- New War Risk on Russia Fringes Amid Armenia-Azeri Clashes (BBG [50])
- Palestinians accuse Israel of breaking seven-hour Gaza truce (Reuters [51])
- Argentine Default Sours Outlook for Peso as Talks Ordered (BBG [52])
- Espírito Santo Saga Entangles Swiss Company (WSJ [53])
- Booming African Lion Economies Gear Up to Emulate Asians (BBG [54])
- Why Recalled Cars Stay on the Road (WSJ [55])
- CME Profit Falls as Trading Volume Declines (WSJ [56])
- London Renters Win in Billionaire Backyard as Prices Soar (BBG [57])
- Junk-Debt Liquidity Concerns Bring Sales (WSJ [58])
- Rescuers race to find survivors after 400 die in China quake (AFP [59])
- Putin Cabbage Ban No Match in Poland for Fed Rate Concern (BBG [60])
- Kiev says it recaptures rail hub in east Ukraine, five soldiers killed (Reuters [61])
- Buffett Waits on Fat Pitch as Cash Hoard Tops $50 Billion (BBG [62])
- Half-Trillion-Dollar Exodus Magnifying U.S. Bill Shortage (BBG [63])
- GE warns that closing ExIm Bank would hit US-Africa trade (FT [64])
Overnight Media Digest
WSJ
* Israel announced another temporary truce in Gaza, but the prospects for a more lasting cease-fire remain murky. (http://on.wsj.com/1s3bfYn [65])
* At least 381 people were killed and more than 1,800 injured when an magnitude 6.1 earthquake struck a remote part of China's southwestern Yunnan province. (http://on.wsj.com/1mdRpCz [66])
* While guns are off the welcome list at chains including Chipotle Mexican Grill Inc, Starbucks Corp, and Sonic Corp, a small but growing number of independent restaurateurs around the country are rolling out the red carpet. (http://on.wsj.com/UVGRjS [67])
* Portugal's central bank unveiled a plan to rescue the country's second-largest lender Banco Espirito Santo SA by breaking up the bank and pumping in billions of euros of state money. (http://on.wsj.com/1uZpL5E [68])
* A shakeout in junk bonds is drawing only cautious interest from bargain hunters, underscoring fears that many once hot securities could prove hard to sell in an increasingly difficult trading environment. (http://on.wsj.com/1skRp9x [69])
* Adding the latest in-vogue deal maneuver to their playbook, activist investors are pressing for overseas mergers that can slice tax bills. In the latest example, Marcato Capital Management LP hired an investment bank to try to drum up interest from U.S. hotel companies that could possibly cut down on their tax bills by buying U.K.-based InterContinental Hotels Group, according to people familiar with the matter. (http://on.wsj.com/1p3EN5P [70])
* The euro zone's central bank has been shrinking its holdings of securities and loans-the opposite course taken by the central banks of the United States, Britain and Japan. Those nations now see faster growth and closer to target inflation than the European Central Bank countries. (http://on.wsj.com/1pyBRgs [71])
* Chinese stocks extended recent gains, bucking the regional trend as other Asian markets were rattled by news from elsewhere in the world. (http://on.wsj.com/1ANVkQ6 [72])
* The U.S. government is moving closer to formal rules barring airlines from offering in-flight cellphone calls, though carriers are pressing for the final decision to be left to them. (http://on.wsj.com/1ANVp6r [73])
* Despite intense interest from consumers, HBO in the United States so far has no plans to offer an online version of its service to people who are not pay-television subscribers. But overseas, HBO is taking a different tack. The Time Warner Inc unit is now exploring other countries where it could expand its Web-TV service model. (http://on.wsj.com/1s3sRmP [74])
* Sales at Michael Kors Holdings Ltd have outpaced competitors for years and its profits have soared. But some on Wall Street worry that the company has expanded too fast and that discounts are rising at department stores. (http://on.wsj.com/WVmbKI [75])
FT
France has gathered support of other European nations to challenge U.S. regulators on their right to levy heavy fines on foreign banks at a G20 meeting later this year, following the record fine imposed on BNP Paribas last month.
Private equity firms, including KKR and Warburg Pincus, are mulling over a $10 billion plan to buy and merge older drug brands of Britain's GlaxoSmithKline and France's Sanofi.
Troubled lender Banco Espirito Santo is to be split into 'good' and 'bad' banks, under a 4.9 billion euro ($6.6 billion) rescue plan that will leave its shareholders and junior bondholders with toxic assets.
A report commissioned by London Mayor Boris Johnson is to show that the city could lose close to 1.2 million jobs and lose out on tens of billions of pounds of gross domestic product if UK decides to quit the European Union.
Britain's banks are actively opposed to the creation of an EU financial services chief as they believe the move could fracture the single market and tilt regulations in favour of the eurozone.
IT outsourcing and consultancy services provider Quindell Plc and UK road assistance firm RAC's joint venture contract to install telematics devices in vehicles has run into problems, with talks of restructuring the tie-up having stalled, according to people familiar with the project.
NYT
* After spending years in the shadow of bankruptcy proceedings, management turmoil and its more prominent broadcasting stations, the Tribune Media Co's publishing division, is striking out on its own. The print properties are being spun off into a new company - Tribune Publishing, which starts trading on the New York Stock Exchange on Tuesday. (http://nyti.ms/UVwe0o [76])
* The troubled lender Banco Espirito Santo SA will be shut down, and its healthy businesses will be transferred to a new bank, as part of 4.9 billion euro ($6.58 billion) rescue plan financed primarily by the Portuguese government. While the Portuguese government will provide most of the money for the rescue in the form of a loan, the heaviest losses will be absorbed by Banco Espirito Santo shareholders and some creditors. (http://nyti.ms/1kgCdt1 [77])
* Botox maker Allergan Inc is suing Valeant Pharmaceuticals International Inc and hedge fund manager William Ackman, accusing them of insider trading as part of their hostile effort to take it over. (http://nyti.ms/1qJGinw [78])
* Treasury Wine Estates, the Australian vintner that owns Penfolds and Beringer Vineyards, said it would consider a sweetened takeover offer led by the private equity giant Kohlberg Kravis Roberts after rejecting an earlier bid. (http://nyti.ms/1tLYLF0 [79])
* The former global head of Barclays Plc's mergers and acquisitions business, Paul Parker, is set to join one of his former rivals, Goldman Sachs Group Inc. Parker has been hired as a co-chairman of Goldman's mergers unit. (http://nyti.ms/1uZuuUT [80])
* Evercore Partners Inc said on Sunday that it planned to buy Institutional Strategy & Investment, a move intended to bolster its research and trading arm. (http://nyti.ms/1ol35mC [81])
* Brazilian firm Patria Investments has closed a new $1.8 billion private equity fund, its largest ever, in yet another sign that investors still find Brazil attractive despite the nation's many macroeconomic challenges. The Sao Paulo-based firm, owned 40 percent by the Blackstone Group, exceeded its $1.5 billion target. (http://nyti.ms/1skUxCu [82])
* The International Swaps and Derivatives Association said Argentina's failure to make a payment on its bonds earlier this week would activate credit default swaps on the country's debt. In the coming days, investors who used the swaps to insure against the default will collect money from investors on the other side of the trade. (http://nyti.ms/1zMcjkx [83])
* For years, New York City has been dutifully pumping more and more money into its giant pension system for retired city workers. But instead of getting smaller, the city's pension hole just keeps getting bigger, forcing progressively more significant cutbacks in municipal programs and services every year. (http://nyti.ms/1xVo4Cj [84])
* Nickelodeon created its first original animated series "Welcome to The Wayne" exclusively for the web and mobile. The program is part of an overhaul at Viacom Inc's 36-year-old children's network to discover, develop and disseminate shows for a new generation who barely distinguish among a television set, a laptop, a tablet and a mobile phone. (http://nyti.ms/1njaIK2 [85])
Canada
THE GLOBE AND MAIL
* Ontario's new Liberal government has brokered its first deal with a major union, a bellwether for difficult labor negotiations in the months ahead. Negotiators announced on Sunday they had resolved a six-month standoff between the province and its white-collar workers in AMAPCEO - Ontario's second-largest civil servants' union. (http://bit.ly/1uei1s9 [86])
* The hunt for Toronto's next police chief promises to be the most extensive the city has ever conducted and holds the possibility of placing an outsider at the helm. Toronto police services board chairman Alok Mukherjee and Mayor Rob Ford say they want someone who can keep the force's budget in line. (http://bit.ly/1AOnY3H [87])
Reports in the business section:
* A powerful group of U.S. members of Congress say the White House should cut Canada out of a major global trade deal unless it opens up its protected dairy and poultry markets. The Democratic and Republican members of Congress argued in a letter sent to President Barack Obama that, without more concessions on agriculture, Canada should be booted out of the 12-country Trans-Pacific partnership talks. (http://bit.ly/WVroSP [88])
NATIONAL POST
* A commission set up by Quebec's liberal government to review government programs and cut back on spending will cost taxpayers at least $3.8 million in its first year of operation. Salaries account for much of the projected cost. (http://bit.ly/1njSIiM [89])
* Canadian Senate is considering the installation of video cameras in its chamber. However, the two-month pilot project would only see the footage directed to an internal feed. It remains unclear what, exactly, the Senators do not want to reveal. (http://bit.ly/1qTYuzA [90])
FINANCIAL POST
* The Canadian government launched a process to create a long-awaited bail-in regime for Canadian banks that will keep taxpayers off the hook in the event any of the banks fail. (http://bit.ly/1kxkii0 [91])
* The Canadian government said it will require the country's two big railways, Canadian National Railway Co and Canadian Pacific Railway Ltd, to ship more than the current minimum of 1 million tonnes of crops a week through the autumn harvest, as it tries to prevent a repeat of last season's backlog. The regulations announced on Friday in the world's third-biggest wheat exporter would require both the railways to each move 536,250 tonnes of crops each week starting Sunday and lasting through Nov. 29. (http://bit.ly/1njTUCT [92])
Hong Kong
SOUTH CHINA MORNING POST
-- More foreign carmakers are expected to cut prices under pressure from anti-monopoly investigations by mainland regulators, with market forces expected to play a bigger role in pricing as competition intensifies. (http://bit.ly/WVgkFg [93])
-- Seven patients who underwent medical procedures in Hong Kong in the first quarter of the year had surgical objects left inside their bodies, the most since 2010, according to new figures revealed by the Hospital Authority. The items included a 12 cm drainage tube left in a patient's abdomen and a 4.5 cm catheter tip left in a kidney. (http://bit.ly/1tIsQFw [94])
-- The stock through train has already helped boost turnover and profitability at Hong Kong Exchanges and Clearing, according to brokers. HKEx, which will report its results on Wednesday, is expected to chalk up profit growth of 5 to 10 percent for the first half of this year. (http://bit.ly/1sjchNA [95])
THE STANDARD
-- A 1 percent cut in government spending is not intended to "turn off the water taps" but just slow the rapid rise in spending to ward off a projected fiscal cliff, the financial secretary said. John Tsang Chun-wah confirmed that the Financial Services and the Treasury Bureau issued letters to all government departments to announce the 1 percent cut across all departments from 2016 to 2018. (http://bit.ly/1udhXcc [96])
-- More young Hongkongers will be going to Germany this year for a working holiday as the quota has been doubled, according to Labour Department. (http://bit.ly/1uZ9ayJ [97])
-- McDonald's Hong Kong is putting the original Big Mac back on the menu with the familiar patty, lettuce and onion for just HK$10. The fast food giant is banking on Hongkongers' short memories to start "lovin" Big Mac and three other big-sellers from Monday, two weeks after being embroiled in the Shanghai contaminated food scandal. (http://bit.ly/1s2kIf5 [98])
HONG KONG ECONOMIC JOURNAL
-- China Unicom (Hong Kong) Ltd, which is due to release interim earnings on Thursday, is expected to post a profit of between 6.71 billion and 7.07 billion yuan ($1.14 billion), up 26.1 percent to 32.9 percent from the first half in the previous year. Second-quarter profit is seen ranging from 3.41 billion to 3.77 billion yuan.
HONG KONG ECONOMIC TIMES
-- China Merchants Land Ltd said it would buy from its controlling parent a 49 percent stake in real estate firm Merchants Property Development (Guangzhou) Ltd for 1.21 billion yuan ($195.81 million) cash.
Britain
The Times
EX-M&S BOSS POISED FOR PEERAGE
The former boss of Marks and Spencer is being lined up for a peerage. Stuart Rose, who chairs the online supermarket Ocado and the clothing brand Fat Face <IPO-FFFL.L>, is expected to be ennobled by the Conservative party within days.
MPC REBELS SET TO BREAK BANK CONSENSUS ON INTEREST RATES
The Bank of England's longest consensus on interest rates could end this week when a minority of monetary policy committee members are expected to vote for a rate rise.
The Guardian
INEOS SIGNALS MOVE INTO FRACKING
Ineos, the company at the centre of a dispute with unions at the Grangemouth plant in Scotland last year, is giving the strongest signal yet of its intention to move into the controversial area of fracking.
The Telegraph
RUSSIA SANCTIONS RISK BRITISH JOBS, WARNS JCB BOSS
One of the UK's most influential businessmen has hit out at European Union and US sanctions against Russia, claiming that they are ill-conceived and may result in the loss of British jobs.
Sky News
HSBC URGES RING-FENCING DELAY AMID CMA PROBE
One of Britain's biggest banks is urging the Government to delay a deadline for separating lenders' retail and investment banking operations amid fears that billions of pounds could be wasted on the project.
Fly On The Wall 7:00 Pre-Market Buzz
ECONOMIC REPORTS
No significant domestic economic reports scheduled for today.
ANALYST RESEARCH
Upgrades
Air Lease (AL) upgraded to Top Pick from Outperform at RBC Capital
Alcatel-Lucent (ALU) upgraded to Overweight from Equal Weight at Morgan Stanley
Armstrong World (AWI) upgraded to Neutral from Underweight at JPMorgan
Bally Technologies (BYI) upgraded to Neutral from Sell at Goldman
Build-A-Bear (BBW) upgraded to Outperform from Market Perform at BMO Capital
Clear Channel Outdoor (CCO) upgraded to Equal-Weight from Underweight at Evercore
Mellanox (MLNX) upgraded to Equal Weight from Underweight at Barclays
Occidental Petroleum (OXY) upgraded to Overweight from Equal Weight at Morgan Stanley
Oil States (OIS) upgraded to Outperform from Neutral at Credit Suisse
Solar Capital (SLRC) upgraded to Overweight from Neutral at JPMorgan
Synergy Resources (SYRG) upgraded to Buy from Hold at Stifel
T-Mobile (TMUS) upgraded to Overweight from Equal-Weight at Evercore
Targa Resources (TRGP) upgraded to Outperform from Neutral at RW Baird
U.S. Steel (X) upgraded to Buy from Hold at Deutsche Bank
Downgrades
American Electric (AEP) downgraded to Equal Weight from Overweight at Morgan Stanley
Bally Technologies (BYI) downgraded to Neutral from Buy at Citigroup
Biota Pharmaceuticals (bota) downgraded to Neutral from Buy at Guggenheim
Chevron (CVX) downgraded to Equal Weight from Overweight at Morgan Stanley
Diamond Offshore (DO) downgraded to Sell from Hold at Deutsche Bank
Douglas Emmett (DEI) downgraded to Sell from Hold at Stifel
Emulex (ELX) downgraded to Underweight from Equal Weight at Barclays
Ensco (ESV) downgraded to Sell from Hold at Deutsche Bank
Halcon Resources (HK) downgraded to Equal Weight from Overweight at Morgan Stanley
Hornbeck Offshore (HOS) downgraded to Underweight from Equal Weight at Morgan Stanley
Kodiak Oil & Gas (KOG) downgraded to Sector Perform from Outperform at RBC Capital
Noble Corp. (NE) downgraded to Hold from Buy at Deutsche Bank
QLogic (QLGC) downgraded to Equal Weight from Overweight at Barclays
RPX Corp. (RPXC) downgraded to Equal Weight from Overweight at Barclays
Transocean (RIG) downgraded to Sell from Hold at Deutsche Bank
Initiations
Ares Capital (ARCC) resumed with an Overweight at JPMorgan
Diamond Resorts (DRII) initiated with an Outperform at Imperial Capital
La Jolla (LJPC) initiated with a Buy at Jefferies
COMPANY NEWS
FCC proposed rules that may limit joint bidding in spectrum auctions (S, TMUS, T, DTV, DISH)
Evercore (EVR) confirmed ISI Group acquisition in an all-stock transaction
Microsoft (MSFT) filed legal action against Samsung (SSNLF) for breach of contract
GE (GE) said it would invest $2B in Africa by 2018
Berkshire (BRK.A) raised its passive stake in VeriSign (VRSN) to 10.4% from 8.0%
EARNINGS
Companies that beat consensus earnings expectations last night and today include:
Orbotech (ORBK), CNA Financial (CNA), Loews (L), Boardwalk Pipeline (BWP), , Top Image Systems (TISA)
Companies that missed consensus earnings expectations include:
Hawaiian Telcom (HCOM), Anworth Mortgage (ANH)
Companies that matched consensus earnings expectations include:
Berkshire Hathaway (BRK.A)
NEWSPAPERS/WEBSITES
HBO (TWX) is exploring countries to expand Web-TV service, WSJ reports
Marcato looks to interest hotel companies in Intercontinental (IHG) bid, WSJ reports
Goldman Sachs (GS) hires former Barclays (BCS) executive Paul Parker, FT reports
PE firms (KKR) mull combining older GSK (GSK), Sanofi (SNY) drug brands, FT says
China excludes Symantec (SYMC), Kaspersky Lab as approved vendors, Reuters reports
KKR (KKR) raises bid for Treasury Wine Estates to $3.2B, Bloomberg reports
Twitter (TWTR) doesn't look profitable, Barron's says
United Stationers (USTR) shares could rise 20%, Barron's says
EMC (EMC) shares could hit $38, Barron's says
Herbalife (HLF) results could have been worse, Barron's says
SYNDICATE
Actavis (ACT) files to sell 843,085 ordinary shares
Jones Energy (JONE) files to sell 36.18M shares of Class A common stock for holders
Medley Capital (MCC) enters $100M common stock distribution agreement
Tonix Pharmaceuticals (TNXP) files $150M mixed securities shelf
xG Technology (XGTI) files $30M mixed securities shelf