Frontrunning: October 24

  • China May Forgo Easing as Economy Rebounds, Survey Shows (Bloomberg)... or as food and house inflation has never gone away
  • China Edges Out U.S. as Top Foreign-Investment Draw Amid World Decline (WSJ)
  • Fed to keep buying bonds despite firmer U.S. growth (Reuters)
  • Bernanke Seen Attacking Jobless Rate With QE Until His Term Ends (Bloomberg)
  • Mortgage applications plunge 12%, down for third week in a row (Dow Jones)
  • Exchanges Retreat on Trading Tools - Fund Managers, Regulators Say Certain Orders Are Risky, Aid High-Speed Firms (WSJ)
  • Europe Bank Chief to Defend Bond-Buying Plan (WSJ)
  • Japan, China Envoys Met Last Week for Talks on Island Feud (Bloomberg)
  • Goldman’s Pill Says ‘Guerrilla’ ECB to Impose Losses on Skeptics (BBG)
  • Chance rise of an Obama defeat (FT)
  • King Says BOE Is Ready to Add to QE If U.K. Recovery Fades (Bloomberg)
  • Rajoy Sees Case for Slowing Spain’s Austerity as Economy Shrinks (BusinessWeek)
  • Hong Kong Intervenes to Defend Peg as Upper Limit Tested (Bloomberg)


Overnight Media Digest


* Apple Inc unveiled a smaller iPad and yet another version of its larger tablet, seeking to blunt an advance by rivals while preserving its premium pricing strategy.

* After a slow start, Facebook Inc's effort to squeeze more money from advertisers on mobile devices is starting to pay off. The mobile boost helped revenue rise 32 percent in the quarter that ended on Sept. 30, to $1.26 billion, slightly topping Wall Street's expectations.

* British defense giant BAE Systems Plc, recovering from the failure of its proposed merger with Airbus parent EADS NV, now faces the challenge of convincing investors that the plan wasn't an act of desperation.

* Zynga Inc is cutting staff for the first time in the social-games maker's brief history, by parting ways with about 5 percent of its workforce.

* Nokia Oyj completed a bond offering to raise 750 million euros ($972.30 million), moving to take advantage of favorable lending conditions to help shore up the company's liquidity reserves, an area that came under scrutiny in its earnings report last week.

* Netflix Inc reported an 88 percent drop in third-quarter net income and lowered its expectations for subscriber additions, sending shares tumbling.

* The British Broadcasting Corp's director general defended the network's much-criticized handling of a scandal over alleged serial sex abuse by its late star Jimmy Savile, even as he said the case shows there was a "problem of culture inside the BBC" in the past.

* Barnes & Noble Inc said customers at 63 stores in nine states may have had their credit-card information stolen.




The BoE is ready to inject more cash into the fragile British economy if recent positive signs fade, BoE Governor Mervyn King said on Tuesday.


Some big shareholders in Trinity Mirror are planning to call for an investigation into alleged phone hacking at tabloid titles including the Daily Mirror.


U.S. companies have warned of weaker global demand and are cutting jobs, raising fresh fears about the health of the world economy and sending shares tumbling.


France is close to agreeing a deal to prop up Peugeot by providing up to 7 billion euros ($9.07 billion) of financial guarantees to the car maker's lending arm.


UBS is planning further drastic cutbacks in its investment bank that could prompt the loss of several thousand jobs.


China has opened a new area of alternative investments to the country's insurance companies.


A controversial plan drawn up in Brussels to force all publicly traded companies to have 40 percent of women on their boards has been scrapped.


The head of the BBC denied on Tuesday helping to cover up a sex scandal involving one of its former stars but accepted the British broadcaster had been damaged by a crisis.


Apple updated its suite of iPads for the holiday shopping season, including a new, thinner and lighter "Mini" edition.


BHP Billiton is working with advisors to consider the sale of its Pinto Valley copper mine in Arizona, which could fetch up to $1 billion.


A Chinese sovereign wealth fund is set to become a landlord in the UK's most important office market: the City of London.



* Apple Inc's iPad Mini, which it unveiled at a press event on Tuesday, weighs about two-thirds of a pound and has a screen that measures 7.9 inches diagonally, making its surface area significantly smaller than that of the 9.7-inch iPad.

* Facebook Inc's Chief Executive, Mark Zuckerberg, told Wall Street that his company was on its way to cracking the mobile puzzle. Facebook posted revenue that slightly beat forecasts, and it said 14 percent of its advertising revenue came from ads on mobile devices.

* With the sale of its Canadian arm, Ally Financial Inc took its biggest step yet toward slimming down and raising money to repay its $17.2 billion taxpayer-financed bailout. The firm said it would sell its Canadian division to the Royal Bank of Canada for about $4.1 billion.

* The Royal Bank of Scotland Group Plc agreed to pay $42.5 million in a settlement with the Nevada attorney general that ends an 18-month investigation into the deep ties between the bank and two mortgage lenders during the housing boom.

* Netflix Inc's third-quarter revenue, $905 million, up from $822 million in the same quarter last year, was in line with estimates. But its streaming subscriber total, 25.1 million in the U.S., while up from 21.4 million in the third quarter last year, was weaker than expected.

* Restoration Hardware Holdings Inc said in a filing that it planned to sell 5.2 million shares at $22 to $24 a share in an initial public offering.

* Hackers have stolen credit card information for customers who shopped as recently as last month at 63 Barnes & Noble Inc stores across the country, including stores in New York City, San Diego, Miami and Chicago, according to people briefed on the investigation.




* The Stephen Harper government is sharpening its policy on takeovers by foreign corporations to single out firms controlled by other governments and set more detailed conditions they must meet before Ottawa would approve a deal, sources say.

* Finance Canada is excluding provincial numbers from new reports that will focus on whether government finances are sustainable over the long term.

After the release of his latest audit, Auditor General Michael Ferguson called on Finance to produce reports for both federal and provincial finances that would show the state of Canada's public finances as a whole.

Reports in the business section:

* The Bank of Canada has laid out a clearer path for interest rates, pushing back the timing of an eventual increase, while warning for the first time that it could boost rates to dissuade consumers from taking on more debt.

* Royal Bank of Canada has emerged from one of the most hotly contested auctions of domestic banking assets in years to buy the Canadian operations of Ally Financial Inc , which will make it the country's biggest player in auto financing.


* Canada's intelligence service needs new policies for dealing with minors as its officers are increasingly crossing paths with underage radicals, a federal watchdog agency said in a report released Tuesday.


* The Toronto stock market tumbled more than 150 points Tuesday amid sliding commodity prices as U.S. earnings disappointments and a fresh round of worry centred on Europe's debt crisis reminded investors about flagging global growth.




--The China Banking Regulatory Commission said it is exploring allowing more fundraising channels for banks to replenish their capital base, a move which would reduce financing pressures on the domestic A-share market.


--Property sector lending by Chinese financial instituitions surged in the third quarter, especially for land development. Data released by the People's Bank of China showed 416.8 billion yuan was lent to the real estate sector from July to September, a rise of 29 percent from the second quarter.


--China's grain output this autumn is likely to hit a record high and bring a ninth year of consecutive growth in annual output, the Ministry of Agriculture said.


--China's COSCO Holdings Co, the nation's largest listed shipping company, said the industry will expand as Chinese economic growth picks up momentum. Chairman and CEO Wei Jiafu said the firm was seeing signs of recovery.

--The Chinese semiconductor industry needs industrial restructuring and consolidation to create internationally competitive firms, the Ministry of Industry and Information Technology said.


Fly On The Wall 7:00 Market Snapshot



American Campus (ACC) upgraded to Buy from Neutral at UBS
Bank of America (BAC) upgraded to Overweight from Neutral at Atlantic Equities
Check Point (CHKP) upgraded to Buy from Neutral at BofA/Merrill
Dollar Tree (DLTR) upgraded to Conviction Buy from Neutral at Goldman
Eagle Bancorp (EGBN) upgraded to Outperform from Market Perform at FBR Capital
Facebook (FB) upgraded to Buy from Neutral at BofA/Merrill
Facebook (FB) upgraded to Buy from Neutral at Citigroup
IBERIABANK (IBKC) upgraded to Outperform from Market Perform at Keefe Bruyette
Molycorp (MCP) upgraded to Buy from Hold at Dahlman Rose
Myriad Genetics (MYGN) upgraded to Buy from Neutral at BofA/Merrill
Rare Element (REE) upgraded to Hold from Sell at Dahlman Rose
Sensata (ST) upgraded to Buy from Neutral at Janney Capital
Whirlpool (WHR) upgraded to Buy from Sell at Goldman


AB InBev (BUD) downgraded to Sell from Neutral at Goldman
Atmel (ATML) downgraded to Neutral from Buy at Nomura
CTC Media (CTCM) downgraded to Hold from Buy at Deutsche Bank
Donaldson (DCI) downgraded to Hold from Buy at Jefferies
DuPont (DD) downgraded to Neutral from Overweight at JPMorgan
Norfolk Southern (NSC) downgraded to Neutral from Buy at Citigroup
United Therapeutics (UTHR) downgraded to Underweight from Neutral at JPMorgan
Virgin Media (VMED) downgraded to Neutral from Buy at Citigroup


Black Hill (BKH) initiated with an Outperform at RBC Capital
Calpine (CPN) initiated with a Sector Perform at RBC Capital
Inergy Midstream (NRGM) initiated with an Overweight at JPMorgan
Liberty Ventures (LVNTA) initiated with a Buy at Citigroup
Oriental Financial (OFG) initiated with a Buy at Sterne Agee
Solar Capital (SLRC) initiated with an Outperform at JMP Securities
Solar Senior Capital (SUNS) initiated with an Outperform at JMP Securities
THL Credit (TCRD) initiated with an Outperform at JMP Securities


European Commission said Microsoft (MSFT) failed to offer browser choices
Facebook (FB) reported monthly active users up 26% to 1.01B at September 30
CEO Zuckerberg said “deeply integrating monetization into our product teams”'
Dow Chemical (DOW) announced restructuring
Monster Beverage said (MNST) stands by the safety of its products
Posco (PKX) downgraded to Baa1 by Moody's; outlook negative
Aflac (AFL) raised Japan sales outlook to up 30%-35%
Broadcom (BRCM) sees Q4 adjusted product gross margin flat to up slightly sequentially
Netflix (NFLX) said growth being driven by TV show viewers
Sees greater sub additions in Q4 and Q1 vs. Q2 and Q3
Thermo Fisher (TMO) said it has "solid foundation" going into 2013
B.R. Bard (BCR) acquired surgical product company Neomend
Essex Property Trust (ESS) acquired apartments in San Jose, CA for $148M
Yelp (YELP) acquired Qype for about $50M
United Therapeutics (UTHR) received complete response letter for oral Trepstinil NDA
Polycom (PLCM) CEO: Q4 to be important quarter with release of new products
Capital Senior Living (CSU) acquired eight communities for $72.9M


Companies that beat consensus earnings expectations last night and today include:
Encana (ECA), Thermo Fisher (TMO), W.R. Grace (GRA), Dow Chemical (DOW), Unisys (UIS), Celadon Group (CGI), Fortune Brands (FBHS), Aflac (AFL), Norfolk Southern (NSC), C.R. Bard (BCR), Panera Bread (PNRA), Gilead (GILD), Facebook (FB), Juniper (JNPR),  Netflix (NFLX), Amgen (AMGN), Broadcom (BRCM), VMware (VMW)

Companies that missed consensus earnings expectations include:
NorthWestern (NWE), Elan (ELN), Embraer (ERJ), Newfield Exploration (NFX),  STMicroelectronics (STM), C.H. Robinson (CHRW), FMC Technologies (FTI), Buffalo Wild Wings (BWLD), Amgen (AMGN)

Companies that matched consensus earnings expectations include:
Praxair (PX), Republic First Bancorp (FRBK), CTS Corporation (CTS), Compuware (CPWR),  SeaBright (SBX)


The nation's two largest stock exchanges are facing a backlash by mutual funds and securities regulators for offering trading tools that could harm institutional investors.
Now, NYSE Euronext (NYX), owner of the New York Stock Exchange, intends to ask regulators to let it alter the order type that critics say could benefit high-speed trading firms, according to exchange officials, the Wall Street Journal reports
Most hedge funds are struggling for a fourth consecutive year, the longest period of underperformance since 1995 to 1998. Hedge funds on average gained 4.7% through September, according to industry tracker HFR, while stock-trading funds were up on average 5.5%, the Wall Street Journal reports
The Fed appears intent to stick to its bond-buying stimulus, having already indicated it would take more than a modest show of economic strength for policymakers to begin taking their foot off the gas. Analysts now believe the central bank will wait until at least December to make any changes to its current plans to buy $40B of mortgage debt per month, Reuters reports
KKR & Co. (KKR), Apax Partners and Madison Dearborn Partners are bidding for Heartland Dental Care, one of the largest U.S. dental practice management companies, worth about $1.3B, sources say, Reuters reports
Mortgage bankers and realtors are warning that it could become even harder for borrowers to qualify for a home loan early next year as the industry faces a number of new rules, Bloomberg reports
Oil pared gains in New York after a decline in manufacturing data from Germany signalled the region’s debt woes may be far from over. U.S. crude was 0.2% higher after falling as much as 0.5% when Markit Economics reported that the German purchasing managers’ index for manufacturing showed 45.7 for October, down from 47.4 in September. Business confidence in Germany slumped to a 32-month low, Bloomberg reports

CBL & Associates (CBL) files to sell 2.47M shares for selling stockholders
Millennial Media (MM) 10M share Secondary priced at $14.15
Novavax (NVAX) announces $27M equity offering
XOMA (XOMA) files to sell common stock


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