Frontrunning: August 21
- FTW: Europe Stocks Rise as Data Signals Need for Stimulus (BBG)
- More de-escalation: Dozens die in Ukraine in street battles, Donetsk shelling (Reuters)
- Calm largely holds in Missouri after grand jury opens shooting investigation (Reuters)
- Attorney General Eric Holder Vows Thorough Probe of Ferguson Shooting (WSJ)
- World’s Biggest Wealth Fund Slows Emerging Market Investment (BBG)
- Market Chilly to Argentine Debt Proposal (WSJ)
- Israeli air strike kills three Hamas commanders in Gaza (Reuters)
- Retooled Hamas Bloodies Israel With Help From Hezbollah (BBG)
- Investors Pour Into Vanguard, Eschewing Stock Pickers (WSJ)
- Fed Debates Early Rate Increases (WSJ)
- Hong Kong’s Rich Get Richer as Economy Shrinks (BBG)
- Millennial Bankers Get Raises as Firms Fight Defections (BBG)
- Bank of America to Pay $17 Billion in Justice Department Settlement (WSJ)
- Dollar General Says It Was Misled During Family Dollar Talks (BBG)
Overnight Media Digest
* U.S. Special Operations forces mounted an unsuccessful mission inside Syria earlier this summer to try to rescue several Americans held by Islamic extremists, including the journalist who was beheaded this week, senior Obama administration officials said. (http://on.wsj.com/1AzOooQ)
* Bank of America Corp is expected to pay a record settlement of nearly $17 billion over its mortgage lending as early as Thursday, according to people familiar with the matter, capping a legal odyssey that has dogged it since the depths of the financial crisis. (http://on.wsj.com/1pgsRhm)
* U.S. air strikes have driven some ground commanders of the Sunni radical group Islamic State from northern Iraq across the border into Syria, Iraqi officials say. (http://on.wsj.com/1rnn8ZG)
* Investors are pouring money into Vanguard Group, the epitome of the hands-off approach to investing, flocking to funds that track market indexes and are not run by stock pickers or star managers. (http://on.wsj.com/1vk6Y14)
* Wall Street banks, under pressure to improve working conditions for junior employees, are raising salaries. A host of big banks including Goldman Sachs Group Inc, JPMorgan Chase & Co and Morgan Stanley have decided to lift pay or are seriously considering the move for many junior bankers. The pay increases, which are coming in the form of salaries as opposed to year-end bonuses, could hit 20 percent to 25 percent at some firms. (http://on.wsj.com/XBDl0q)
* Russia temporarily closed four McDonald's Corp restaurants in Moscow, citing sanitary violations, amid the country's most-serious confrontation with the West since the Cold War. (http://on.wsj.com/VFypWR)
* Law enforcement's battle against Symantec Corp's Norton, Intel Corp McAfee brands and others gained new attention this month after anonymous activists published documents from FinFisher GmbH, a secretive German firm that sells computer code to help governments snoop on targets. Amid customer names and secret price lists, the cache exposed complaints from authorities that antivirus programs had thwarted their planned surveillance. (http://on.wsj.com/1ncbw4p)
* Argentina's options are dwindling after its latest proposal to exit default by sidestepping a U.S. court order met with skepticism in financial markets on Wednesday. Argentine bond prices slipped and the black-market peso tumbled to a record low against the dollar the day after Argentine President Cristina Kirchner proposed that investors holding defaulted bonds swap them for new debt governed by Argentine law. (http://on.wsj.com/1q1zWRR)
* African governments are on pace to issue a record amount of bonds in 2014 for a second consecutive year, jumping at the opportunity to borrow at low interest rates to fund infrastructure and other spending. But global investors' appetite for African bonds may be testing its limit. (http://on.wsj.com/1sW16x2)
* U.S. Federal Reserve officials debated at their July policy meeting whether they might need to raise interest rates sooner than expected in light of a strengthening recovery, but they were restrained by lingering doubts about whether the economy's gains would persist. (http://on.wsj.com/1sVwCLG)
* North Carolina lawmakers on Wednesday passed a new legislation to regulate coal-ash pits and clean up decades of toxic waste generated by coal-burning electricity plants. (http://on.wsj.com/1wb81ou)
* A handful of private-equity firms are vying to buy American Tire Distributors Holdings Inc in an auction that could fetch more than $3 billion, according to people familiar with the matter. (http://on.wsj.com/1p01CCA)
* Glencore Plc said it would buy back $1 billion in shares and avoid expensive expansion projects. But Chief Executive Ivan Glasenberg signaled possible interest in mining assets that BHP Billiton Plc plans to spin off. (http://on.wsj.com/1mo1hdh)
* A federal judge handed a legal victory to drugmaker Hospira Inc by suspending the U.S. Food and Drug Administration's decision this week to allow the marketing of certain generic copies of Hospira's top product, the sedative Precedex. (http://on.wsj.com/1oTfBzW)
* Activist investor Carl Icahn on Wednesday disclosed an 8.5 percent stake in Hertz Global Holdings Inc and said he may seek board representation. (http://on.wsj.com/1vk0Iqg)
* Hong Kong investor Tony Fung's bet on Australia's gambling industry has won support from the country's competition regulator, which said it would not block the planned 216.8 million Australian dollar ($200.5 million) acquisition of a casino in tropical Cairns. (http://on.wsj.com/1pgnD5m)
* Dong Nguyen, the man behind the world-wide mobile gaming sensation "Flappy Bird" has unleashed his newest effort. The Vietnamese developer whose famously challenging title winged its way to the top of the App Store and Google Play earlier this year, on Thursday released his newest work, called "Swing Copters." (http://on.wsj.com/1wbhE6t)
After an unprecedented three years of unanimity on interest rates, two out of the Bank of England's Monetary Policy Committee's nine members decided to vote in favour of raising interest rates.
Germany broke with post-war tradition in saying it would arm Iraqi Kurdish security forces fighting Islamic State militants in northern Iraq.
The European Central Bank and eight national regulators, including the eurozone's five largest economies, will pay up to 487.7 million euros ($646.8 million) on fees to external advisers for their work on the region's health check of its biggest banks, according to Financial Times research.
Commodities group Glencore will return $1 billion to investors the first share buyback by a large miner since the commodities boom began to cool.
Carillion abandoned hopes of creating a 3 billion pound construction powerhouse after it gave up its month-long pursuit of larger rival Balfour Beatty, which thrice rejected its offer.
Goldman Sachs is hiking salaries of junior bankers in the U.S. by about 20 percent in a move to attract and retain young graduates.
* Online lender AvantCredit is expected to announce early on Thursday that it has secured a $200-million credit facility led by the investment bank Jefferies, doubling its capacity to lend to consumers. (http://nyti.ms/1vjWSxc)
* First Investors Financial Services Group has agreed to pay a $2.75 million penalty over accusations that it consistently gave giant credit reporting agencies like Experian and Equifax flawed reports about thousands of car buyers. (http://nyti.ms/1s1QmsF)
* The Justice Department is poised to announce a $16.65 billion settlement with Bank of America Corp over accusations that it duped investors into buying toxic mortgage securities, say people briefed on the matter - the single largest government settlement by a company in American history. (http://nyti.ms/1p04G1r)
* An increasingly vocal minority of Federal Reserve officials want the central bank to retreat more quickly from its stimulus campaign, arguing that the bank has largely exhausted its ability to improve economic conditions. (http://nyti.ms/1oTlptm)
* An experimental drug has completely protected monkeys from lethal doses of a virus related to Ebola, bolstering confidence that a similar medicine might be effective if deployed in the current outbreak in Africa, researchers reported on Wednesday. (http://nyti.ms/1ncq97X)
* UPS Stores, a subsidiary of United Parcel Service Inc , said on Wednesday that a security breach may have led to the theft of customer credit and debit data at 51 UPS franchises in the United States. (http://nyti.ms/VFFNkP)
* Nestle SA, one of the world's largest food companies, is adopting animal welfare standards that will affect 7,300 of its suppliers around the globe, and their suppliers. (http://nyti.ms/1q1H94c)
* As Europe faces the prospect of its third recession in five years, France is quickly emerging as one of the weakest links among the 18 nations that share the euro. (http://nyti.ms/1s1UDMX)
* Dollar General Corp, which on Monday offered $8.9 billion for Family Dollar Stores Inc, trumping an existing offer from Dollar Tree Inc, is contending that Family Dollar's chief executive may have let personal interest cloud his judgment. (http://nyti.ms/1sW9lJo)
* Carl Icahn, the longtime activist investor, disclosed in a regulatory filing on Wednesday that he had accumulated an 8.48 percent stake in Hertz Global Holdings Inc, with plans to put pressure on the rental car company's management. (http://nyti.ms/1AzQ8yo)
* Virtual currency start-up Chain, which aims to make it easier for developers to build Bitcoin applications, announced on Wednesday that it had closed a $9.5 million investment round led by Khosla Ventures, bringing its total funding to $13.7 million. (http://nyti.ms/XBPxOA)
* Argentina has proposed a way to pay its bondholders in a move that would bypass a United States court ruling that has blocked its payments and sent the country spiraling into default last month. (http://nyti.ms/1pgvQq0)
* Infineon Technologies AG, the German chip maker, agreed on Wednesday to buy the International Rectifier Corp, a specialty semiconductor producer, for about $3 billion in cash to bolster its international presence and gain greater scale. (http://nyti.ms/VH1tN8)
* Berkshire Hathaway Inc has agreed to pay $896,000 to settle accusations by the Justice Department that it did not follow antitrust guidelines before acquiring additional shares in the USG Corp in December, according to a filing in the Federal District Court in Washington on Wednesday. (http://nyti.ms/1pMCK6s)
* SoundCloud will begin incorporating advertising and, for the first time, let artists and record labels collect royalties as part of a new licensing deal with entertainment companies.(http://nyti.ms/1pMD1pS)
THE GLOBE AND MAIL
* Community centers in the Metro Vancouver area are opening up registration for day camps and other child-care programs for the fall, signaling expectations for a continued teachers' strike come September. Parents are anxiously awaiting news as the expected start of school draws closer, but neither the British Columbia Teachers' Federation nor the education ministry will comment on negotiations, citing a media blackout. The government maintains that it has no plans to legislate teachers back to work. (http://bit.ly/1moHavn)
* The new leader of the Canadian Medical Association, Chris Simpson, is calling out the government of Stephen Harper for its inaction on healthcare, saying the medicare system is floundering and Canadians are "tired of excuses as to why the federal government can't take action." Simpson said given the challenges posed by the aging baby-boomer demographic, the starting point for healthcare reform needs to be creating a comprehensive seniors' strategy. (http://bit.ly/1kX7DVo)
Reports in the business section:
* Robert Hogue, an economist at Canada's biggest bank Royal Bank of Canada, says home prices could start falling in 2016 if interest rates return to more normal levels. And he warned that, in the meantime, what goes up will likely come down if salaries and incomes don't keep pace. (http://bit.ly/1oTW6at)
* New Democratic Party Member of Parliament Sana Hassainia has quit the caucus over what she felt was an excessively pro-Israel stance on the current conflict in Gaza and demeaning party demands to toe the line. Hassainia, who represents the Montreal-area riding of Vercheres-Les Patriotes, alleged that she was "punished" for supporting Mulcair rival Brian Topp for the party leadership, including losing her position on the Commons committee on the status of women. (http://bit.ly/1pfnrTG)
* Toronto Mayor Rob Ford said he had "no problem" submitting to drug and alcohol tests if all other mayoral candidates do as well, but then went on to suggest it should extend to all political candidates and possibly civil servants. (http://bit.ly/1moK2Zn)
* Fitch Ratings has affirmed Canada's AAA credit rating and says the outlook is stable. The New York-based global ratings agency, in a report issued on Tuesday, said its assessment was based, among other factors, on Canada's political stability and track record of prudent fiscal management. (http://bit.ly/1ofXoH5)
* Target Corp Canada executives are under the gun to make improvements to the money-losing retailer by Christmas after unwrapping a not-so-pretty set of second-quarter results on Wednesday. Target Corp Chief Executive Brian Cornell is making the mass merchant's troubled start in Canada a top priority after the fledgling unit reported an 11.4 percent slide in second-quarter sales at established stores and a growing operating loss. (http://bit.ly/1to38E0)
- State-owned energy, electricity and transportation companies from three provinces in northeast China will launch a mixed ownership pilot program in the near future, sources told the official newspaper.
- China has begun the trial of the former director of Beijing Zoo over corruption charges after investigators found close to 6 million yuan ($977,278) in cash at his home last year.
- The price of shark fin, one of China's most expensive delicacies, has dropped from 2,800 yuan per kg to 1,200 yuan in some seafood markets in the southern city of Guangzhou, following a crackdown against official extravagance and luxury.
- Chinese airplane pilots will have to refine heavy accents by 2016 or miss out on jobs, according to the country's civil aviation authority. The Civil Aviation Administration of China is trying to avoid communication lapses between pilots and controllers.
SHANGHAI SECURITIES NEWS
- China's railway development fund is looking at ways to attract a wider base of investors, including setting up preferential shares.
BRITISH ISIS MILITANT IN JAMES FOLEY VIDEO 'GUARDS FOREIGN HOSTAGES IN SYRIA'
The English jihadist who beheaded the American journalist James Foley is believed to be the leader of a group of British fighters holding foreign hostages in Syria, sources have told the Guardian.
SNP ACCUSED OF EXAGGERATING NORTH SEA OIL RESERVES BY UP TO 60 PCT
Sir Ian Wood, the most influential figure in the Scottish oil industry, has accused Alex Salmond's government of exaggerating North Sea oil reserves by up to 60 percent.
MPs REBUKE CARNEY OVER CONFLICT OF INTEREST FEARS
MPs have issued a veiled rebuke to the governor of the Bank of England after it failed to disclose a sensitive shareholding of Richard Sharp, one of Mark Carney's former Goldman Sachs colleagues, who now sits on the Bank's powerful Financial Policy Committee.
OSBORNE DECLINES TO SHARE DETAILS OF CO-OP MEETINGS
George Osborne has declined to hand over details of meetings between Treasury officials and senior bankers to discuss the Co-op Bank's failed attempt to buy 631 branches from Lloyds Banking Group.
LIDL TO LAUNCH NEW FASHION RANGE Lidl, the discount retailer, takes on Primark, George and high street with cut-price clothing.
Fly On The Wall Pre-Market Buzz
Domestic economic reports scheduled for today include:
Jobless claims for the week of 8/16 at 8:30am -- consensus 300,000
PMI manufacturing index flash at 9:45am
Philadelphia Fed survey for August at 10am -- consensus 20.0
Existing home sales for July at 10am -- consensus 5.00M
Leading indicators for July at 10am -- consensus 0.6%
EIA natural gas report at 10:30am
Money supply at 4:30pm
American Eagle (AEO) upgraded to Buy from Neutral at Janney Capital
American Eagle (AEO) upgraded to Buy from Neutral at SunTrust
Cameco (CCJ) downgraded to Market Perform from Outperform at Cowen
InterMune (ITMN) downgraded to Market Perform from Outperform at Wells Fargo
International Rectifier (IRF) downgraded to Market Perform at Raymond James
Planar Systems (PLNR) downgraded to Neutral from Buy at B. Riley
WhiteWave Foods (WWAV) downgraded to Neutral from Buy at Longbow
AllianceBernstein (AB) initiated with a Hold at Jefferies
Federated Investors (FII) initiated with a Buy at Jefferies
MDC Partners (MDCA) initiated with an Outperform at FBR Capital
MeetMe (MEET) initiated with an Outperform at JMP Securities
PNM Resources (PNM) initiated with a Hold at KeyBanc
Summit Hotel Properties (INN) initiated with an Outperform at JMP Securities
Tesla (TSLA) initiated with an Outperform at CLSA
UPS (UPS) notified customers of potential data compromise, incident resolution. Based on the current assessment by The UPS Store and the IT security firm, certain customers' information, who used a credit or debit card at the 51 impacted franchised center locations between January 20 and August 11, may have been exposed
Dollar General (DG) sent a letter to Family Dollar's (FDO) board, said "now forced to favtor a $305M breakup fee into offer." Dollar General said it was "surprising" that Family Dollar was considering a proposal in that range from Dollar Tree, and that no representative of Family Dollar followed up with any representative of Dollar General before entering into the merger agreement with Dollar Tree (DLTR)
Hertz (HTZ) said it remains focused on executing its operating initiatives
HP (HPQ) said it delivered YoY revenue growth for first time in three years in Q3
Sally Beauty (SBH) authorized a new $1B share repurchase program
Kindred Biosciences (KIN) said its pivotal field study of CereKin did not meet its primary endpoint
Companies that beat consensus earnings expectations last night and today include:
Hormel Foods (HRL), L Brands (LB), 58.com (WUBA), America's Car-Mart (CRMT), CACI (CACI), Synopsys (SNPS)
Companies that missed consensus earnings expectations include:
Sears (SHLD), Kirkland’s (KIRK), Stage Stores (SSI)
Companies that matched consensus earnings expectations include:
HP (HPQ) sees FY14 adjusted EPS $3.70-$3.74, consensus $3.72
HP (HPQ) sees Q4 adjusted EPS $1.03-$1.07, consensus $1.05
CACI (CACI) backs 2015 EPS view $5.10-$5.51, consensus $5.33
Synopsys (SNPS) sees FY14 EPS $2.48-$2.50, consensus $2.48
Synopsys (SNPS) sees Q4 EPS 59c-61c, consensus 63c
Semtech (SMTC) sees Q3 EPS ex-items 42c-48c, consensus 46c
L Brands (LB) raises FY14 EPS guidance to $3.03-$3.18 from $3.00-$3.15
L Brands (LB) sees Q3 EPS 26c-31c, consensus 30c
Allergan (AGN) talks with Salix (SLXP) in defense tactic said to be dormant, Bloomberg says
Verizon (VZ) says not in talks to set up another app store, Re/code reports
Galena (GALE) fired CEO over stock promotion scandal, The Street reports
CBS (CBS) seeking bigger share of pay-television revenue from affiliates, WSJ reports
Toyota (TM) slices China Lexus part costs amid anti-trust worries, Reuters says
JetBlue (JBLU) shares can continue higher, Barron's says
Five Oaks (OAKS) files to sell 6.49M shares, 3.13M warrants for holders
Golub Capital (GBDC) enters $75M at-the-market equity distribution agreement
Medley Capital (MCC) 5M share Spot Secondary priced at $13.02
Medley Capital (MCC) files to sell 5M shares of common stock
Motorcar Parts (MPAA) files to sell 2M shares of common stock
NGL Energy Partners (NGL) files to sell $300M of common units
National General (NGHC) files to sell $100M of preferred stock
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