Frontrunning: October 10

  • U.S. Military Is Sent to Jordan to Help With Crisis in Syria (NYT)
  • IMF Weighing New Loans for Europe (WSJ)
  • Romney Targets Obama Voters (WSJ)
  • China’s Central Banker Won’t Attend IMF Meeting Amid Island Spat (Bloomberg)
  • Japan Calls China PBOC Chief Skipping IMF Meeting ‘Regrettable’ (Bloomberg)
  • German media bristles at hostile Greek reception for Merkel (Reuters)
  • The End Might Be Near for Opel (Spiegel)
  • IMF sounds alarm on Japanese banks (FT)
  • Cash Tap Stays Dry for EU Banks (WSJ)
  • Goldman in Push On Volcker Limits (WSJ)
  • IMF Vinals: Further Policy Efforts Needed to Gain Lasting Stability (WSJ)
  • King signals inflation not primary focus (FT)

Overnight Media Digest


* The government sued Wells Fargo & Co, accusing the biggest U.S. mortgage lender of "reckless" lending and leaving a federal insurance program to pick up the tab.

* The boards of Airbus parent EADS and British defense giant BAE Systems Plc met late Tuesday to discuss their proposed merger before a critical deadline, as senior European officials cited progress in government talks on how the deal would be structured.

* Mitt Romney is putting a new emphasis on visiting counties that voted for President Barack Obama in 2008, as he urges Republicans in swing states to help him push the president's supporters to switch sides.

* German Chancellor Angela Merkel, making her first visit to Athens since Europe's debt crisis began in late 2009, on Tuesday said she saw "light at the end of the tunnel" for Greece as the debt-stricken country battles through a painful austerity program aimed at restoring its fiscal health.

* Goldman Sachs Group Inc is lobbying regulators to exempt investment vehicles known as credit funds from the "Volcker rule" in a bid to preserve the firm's lucrative merchant-banking unit.

* France, Spain and several other euro-zone governments won't hit budget deficit targets agreed to with European authorities, the International Monetary Fund said Tuesday, setting the stage for a contentious debate over whether the governments should pursue more cuts or allow the targets to slip.

* Aluminum maker Alcoa Inc reported a net loss of $143 million for the third quarter, partly reflecting the costs of settling a four-year legal battle over bribery allegations, but results were modestly better than Wall Street's forecasts.

* A judge approved a $71.5 million settlement Tuesday with former partners of defunct law firm Dewey & LeBoeuf LLP, giving the green light to a plan whose speedy resolution could set a new benchmark for unwinding failed partnerships.

* The biggest U.S. banks will have to run two internal "stress tests" each year and publish some of the results on their websites under new rules that enshrine the examinations as a central plank of post-crisis industry oversight.

* True Religion Apparel Inc is putting itself up for sale, as the fading maker of premium jeans looks for help to boost its growth.




Britain's FSA recently informed banks that they will not be required to hold any extra capital against new UK loans.


The Bank of England will ultimately have to face up to monetary policy's limits as a tool to stimulate the economy, BoE governor Mervyn King said.


Google has made a bid to avoid an antitrust war with Brussels by offering to label information from its in-house services.


Russia's second biggest mobile operator, MegaFon, announced its plan to sell shares in London this year.


British online fashion retailer ASOS is set to appoint Kate Bostock, the former head of general merchandise at Marks & Spencer, as a senior executive.


Jack Dorsey, Twitter's product mastermind, has stepped back from day-to-day operations to focus on his other start-up, payments firm Square.


Talks between EADS and BAE Systems have hit a new obstacle over Germany's reluctance to endorse an Anglo-French scheme for handling state shareholdings.


UPS is to be served with a formal EU complaint over its 5.2 billion euros ($6.71 billion) takeover bid for TNT Express.


ENRC is preparing to shake up its senior ranks, with Mehmet Dalman taking the reins as executive chairman.


Russian president Vladimir Putin backs BP's plan to sell its 50 percent stake in TNK-BP to the state oil group Rosneft.


The IMF has warned that unless the euro zone resolves its capital crisis, European banks' balance sheets will contract severely.



* United States prosecutors sued Wells Fargo & Co on Tuesday, accusing it of lying about the quality of the mortgages it handled under a federal housing program.

* Venturing into the most hostile territory in Europe, Chancellor Angela Merkel of Germany visited Athens on Tuesday, telling Greeks that she understood their suffering but urging the country to stay the course on reforms and budget cuts.

* Wal-Mart Stores Inc kicked Inc out of its 4,000 stores last month when it discontinued Kindle tablets and e-readers. Now, the retailer is poised to use those stores against its online rival once again - this time aiming for the heart of Amazon's retail model.

* Stanley Black & Decker agreed on Tuesday to sell its hardware and home improvement unit to Spectrum Brands Holdings for $1.4 billion in cash, as the company worked to whittle down its product portfolio.

* Jack Welch, the former chief executive of General Electric Co, said Tuesday that he would no longer write for Fortune magazine, after Fortune produced coverage that was critical of his comments last Friday about the Department of Labor's monthly jobs report.

* Chevron Corp, the second-largest American oil company after Exxon Mobil Corp, warned Tuesday that its third-quarter earnings would be "substantially lower" than in the second quarter.

* The Penske Media Corp, a collection of entertainment blogs owned by a son of the auto racing mogul Roger Penske, on Tuesday announced the completion of a $25 million deal to buy Variety from Reed Elsevier, which has owned the trade newspaper since 1987.

* The financial industry in New York has slashed jobs by the thousands over the last two years




* The Montreal region was rattled by an earthquake strong enough to wake some people from their slumber just after midnight Wednesday.

* After almost a year of waiting, Canada has formally joined major Pacific Rim trade talks - negotiations that will put pressure on Ottawa to ratchet back protections sheltering Canadian dairy, egg and poultry farmers from foreign competition.

Reports in the business section:

* Telus Corp is poised to launch an app on Wednesday that will allow its 600,000 home television subscribers to channel surf on Telus's Optik TV service using an iPhone or iPad instead of the remote control, in one of the biggest upgrades since remotes went wireless in the 1980s.

* Polar Mobile, one of Canada's fastest-growing mobile start-ups, is completely overhauling the way it does business, switching focus from building apps for specific smartphones and instead designing software that runs on any mobile device. At the heart of the company's transition is HTML 5.


* The United Church of Canada is poised to strike a special task force dedicated to uncovering historic forced adoption practices, just as a national group prepares for an unprecedented conference next week that it hopes will catapult the topic squarely on to the public agenda and pressure the federal government to call an inquiry.

* Quebec's corruption inquiry has exploded onto the provincial stage with allegations of illegal political financing by the recently defeated Charest Liberals, the same party that reluctantly called the probe. After having already alleged rampant kickbacks, Mafia ties and bid-rigging at the municipal level, a star witness has now made scathing accusations of influence-peddling under the ex-Liberal government.


* If Chinese telecom firms are allowed to provide components for Canadian networks, the rising Communist superpower could compromise this country's security, experts said Tuesday, adding that such risk remains high regardless of where suppliers are based.

The warning comes in the wake of a report this week from the United States Congressional Intelligence Committee that labeled both Huawei Technologies Co Ltd and ZTE Corp as national security threats.

* Canada's economic growth is being driven by resource-rich Western provinces, according to a Bank of Montreal report released Tuesday. Alberta leads the pack, with the bank predicting 3.5 percent real GDP growth this year, falling back a bit to 2.9 percent in 2013.


Hong Kong


-- Central Huijin, an investment agency of the central government, raised its stakes in mainland banks, including Industrial and Commercial Bank of China (ICBC) and Bank of China , in the third quarter. Analysts said this move is an attempt to keep the stock market stable ahead of the 18th national congress. ()

-- China Galaxy Securities is set to include additional bookrunners in its dual listing in Hong Kong and Shanghai that could raise more than $1 billion as soon as the first quarter of next year, according to people familiar with the situation. ()


-- Consumer goods exporter Li & Fung Ltd has appointed Ed Lam, a former Citigroup Inc. investment banker, as chief financial officer, in order to expand senior management team to facilitate its organic growth and acquisition strategy.


-- Hong Kong home prices and rents rose to a record high in August, according to the latest Hong Kong government data, raising the spectre of a worsening of 1997 housing bubble. The primary index for measuring private property prices rose for the seventh consecutive month to 210.6 in August, up 2.2 percent from July.


-- China Vanke, the country's largest real estate developer by sales, has acquired a commercial site for 650 million yuan ($103.37 million) in Foshan city, Guangdong.

-- Chinese property developer Kaisa Group Holdings Ltd has acquired three commercial and residential sites in Foshan city for a total of 1.8 billion yuan.


-- Property developer Shimao Property Holdings Ltd said contract sales for the first three quarters totalled 35.7 billion yuan, and has exceeded the full-year sales target of 30.7 billion yuan.


Fly On The Wall 7:00 Market Snapshot



Abercrombie & Fitch (ANF) upgraded to Overweight from Neutral at Piper Jaffray
Dollar Tree (DLTR) upgraded to Outperform from Market Perform at Wells Fargo
Flushing Financial (FFIC) upgraded to Outperform from Market Perform at FBR Capital
Host Hotels (HST) upgraded to Top Pick from Outperform at RBC Capital
M&T Bank (MTB) upgraded to Outperform from Neutral at Credit Suisse
NxStage Medical (NXTM) upgraded to Market Perform from Underperform at Wells Fargo
Ralph Lauren (RL) upgraded to Overweight from Neutral at Piper Jaffray
Qlik Technologies (QLIK) upgraded to Buy from Neutral at UBS
Qualcomm (QCOM) upgraded to Outperform from Neutral at Exane BNP Paribas
RLJ Lodging Trust (RLJ) upgraded to Outperform from Sector Perform at RBC Capital
Shutterfly (SFLY) upgraded to Buy from Hold at Cantor
Yum! Brands (YUM) upgraded to Buy from Outperform at CLSA


American Eagle (AEO) downgraded to Neutral from Overweight at Piper Jaffray
AvalonBay (AVB) downgraded to Outperform from Top Pick at RBC Capital
Concur (CNQR) downgraded to Hold from Buy at Wunderlich
Darling (DAR) downgraded to Market Perform from Outperform at BMO Capital
Diamond Offshore (DO) downgraded to Market Perform from Outperform at FBR Capital
DiamondRock (DRH) downgraded to Underperform from Sector Perform at RBC Capital
Ferro (FOE) downgraded to Underperform from Neutral at Longbow
Fifth Third Bancorp (FITB) downgraded to Neutral from Buy at BofA/Merrill
Genesco (GCO) downgraded to Neutral from Overweight at Piper Jaffray
Group 1 Automotive (GPI) downgraded to Neutral from Buy at Sterne Agee
Home Depot (HD) downgraded to Perform from Outperform at Oppenheimer
Kansas City Southern (KSU) downgraded to Neutral from Positive at Susquehanna
LaSalle Hotel (LHO) downgraded to Sector Perform from Outperform at RBC Capital
Nationstar (NSM) downgraded to Market Perform from Outperform at Keefe Bruyette
Ocwen Financial (OCN) downgraded to Market Perform from Outperform at Keefe Bruyette
Owens Corning (OC) downgraded to Neutral from Overweight at JPMorgan
Penske Automotive (PAG) downgraded to Neutral from Buy at Sterne Agee
Rowan Companies (RDC) downgraded to Market Perform from Outperform at FBR Capital
SAP (SAP) downgraded to Equal Weight from Overweight at Barclays
Sky West (SKYW) downgraded to Underperform from Neutral at BofA/Merrill
Tyco (TYC) downgraded to Neutral from Outperform at Credit Suisse
U.S. Bancorp (USB) downgraded to Neutral from Buy at BofA/Merrill
Zynga (ZNGA) downgraded to Neutral from Overweight at Piper Jaffray


First Republic Bank (FRC) initiated with an Outperform at FBR Capital
Genesis Energy (GEL) initiated with an Outperform at Raymond James
HCP Inc. (HCP) initiated with a Sector Perform at RBC Capital
Kaman (KAMN) initiated with a Neutral at Longbow
Laredo Petroleum (LPI) initiated with a Buy at C.K. Cooper
McGraw-Hill (MHP) initiated with an Overweight at Barclays
Moody's (MCO) initiated with an Equal Weight at Barclays
Select Comfort (SCSS) initiated with a Neutral at SunTrust
Ventas (VTR) initiated with an Outperform at RBC Capital


Cooper Industries (CBE), Danaher (DHR) to sell Apex Tool to Bain Capital for about $1.6B
H&R Block (HRB) exploring alternatives to S&L status after proposed Fed requirements
FedEx (FDX)  targets $1.7B in annual profit improvement by end of FY16
Alcoa (AA) lowered 2012 global aluminum demand view to 6%, cites slowdown in China
Seeing strength in automotive and aerospace, said aerospace demand should remain strong in FY13
Cummins (CMI) sees cutting workforce 1000-1500 by year end
Duff & Phelps (DUF) acquired iEnvision Technology
SunPower (SPWR) acquired 42%, minority stake in Diamond Energy
Ferro (FOE) explores strategic options for solar pastes business
Committed to reducing expenses by $30M by end of 2014
STAG Industrial (STAG) announced acquisition of $129M in industrial buildings
LCNB (LCNB) to acquire First Capital Bancshares for $19.6M
China Auto Logistics (CALI) announced 1-for-6 reverse stock split


Companies that beat consensus earnings expectations last night and today include:
Costco (COST), Adtran (ADTN), Alcoa (AA)

Companies that matched consensus earnings expectations include:
Healthcare Services (HCSG), Yum! Brands (YUM)


China central bank governor Zhou Xiaochuan pulled out of the annual meeting of the IMF, as the government ups its protest over a continuing territorial dispute with Japan, signaling that the diplomatic fight is spilling over into the realm of economics, the Wall Street Journal reports
Goldman Sachs (GS) is lobbying regulators to exempt investment vehicles known as credit funds from the "Volcker rule" in a bid to preserve the firm's lucrative merchant-banking unit.
If that fails, Goldman has a backup plan. Some executives at the firm believe they have found a way to extricate the credit funds from proposed limits on how much can be invested in hedge funds and private-equity funds, sources say, the Wall Street Journal reports
EADS (EADSY) and BAE Systems (BAESY) are making one final move ahead of a deadline to breathe life into the troubled $45B aerospace merger, as doubts grow over German backing for the deal, Reuters reports
Microsoft (MSFT) CEO Steve Ballmer signaled a new direction for the software company, pointing to hardware and online services as its future, taking a page from rival Apple (AAPL), Reuters reports
Fed Vice Chairman Janet Yellen said Fed asset purchases that increase U.S. economic growth would benefit the world, with emerging nations having the tools to manage excess capital flows, Bloomberg reports
Apple’s (AAPL) iPhone 5 supply shortfall is being exacerbated by a quality-control crackdown at Foxconn Technology Group that’s designed to cut the number of devices shipped with nicks and scratches, sources say. The scrapes, which set off complaints with the iPhone’s debut last month, are due to Apple’s decision to use a type of aluminum that helps make the smartphone thinner and lighter, Bloomberg reports


Ambarella (AMBA) 6M share IPO priced at $6.00
Geron (GERN) may issue up to $50M of shares through agreement with MLV
Lexington Realty (LXP) file to sell 15M shares of common stock
MRC Global (MRC) files to sell 39.27M shares of common stock for holders
Whitestone REIT (WSR) files to sell 786k shares for limited partnership interest