus up 0.2%
Consumer sentiment index for March at 9:55--consensus 81.8

ANALYST RESEARCH

Upgrades

Banc of California (BANC) upgraded to Buy from Neutral at Sterne Agee
Independent Bank (INDB) upgraded to Outperform from Market Perform at Keefe Bruyette
Lowe's (LOW) upgraded to Outperform from Perform at Oppenheimer
NuStar Energy (NS) upgraded to Buy from Neutral at Goldman
NuStar GP Holdings (NSH) upgraded to Neutral from Sell at Goldman
Selective Insurance (SIGI) upgraded to Outperform from Market Perform at Keefe Bruyette
Teva (TEVA) upgraded to Equal Weight from Underweight at Morgan Stanley
Teva (TEVA) upgraded to Neutral from Underweight at JPMorgan
Turkcell (TKC) upgraded to Buy from Neutral at UBS

Downgrades

AngloGold (AU) downgraded to Underperform from Neutral at Macquarie
Covisint (COVS) downgraded to Neutral from Outperform at Credit Suisse
Delek Logistics (DKL) downgraded to Neutral from Buy at Goldman
Harmony Gold (HMY) downgraded to Underperform from Neutral at Macquarie
Houston Wire & Cable (HWCC) downgraded to Underperform at Raymond James
Nucor (NUE) downgraded to Neutral from Outperform at Credit Suisse
Oncothyreon (ONTY) downgraded to Hold from Buy at Cantor
Pinnacle Entertainment (PNK) downgraded to Hold from Buy at Deutsche Bank
Plug Power (PLUG) downgraded to Neutral from Buy at Roth Capital
U.S. Steel (X) downgraded to Underperform from Neutral at Credit Suisse

Initiations

Alcoa (AA) initiated with a Buy at Sterne Agee
Allscripts (MDRX) initiated with a Buy at SunTrust
Atmel (ATML) initiated with a Buy at BofA/Merrill
Cerner (CERN) initiated with a Buy at SunTrust
China Biologic (CBPO) initiated with an Outperform at Oppenheimer
Computer Programs (CPSI) initiated with a Neutral at SunTrust
DHT Holdings (DHT) initiated with a Buy at UBS
Navios Acquisition (NNA) initiated with a Neutral at UBS
Quality Systems (QSII) initiated with a Neutral at SunTrust
Rose Rock Midstream (RRMS) initiated with a Buy at UBS
Scorpio Tankers (STNG) initiated with a Buy at UBS
SemGroup (SEMG) initiated with a Buy at UBS
StealthGas (GASS) initiated with a Buy at UBS
Teekay Tankers (TNK) initiated with a Neutral at UBS
Top Image Systems (TISA) initiated with a Buy at Canaccord
Tsakos Energy (TNP) initiated with a Buy at UBS

COMPANY NEWS

Herbalife (HLF) rescheduled its annual general meeting to allow the company to continue its discussions with Carl Icahn about adding Icahn nominees to the company's board
AT&T (T) completed Leap Wireless (LEAP) acquisition
Barnes & Noble (BKS), Microsoft (MSFT) amended NOOK partnership
Liberty Media (LMCA) said its offer for Sirius XM (SIRI) was no longer applicable and will split its cable and media assets into two new tracking stocks
Zogenix (ZGNX) declined on news that Senator Manchin introduced a bill to ban Zohydro
Trian's Peltz criticized PepsiCo's (PEP) 'dismissive tone' on separation proposal
Aeropostale (ARO) reported a financing pact with Sycamore Partners

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Luxfer (LXFR), Erickson Air-Crane (EAC), Aastrom (ASTM), Omeros (OMER), Sophiris Bio (SPHS), Federal Agricultural Mortgage (AGM), ChemoCentryx (CCXI), KaloBios (KBIO), Engility Holdings (EGL), Oncothyreon (ONTY), Mattress Firm (MFRM), Paragon Shipping (PRGN), Bright Horizons (BFAM), SeaWorld (SEAS), Ulta Salon (ULTA), ImmunoCellular (IMUC)

Companies that missed consensus earnings expectations include:
Fuel Systems (FSYS), Hibbett Sports (HIBB), B2Gold (BTG), Silvercrest Asset (SAMG), Surgical Care Affiliates (SCAI), TransAtlantic Petroleum (TAT), Gastar Exploration (GST), Ocera Therapeutics (OCRX), Transcept Pharmaceuticals (tspt), BioAmber (BIOA), Athersys (ATHX), Cbeyond (CBEY), Aeropostale (ARO), XO Group (XOXO)

Companies that matched consensus earnings expectations include:
Tahoe Resources (TAHO), TearLab (TEAR), Anacor (ANAC)

NEWSPAPERS/WEBSITES

Barclays (BCS) readying radical overhaul of investment bank unit, FT says
Electronic Arts (EA) to lay off some employees from PopCap unit, WSJ reports
Target (TGT) did not follow up after hackers broke into system, WSJ reports
RBS (RBS) hires Morgan Stanley (MS) to advise on options for Ulster Bank, Irish Times reports
Cisco (CSCO) being probed by DOJ, SEC over Russia unit, Bloomberg reports
Microsoft (MSFT) ready to fight back as iPad (AAPL) generation shuns Office, Reuters says
Sony (SNE) tops Microsoft (MSFT) in February console sales, Bloomberg reports 
General Electric (GE) spinoff should boost stock, Barron's says

SYNDICATE

Athersys (ATHX) files to sell 20M shares of common stock, warrants
Castlight Health (CSLT) 11.1M share IPO priced at $16.00
Dyax (DYAX) files to sell common stock
Ignyta (RXDX) 5.245M share Secondary priced at $9.15
InterMune (ITMN) 7.5M share Secondary priced at $32.75
MakeMyTrip (MMYT) 5.5M share Secondary priced at $23.00
Omeros (OMER) reports proposed offering of common stock
TICC Capital (TICC) files to sell 6M shares of common stock
ZAIS Financial (ZFC) files to sell 3.25M shares of common stock for holders
ZBB Energy (ZBB) files to sell common stock

 

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Fri, 03/14/2014 - 07:46 | 4547040 polo007
polo007's picture

According to The International Monetary Fund (IMF):

http://www.imf.org/external/pubs/ft/fandd/2014/03/pdf/bluedorn.pdf

In theory, there are many reasons why asset price movements could be associated with the business cycle. First, asset prices affect households’ net wealth and their ability to borrow, which can have important effects on households’ consumption plans. Second, according to standard Tobin’s q-theory, investment should move in the same direction as q, which is the ratio of the market value of capital to its replacement cost. Therefore investment should be high when asset prices—which are directly associated with the market value of capital—are high, and vice versa. Third, asset price changes can affect firms’ balance sheets, hurting or helping their collateral and creditworthiness and thus increasing or decreasing their willingness and ability to invest. Asset price movements may also affect banks’ balance sheets, inducing them to adjust their capital and lending activities. These effects can be amplified through financial markets when there are differences in the information available to borrowers and lenders and borrowers are limited in their ability to commit to repayment.­

Last, according to the basic asset-pricing equation in finance, an asset price should equal the discounted value of its current and expected future returns. In the case of equities, dividends are the relevant returns; for houses, it is rent. To the extent that returns move together or ahead of economic conditions, asset prices should be useful in forecasting economic activity. Movements in the discount rate (that is applied to the stream of future returns to derive present value) accentuate this relationship if they reflect investors’ search for yield—during economic expansions investors take on more risk, lowering the discount rate and bidding up the price of unchanged dividend or rent flows, while in economic contractions they do just the opposite.

In other words, there is an inherent asymmetry in the predictive power of equity prices. When stock prices fall sharply, watch out! When they rise, the chances of a recession do not change much. The predictive power of asset prices also changes when the other real-time variables are flashing red—the orange line is everywhere higher than the green line. If a term spread inversion and falling house prices accompany a large equity price drop, the model indicates that a recession is very likely in the offing.

Real asset price corrections are useful predictors of new recessions. In particular, large corrections in real equity prices are associated with significant increases in the chance that a recession will start in the following quarter. If at the same time, house prices collapse and the term spread becomes negative, the chance of a recession increases markedly. The message is clear: policymakers should be mindful of sharp asset price drops—especially if the declines are accompanied by narrowing term spreads. These developments are likely to signal trouble in the very near future.

Fri, 03/14/2014 - 07:57 | 4547056 negative rates
negative rates's picture

I wouldn't mess with that trouble if I were you Yogi.

Fri, 03/14/2014 - 08:49 | 4547204 Catullus
Catullus's picture

policymakers should be mindful of sharp asset price drops—especially if the declines are accompanied by narrowing term spreads.

You're right! Especially since they trade on insider information, they should definitely be aware of when asset prices are about to drop.

Fri, 03/14/2014 - 07:55 | 4547053 duo
duo's picture

Let's see, when GM was about to go belly-up Toyota was raked over the coals for a few dozen stuck floor mats, yet GM kills hundreds over nearly a decade and the NTHSA and other agencies look the other way?

Good thing the Feds didn't bailout Boeing.

Fri, 03/14/2014 - 07:58 | 4547059 Ban KKiller
Ban KKiller's picture

Die, FIG, die. Take down NSM too. Both corrupt companies as evidenced by their performance and massive public complaints.

Fri, 03/14/2014 - 08:20 | 4547115 Son of Captain Nemo
Son of Captain Nemo's picture

"Putin Deports Executives for Speeding as Sanctions Loom"...

Certainly hope this is true and not just propaganda.  In fact, Putin needs to make good on the threat of recalling his dips from Washington, Tel Aviv, London and the EU and start expelling them from Moscow if Kerry keeps the verbal tenor going!

Fri, 03/14/2014 - 08:59 | 4547253 rtalcott
rtalcott's picture

Riddle me this Batman....How can the training program be "highly rated" when the operational staff can barely pass the competence tests?

 

"...managed a "marginal" rating because their poor marks were blended with the better performance of support staff - like cooks and facilities managers - and they got a boost from the base's highly rated training program. "

 

http://apnews.myway.com//article/20140314/DACHC3AO2.html

Do NOT follow this link or you will be banned from the site!