Frontrunning: January 15

  • White House delays 2014 budget after "fiscal cliff" standoff (Reuters) - And Senate will pass this... never?
  • Amari Signals Limits to Abe’s Campaign to Weaken Yen (BBG)
  • Draghi’s Bond Rally Masks Debt Doom Loop Trapping Spain (BBG)
  • Obama backs gun limits, concedes tough fight ahead (AP)
  • Bernanke to Weigh QE Costs as Fed Assets Approach Record (BBG)
  • Japan to Sell Debt Worth 7.8 Trillion Yen to Pay for Stimulus (BBG)
  • France more than doubles forces in Mali (FT) and yet...
  • Malian Rebels Take Town and Vow to Avenge French Attack (NYT)
  • China’s Li Calls for Patience as Government Works to Reduce Smog (BBG)
  • EU berates China over steel subsidies (BBG)
  • Number of working poor families grows as wealth gap widens (Reuters)
  • Intel to GE Stuck in Profit Slump as U.S. Rebound Stalls (BBG)


Overnight Media Digest


* Dell Inc has held talks recently with buyout firms Silver Lake Partners and TPG about going private as the technology company struggles to find a new course for itself following the end of the personal-computer boom.

* United Parcel Service Inc abandoned a nearly $7 billion bid for Dutch parcel-delivery company TNT Express NV after encountering stiff objections to the deal from European antitrust regulators.

* Apple Inc has cut its component orders for the iPhone 5 because of weaker-than-expected demand, people familiar with the situation said on Monday, indicating sales of the latest smartphone haven't been as strong as anticipated.

* The French government on Monday agreed to pay state-controlled power utility Electricite de France SA 4.9 billion euros ($6.55 billion) to cover subsidies related to green energy and the poor, eliminating a key area of financial uncertainty for investors.

* Best known for its playful plastic timepieces, Swatch Group on Monday said it was paying $750 million to buy the swanky Harry Winston brand -- the diamonds that Marilyn Monroe cooed about in the movies.

* U.S. regulators hit JPMorgan Chase & Co with four formal enforcement actions targeting lapses in risk-management and money-laundering controls, including the first sanctions in response to the bank's multibillion-dollar 2012 trading debacle.

* News Corp has raised its stake in pay-TV company Sky Deutschland AG to 54.5 percent from 49.9 percent, giving a lift to the German broadcaster as it strives to turn a profit this year.

* The transportation authority in Chicago accused two of the world's largest airlines, United Continental Holdings Inc and AMR Corp's American Airlines, of dodging a combined $300 million in local taxes since 2005, expanding its allegations that several towns in Illinois are illegally operating as tax havens.

* A Canadian judge on Monday acquitted three former Nortel Networks Corp executives of fraud charges, bringing to an end the legal chapter in one of Canada's biggest corporate collapses.

* RadioShack Corp said it ended its unprofitable mobile-phone partnership with Target Corp after failing to negotiate more beneficial terms with the discount retailer.

* Hemlock Semiconductor Group said on Monday it plans to cut production and lay off 400 employees, or more than a quarter of the workforce at its Michigan and Tennessee factories, amid a dropoff in orders from China.

* President Barack Obama, facing a battle over raising the United States' borrowing limit, made clear on Monday that he sees no alternative to Congress voting for an increase and said that not doing so would be "irresponsible" and "absurd."



British Banking Association head Anthony Browne said Britain's banks would support a new professional standards body.

A plan by U.S. investment bank Goldman Sachs to delay paying UK bonuses to take advantage of a tax cut has drawn heavy criticism from members of Parliament.

Britain's Treasury will benefit by more than 9 billion pounds annually from 2017 from pension reform.

In a report, the European Commission said China was illegally helping steel manufacturers to obtain materials below market prices.



* Shares of Dell Inc spiked nearly 13 percent on Monday after Bloomberg News reported that the beleaguered personal computer was in talks with at least two private equity firms over a potential buyout.

* United Parcel Service Inc's $6.9 billion bid for TNT Express NV is the latest merger blocked by the European Union, and certainly the most prominent since the proposed tie-up of NYSE Euronext and Deutsche Börse last year.

* Worries about low-cost competition weighed on Apple Inc's stock on Monday after reports that the company had reduced orders of screens for the iPhone 5, suggesting that demand for the phone could be weaker than expected.

* Nearly a year after it announced its bid to go public, Facebook Inc is confronting the ultimate burden of the information age: how to help its users find what they are looking for amid the billions of pictures, "likes" and status updates they post every day.

* Federal banking regulators hit JPMorgan Chase & Co with two enforcement actions on Monday for failures in risk management that led to a multibillion-dollar trading loss, the first formal sanctions in a case that damaged the bank's reputation and brought heightened scrutiny to its trading operations.

* Swatch Group agreed on Monday to make its largest acquisition to date, taking over the watch and jewelry business of Harry Winston, which plans to shift its focus to its diamond mining activities.

* Coca-Cola Co began a new television ad campaign on Monday aimed at getting on the healthy side of the national debate over obesity - a novel step for a company built on sugary soft drinks.

* Chrysler, the smallest of the American automakers, kicked off the annual Detroit auto show on Monday with new versions of its Grand Cherokee and Compass SUV's. The two Jeep models have helped propel the company's strong sales growth since its government bailout and bankruptcy in 2009.

* American and European officials are taking longer than expected to agree to begin free-trade talks, leading to some barely contained impatience among European political leaders who are hoping that President Barack Obama will signal support for a pact in his State of the Union address next month.

* An Ontario court acquitted three former senior executives of the failed Nortel Networks Corp on Monday in a complex and protracted fraud case.

* An audacious plan to lay a multibillion-dollar wind power transmission spine under the seabed from southern Virginia to the New York City area will take a step forward on Tuesday with an announcement of plans for the first leg, a 189-mile segment running from Jersey City to a spot south of Atlantic City




* Canada appeared to be one step closer to boycotting this year's Commonwealth leaders' summit as Prime Minister Stephen Harper bluntly called on the Sri Lankan government to reinstate the country's fired chief justice Shirani Bandaranayake.

* The campaign to choose a successor to Ontario Premier Dalton McGuinty is expected to split into two camps in the run up to the leadership convention, as the candidates step up their efforts to woo delegates and more clearly articulate how they would govern.

Reports in the business section:

* Three former top executives of Nortel Networks Corp were found not guilty of fraud, closing a key chapter in a financial scandal that helped bring down the once-mighty telecommunications giant.

In a ruling on Monday, Justice Frank Marrocco of the Ontario Superior Court found that the accounting manipulations that caused the company to restate its earnings for 2002 and 2003 did not cross the line into criminal behavior.

* Alamos Gold Inc has made a takeover bid for Vancouver-based Aurizon Mines Ltd that values the company at C$780 million ($791.4 million).

Toronto-based Alamos has offered C$4.65 per Aurizon share in cash and stock, which is a premium of 36 percent to Aurizon's closing price on Friday on the Toronto Stock Exchange.


* First Nations leaders and Idle No More activists have promised only peaceful protests on their national day of action on Wednesday, but once warmer weather sets in, key highways including the main road to Alberta's Fort McMurray, could be blocked for days, weeks or even months, prompting what one chief called "chaos."

Athabasca Chipewyan First Nation Chief Allan Adam said that while there are no plans to shut down Highway 63, the only all-weather road to Fort McMurray, on Wednesday, the government should expect a months-long summer blockade if it does not repeal or amend its recently passed omnibus budget bill that made changes to the Indian Act and the Navigable Waterways Act.

* Only days after a Newfoundland Bank of Montreal branch was claimed by the largest fire in local memory, bank officials have announced they will soon be up and running again out of the back of a recreational vehicle.


* Encana Corp interim Chief Executive Clayton Woitas has emphasized in an interview that Canada's largest natural gas producer is not for sale.

The sudden departure of Randy Eresman as chief executive last week stirred hopes that the new leadership can rejuvenate the ailing company, while fuelling speculations that the company is in line for a takeover.

* Rogers Communications Inc said on Monday it acquired spectrum and a cable division in Southern Ontario from Shaw Communications Inc for about C$700 million ($710 million).




--China's currency, the yuan, is likely to continue its two-way trade and rise slightly this year, the newspaper said in its commentary.

--Jiugui Liquor Co Ltd, a Chinese liquor maker, said its net profit is likely to be between 480-520 million yuan in 2012, up 149 percent to 170 percent from 2011. However, the company's fourth-quarter earnings marked a sharp fall after media reports said it added excessive levels of plasticisers to its products.


--Experts say measures to fight pollution could hurt the economy as some construction works will be put on hold and factories told to halt production.


--With a recovery in the Chinese economy, the country's power consumption could rise 9 to 10 percent in 2013, up from 5.5 percent growth in 2012, the newspaper said in its commentary.


Fly On The Wall 7:00 AM Market Snapshot



Boston Scientific (BSX) upgraded to Outperform from Neutral at Credit Suisse
Celgene (CELG) upgraded to Buy from Neutral at BofA/Merrill
Cliffs Natural (CLF) upgraded to Buy from Hold at Deutsche Bank
Credit Suisse (CS) upgraded to Outperform from Neutral at Exane BNP Paribas
Maxim Integrated (MXIM) upgraded to Outperform from Perform at Oppenheimer
Mellanox (MLNX) upgraded to Buy from Neutral at UBS
PetroLogistics (PDH) upgraded to Buy from Neutral at Citigroup
RAIT Financial (RAS) upgraded to Outperform from Market Perform at FBR Capital
RPM (RPM) upgraded to Perform from Underperform at Oppenheimer
ViroPharma (VPHM) upgraded to Buy from Neutral at BofA/Merrill


ARM Holdings (ARMH) downgraded to Equal Weight from Overweight at Morgan Stanley
Aflac (AFL) downgraded to Neutral from Buy at Sterne Agee
BE Aerospace (BEAV) downgraded to Hold from Buy at Deutsche Bank
Bazaarvoice (BV) downgraded to Hold from Buy at Deutsche Bank
Biogen (BIIB) downgraded to Neutral from Buy at BofA/Merrill
Domtar (UFS) downgraded to Neutral from Buy at Goldman
Dycom (DY) downgraded to Outperform from Strong Buy at Raymond James
Hecla Mining (HL) downgraded to Sell from Hold at Deutsche Bank
Logitech (LOGI) downgraded to Underperform from Neutral at Credit Suisse
PDL BioPharma (PDLI) downgraded to Underperform from Neutral at Credit Suisse
Pan American Silver (PAAS) downgraded to Hold from Buy at Deutsche Bank
Patterson Companies (PDCO) downgraded to Sell from Neutral at Goldman
Principal Financial (PFG) downgraded to Neutral from Buy at Sterne Agee
Regeneron (REGN) downgraded to Hold from Buy at Jefferies
Rock-Tenn (RKT) downgraded to Buy from Conviction Buy at Goldman
Silver Standard (SSRI) downgraded to Sell from Hold at Deutsche Bank
Sirona Dental (SIRO) downgraded to Neutral from Buy at Goldman
Symetra Financial (SYA) downgraded to Underperform from Neutral at Sterne Agee
TD Ameritrade (AMTD) downgraded to Neutral from Buy at Sterne Agee
Watsco (WSO) downgraded to Neutral from Outperform at RW Baird


Boston Properties (BXP) initiated with an Outperform at RW Baird
Chesapeake Lodging (CHSP) initiated with an Outperform at BMO Capital
CoreSite Realty (COR) initiated with an Outperform at RW Baird
Digital Realty (DLR) initiated with an Outperform at RW Baird
DuPont Fabros (DFT) initiated with a Neutral at RW Baird
Duke Realty (DRE) initiated with an Outperform at RW Baird
E-Trade (ETFC) initiated with a Buy at Sterne Agee
First Industrial Realty (FR) initiated with an Outperform at RW Baird
Healthcare Trust (HTA) initiated with an Outperform at RW Baird
Hyatt Hotels (H) initiated with an Outperform at BMO Capital
PROS (PRO) initiated with an Outperform at JMP Securities
Palo Alto (PANW) initiated with a Hold at Jefferies
Piedmont Office Realty (PDM) initiated with an Outperform at RW Baird
STAG Industrial (STAG) initiated with an Outperform at RW Baird
Sterling Financial (STSA) initiated with a Buy at Sterne Agee
Terreno Realty (TRNO) initiated with an Outperform at RW Baird
Umpqua Holdings (UMPQ) initiated with an Underweight at Barclays


Federal Reserve Board issued two consent Cease and Desist Orders, ordered JPMorgan (JPM) to take action on risk-management, money laundering prevention
Shaw Communications (SJR) signed agreement with Rogers Communications (RCI) for purchase, sale of assets. Rogers will pay Shaw about $700M for Mountain Cable, the spectrum licenses and other transactions, net of TVtropolis
American Airlines (AAMRQ), Boeing (BA) entered restructured aircraft purchase agreement
AA entered amended Airbus (EADSY) purchase agreement
Apple (AAPL) announced Wi-Fi + cellular iPad models available in China on January 18
RadioShack (RSH), Target (TGT) dissolved target mobile partnership
MasterCard (MA), Equity Bank announced partnership in African markets
Lennar (LEN) CEO Miller sees “strong profitability” in FY13
Globecomm (GCOM) lowered FY forecast, hired Needham to explore alternatives


Companies that beat consensus earnings expectations last night and today include: Mercantile Bank (MBWM), Lennar (LEN), Washington Federal (WAFD)

Companies that missed consensus earnings expectations include:
Majesco (COOL), Limoneira Company  (LMNR)


Fed Chairman Bernanke said he still wasn't satisfied with the economy's progress and indicated that he plans to stick with the unconventional programs the central bank is using to lift output. The Fed has said that continuing these programs—such as an $85B-a-month bond-buying effort—depends on progress in the U.S. job market, the Wall Street Journal reports
American workers are opening their first paychecks of the year and finding an unpleasant surprise: The government's take has gone up. That consumers remain tentative threatens to put a drag on economic growth. The effect for companies is that this will likely cement a frugal attitude that led consumers to cut back on eating out and shift to less-expensive store brands, the Wall Street Journal reports
Wal-Mart Stores (WMT) plans to hire over 100,000 veterans in the U.S. over the next five years, Reuters reports
The message from automotive CEOs at the opening of the 2013 Detroit auto show: Sportscars are hot, electrics are not, Reuters reports
Wall Street investment banks, loathed by investors in 2011 and hurt by weak trading last year, are poised for a return to the spotlight. Investment-banking and trading revenue likely surged 44% in the period from a year earlier, according to estimates by Morgan Stanley, Bloomberg reports
Bond risk for Japan’s major companies, from Toyota (TM) to Sony (SNE), fell to a 10- month low as Prime Minister Shinzo Abe’s $116B stimulus plan added fuel to the longest stock-market rally since 1989, Bloomberg reports


Agree Realty (ADC) announces offering of 1.3M shares of common stock
Alnylam (ALNY) commences offering of $125M of common shares
Chuy's (CHUY) files to sell 5.175M shares of common stock
Golub Capital (GBDC) to offer 4.5M shares of common stock
InterMune (ITMN) to offer 12.5M shares of common stock
MarkWest Energy (MWE) files to sell 19.95M common units representing limited partners
Solar Senior Capital (SUNS) commences offering of 2M shares of common stock
USA Compression (USAC) 11M share IPO priced at $18.00